A share capital increase is the procedure by which a company increases its share capital, that is, the total sum contributed by the partners or shareholders, which represents the company's initial or enlarged equity. The increase is formalised by means of a public deed (escritura pública) executed before a notary and must be registered at the Companies Registry (Registro Mercantil) to be valid against third parties.
A capital increase may be carried out to finance new projects, improve solvency, expand the business or bring in new partners.
What is it for?
- Increasing the financial resources available to the company
- Bringing in new partners or increasing the holdings of existing ones
- Improving the company's financial image and creditworthiness
- Facilitating the expansion or diversification of the business
What does the notary do?
- Reviews the resolution passed by the General Meeting or the competent body
- Drafts and authorises the public deed of the capital increase
- Checks the identity and capacity of the signatories
- Sets out how the increase is made: cash contributions, non-cash contributions or debt-to-equity conversion
- Facilitates the registration of the increase at the Companies Registry
Common ways of increasing capital
- Cash contributionsthe partners contribute money
- Non-cash contributionsassets, rights, or tangible or intangible property
- Debt-to-equity conversionconverting debts owed by the company to partners into capital
- Issue of new shares (acciones or participaciones)to be subscribed
Important considerations
- The calling of the meeting and the adoption of the resolution must comply with the articles of association and the law
- An auditor's report may be required for non-cash contributions
- The new share titles must be registered at the Companies Registry
- The Spanish Tax Agency (Hacienda) and other authorities must be notified as appropriate
Legal value
A share capital increase is only valid and enforceable against third parties once it has been executed as a public deed before a notary and registered at the Companies Registry. This ensures legal certainty in the company's structure and in the partners' rights.