Share Capital Increase and Reduction in Spain

Understand how to adjust the equity that shareholders have.

 

Our corporate lawyers will guide you through the process step-by-step.

How can a lawyer help me?

The process of increasing a company’s share capital is relatively straightforward, but there are many formal requirements to comply with. With such formalities and proceses, we always recommend working with a lawyer to ensure that the desired operation complies with highly technical process, such as the division of new shares, how to deposit the new capital in the company’s bank account or how to draft the meeting’s resolution to avoid issues with the Commercial Register.

The process is typically quick and simple when a company works with an experienced lawyer who knows how ot navigate Spanish bureaucracy. Their knowledge helps prevent headaches when executing the the share capital adjustment as well as potential problems in future. A lawyer can even sign the deed before a notary on your behalf via Power of Attorney, if it has been granted by the company’s administration.

At Lexidy LegalTech Boutique, we go the extra mile by assisting our clients on every step of the process. Here, we would advise the client on the best way to proceed with the share capital increase, the necessary amount to contribute and the best way to distribute the new shares. Lexidy’s recommendations will take into account the shareholders’ rights and the possible different taxation that follows. Our lawyers are here for businesses of all shapes, sizes and industry to assist them with their share capital needs..

¨We will be with you each step of the journey.¨

 

What is a share capital increase?

Increasing share capital is a corporate operation where the company’s share capital is adjusted by either issuing new shares or increasing the nominal value of the existing shares. 

This action must be agreed at the General shareholders Meeting and follow the process identified in the Company’s Articles of Association.

Spain’s Capital Companies Act allows share capital to be increased in the following ways.

 

  • Capital increase by cash contribution: This can be conducted by making a financial contribution in the company.

 

  • Capital increase by non-cash contribution: This is executed by contributing other assets that are not cash. These assets, which can items like a computer or a car, must have their ownership and economic valuation accredited. 

 

  • Capital increase charged to profits or reserves: This type of capital increase occurs from the profits or reserves already displayed in the last approved balance sheet.

 

  • Capital increase by offsetting credits: This capital increase requires the delivery of shares in the company’s capital in exchange for paying or forgiving the company’s existing debt.

What is a share capital reduction?

A capital reduction is a corporate operation where the sahre capital is adjusted as per the company’s Articles of Association. There are three types of capital reduction: 

  • Reducing the shares’ real value. This approach allows the company to reduce the nominal value of the shares but maintain the total number of shares in the business. This means that each share will decrease in value to match the total amount of the new, lower share capital.
  • Share amortization. This type of capital reduction eliminates a certain number of shares until the total capital falls to the new, agreed amount. This means that the the nominal value of the shares isn’t reduced. Instead, some shares are directly removed, which reduces the share capital and returns an amount to each shareholder.
  • Grouping shares for exchange. This requires several shares to be grouped together and replaced by a new one. This is similar to share amortization except the elimination of shares is achieved by combining the shares, rather than handling them individually.

How can I increase or reduce the share capital of my company?

Any action to increase or reduce the existing share capital must be agreed to at the General Shareholders Meeting and must follow the requirements stated in the bylaws. Once the resolution to increase or reduce the share capital has been approved and implemented, the directors must redraft the bylaws to reflect the new share capital figure.

A notary public must witness the signing of a certificate confirming the decision was made at the meeting. After this, the resolution must be registered in the Commercial Register.

Can I increase and reduce the share capital at the same time?

When a company has a financial accounting loss and its share capital has been reduced below the legally required minimum, the company enters a situation known as “compulsory dissolution”. 

To avoid dissolving the company and then cleaning up the accounts, businesses can instead carry out a so-called “accordion operation”.

This is a special corporate operation where the share capital is simultaneously reduced and increased. The aim of this is to financially reorganize the company. This operation allows the company to reduce its share capital to offset its debts and clean up its balance sheet, while immediately executing a capital increase to raise new resources and continue its activity.

Our Story

We are a department formed by qualified legal experts who have been trained in the field of corporate law. We work on these requests every day and it’s our passion. For us, Lexidy is a way of life and what excites us the most is to be able to deliver the happiness and satisfaction of a successful process. We want to help you achieve your goals and dreams.

Héctor Lopez Vazquez

Head of Corporate Department

Madeleine Cadwell

Paralegal

Marta Ametller

Paralegal

Samuel Ortega Vega

Lawyer

Client’s stories

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