For many growing companies, bringing in an investment fund can be a strategic step. This operation, generally carried out via a capital increase, enables the company to strengthen its equity capital, finance growth or open up its shareholder base to new partners.
But how can you increase your share capital effectively? What are the steps to follow? What are the legal and financial terms and conditions? ⬇️
What is a capital increase?
A share capital increase involves increasing a company’s capital by bringing in new contributions. It modifies the amount of share capital set out in the company’s bylaws, and often involves the issue of new shares.
There are several forms of capital increase:
- Cash contribution (cash inflow),
- By contribution in kind (building, equipment, securities, etc.),
- By incorporation of reserves,
- By offsetting receivables.
Why invest in a fund via a capital increase?
Calling on an investment fund enables a company :
- To finance a development project, external growth or restructuring,
- Strengthen shareholders’ equity without recourse to debt,
- Welcome a strategic partner capable of providing business or sector-specific support,
- Prepare for a gradual transfer of capital.
This operation is part of a long-term strategy and must be aligned with the objectives of the current partners or shareholders.
How to increase your company’s capital: key steps
Determining capital requirements
First and foremost, you need to accurately assess the amount of share capital to be increased. This decision depends on the need for financing, the company’s valuation, and the nature of the fund’s contribution (minority or majority).
Choose the augmentation mode
The majority of capital increases carried out with the arrival of a fund are cash capital increases. The fund undertakes to inject a sum of money into the company, in exchange for shares.
It is also possible to increase capital by incorporating a partner’s current account, or to convert a receivable held by the fund.
Amend the company’s bylaws
Any change in the company’s share capital requires an amendment to the Articles of Association. An Extraordinary General Meeting must be called to validate this increase in share capital, define the terms of the operation, and approve the entry of the new partner or shareholder.
Release and deposit of funds
The capital is deposited by the fund in a blocked account (bank or notary), before the deeds are signed. A certificate of deposit is required to formalize the transaction with the court clerk’s office.
Legal formalities
The deed of capital increase must be registered, then published in a legal gazette. A file is then filed with the clerk’s office, including the new articles of association, the minutes, the certificate of filing and the M2 amendment form.
What are the implications for existing partners?
The arrival of a fund alters the balance of ownership. Partners or shareholders need to anticipate:
- The possible dilution of their shares,
- The fund’s political and economic rights (shareholders’ agreement, dividends, voting rights, etc.),
- Commitments made to the fund (business plan, reporting, eventual exit, etc.).
The success of this operation depends on good preparation, balanced negotiation, and a clear alignment of interests between the parties.
How do you determine the amount to increase?
The amount of share capital to aim for depends on several factors:
- The planned investment or development project,
- The valuation of the company negotiated with the fund,
- The level of participation desired by the fund,
- Your company’s legal form and applicable legal thresholds.
It is advisable to seek the support of a financial or legal expert to assess and structure this operation as effectively as possible.
Conclusion: integrating a fund into your capital is a strategic decision that needs to be carefully managed
A capital increase involving a fund is a structuring operation for a company. If carried out properly, it can strengthen equity capital, accelerate growth and involve a trusted partner in the company’s development! But it also means mastering the legal, financial and human aspects, and preparing the company’s future governance.
➡️ At JTNH, we support management at every stage of the capital increase, from valuation to the drafting of the shareholders’ agreement, with a confidential, tailor-made approach.
