Capital increase procedures
The share capital is increased, either by issuing new shares or by increasing the nominal amount of existing shares.
The new shares are paid up, either in cash, or by offsetting against liquid and payable debts on the company, or by incorporation of reserves, profits or issue premiums, or by contribution in kind, or by conversion of bonds.
Changes in capital are often a modality of the external growth of companies. The issue of securities is made either in remuneration of contributions or in exchange for securities of another company.
Collective decision to increase the capital
The decision to increase the capital is the responsibility of an extraordinary general meeting . The extraordinary general meeting alone is competent to decide, on the report of the board of directors or the management board, as the case may be, on a capital increase.
The board of directors or the management board, as the case may be, gives, in its report, all useful information on the reasons for the proposed capital increase as well as on the progress of corporate affairs since the start of the current financial year and , if the ordinary general meeting called to approve the accounts has not yet been held, during the previous financial year.
The capital increase is carried out by issuing securities giving immediate or future access to a portion of the company’s capital.
The capital increase by increasing the nominal amount of the shares is only decided with the unanimous consent of the shareholders, unless it is carried out by incorporation of reserves, profits or share premiums.
The new shares are issued either at their nominal amount or at this amount plus an issue premium.
Delegation to the board of directors or the management board
The exclusive competence of the meeting does not prevent it from delegating to the board of directors or the management board the issue of new securities.
It may, within the limit of a ceiling that it assigns to the capital increase that it decides and on condition of determining itself, by a separate resolution taken on the special report of the statutory auditors, the amount of the capital increase which can be carried out without preferential subscription rights, delegate to the board of directors or the management board as the case may be, the powers necessary for the purpose of proceeding within twenty-six months, in one or more times, to the issuance of securities leading to this increase, to note the realization thereof and to proceed with the corresponding modification of the articles of association.
The delegation thus effected cancels any previous delegation and prohibits the taking of new ones. However, in all cases, issues made in favor of one or more persons (articles L. 225-138,) issues for the benefit of salaried staff of stock subscription or purchase options (article L. 225-177 to L. 225-197 of this code and L. 443-5 of the labor code) are the subject of a special resolution.
When carrying out the delegation, the general meeting must set specific ceilings for priority shares issued pursuant to article L. 228-11 as well as for investment certificates issued pursuant to article L. . 228-30. It may also set specific ceilings for any other category of securities.
Any delegation from the general meeting is suspended during a public purchase or exchange offer for the company’s shares, unless the general meeting, prior to the offer, has expressly authorized, for a period included between the meeting dates of the two assemblies called to approve the accounts for the past financial year, a capital increase during the said public purchase or exchange offer period and if the envisaged increase has not been reserved .
In public limited companies whose securities are admitted to trading on a regulated market, the board of directors or the management board, as the case may be, may delegate to the chairman the powers necessary for carrying out the capital increase, as well as that of ” suspend it, within the limits and according to the terms and conditions that it may set beforehand.
The Chairman reports to the Board of Directors or the Management Board, as the case may be, on the use made of these powers under the conditions provided for by the latter.
The board of directors or the management board, as the case may be, reports to the next ordinary general meeting on the use made of the authorizations to increase capital previously voted by the extraordinary general meeting.
Any statutory clause conferring on the board of directors or the management board, as the case may be, the power to decide on the capital increase is deemed unwritten.
Decisions taken in violation of these provisions are void.
Subject to the implementation of the option provided for in the third paragraph of III of Article L. 225-129, the capital increase must be carried out either within five years from the date of the general meeting which takes place. ” decided or authorized, either within the time limits provided for in Articles L. 225-136, L. 225-137, L. 225-138, L. 225-151 and L. 228-95.
This period does not apply to capital increases to be carried out by converting bonds into shares or presenting warrants, nor to additional increases reserved for bondholders who have opted for the conversion or to holders of warrants who have exercised their subscription right. It also does not apply to capital increases in cash resulting from the subscription of shares issued following the exercise of options provided for in Article L. 225-177.
The capital must be fully paid up before any issue of new shares to be paid up in cash, otherwise the transaction will be null and void.
In addition, the capital increase by public offering, carried out less than two years after the incorporation of a company in accordance with Articles L. 225-12 to L. 225-16, must be preceded, under the conditions referred to in Articles L. 225-8 to L. 225-10, a verification of the assets and liabilities as well as, where applicable, the specific advantages granted.
Preferential subscription right
The capital increase is likely to lead to a dilution of the former shareholders. The law provides for a preferential subscription right, in practice the managers generally make the shareholders waive this right.
The principle of preferential subscription rights
The shares carry a preferential subscription right to capital increases.
The shareholders have, in proportion to the amount of their shares, a preferential right to subscribe for cash shares issued to carry out a capital increase. Any contrary clause is deemed unwritten.
During the subscription period, this right is negotiable when it is detached from shares which are themselves negotiable. Otherwise, it is transferable under the same conditions as the action itself.
Individual waiver of preferential subscription rights
The shareholders can individually waive their preferential right.
Shareholders who individually renounce their preferential subscription rights must notify the company by registered letter.
In companies whose shares are listed on the official list or on the secondary market, the waiver may not be made in favor of named beneficiaries.
Renunciation without indication of beneficiary must be accompanied, for bearer shares, by the corresponding coupons or by a certificate from the securities depositary or the authorized intermediary provided for by decree n ° 83-359 of 2 May 1983 noting the renunciation of the ‘shareholder.
The waiver made in favor of named beneficiaries must be accompanied by their acceptance.
For the application of the provisions of articles 184 and 185 of the law on commercial companies, account is taken for the calculation of the number of unsubscribed shares of those corresponding to the preferential rights which the shareholders have renounced individually without indication of the name. beneficiaries. However, when this waiver has been notified to the company at the latest on the date of the decision to carry out the capital increase, the corresponding shares are made available to the other shareholders for the exercise of their preferential subscription right. .
The bare owner of shares is deemed, with regard to the usufructuary, to have neglected to exercise the preferential subscription right to new shares issued by the company, when he has neither subscribed for new shares nor sold the subscription rights, eight days before the expiry of the subscription period granted to shareholders.
With regard to the usufructuary, he is deemed to have neglected to exercise the right to the allocation of free shares, when he has neither requested this allocation nor sold the rights, three months after the start of the allocation operations.
If the general meeting expressly decides, the shares not subscribed on an irreducible basis are allocated to shareholders who have subscribed on a reducible basis a number of shares greater than that which they could subscribe on a preferential basis in proportion to the subscription rights of which they have and, in any case, within the limits of their requests.
If the subscriptions on an irreducible basis and, where applicable, on a reducible basis have not absorbed all of the capital increase:
1o The amount of the capital increase may be limited to the amount of subscriptions under the double condition that this reaches at least three quarters of the increase decided and that this option was expressly provided for by the meeting at the time of the issue;
2o The unsubscribed shares may be freely distributed in whole or in part, unless the meeting decides otherwise;
3o The unsubscribed shares may be offered to the public in whole or in part when the meeting has expressly admitted this possibility.
II. – The board of directors or the management board may use, in the order it determines, the options provided for above or only some of them. The capital increase is not carried out when, after the exercise of these faculties, the amount of subscriptions received does not reach the totality of the capital increase or three quarters of this increase in the case provided for in 1 ° of the I.
III. – However, the board of directors or the management board may, ex officio and in all cases, limit the capital increase to the amount reached when the unsubscribed shares represent less than 3% of the capital increase. Any contrary deliberation is deemed unwritten.
Cancellation of preferential subscription rights
The meeting which decides or authorizes a capital increase may waive the preferential subscription right for the entire capital increase or for one or more tranches of this increase. It rules, on pain of nullity, on the report of the board of directors or the management board and on that of the auditors.
Report of the board of directors or the executive board
The report of the board of directors or of the management board indicates the maximum amount and the reasons for the proposed capital increase, as well as the reasons for the proposed cancellation of the preferential subscription right. It further states:
1 ° In the cases provided for in Articles 186-1 and 186-2 of the Law on Commercial Companies, the terms and conditions for the placement of new shares or investment certificates and, with their justification, the issue price or the terms of his determination ;
2 ° In the case provided for in article 186-3 of the law on commercial companies, the name of the beneficiaries of the new shares or investment certificates, the number of securities allocated to each of them and, with its justification, the issue price.
When the meeting itself fixes all the terms of the capital increase, the report also indicates the impact on the shareholder’s situation of the proposed issue, in particular with regard to his share of the capital. specific to the end of the last financial year. If the closing is more than six months prior to the planned transaction, this impact is assessed in the light of an interim financial situation established using the same methods and using the same presentation as the last annual balance sheet. In listed companies, the theoretical impact on the current market value of the share as it results from the average of the twenty previous trading sessions is also indicated. This information is also given taking into account the
The statutory auditor gives his opinion on the proposal for the elimination of the preferential right, on the choice of the elements for calculating the issue price and on its amount, as well as on the impact of the issue on the shareholder’s situation. appreciated in relation to shareholders’ equity and, where applicable, to the market value of the share. He checks and certifies the sincerity of the information taken from the accounts of the company on which he gives this opinion.
When the general meeting has delegated its powers, the board of directors, or the management board, draws up, at the time it makes use of the authorization, an additional report describing the final conditions of the transaction established in accordance with the authorization given by the assembly. The report also includes the information provided for in article 155-1 above.
In particular, the statutory auditor verifies that the terms of the transaction comply with the authorization given by the meeting and the information provided to it. It also gives its opinion on the choice of the elements for calculating the issue price and on its final amount, as well as on the impact of the issue on the shareholder’s situation as defined in paragraph 2 of the article 155-1 above.
These additional reports are immediately made available to shareholders at the head office, no later than fifteen days following the meeting of the board of directors or the management board, and brought to their attention at the next general meeting.
Issuance by public offering
The issue by public offering without preferential subscription rights to new shares conferring on their holders the same rights as the old shares is subject to the following conditions:
1o The issue is carried out within three years from of the assembly which authorized it;
2o For companies whose shares are admitted to trading on a regulated market, the issue price is at least equal to the average of the prices recorded for these shares for ten consecutive days chosen from the last twenty trading days preceding the start of the issue;
3o For companies other than those referred to in 2o, the issue price is at least equal, at the choice of the company and except to take into account the difference in the date of vesting, i.e. the share of shareholders’ equity per share, such as that they result from the last balance sheet approved on the date of issue, or at a price fixed by expert appointed in court at the request of the board of directors or the management board, as the case may be.
Issuance by public offering without preferential subscription rights to new shares that do not confer on their holders the same rights as the old shares is subject to the following conditions:
1o The issue must be completed within two years from the general meeting which authorized it;
2o The issue price or the conditions for setting this price are determined by the extraordinary general meeting on the report of the board of directors or the management board and on the special report of the auditor.
II. – When the issue is not carried out on the date of the annual general meeting following the decision, an extraordinary general meeting decides on the report of the board of directors or the management board and on the special report of the auditor , on maintaining or adjusting the issue price or the conditions for determining it. Otherwise, the decision of the first meeting becomes null and void.
Cancellation of preferential subscription rights in favor of one or more persons
The general meeting which decides on the capital increase may, in favor of one or more persons, waive the preferential subscription right. The beneficiaries of this provision cannot, on pain of nullity of the deliberation, take part in the vote. The quorum and majority required are calculated after deduction of the shares they own. The procedure provided for in article L. 225-147 does not have to be followed.
II. – The issue price or the conditions for setting this price are determined by the extraordinary general meeting on the report of the board of directors or the management board and on the special report of the auditor.
III. – The issue must be carried out within two years from the general meeting which authorized it. When it has not been carried out on the date of the annual general meeting following the decision, the provisions of II of article L. 225-137 apply.
IV. – For the application of the first paragraph of Article L. 443-5 of the Labor Code, when the general meeting has removed the preferential subscription right in favor of the employees of the company or of the companies linked to it within the meaning of article L. 225-180:
1o The subscription price remains determined under the conditions defined in article L. 443-5 of the labor code;
2o The capital increase is only carried out up to the amount of shares subscribed by employees individually or through a mutual fund. It does not give rise to the formalities provided for in Articles L. 225-142, L. 225-144 and L. 225-146;
3o The issue by a company whose shares are admitted to trading on a regulated market may be carried out within five years from the general meeting which authorized it;
4o The period likely to be granted to subscribers for the release of their securities may not exceed three years;
5o The subscribed shares may be paid up, at the request of the company or the subscriber, either by periodic installments or by equal and regular deductions from the subscriber’s salary;
6o The shares thus subscribed issued before the expiry of the five-year period provided for in Article L. 443-6 of the Labor Code can only be negotiated after having been fully paid;
7o The issue of new shares to be paid in cash is authorized even though the shares mentioned in 6o are not fully paid up.
When the shares are encumbered with a usufruct, the preferential subscription right attached to them belongs to the bare owner. If the latter sells the subscription rights, the sums resulting from the transfer or the goods acquired by him by means of these sums are subject to usufruct. If the bare owner neglects to exercise his right, the usufructuary can replace him to subscribe to the new shares or to sell the rights. In the latter case, the bare owner may demand the re-use of the sums resulting from the transfer. The goods thus acquired are subject to usufruct.
The new shares belong to the bare owner for bare ownership and to the usufructuary for the usufruct. However, in the event of payment of funds made by the bare owner or the usufructuary to complete or complete a subscription, the new shares only belong to the bare owner and the usufructuary up to the value of the rights of subscription. The surplus of the new shares belongs in full ownership to the person who paid the funds.
These provisions apply in the silence of the agreement of the parties.
The period granted to shareholders for the exercise of the subscription right may not be less than ten trading days from the date of the opening of the subscription.
This period ends in advance as soon as all the irreducible subscription rights have been exercised or the capital increase has been fully subscribed after individual waiver of their subscription rights by shareholders who have not subscribed.
The company performs publicity formalities before opening the subscription .
Shareholders are informed of the issue of new shares and its terms by means of a notice containing in particular the following information:
1 The company name, followed, where applicable, by its acronym;
2 The form of the company;
3 The amount of share capital;
4 The address of the head office;
5 The registration numbers of the company in the trade register and at the national institute for statistics and economic studies;
6 The amount of the capital increase;
7 The opening and closing dates of the subscription;
8 The existence, for the benefit of the shareholders, of the preferential subscription right to new shares as well as the conditions for exercising this right;
9 The nominal value of the shares to be subscribed in cash, whether or not this value appears in the articles of association, and, where applicable, the amount of the share premium;
10 The amount immediately payable per share subscribed;
11 The name or the company name, the address of the residence or the registered office of the depositary.
12 Where applicable, a summary description, valuation and method of remuneration for contributions in kind included in the capital increase, with an indication of the provisional nature of this valuation and this method of remuneration.
13 The indication that if the unsubscribed shares represent more than three percent of the capital increase, the subscription will either be open to the public or limited to the amount of subscriptions received.
If the company makes a public call for savings and that it is not subject to the provisions of article 94-1 of the finance law for 1982 (n ° 81-1160 of December 30, 1981), the notice is inserted in a notice published in the Bulletin of mandatory legal announcements, at least six days before the opening date of the subscription.
Otherwise, the information provided for in the first paragraph shall be brought to the attention of the shareholders within the same period by registered letter with acknowledgment of receipt.
When the general meeting has decided to waive the shareholders’ preferential subscription right, these provisions of the previous article are not applicable.
The subscription contract is evidenced by a subscription form. The subscription form is dated and signed by the subscriber or his representative who writes in full the number of shares subscribed. A copy of this bulletin drawn up on plain paper is given to him.
The subscription form states:
1 ° The company name, followed where appropriate by its acronym;
2 ° The form of the company;
3 ° The amount of the share capital;
4 ° The address of the registered office;
5 ° The registration number of the company in the trade register;
7 ° The amount and terms of the capital increase;
8 ° Where applicable, the amount to be subscribed for in cash shares and the amount released by contributions in kind;
9 ° The name or corporate name and address of the person receiving the funds;
10 ° The surname, usual first name and domicile of the subscriber and the number of securities subscribed by him;
11 ° The mention of the delivery to the subscriber of a copy of the subscription form;
However, the subscription form is not required from credit institutions and investment service providers who receive a mandate to make a subscription, and these agents need to justify their mandate.
Shares subscribed for in cash are compulsorily paid up, upon subscription, of at least a quarter of their nominal value and, where applicable, of the entire issue premium. The release of the surplus must take place, on one or more occasions, within five years from the day on which the capital increase becomes final.
The provisions of the first paragraph of Article L. 225-5, with the exception of those relating to the list of subscribers, are applicable. Withdrawal of funds from cash subscriptions may be made by an agent of the company after issuance of the depositary’s certificate.
If the capital increase is not carried out within six months from the opening of the subscription, the provisions of the second paragraph of Article L. 225-11 may be applied.
In companies making a public call for savings for the placement of their shares, the capital increase is deemed to have been carried out when one or more investment service providers approved for this purpose under the conditions provided for in Article 11 of Law No. 96-597 of 2 July 1996 on the modernization of financial activities irrevocably guaranteed its successful completion. Payment of the paid-up portion of the nominal value and of the entire issue premium must be made no later than the thirty-fifth day following the end of the subscription period.
Subscriptions and payments are recorded by a certificate issued by the depositary when the funds are deposited, on presentation of the subscription forms.
Releases of shares by offsetting liquid and payable debts on the company are recorded by a certificate from the notary or the auditor. This certificate serves as the depositary’s certificate.
In the event of contributions in kind or the stipulation of special benefits, one or more contribution auditors are appointed by court decision. They are subject to the incompatibilities provided for in article L. 225-224.
These auditors assess, under their responsibility, the value of contributions in kind and specific benefits. Their report is made available to shareholders under the conditions determined by decree of the Council of State. The provisions of article L. 225-10 are applicable to the extraordinary general meeting.
If the meeting approves the valuation of the contributions and the granting of special advantages, it notes the completion of the capital increase.
If the meeting reduces the valuation of the contributions as well as the remuneration for special benefits, the express approval of the changes by the contributors, beneficiaries or their duly authorized representatives for this purpose is required. Otherwise, the capital increase is not carried out.
Contribution shares are fully paid upon their issuance.
The provisions of Article L. 225-147 are not applicable in the event that a company whose shares are admitted to trading on a regulated market carries out a capital increase in order to remunerate the securities contributed to an offer. public exchange on shares of another company whose shares are admitted to trading on a regulated market of a State party to the Agreement on the European Economic Area or a member of the Organization for Economic Cooperation and Development .
The capital increase takes place under the conditions provided for in Article L. 225-129. However, the statutory auditors must express their opinion on the conditions and consequences of the issue, in the prospectus distributed on the occasion of its completion and in their report to the first ordinary general meeting following the issue.
In the event of the allocation of new shares to shareholders following the incorporation into the capital of reserves, profits or issue premiums, the right thus conferred as well as fractional rights are negotiable or transferable except in the event of an express decision by the meeting taken under the conditions provided for in II of article L. 225-129. These rights belong to the bare owner, subject to the rights of the usufructuary.