follow-on offering

Under capital, all capital measures are understood to be aimed at increasing the equity of the company and can be carried out either as internal financing as well as in the way of external financing. The opposite is the capital reduction.

• 7.1 Ordinary and authorized capital
• 7.2 Conditional capital increase
• 7.3 Special instruments for banks

General

Capital are mostly based on economic reasons and mainly relate to corporations, because their capital requirements are high and their liability is limited mass, normally on the assets of the Company ( a separate liability of the shareholders of the contribution obligation also does not exist ). In commercial partnerships is next to the assets of the Company nor the unlimited liability of the private assets of the general partners. These are the reasons that are set out in detail in the share capital law that applies to limited liability companies and partnerships limited by shares. The German Stock Corporation Act is designed for high net worth companies, so that capital increases represent a significant source of their funding. The legislator has created fragmentary capital requirements for other legal forms.

Reasons for capital

When converting any legal form to a joint stock company often leads to capital increases, because the AG is a capital- intensive and therefore legal form legal form related backlog is seen. Capital required for business reasons, if investments are planned (property investments or acquisition of shares ) and want to keep their current coverage ratio by equity. Without special investment plans show an increase in equity, if for credit reasons, an increase in the equity ratio to improve the balance sheet structure is required, or the proportion of debt to be reduced in order to reduce the interest charges (finance leverage ). The latter leads to a tendency of lower earnings, so that the operating break-even point is reached earlier at a lower level of fixed costs (operating leverage ).

Capital increases at AG

The German Stock Corporation Act deals in § § 182-206 AktG in great detail with the different types of capital. Generally, a distinction is made between the actual and the nominal capital. Effective capital lead to a monetary union increases in equity, nominal merely entail a shift in favor of the reserves and in favor of the share capital (passive exchange). All capital increases in common is that they are to be decided by the General Meeting before and are only legally binding if they have been entered in the commercial register.

Effective capital

This distinguishes the ordinary, conditional and authorized capital the law. These shapes represent external financing because the inflow from sources outside the company takes place.

• Normally, the capital forms the inflow of new capital by an ordinary capital increase (§ § 182 to § 191 AktG). It sets a statute changing the resolution of the general meeting ahead ( § 182 AktG) and ( § 9 AktG) implemented through the issue of new shares at a fixed issue price, which shall not be less than par.
• Conditional capital increase ( § 192 to § 201 AktG) occurs when, following a General Meeting decision to increase the share capital is to be carried out only insofar as is done by a conversion or subscription rights by shareholders use ( § 192 AktG). you secures rights to shares arising from conversion and subscription rights of convertible bonds or stock option plans,
• Prepares mergers before or
• Permits the granting of stock options to employees of the Company to subscribe for new shares.

Forms of effective capital

There are basically two forms of capital:

• Rights issues, where existing shareholders subscription rights for participation in the capital increase (ie, the purchase of new, additional shares). This allows the existing shareholders maintain their percentage interest in the corporation at the same level and not subject to anti-dilutive.
• Capital under exclusion of the subscription right.

To carry out a capital increase, various ways are conceivable.

• When bookbuilding process a subscription period is after an advertising phase just as in an IPO that appear later then leads to the allocation of the new shares.
• In contrast, the entire block trade new shares are sold to an investment bank, which in turn tries to place at their own risk in this market.
• The third variant, which has established itself more and more in recent years is the accelerated bookbuilding, in which the new shares (depending on the market situation, often in a few hours to 1-2 days ) sold in a short time to interested investors.

Nominal capital

Nominal capital increases out of company denied (§ § 207 to § 220 AktG) and are therefore internal financing. Conversion capability in capital from company funds are only of profit and capital reserves in the last approved financial statements. The " other " reserves may - with the exception of an existing net loss or loss brought forward ( § 208 para 2 AktG) - be completely converted; statutory reserves and capital reserves, however, only if they exceed a total of 10 % of the share capital (§ 208 para 1 AktG).

The capital of the preceding balance sheet must be audited and may date back more than 8 months ( § 209 para 1 AktG). It must also be insured with the registration of the capital increase that since the balance sheet date, no deterioration of the financial situation has occurred.

The nominal capital is done technically by the issue of bonus shares ( bonus shares ). Here, there is no inflow (passive exchange ) because the shareholders have to make any cash contributions. The issue of bonus shares, the total value of the company remains unchanged, but is spread over more shares, causing the price of each share decreases. The shareholders received by the nominal capital therefore nothing for free; the designation of bonus shares is therefore misleading.

Reason for this shape is that of reducing a high share price ( "heavy Shares") to enhance market attractiveness. Even nominal capital increases only through registration in the Commercial Register ( § 211 AktG), which will be deemed by law that the new shares are fully paid.

Capital of a GmbH

The effective capital is according to § 55 Limited Liability Companies Act requires a statutory change resolution to increase, acquisition of capital contribution to be made and entered in the commercial register. Since a right to participate in an effective capital for the old shareholders of law does not exist (no statutory entitlement as in the AG), changes in participation rates and asset losses are possible if the partnership agreement does not regulate this. An " indirect " way of the capital increase, the possibility of claiming a margin call is ( § 27 and § 28 Limited Liability Companies Act ), which greatly simplifies the capital of a GmbH.

Capital in other legal forms

For partnerships must, so far as the statute provides otherwise agree to a capital increase of all shareholders in the shareholders' meeting, because a shift in the ownership structure can occur. After the capital increase through informal write-up of the supplied amounts of capital on the variable capital account of the shareholders ( § 120 HGB) or by the non- removal of annual surpluses done. Increases in nominally linked deposits of the limited partners, however, require the registration in the commercial register ( § 175 HGB). Capital increases by admission of new shareholders mean that the new shareholders for the previous liabilities of the Company shall be liable ( § § 28, 130, 173 HGB).

The adoption of new business units is in the cooperative by the existing or new members ( § § 15, § 15a and § 15b GenG). The required membership application is submitted to the register of cooperatives.

Capital increase by silent partners

The inclusion of silent partners leads to an inflow and is regulated in § § 236 HGB 230 to §. Silent partners need not loss, but must share in the profits ( § 231 HGB). A change in legal form is not required by the occurrence of silent partners; the existing legal form together with the silent partners an inner society which does not appear to the outside. A silent society can only be classified as equity if it is also involved in losses; a mere profit-sharing leads to passivation as debt. The silent company requires in a stock corporation the approval of the Annual General Meeting. The loss involved insert the silent partner goes into the company's assets over ( § 230 section 2 HGB ).

Legal situation in Switzerland

In Switzerland, there are special rules that define the manner and the extent of capital. These are mainly found in Articles 650 and 653i of the Swiss Code of Obligations, in part, however, other provisions, such as the Bank Act are applicable. According to the Code of Obligations, there are three variants of the capital, ordinary, authorized and conditional capital increase.

Ordinary and authorized capital

The ordinary capital increase is decided by the General Assembly. The Board is required to carry it out within three months and entered in the Commercial Register. If the capital increase resolved not performed at this time or not registered in the commercial register, the security of the decision.

The authorized capital allows a flexible increase in equity. In particular, the Board is authorized by the General Assembly to independently increase equity by a certain amount. If the increase is not made ​​within two years, the security of the decision. In addition, the authorized capital may amount to a maximum of 50 % of the existing share capital.

Both forms of capital are subject to certain common rules, which specifically regulates in particular the Issue Date and the subscription rights of existing shareholders.

Conditional capital increase

The conditional capital increase, finally, the company convertible bonds, ie bonds goes either at the request of a party (voluntary bond ) or on a specific date ( compulsory or mandatory convertible ) are converted into equity. The conditional capital increase is to be adopted as the other two forms of the General Assembly. As with the approved capital increase, the height is also limited to 50 % of the existing share capital.

Special instruments for banks

In addition to the general options of the capital after 2012 OR there are additional opportunities for capital for banks and major financial groups dominated under Article 11-13 of the Banking Act since the introduction of so-called too-big -to -fail submission on March 1. Notably, these are on the one hand to the creation of additional conversion section through the issuance of CoCo- Bonds or Buffer Notes and the other to the creation of so-called reserve capital, a special form of contingent capital, but subject to any statutory limitation in the amount and time.