Last Updated on May 29, 2021 by LawEuro
Stock Corporation Act (Laws / Regulations of Germany)
Subchapter 4
Capital increase using company funds
Section 207
Pre-requisites
(1) The general meeting may resolve to increase the share capital by converting the capital reserves and retained income to share capital.
(2) Section 182 (1) and section 184 (1) shall apply mutatis mutandis to the resolution and to the application for entry in the register of same. Companies with no-par-value shares may increase their share capital also without issuing new shares of stock; the resolution adopted on the capital increase must state the nature of the increase.
(3) The resolution is to be based on a balance sheet.
Section 208
Convertibility of capital reserves and retained income
(1) The capital reserves and the retained income that are to be converted to share capital must have been recognised as “capital reserves” or “retained income” in the last annual financial statement and, where the resolution is based on a different balance sheet, also in that balance sheet, or they must have been recognised as an allocation to said reserves in the last resolution adopted as to the appropriation of the surplus for the year or of the net income. Subject to the stipulations made in subsection (2), other revenue reserves and the allocations made to same may be converted to share capital in their full amount; the capital reserves and the statutory reserves as well as the allocations to same may be converted to share capital only insofar as they are higher, in the aggregate, than one tenth of the share capital thus far, or whichever higher portion of same is specified in the by-laws.
(2) The capital reserves and the retained income as well as the allocations made to same may not be converted insofar as the balance sheet serving as the basis recognises a loss including a loss carried forward. Retained income and the allocations made to same that are determined for a specific purpose may be converted only insofar as this is compatible with their intended purpose.
Section 209
Balance sheet serving as the basis
(1) The resolution may be based on the last annual balance sheet if the annual balance sheet has been audited and the approved annual balance sheet is certified by the unqualified audit opinion of the auditor of the annual accounts and if its cut-off date does not precede by more than eight (8) months the date on which the application is filed for entry in the register of the resolution.
(2) Where the resolution is not based on the last annual balance sheet, the balance sheet must comply with sections 150, 152 of the present Act and with sections 242 to 256a and sections 264 to 274a of the Commercial Code (HGB). At a maximum, the balance sheet cut-off date may precede by eight (8) months the date on which the application is filed for entry in the register of the resolution.
(3) The balance sheet must be audited by an auditor of annual accounts to establish whether it complies with sections 150, 152 of the present Act and with sections 242 to 256a and sections 264 to 274a of the Commercial Code (HGB). It must be certified by an unqualified audit opinion.
(4) Unless the general meeting elects a different auditor, that auditor shall be deemed as having been elected who was elected by the general meeting to audit the last annual accounts or appointed by the court. Unless the special aspects of the auditor’s engagement require otherwise, section 318 (1), third and fourth sentences, section 319 subsections (1) to (4), section 319a (1), section 319b (1), section 320 subsections (1) and (2), section 321, section 322 (7) and section 323 of the Commercial Code (HGB) shall correspondingly apply to the audit.
(5) In the case of insurance companies, the auditor shall be determined by the supervisory board; subsection (4), first sentence, shall apply mutatis mutandis. Unless the special aspects of the auditor’s engagement require otherwise, section 341k of the Commercial Code (HGB) shall apply to the audit.
(6) In the case governed by subsections (2) to (5), section 175 (2) shall apply mutatis mutandis to making accessible the balance sheet and to the provision of copies.
Section 210
Application for entry in the register, and entry in same, of the resolution
(1) The balance sheet on which the capital increase is based along with the audit opinion, and in the case governed by section 209 subsections (2) to (6) also the last annual balance sheet unless it has already been filed pursuant to section 325 (1) of the Commercial Code (HGB), are to be attached to the application for entry in the Commercial Register of the resolution. The parties filing the application for entry in the register are to declare to the court that, as far as they are aware, no reduction of assets has occurred, since the balance sheet cut-off date serving as the basis of the capital increase until the date of the application for entry in the register, that would contravene the capital increase had this been resolved upon on the date on which the application for entry in the register was filed.
(2) The court may enter the resolution in the register only if the balance sheet on which the capital increase is based was prepared as per a cut-off date that does not precede by more than eight (8) months the date on which the application is filed for entry in the register of the resolution and if a declaration pursuant to subsection (1), second sentence, has been made.
(3) The court need not review whether the balance sheets comply with statutory regulations.
(4) The entry of the resolution is to state that the capital increase is one using company funds.
(5) (repealed)
Section 211
Entry into force of the capital increase
(1) Upon the resolution as to the capital increase having been entered in the register, the share capital shall have been increased.
(2) (repealed)
Section 212
Beneficiaries of the capital increase
The stockholders shall be entitled to the new shares of stock in the ratio of their shareholding to the current share capital. Any resolution adopted by the general meeting to the contrary shall be null and void.
Section 213
Fractional shares of stock
(1) Where the capital increase results in a portion of the current share capital only being allotted a part of a new share of stock, this fractional share may be disposed of independently and is transferable by inheritance.
(2) The rights attaching to a new share of stock, including the claim to having a share certificate issued, may be exercised only if fractional shares of stock that together make up a full share of stock are held by a single holder, or if several parties entitled to certain rights, whose fractional shares of stock together make up a full share of stock, join together for purposes of exercising the rights.
Section 214
Calls made on the stockholders
(1) Following the entry in the register of the resolution as to the increase of the share capital by issuance of new shares of stock, the management board is to call on the stockholders to collect the new share certificates without undue delay. Notice of the call is to be given in the company’s publications of record. The notice is to state:
1. The amount by which the share capital has been increased,
2. The ratio in which new shares of stock are allocated to the old shares of stock.
Furthermore, the notice is to indicate that the company is entitled to sell, for the account of the parties involved, any shares of stock the certificates of which are not collected within one (1) year of the call having been published by notice despite three (3) reminders having been issued previously that warn of the consequences.
(2) After one (1) year has lapsed since the publication by notice of the call, the company is to issue a reminder, warning that it will sell any shares of stock the certificates of which have not been collected. Notice of this reminder and warning of the consequences is to be given in the company’s publications of record three (3) times at intervals of at least one (1) month. The last such publication must be made before eighteen (18) months have lapsed since the call was published by notice.
(3) After one (1) year has lapsed since the last publication by notice of the reminder and warning of the consequences, the company is to sell the shares of stock the certificates of which have not been collected, doing so for the account of the parties involved, at the stock exchange price and, should no stock exchange price exist, the company is to sell the shares of stock at public auction. Section 226 (3), second to sixth sentences, shall apply mutatis mutandis.
(4) Subsections (1) to (3) shall apply mutatis mutandis to companies that have not issued any share certificates. The companies are to call on the stockholders to have allotted to themselves the new shares of stock.
Section 215
Treasury shares of stock. Partly paid shares of stock
(1) Treasury shares of stock shall participate in the increase of the share capital.
(2) Shares of stock that have been paid in only in part shall participate in the increase of the share capital in accordance with their proportion in the share capital. In their case, the capital increase cannot be implemented by issuing new shares; in the case of par-value shares, their nominal amount is increased. If fully paid shares of stock exist besides the partly paid shares of stock, then, in the case of fully paid par-value shares, the capital increase may be performed by increasing the nominal amount of the shares of stock and by issuing new shares of stock; the resolution adopted as to the increase of the share capital must set out the nature of the increase. Inasmuch as the capital increase is implemented by increasing the nominal amount of the shares of stock, it is to be calculated such that no amounts are allocated to shares of stock, as a result of the increase of the share capital, which cannot be covered by an increase of the nominal amount of the shares of stock.
Section 216
Protection of the rights of the stockholders and of third parties
(1) The relationship inter se of the rights appurtenant to the shares of stock will not be affected by the capital increase.
(2) Insofar as individual rights of partly paid shares of stock, in particular the participation in the profits or the voting right, are governed by the contribution made for the share of stock, the stockholders shall be entitled to these rights, until they have made the contributions as yet outstanding, only in accordance with the amount of the contribution they have made thus far, increased by the percentage by which the share capital was increased as calculated on the basis of the nominal amount of the share capital. Where further payments are made, these rights shall expand in proportion with such payments. In the case governed by section 271 (3), the amounts of the increase shall be deemed as fully paid.
(3) The economic substance of contractual relations which the company maintains with third parties who depend on the distribution of profits by the company, on the nominal amount or value of their shares of stock or on the value of their share capital, or on the current circumstances in terms of the capital or profits, will not be affected by the capital increase. The same applies to incidental duties of the stockholders.
Section 217
Commencement of the participation in the profits
(1) Unless otherwise determined, new shares of stock shall participate in the profits of the entire financial year in which the increase of the share capital was resolved upon.
(2) It may be stipulated in the resolution adopted as to the increase of the share capital that the new shares of stock shall participate in the profits of the last financial year expired already prior to the resolution as to the capital increase being adopted. In such event, the increase of the share capital is to be resolved upon prior to a resolution being adopted regarding the appropriation of the net income of the last financial year expired. The resolution adopted as to the appropriation of the net income of the financial year last expired before said resolution as to the capital increase was adopted shall enter into force only once the share capital has been increased. If the resolution adopted as to the capital increase has not been entered in the Commercial Register within three (3) months of the resolution having been adopted, the resolution adopted as to the increase of the share capital and the resolution adopted as to the appropriation of the net income of the financial year last expired before said resolution as to the capital increase was adopted shall be null and void. The period shall be tolled for as long as an action for avoidance or an action for annulment is pending.
Section 218
Contingent capital
The contingent capital shall increase in the same ratio as the share capital. Where the contingent capital has been resolved upon in order to grant rights of exchange to creditors of convertible bonds, then, unless it has been agreed that the parties entitled to the exchange are to make additional payments, special reserves are to be formed in order to cover the difference between the issue price of the bonds and the higher minimum issue price of the shares of a new issue to be allotted for them.
Section 219
Prohibited issuance of shares of stock and temporary share certificates
Prior to the resolution as to the increase of the share capital having been entered in the Commercial Register, no new shares of stock and no temporary share certificates may be issued.
Section 220
Carrying values
Those amounts shall be deemed to be acquisition costs of the shares of stock purchased prior to the increase of the share capital and the new shares of stock allotted to them that result for the individual shares of stock once the acquisition costs of the shares of stock purchased prior to the increase of the share capital are distributed to these shares of stock, and to the new shares of stock allotted to them, in the ratio that the shares of stock have to the share capital. The accrual of shares of stock is not to be recognised on the balance sheet as an addition.
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