The conditional capital increase

In addition to the ordinary and the approved capital increase, there is also the possibility of a conditional capital increase. In the case of a conditional capital increase, the company grants third parties, namely those entitled to convert or option rights or employees, the right to subscribe for new shares. Here you will learn exactly what this means and what it is used for.

What is a conditional capital increase?

‍Characteristic of the conditional capital increase, which is regulated in Art. 653 OR, is that the equity increases through the continuous issue of shares. This requires a resolution by the general meeting to amend the statutes. However, the general meeting only decides on the maximum amount of the capital increase. Whether, when, and to what extent the share capital is actually increased is in the hands of the holders of the conversion and option rights or the entitled employees. This decision must be taken with a qualified majority (at least 2/3 majority of the votes represented and an absolute majority of the share nominal values represented), according to Art. 704 OR. The statutes must specify:

1. the nominal amount
2. the number, nominal value and type of shares
3. the group of those entitled to convert or option rights
4. the cancellation of the subscription rights of the existing shareholders
5. the preferential rights of certain categories of shares
6. the restriction on the transferability of new registered shares

Furthermore, it is characteristic of the conditional capital increase that the equity increases at the moment and to the extent that the conversion or option rights are exercised. The entry in the commercial register is merely declaratory in nature.

‍Convertible and option bonds

‍Convertible bonds are fixed-term securities that are regularly interest-bearing and repaid at the end of the term. However, they also give the holder the option to forego repayment for a certain period of time and instead receive shares. The conditions under which the shares can be acquired are preset. With the conversion, the company's debt for repayment is offset by the liberation demand of the shareholder. This reduces the company's external capital, while the equity increases.

Option bonds are also securities that bear interest and whose amount is repaid after a certain period of time. They also confer the right to acquire shares under predetermined conditions for a certain period of time. However, the difference from convertible bonds is that the shares are purchased. Thus, the company's external capital does not change, while the assets and equity increase.

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