What is a capital increase?
Every company is required to notify ACRA of its initial share capital at the time of its incorporation. Shares can be issued as fully paid or partially paid. A company may subsequently decide to increase its share capital and/or allot new shares in the company after it has been incorporated.
Before every new allotment of shares, the shareholders will have to authorise the Directors to issue new shares in the company by an ordinary resolution (if there is no existing authority given).
Methods to increase share capital/allot shares
An increase of share capital/allotment of shares can be done mainly through the following methods (subject to regulations in the company’s Constitution):
- In cash
This method is through the injection of fresh cash into the Company by an existing shareholder or a new shareholder. (Proof of remittance has to be provided before new shares can be allotted and issued as fully paid)
- Capitalisation of Loan
This method is through the capitalisation of an existing loan provided to the company. The company will capitalise a sum owing to the shareholder and issue new shares to the shareholder in return. (A copy of the financial statements/management accounts reflecting this loan amount has to be provided before new shares can be allotted and credited as fully paid)
- By Contract in Writing
This method is the allotment of new shares in accordance with an agreement entered into between the company and the shareholder(s). Shares may be allotted pursuant to the agreement either for cash or otherwise in cash such as for services rendered.
This contract should be prepared by lawyers and should set out all the details of the proposed transaction for example, value of the services provided and subscription amount. (A Directors’ resolution should be passed to approve the entry into such agreements and proof of remittance has to be provided if cash is involved)