Capital increases are an indispensable part of the corporate landscape. They offer companies the opportunity to improve their asset and liquidity position and thus expand their scope for action. Nevertheless, they also harbour potential for conflict, especially for minority shareholders. In order to understand how capital increases work and how you can protect your rights as a minority shareholder, it is important to familiarise yourself with this topic.
The pitfalls of a capital increase
A capital increase leads to a change in the ownership structure of the company. New investors may join or existing shareholders may increase their shareholding by making an additional contribution. Minority shareholders, however, may find themselves in an unfavourable position if they cannot participate in the capital increase due to a lack of financial resources or an excluded subscription right.
The most common form of capital increase is the cash capital increase, in which cash is used to increase the nominal capital of the company. If the majority shareholders do not exclude the subscription right, all shareholders basically have the opportunity to participate in the capital increase. However, if this is not possible, there is a risk of dilution of the company's shareholding.
Strategies for minority shareholders
In practice, the dilution of profit and voting rights through capital increases plays a significant role. Awareness of this issue and an understanding of how to deal with capital increases can help resolve problems in the sphere of minority shareholders.
In particular, minority shareholders should exercise caution when authorised capital is available to management and capital increases can be carried out without a formal capital increase resolution. It is therefore advisable to carefully examine the contractual situation and the concrete shareholding structure with regard to the risk of dilution through capital measures.
Preventive measures against encroaching capital increases
Capital increases in which subscription rights are excluded can be very disadvantageous. Minority shareholders who are not allowed to participate in a capital increase due to the lack of pre-emptive rights inevitably lose voting and profit rights.
It is important to note that a particularly aggressive capital increase with exclusion of subscription rights is only legally effective if there is a legitimate interest of the company. In the case of inadmissible justifications, minority shareholders should take action in advance to protect their interests. This may include discussions in the run-up to the shareholders' meeting or legal action.
Summary
The role of capital increase in corporate law is of great importance. It can present both opportunities and challenges for minority shareholders. If you find yourself in this position, you should study the issue well and seek legal assistance if needed.
Our team of experienced lawyers can assist you with any questions you may have about increasing your share capital and protecting your rights as a minority shareholder. Feel free to contact us for an individual consultation. We will help you strengthen your position and effectively represent your interests.