Forms of capital increase

Every healthy company, in a certain moment of its trajectory, must increase its capital stock. The capital increase is necessary when the company wants to expand its activities, make new investments, obtain additional resources to achieve its purpose, among others.

The capital increase operation may have significant impacts on the company's corporate structure, since the new resources obtained may imply in a dilution of the shareholding interest of the existing partners or shareholders. For this reason, it is important that the operation be conducted properly, in compliance with the applicable law and in conjunction with specialized legal and financial advice.

There are several ways of increasing the capital stock of a company in Brazil, the main ones being the following:

1. Capital increase with investment by the partners: the company's partners decide to make a financial contribution in the company, i.e., place more financial resources in the company. In the case of limited liability companies, this increase may be by issuing new quotas or increasing the nominal value of the quota.

2. Capital increase with the incorporation of reserves: the company may use its profit reserves or other accumulated resources to increase the capital stock, without the need of financial contribution from the partners. This form of capital increase is known as incorporation of reserves.

3. Capital increase with the issue of new shares (OPA): companies, in this specific case, companies, decide to issue new shares for sale in the market, with the objective of raising financial resources. In this case, the company must comply with certain legal and regulatory requirements, such as registering the issue of shares with the Securities and Exchange Commission (CVM). OPA stands for "Takeover Bid".

4. Capital increase with the entry of new investors: the company may receive investments from third parties, which can be, among other characteristics, angel investors, venture capital or private equity, in exchange for equity participation.

Within each form of capital stock increase commented above, there are several ways to materialize the capital stock increase, such as using debt and/or assets to contribute to the capital stock.

In the case of capital increase by investment of the partners or shareholders themselves, we can observe the realization of the famous AFACs, or, capital increase by capitalization of assets, in the case of corporations.