Forms of capital increase: AFAC and capitalization of assets

We have already seen some ways of increasing the capital stock of a company and that there are several ways of contributing value within each form of increase. There are, in fact, many ways.

We can say that within the possibilities of capital increase by the shareholders or partners themselves, there are some mechanisms that can be used to increase the capital stock. The AFAC and the capitalization of assets are two of these mechanisms.

AFAC

It is a type of capital increase by anticipation, which can only be performed by the partners/shareholders of the company.

In this type of increase, the partner contributes capital to the company, which in the future will be converted into a capital stock increase. This operation is commonly used when the partners intend or need to advance capital for the benefit of the company, but do not want to formalize the capital increase at that moment. In other words, differently from other contribution possibilities, the AFAC is first integrated to the company's equity, and only then it is recorded in the company's bookkeeping.

The AFAC can be retractable or non-retractable. To be used with the purpose of increasing the corporate capital, it must be non-retractable - meaning that it cannot be annulled or changed. Therefore, the most important point to pay attention to regarding the AFAC is that it is not characterized as a loan agreement or donation from the partner to the company. If the AFAC is declared retractable, it may call the Federal Revenue's attention for its taxation.

Capitalization of assets

In a corporation, the rule is the capital increase by share subscription. The exception to this rule is the increase by incorporation of reserves, when no new shares are issued. The capitalization of assets is a form of capital increase by share subscription used in joint stock companies, which differs from the contribution of financial resources made directly by shareholders.

The capitalization of assets, then, occurs when there is a previous determination of the asset that should be used for the capital stock increase, that is, the company chooses the object, the asset, that it wants to be used to compose its capital stock. This type of increase is interesting when the company visualizes that a certain asset can be very advantageous for its economic activity, for example.

It happens as follows: an EGM is called to deliberate on the capital increase, in which the specific asset that will be used to accomplish the increase will be defined (it does not matter who owns the asset; whether it is a shareholder or not - the capitalization is done precisely as a strategy of the company to "call" a specific asset to its capital stock) and, in the same EGM, it issues the shares representing the capital stock increase. The increase is defined and completed at this EGM.

Order: 1º) Deliberation; 2º) Issue; 3º) Preference.

In the 30 days following the issue of the shares, the shares remain in treasury, and within the period of the preemptive right, shareholders may exercise their preemptive right in proportion to the shares they hold.

The shareholders who exercise the preemptive right (see that in the capitalization the preemptive right is also respected, although at a different moment) make the payment of the value of the shares, which will be delivered to the owner of the paid-up assets and the shares are delivered to those who exercised the preemptive right.

If the preemptive right is not exercised, the owner of the asset becomes a shareholder of the company, in proportion to the value of the asset incorporated to the capital stock.

The difference between the capitalization of assets and the contribution of funds made directly by the shareholders is that, in the contribution of funds, the preemptive right must be exercised prior to the issue of shares, i.e., in the contribution of funds by shareholders, the order is as follows: 1st) Deliberation; 2nd) Preference; 3rd) Issue.