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Do you want to increase Capital against reserves or profits of the enterprise

Do you have to increase the share capital of the company from reserves ?. Note that for this, a General Meeting must have passed a balance within the six months prior to the agreement of capital increase and that it must be verified by the auditor of the company or by an auditor appointed by the Company Register at the request of administrators, if society were not required to be audited.

As you know if you want to increase the share capital of the company, it can be achieved by creating new shares or issuing new shares or by increasing the nominal value of the existing ones. In both cases, the capital may be increased by means of new cash contributions in kind or social heritage, including the provision of credits against the company or against profits or reserves already incorporated into it last approved balance sheet.

A capital is a form of business financing is to increase the equity of a company increasing its capital.

This funding can be obtained with the existing shareholders of the company with the contribution of new capital, or sacrificing the remuneration of shareholders, so that the expansion is done against reserves or undistributed earnings allocated to reserves.

As it regards the initiative of the enlargement, the Board of Directors who normally corresponds propose to the shareholders' meeting, though, by law, any shareholder holding more than 5% property may request that a meeting be convened and propose their own project alternatives, including increase capital.

Capital increase against reserves or profits


It is to use available reserves as share premium, legal reserve and undistributed earnings allocated to reserves. The realization of a capital increase of this type involves making an accounting entry consisting of a transfer of the reserve account or benefit to social capital.

With the capital increase against reserves, the amount of capital and reserves remains the same, therefore any quantitative financial change does not occur. Instead, it means a qualitative change because society happens to have availability of their reservations to not be available for having transferred to the capital account.

To capitalize reserves the requirement that they are freely available must also be met. The law sets limits freely available, stating that:

The general meeting resolved on the implementation of the profit according to the approved balance sheet.Once as are provided by law or statute, they may only be distributed dividends against profit for the year or unrestricted reserves if the value of equity is not or, as a result of the distribution, will not be less than capital stock. For this purpose, the benefits recognized directly in equity will not be subject to distribution, directly or indirectly.

If there are losses from previous years that cause the value of the net assets of the company is less than the amount of share capital, the proceeds will be used to offset these losses.

Any distribution of benefits is also prohibited unless the amount of available reserves is at least equal to the amount of research and development expenditures appearing on the balance sheet.

When the capital increase is made against reserves, may be used for this purpose available reserves, reserves for premium of shares or share issue and the legal reserve in full, if society were limited liability or in the amount exceeding 10% of the increased share capital, if society was anonymous.
Balance and auditing.
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