The change of share capital is possible in the limited liability companies. These changes include an increase and reduction of share capital, which can't be below the legal minimum.
In accordance with the Companies Law, the minimum share capital is 100 dinars. With some special law can change that this minimal amount to be more than 100 dinars for those companies which do certain businesses.
Increase of the company's share capital
In accordance with the Companies Law and paragraph 146. of the Law, the share capital can be increased in various ways:
- New investments from old members or a new member,
- Turning company's reserves or profit into share capital,
- Turning or conversion of claims toward the company into share capital
- Status changes which have an increase of share capital as its consequence
- Turning ( conversion) additional payments into share capital
The increase of capital of the limited liability company is based on the board's decision, which decides on change and increase of the LLC's capital. According to that, the capital can't be increased with new contributions before payment is done. The only exception is when there is a new member who becomes a part of the company, so the decision can be brought before the new member's capital is fully paid in (or invested), but only under certain condition. The new member must at the same time fully pay in the capital or invest his contribution into the company.
The documentation for the increase of share capital is:
- Registrational application for the increase of the LLC's share capital,
- Board's decision about the increase of share capital,
- Bank's confirmation about payment of money contribution ( or the member's memorandum about the evaluation of non-monetary contribution or the authorities confirmation about the evaluation of non-monetary contribution),
- Yearly financial report,
- The proof of paying compensation for change of data about share capital.
HLB T&M Consulting prepares the documentation related to the increase of share capital and submits the applications to the authorities. We give operative and advisory services to all legal persons and the LLC and help them increase the quality of their work.
The reduction of the LLC's share capital
In accordance with the Companies law and paragraph 147. of that Law, the LLC can reduce its share capital. In that case, the amount can't be lower than the legal minimum (100 dinars). Legitimate reasons for the reduction of the capital are:
- Covering the company's losses
- Creating or increasing the company's reserves for covering future losses or for the increase of share capital from the company's net property
- Relief from payment commitment, or investing the investment in the company
- Withdrawal or cancellation of stake
- Cancellation of own stake due to indisposal
As well as in the previous case, the decision about the change and reduction of share capital is made by the company's board. This decision must be registered in the Business registers agency and the deadline for its registration is three months from making board decision. If the decision is not registered in, than it becomes invalid.
The reduction of share capital and creditor's protection
The decision of share capital reduction must have an invitation for the creditors to report their claims for securing them in accordance with the clauses of creditor's protection.
There are two situations when the reduction of share capital can be done. Those are:
- Reduction without applying the clause about creditor's protection – carried out in one step
- Reduction with applying the clause about creditor's protection – carried out in two steps
In the first case, when the reduction of capital is carried out in one step, it implies that the application and change are submitted only to the BRA. In the second case, when the clauses about creditor's protection are applied, reduction is done is carried out in two steps. First, the decision about change is registered and published on the official site of the BRA. In the second step, the decision about the reduction is carried out.
According to the rule, it is considered that the reduction of share capital starts on the day when this change is registered in the Business registers agency, which can be seen on the registers' site.
Accounting agency HLB T&M Consulting offers you competent consulting services related to the legal procedure for increase and reduction of share capital of the company as well as the assistance with submitting the application to the business register agency.
Contact us for all the questions related to the change in your company's capital and ensure in the quality of our work.