When a company decides to raise capital, it needs more than just investors and funding: it requires legally sound resolutions to support the process. In this blog post, we take a closer look at which resolutions are required, how they must be structured, and why they are crucial for shareholders and the company.
The Two Key Resolutions in Every Capital Increase
Regardless of whether it's an ordinary capital increase, a conditional capital increase, or an authorized capital band: two resolutions are always required:
- Shareholders' Meeting Resolution – the shareholders' approval of the capital increase
- Board Resolution – the implementation of the capital increase
1. The Shareholders' Meeting Resolution
The shareholders' meeting is the supreme body of a stock corporation – therefore, its approval is required when new shares are issued. Issuing new shares leads to dilution of existing shares, affecting not only the ownership stake but also voting rights and dividend entitlements.
For certain types of capital increases, such as the capital band or the conditional capital increase, a statutory amendment is also required, which must be notarized.
Quorums:
- Simple majority is sufficient for the ordinary capital increase
- Qualified majority (2/3 of represented votes and the absolute majority of represented share value) for capital band and conditional capital increase
Why are the thresholds higher for a capital band and a conditional capital increase? The board receives broader powers over a longer time horizon – thus, shareholder rights require stronger protection.
Notarization requirement: Shareholders' resolutions must be notarized – even in virtual or hybrid meetings.
2. The Board Resolution
The so-called implementation resolution is passed by the board and is not subject to notarization, but must be formally recorded and signed. This protocol is then submitted to the notary.
The notarized confirmation resolution must include the following:
- Number of newly issued shares
- Amount of the capital increase
- Subscribers and form of contribution
Additionally, a capital increase report must be prepared to transparently document the capital increase. This report and other required documents are submitted to the commercial register.
The board must also observe the following deadlines:
- Ordinary capital increase: Must be completed within 6 months
- Capital band: Valid for 5 years
- Conditional capital increase: No deadline
The capital increase is considered legally complete upon registration with the commercial register.
Why Are the Legal Requirements So Strict?
- Shareholder protection and anti-dilution: Shareholders must approve any reduction in their stake due to new investors. They also have a statutory pre-emptive right to participate in the capital increase. The shareholders' meeting can limit this right or authorize the board to manage unexercised pre-emptive rights.
- Transparency and traceability: Shareholders must be able to assess how the capital increase affects their rights. This requires detailed resolutions. Documentation must also be clear and accessible after the fact.
- Legal certainty and equal treatment: Legally defined procedures ensure that all shareholders are treated equally – and that all companies are assessed by the commercial register according to the same standards.
- The role of the notary: The notary ensures that all legal requirements are met and that the rights of all parties are protected – including both shareholders and creditors.
- Capital contribution control: To prevent capital from being recorded that was never actually paid in, a full audit is required. This includes the capital increase report, audit confirmation, and supporting evidence – which also protects creditors.
- Registration in the commercial register: The capital increase only becomes legally effective upon registration. From that point on, the new shares can be issued and the capital used.
Sidebar 1: Shareholders' Meetings – Physical, Digital, or Proxy?
Today’s laws are flexible: meetings can be physical, hybrid, or entirely virtual. A fully virtual meeting requires a specific statutory clause.
For extraordinary meetings, it is common for shareholders to be represented by proxy – providing flexibility for all parties involved.
Sidebar 2: Do All Board Members Need to Be Present for the Board Resolution?
Statutes often contain a clause allowing a single board member to represent the board before the notary for capital increases. If not regulated, this can also be resolved in the board or shareholders' resolution. In practice, the full board is rarely present – usually, one or two members represent the board.
Interested? Then …
… watch the video!
What resolutions are essential to make your capital increase legally secure?
In this episode, you’ll learn which shareholder and board resolutions matter most, what formalities to observe – and how to avoid common legal pitfalls during your funding round.
Then click your way into our YouTube webinar: Part 8 - The Right Resolutions for Your Capital Increase | SeedFast-Webinar financing round
… read the next blog post!
How can you structure and execute your capital increase efficiently, securely, and in compliance with the law?
In our final article, we show you how SeedFast supports you from planning to registration – digitally, professionally, and at a fixed price.
Want to know how? Then read more: Coming soon in our next blog post!
… plan your financing round with us!
Thinking about raising capital?
We support you in making your round smooth, investor-ready and compliant – without the legal headaches.
Start your inquiry at www.seedfast.ch.
… and if you have questions: reach out to us!
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www.konsento.ch - Lex Futura – the law firm for innovative legal support for startups
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