For the company
The contribution is not revenue: it goes into equity. Registration tax and stamp duty at a fixed rate on the deed.
Companies · Extraordinary transactions
SRL capital increase in Turin
A capital increase is used to bring in resources, to bring in a new member, or because losses have eroded the capital and the law requires it. These are three different situations, and the technique changes in each one.
01 · The distinction
Paid capital increase and free capital increase
The distinction is clear-cut and concerns where the resources come from: in a paid increase, new money or assets come in from outside; in a free increase nothing comes in, and existing reserves are simply moved to capital.
| Paid | Free | |
|---|---|---|
| Source of the resources | New contributions from members or third parties | Available reserves already in equity |
| Effect on equity | Increases it | Unchanged: only its make-up changes |
| Effect on holdings | May change the percentages, if not everyone subscribes | Percentages stay the same |
| New members coming in | Possible | Not possible |
| Resolution | Extraordinary shareholders' meeting, notarial deed | Extraordinary shareholders' meeting, notarial deed |
| When it is used | Cash is needed or someone is to be brought in | The aim is to strengthen the capital formally |
A free increase does not bring a single euro into the company: it moves sums already in equity from reserves to capital. It gives the structure formal solidity; it does not fund the business. If you are looking for resources, you need a paid increase or a shareholder loan.
02 · Protecting members
Members' right to subscribe
In a paid increase, existing members have the right to subscribe the part proportional to the holding they already own. This is the protection against forced dilution.
- The right applies in proportion to the holding owned.
- The resolution sets a deadline for exercising it, no shorter than the one set by the law.
- The unsubscribed part can be offered to the other members or, where allowed, to third parties.
- Excluding or limiting the right requires a provision in the articles of association and qualified majorities.
- A member who does not subscribe suffers dilution of their percentage.
- In an SRL (Italian limited liability company), a member who opposes the exclusion of the right has a right of withdrawal.
Why the share premium matters
It is the tool that protects those who were already there.
- Whoever comes in later pays more than the nominal value of the holding
- The premium makes up for the value already built by the existing members
- Without a premium, the new member buys at a price that does not reflect the business
- It goes into a reserve, not into capital
03 · How it is done
The steps of an SRL capital increase
The increase requires a resolution of the extraordinary shareholders' meeting and goes through a notary. The timing depends on how the contributions are made.
- The contribution can be in cash, in kind or in receivables.
- Contributions in kind require a sworn valuation report, with content set by the law.
- It is possible to contribute work or services, backed by an insurance policy or a surety.
- Waiving a shareholder loan can serve as the contribution, with its own tax effects.
The resolution
Extraordinary shareholders' meeting before a notary, stating the amount, the arrangements, the subscription deadline and any share premium.
Subscription
Members exercise their right within the deadline. Whoever subscribes takes on the obligation to pay what is due.
Payment
For cash contributions, the portion set by the law is paid on subscription, and the rest according to the terms of the resolution.
Registration
The notary files the resolution with the Registro delle imprese (the Companies Register). The increase takes effect on registration, with a statement that it has been carried out.
04 · When it is compulsory
Recapitalisation after losses
This is the case where the increase is not a choice. When losses exceed certain thresholds relative to capital, the law requires action.
- When losses reduce capital by more than a third, the directors must call a shareholders' meeting without delay.
- If by the following financial year the loss has not fallen below the threshold, the meeting must reduce the capital accordingly.
- If losses take capital below the legal minimum, it must be reduced and at the same time increased to at least the minimum, or the company must be converted or wound up.
- Inaction by the directors leads to personal liability.
- The early warning measures require the crisis to be detected before it reaches this point.
- Liquidation is the alternative when recapitalisation is not feasible.
The so-called "accordion transaction" (reducing capital for losses and increasing it at the same time) is the usual way to put a company back on a sound footing. It must, however, come with a credible plan: increasing capital in a company that keeps making losses only puts the problem off by one financial year.
05 · Taxes
Tax treatment
A capital increase does not in itself create taxable income for the company, but it does affect the members' position.
For the member
The amount paid in increases the tax cost of the holding, which will count if it is sold or on liquidation.
The share premium
It goes into a capital reserve, with its own rules on distribution and taxation.
Contributions in kind
They may give rise to capital gains for the contributor, based on the value assigned in the valuation.
Waiving loans
It has specific treatment, which depends on the tax value of the receivable waived.
Free increase
It does not create taxable income for members, because there is no distribution: only the make-up of equity changes.
06 · Coming in
When you need to bring someone in
This is the most delicate use of a capital increase, because it redraws the balance of power in the company.
- The new member comes in by subscribing a reserved increase, with the other members' pre-emption rights excluded.
- Exclusion requires a provision in the articles of association and qualified majorities, and gives dissenting members the right to withdraw.
- The share premium is how the new member is made to pay for the value already built.
- The shareholders' agreements should be set out in advance: governance, special rights, exit clauses.
- The new member's due diligence is the stage at which the company's unresolved problems come to light.
- The alternative is a transfer of holdings: in that case the money goes to the outgoing members, not to the company.
The difference is substantial and should be chosen deliberately: with a capital increase the money goes into the company and funds the business; with a transfer of holdings the money goes to the members who sell. If you are looking for resources for the business, you need the first, not the second.
Frequently asked
The questions that keep coming up
Can I increase the capital without putting in more money?
Yes, with a free increase, which uses available reserves already in equity and turns them into capital.
It should be clear, however, that no new resources come in: equity stays exactly the same and only its make-up changes. It gives formal solidity; it does not fund the business.
What happens to me if I do not subscribe?
Your percentage holding falls proportionally, because the capital grows while your holding stays as it was. This is the dilution effect.
Pre-emption rights exist precisely to avoid this: within the deadline set by the resolution you can subscribe the part proportional to your holding and keep your percentage.
Why am I being asked for a share premium to come in?
Because the economic value of the company is not the same as the nominal value of its capital: whoever comes in later finds an established business, with customers, know-how and reserves built by others.
The premium makes the new member pay for that difference, so that those who were there before are not penalised. It goes into an equity reserve, not into capital.
Losses have wiped out the capital. Do I have to recapitalise?
If capital has fallen below the legal minimum you have three routes: reduce it and at the same time increase it to at least the minimum, convert the company into a type with lower capital, or put it into liquidation.
Doing nothing is not an option: inaction by the directors leads to personal liability. The choice should be made on the real prospects of the business, not just on the financial statements.
Let's talk
Who comes in, and on what terms, is decided before the shareholders' meeting
Share premium, pre-emption rights, shareholders' agreements: these are the clauses that set the balance of power for the years that follow.