Head of practice
Attorney. Specialist in commercial and labor law. Over 16 years of experience in legal support of businesses - debt recovery, contract enforcement, recovery of damages, commercial property and lease disputes.
Increase of authorized capital
Increasing the authorized capital of a limited liability company is one of the most common corporate tools for business development. In practice, company owners face the need to attract additional financing, change the ratio of participants’ shares or prepare the business for scaling. It is in such cases that the issue of increasing the authorized capital of an LLC arises.
Although the procedure seems formal, incorrect formalization of participants’ decisions or violation of established deadlines may lead to corporate conflicts and problems with state registration of changes. Therefore, it is important to understand not only legislative requirements, but also the practical nuances of implementing such a decision.
How to increase the authorized capital of an LLC
Authorized capital may be increased both through additional contributions of participants and by attracting new investors to the company. The choice of a specific mechanism depends on the business goals and corporate structure of the company.
Most often, capital increase is used for:
- attracting additional financing without formalizing a loan;
- entry of a new participant into the LLC;
- increase of the share of a separate participant;
- improving the financial stability of the company;
- fulfilling the requirements of potential partners or investors.
It is important to remember that before increasing the authorized capital, all participants must fully make their previous contributions. This is one of the basic legislative requirements, which is often underestimated at the document preparation stage.
Procedure for increasing the authorized capital of an LLC
The procedure for increasing the authorized capital of an LLC has an algorithm clearly defined by legislation. Although at first glance it looks quite simple, in practice even minor mistakes in corporate documents may lead to refusal of state registration or become grounds for disputes between participants.
In general, the procedure includes the following stages:
- adoption by participants of a preliminary decision on attracting additional contributions;
- determination of the amount of the future increase in authorized capital and the procedure for contributing funds or property;
- making additional contributions by participants or third parties within the established term;
- approval of the results of contribution after completion of the specified period;
- determination of the final amount of authorized capital and the new ratio of participants’ shares;
- state registration of the relevant changes in the Unified State Register.
It is important to understand that the decision to increase authorized capital is made in two stages. First, the participants agree on the intention to attract additional contributions and determine the conditions for making them. Only after the actual contribution of funds or property is the final decision made to approve the results and the new distribution of corporate rights.
Special attention must be paid to the content of decisions of the general meeting. The documents must clearly define the amount of additional contributions of each participant, the terms for making them, the procedure for redistribution of shares, as well as the new amount of the company’s authorized capital. It is inaccuracies in these provisions that are one of the most common reasons for refusal by the state registrar to enter changes into the Unified State Register.
Separately, situations should be taken into account when a new investor enters the company. In such cases, it is advisable to regulate in advance issues of corporate governance, decision-making mechanisms and protection of participants’ interests, since after increasing the authorized capital, not only the size of the company’s assets changes, but also the balance of corporate control.
What documents are required to increase authorized capital
Depending on the specific situation, the list of documents may differ. At the same time, in most cases the following documents are used:
- minutes or decision of the general meeting of participants;
- documents confirming the making of additional contributions;
- new version of the charter or amendments to it (if necessary);
- application for state registration of changes;
- documents regarding the new participant, if they enter the company.
Risks during increasing authorized capital
Many entrepreneurs believe that the main difficulty lies in preparing documents. In fact, risks often arise much earlier – at the stage of determining the transaction structure between participants.
| Potential situation | Possible consequence | What should be taken into account |
|---|---|---|
| Violation of contribution deadlines | Impossibility of completing the procedure | Control the deadlines defined by the meeting decision |
| Mistakes in corporate documents | Refusal to register changes | Conduct legal review of documents |
| Uncertainty regarding participants’ shares | Corporate dispute | Agree in advance on the ownership structure |
| Entry of a new investor without proper regulation | Conflict between participants | Provide mechanisms for protecting the interests of the parties |
In addition to formal requirements, tax and corporate analysis of the specific situation is important. This is especially relevant when the participants include foreign companies or non-resident individuals.
Legal support for increasing the authorized capital of an LLC
In practice, the procedure for increasing authorized capital is rarely limited to preparing only one protocol. It is necessary to take into account the corporate structure of the business, existing arrangements between participants, investment plans and future risks.
The team of “Prikhodko and Partners” regularly supports projects involving changes to the corporate structure of Ukrainian companies. Our practical experience allows us not only to prepare the necessary package of documents, but also to assess possible consequences for business owners even before the procedure begins.
In many cases, the lawyers of “Prikhodko and Partners” help choose the optimal mechanism for attracting financing, since increasing authorized capital is not always the only or best solution. Proper legal analysis at the start allows avoiding unnecessary time costs and potential corporate disputes in the future.
Contacting the specialists of “Prikhodko and Partners” is especially relevant in cases where the entry of a new investor, a change in ownership structure or comprehensive reorganization of corporate relations between the company’s participants is planned.
Calculate the cost of services
1 question
Was the company's profit distributed?
2 question
Do you want to increase the authorized capital with the help of cash deposits?
3 question
Are all members of the company in Ukraine?
Can the authorized capital of an LLC be increased through a new participant?
Yes. The legislation allows admitting a new participant to the company by making an additional contribution and corresponding redistribution of shares.
How long does the procedure for increasing authorized capital take?
The duration depends on the term for making additional contributions defined by the participants. After completion of corporate procedures, state registration of changes usually takes minimal time.
Is it mandatory to amend the charter after increasing authorized capital?
Not always. The need to make changes depends on the content of the current charter and the way information about the amount of authorized capital and participants’ shares is reflected in it.
You may also need:
OBTAINING A BANKING LICENSE IN UKRAINE
Read more
License for professional activity on the securities market in Ukraine
Read more
Internet casino license
Read more
Obtaining a license for collection in Ukraine
Read more
Liquidation of problematic assets in Ukraine
Read more
Change of the director of the joint-stock company
Read more
Hazardous waste license
Read more
Increase in the authorized capital of the enterprise
Read more
License to import medicinal products in Ukraine
Read more
License for gaming machine halls
Read more
Introduction of corporate rights to the authorized capital
Read more
Creation of a foreign holding in Ukraine
Read morecall back
during the day
Telegram
Viber
WhatsApp
Facebook
Instagram