New Company Law 2023: new possibilities through the capital fluctuation margin
As of 1 January 2023, public limited companies have the option to adjust their capital more flexibly.
Greater hurdles under old law
If a company wanted to create new shares to generate equity or eliminate overcapitalisation under the old law, an authorised capital increase or a capital reduction had to be carried out in each case.
Under the new law, this process can be accelerated by having the articles of association provide for a so-called “capital fluctuation margin”. The articles of association authorise the board of directors to change the share capital within a certain range for a certain period of time.
When structuring the capital fluctuation margin, the following points must be strictly observed:
- A capital fluctuation margin is only possible for public limited companies, not for limited liability companies.
- The introduction of a capital fluctuation margin is only possible for joint-stock companies that have not waived the limited audit of the annual accounts (do not provide for an opting-out)
- The limits of the increase and reduction must be specified in the articles of association. The capital entered in the commercial register may not be exceeded or undercut by more than half.
- The period of time during which the share capital may be changed must be specified and may not exceed 5 years.
- The subscription rights of the shareholders must be safeguarded.
Duties of the board of directors
After each adjustment of the share capital, the board of directors is obliged to adjust the articles of association accordingly.
The resolution on the amendment of the articles of association and the findings of the board of directors must be publicly certified and entered in the commercial register. In summary, it can be stated that the board of directors can structure the business year more flexibly through the capital fluctuation margin, but in doing so, some prerequisites and time limits must be observed.
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