Capital increases at the Greek public limited company and limited liability company

A capital injection into a Greek stock corporation is possible essentially through a capital increase, a shareholder loan, or a gift. For tax reasons, a capital increase is usually preferred. A capital increase attracts the capital accumulation tax, currently at a rate of 0.5% of the amount of the increase; the granting of a loan instead attracts stamp duty, the amount of which depends on the circumstances of the individual case.

A distinction is drawn between an actual and a nominal increase of the share capital. An increase is “actual” where new capital flows into the company; it is “nominal” where existing funds (reserves, profits) are converted into capital. An actual capital increase can be carried out by payment for subscribed shares or by set-off against liabilities (capitalisation of liabilities).

Increase against payment for new shares

The Stock Corporation Act 4548/2018 distinguishes between an ordinary and an extraordinary capital increase (Articles 23–24 of Law 4548/2018). An ordinary capital increase is effected by an amendment of the articles of association and requires a resolution of the general meeting passed by an increased majority; an extraordinary capital increase, by contrast, can be effected without amending the articles of association, by resolution of the board of directors or of the general meeting by simple majority, provided the articles of association so allow — for example, up to a maximum amount specified in the articles.

Every resolution for a capital increase must be filed for registration with the General Commercial Registry (ΓΕΜΗ) in order to become effective against third parties. The board of directors must certify that payment has been received within the required time limit (Article 20 of Law 4548/2018); this certification must likewise be published in the Commercial Registry.

On every issue of shares, the existing shareholders are, in principle, entitled to a statutory pre-emption right on equal terms (Article 26 of Law 4548/2018); no separate provision in the articles of association is required for this. The pre-emption right does not apply to capital increases against contributions in kind, nor to the acquisition of already existing shares. The general meeting may restrict or exclude the existing shareholders’ pre-emption right (Article 27 of Law 4548/2018); to do so, the board of directors must submit a written report on the reasons for the intended restriction or exclusion.

Increase by capitalisation of liabilities (debt-equity swap)

A further form of capital increase is the conversion of liabilities into share capital: the company sets off its liability towards a creditor against that creditor’s obligation to pay for new shares subscribed as part of the capital increase. No fresh capital flows to the company in this case; instead, outside liabilities are converted into equity, which eases the company’s financial position. A resolution of the general meeting on the capital increase, or on the issue of new shares for set-off against the liabilities, is required; clearly quantified liabilities that are verifiable from the accounts (e.g. loans documented in writing) generally do not require a separate valuation by experts.

Nominal capital increase

A nominal capital increase is carried out by capitalising reserves and profits and is predominantly an accounting exercise, since no new funds flow to the company as a result. Before profits can be capitalised, any losses carried forward must first be covered; in addition, a statutorily prescribed proportion of the annual profit must be allocated to the formation of the ordinary reserve.

Increase of the share capital of the GmbH (EPE)

A capital increase in an EPE always requires an amendment of the articles of association and requires a majority of three-quarters of the shareholders, who must also hold three-quarters of the share capital.

The new capital may be subscribed by the existing shareholders or by third parties. The existing shareholders have a pre-emption right, which may be excluded by the capital-increase resolution or by a unanimous shareholders’ resolution; where there are several shareholders, the pre-emption right is allocated according to their respective membership interests.

The GmbH Act (Law 3190/1955, as amended by Law 4541/2018) primarily governs the actual capital increase by new contributions; a nominal increase from reserves is nonetheless permitted. The capital-increase resolution must be registered with the General Commercial Registry (ΓΕΜΗ). Where the capital increase is carried out by contributions in kind or by capitalising reserves or liabilities, a valuation by independent experts is generally required.

Increase of the share capital of the IKE

For the IKE too, a capital increase always requires an amendment of the articles of association (Article 68(2) of Law 4072/2012); a majority of two-thirds of the membership interests is required.

The new capital may be subscribed by the existing shareholders or by third parties. The existing shareholders generally have a pre-emption right, which, however, does not apply to a capital increase by contributions in kind; the articles of association may restrict the pre-emption right to shareholders who hold capital contributions.

The articles of association may further provide that the capital is to be increased by new contributions at a specified time or upon a specified condition, or may make this dependent on a resolution of the management or of the shareholders. Unless otherwise agreed, all shareholders are obliged to participate in the capital increase in proportion to their interest.