Who in the company decides to increase capital (Paid Up Capital)?
Shareholder Approval Is Required
- An increase in Paid-Up Capital must be approved through a Shareholders' Resolution
- Directors cannot increase the company's Paid-Up Capital on their own, as doing so may violate company law requirements
What Is the Role of the Board of Directors?
- The board typically assesses the company's funding needs and proposes the amount of capital to be increased
- The proposal is then submitted to shareholders for approval
What If Shareholders Reject the Proposal?
- The company may explore alternative funding methods to meet its financial needs
- Common options include additional capital contributions from existing shareholders or funding from new investors
Equity Dilution as a Funding Method
- The company may issue new shares, resulting in the dilution of existing shareholdings
- Existing or new investors can subscribe to these shares and inject funds into the company
Summary
- An increase in Paid-Up Capital must ultimately be approved by shareholders
- The board of directors proposes the plan, while shareholders make the final decision
- If the proposal is rejected, the company may consider other financing alternatives.