What is a conditional capital increase?

Antwort

A conditional capital increase is a special form of capital increase under Art. 653 et seq. of the Swiss Code of Obligations (CO), where the company’s share capital is not increased immediately, but only when a specific condition is met – namely, the exercise of conversion or option rights. Typical examples include convertible loan agreements (CLA) and employee or board stock option plans (ESOP/VSOP). In these cases, the company grants third parties the right to convert their claim or option into company shares. The new share capital is created only once these rights are exercised – hence the term conditional capital. Legally, the general meeting must first adopt an articles of association provision on conditional capital, defining the maximum amount of the potential increase, the nature of the rights granted, and the eligible beneficiaries (e.g., lenders or employees). This allows future capital increases to take place without a new general meeting resolution, once the rights are exercised. Conditional capital is therefore a flexible and pragmatic instrument that enables companies to manage financing rounds efficiently, implement employee participation programs, and preserve investor confidentiality – especially in the context of convertible loans, where no disclosure of creditors in the articles of association is required.