Capital increase with convertible loans: preserving confidentiality and avoiding mistakes

In the case of convertible loan agreements (CLAs), disclosure of investors’ holdings in the articles of association can be avoided by executing the conversion through conditional capital already provided for in the company’s articles. In this structure, the set-off of the loan claim occurs automatically, and therefore Art. 634a CO does not require the publication of the creditor’s name, the amount of the claim, or the shares allocated in the articles of association or the commercial register.

Konsento makes capital increases through the set-off of convertible loans – also known as Convertible Loan Agreements (CLA) – easier, safer, and more efficient than ever before. With our intelligent digital platform, the entire process is seamlessly guided from start to finish: from recording the convertible loans to the automatic generation of all required proposals for the board of directors and general meeting, and the legally compliant creation of all documents – everything happens step by step, clearly structured and fully compliant. The platform coordinates all stakeholders – shareholders, convertible loan investors, the board of directors, notary, and auditor – in one secure digital workspace. Communication, approvals, and signatures take place entirely online. Thanks to the integration of qualified electronic signatures and online notarization by experienced notaries, the full process – from resolution to commercial register filing – can be completed digitally. Behind the technology stands the legal and notarial expertise of the Konsento team. Our intelligent process logic automatically identifies which form of capital increase – ordinary, conditional, or within the capital band – is legally optimal and prevents common mistakes in the set-off of convertible loans. At the same time, the human verification by the notary ensures that each capital increase is not only digitally efficient but also legally watertight. The result: a fully digital, legally secure, and confidential capital increase that saves time, avoids errors, and protects investor privacy – powered by Konsento.

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.

A set-off contribution is a form of capital increase in which the shareholder’s payment obligation is not fulfilled by a cash contribution but through the set-off of an existing claim against the company. According to Art. 634a of the Swiss Code of Obligations (CO), shares may be paid up by setting off a claim that a shareholder or creditor holds against the company. In this case, the articles of association must generally specify: the amount of the claim set off, the name of the shareholder or creditor, and the shares allocated to them. These details remain visible in the articles and are publicly accessible via the commercial register, but they may be deleted after ten years by resolution of the general meeting. The disclosure of such set-off transactions can be avoided by establishing a conditional capital clause in the articles of association.