Companies must have a starting capital and, in most cases, the amount is fixed. For certain types of companies, it is possible opt for variable capital. Business-and-Law study here functioning of variable capital.
Companies eligible to use the variable capital
Only companies that are not public limited companies (SA) may employ variable capital. The SARL, SAS, SNC and civil companies can thus use this practice.
Essential notions concerning the use of variable capital
The use of variable capital implies the understanding of three main aspects: the subscribed capital, the floor capital and the maximum authorized capital.
The subscribed capital
The subscribed capital is the amount of share capital listed in the articles of association.
This amount is closely linked to the floor capital.
The floor capital
The floor capital is the minimum amount below which the share capital cannot be reduced. This minimum must not be less than 10% of the subscribed capital initially recorded in the articles of association.
The floor capital is mentioned in the notice of incorporation of the variable capital company.
The maximum authorized capital or ceiling capital
The maximum authorized capital or ceiling capital is the maximum amount that the share capital can reach without it being necessary to carry out a capital increase with a decision by the shareholders' meeting.
No limit is imposed on the determination of the maximum authorized capital.
When is variable capital possible?
Variable capital is possible when the company was founded. It is then necessary to provide for the operation of the variable capital in the articles of association and to carry out the appropriate publication formalities.
It is also possible to choose the variable capital after the establishment of the company. This requires a unanimous decision of all the partners and the insertion of a clause linked to variable capital in the articles of association.
Clause relating to variable capital
When the partners have decided to use variable capital, an article of the articles of association must clearly govern this form of organization and include several elements:
- the subscribed capital,
- the floor capital,
- the maximum authorized capital.
If these points are not explained in the statutes, any increase in capital without the agreement of the members is void.
Furthermore, the statutory clause must specify who is the entity responsible for deciding on increases or reductions of capital within the limits of the variable capital.
Legal obligations for a company with variable capital
Companies with variable capital must imperatively mention on their commercial documents (invoices, quotes, T&Cs, etc.) the expression “variable capital”.
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