A share issue may be carried out against payment or without payment. If the Articles of Association of the company stipulate a nominal value for the share, a share issue will inevitably result in an increase of the share capital, at a minimum with an amount corresponding to the nominal value of the issued shares. On the other hand, if the shares do not have a nominal value, the company may decide to credit the subscription price wholly or partly in unrestricted equity, instead of the share capital.
In connection with a share issue, the shareholders and, subject to a resolution of the shareholders, external parties, provide the company with equity capital through subscription of either new shares issued by the company or so-called treasury shares held by the company. In this case, the company may also gain new shareholders.
In case of a share issue against payment, it is also possible that the subscription price will be paid wholly or partly in other assets than cash. Such payment and assets are referred to as contribution in kind. Accordingly, contribution-in-kind issues can often be appropriate in corporate restructuring [Corporate Restructuring] or mergers and acquisitions [Corporate Acquisitions]. Use of contribution-in-kind must be sanctioned in the resolution regarding the share issue, to which must also be annexed an account specifying the contribution in kind, the payment that the contribution applies to, as well as the relevant circumstances for and methods of valuation of the assets. It is essential, that the financial value of the contribution in kind must not be less than the amount of subscription price for the shares at the time of payment of the contribution in kind.
A resolution of a general meeting of shareholders is required for a share issue. The general meeting may also authorize the Board of Directors to decide on a share issue, in which case the maximum number of shares to be issued shall be set in the authorization resolution. A resolution regarding a share issue against payment, as well as the number or maximum number of shares to be issued shall be notified to the Trade Register for registration within one month of the resolution. The shares that have actually been subscribed in the issue, on the other hand, must be notified for registration without undue delay, following full payment of the subscription price and fulfillment of other terms for subscription, if applicable. The share issue will lapse, if the shares are not registered within five years of the resolution regarding issue, or such short period as set in the resolution, if applicable. A resolution regarding a share issue without payment and the shares to be issued must be notified for registration without delay.
In a share issue, the existing shareholders normally have a pre-emptive right to subscribe the issued shares. Such right must be proportional to the number of shares held by the shareholders. If the company has a weighty financial (such as securing of the company's financing needs, or incentive schemes), it is possible to deviate from the pre-emptive right, in which case the share issue is referred to as a directed share issue. Since a directed share issue entails deviating from the principle of equal treatment of the shareholders, a qualified majority vote is required to pass such a resolution, which means that a at least two thirds (2/3) of the votes cast and the shares represented at the general meeting shall vote for the resolution regarding the share issue or authorization of the Board of Directors. A directed share issue can be carried out without payment only when there is an especially weighty reason both on the part of the company and taking into account the interests of all shareholders.