When a company wishes to expand or is in its initial phase, financial leverage is necessary. After all, at the start of a company there are expenses until it starts to generate profit. Therefore, there is share capital, which is an option for companies to have money for salaries or equipment in the initial phase of a company. 

With this article from Advogados em Braga, you will learn more about share capital. What it is, what its advantages are, and what types of share capital exist are highlighted points. 

O que é o capital social de uma empresa?

The share capital of a company It is the capital invested by partners or shareholders of a company in a phase when it is still starting out. This capital often occurs in the form of money and is intended for salaries or rent. 

O capital social de uma empresa serve como um pilar financeiro fundamental, representando o valor total dos bens e do dinheiro que os sócios ou acionistas comprometem a investir no negócio. É a base financeira inicial que permite à empresa operar, realizar investimentos e enfrentar os desafios do mercado.

In a company, share capital is essentially used for initial expenses, such as equipment, salaries, or rent. Costs associated with business expansion, as well as being a guarantee of expenses shared among the partners of a company, are also key aspects of share capital. 

Os tipos de capital social são: * **Capital Social Nominal:** O valor que as sociedades estabelecem no seu contrato ou estatuto social, que pode ser alterado posteriormente. * **Capital Social Real (ou efetivo):** O valor efetivamente integralizado pelos sócios, ou seja, o montante de dinheiro ou bens que já foi entregue à sociedade. * **Capital Social Subscrito:** O montante de capital que os sócios se comprometem a entregar à sociedade, nem sempre integralizado de imediato. * **Capital Social Autorizado:** Em algumas jurisdições, é o montante máximo de capital que uma sociedade pode emitir sem necessidade de alteração estatutária.

Within share capital, two types stand out: subscribed share capital and paid-up share capital. 

Subscribed share capital refers to the total amount that the partners have committed to investing in the company, while paid-up share capital is the amount already effectively invested by the partners in the company. 

Subscribed Share Capital

• It is the commitment made by the partners to invest a certain amount in the company.
• It can be equal to or greater than the paid-up share capital.
• Represents the total value that the partners have agreed to contribute for the formation of the company or for future capital increases. 

Paid-up Share Capital

• It is the part of the subscribed capital that has already been effectively paid or delivered by the partners to the company.
• It can be equal to the subscribed share capital, or less, if part of the subscribed amount has not yet been paid up.
• Represents the financial resources, goods, or assets that have already been transferred to the company's possession. 

Besides these two main types, social capital can be classified in other ways, depending on the context. For instance, in some situations, we speak of nominal social capital (the value declared in the articles of association) and real social capital (the value effectively available to the company). 

How to determine a company's share capital

The indicated way to define a company's share capital value is measured by the total amount that will be needed to spend in the initial projection phase of a company. 

What are the ways to realise share capital?

Share capital can be realised in various ways:

Incoming funds: Investors inject money into the company;

Payment in kind The investors contribute assets such as property or equipment necessary for the company's activities. 

How to change a company's share capital?

To liven up a company's share capital, specific steps should be followed, such as:

• General meeting of partners to deliberate on the amendment;
• a deed is made in Notary, with information such as who can participate in this change or dates of the changes;
• The change must be communicated to Her Majesty's Revenue and Customs. 

O capital social mínimo para abrir uma empresa em Portugal é de 1 euro.

The minimum share capital required to set up a company in Portugal varies depending on the type of company. For private limited companies (Lda), including single-member private limited companies, the minimum share capital is 1 euro per share, meaning 1 euro for a single-member company and 2 euros for a company with two shareholders. For public limited companies (SA), the minimum share capital is 50,000 euros. 

• Private Limited Companies (Lda) Share capital is divided into quotas, and each quota must be worth at least 1 euro. Thus, in a company with two partners, the minimum share capital is 2 euros. 
• Public Limited Companies (PLC) The minimum share capital is €50,000 and it is divided into shares. 
• Sole Proprietorship Limited Company In this type of company, the minimum share capital is 1 euro. 
• The Importance of Social Capital Share capital represents the initial investment in the company and can be used to cover start-up and operational costs. 
• Capital Realisation Share capital can be paid up (deposited in a bank account) by the end of the company's first year of operation.

What are the differences between subscribed capital and paid-up capital?

Share capital is not a single definition, but is divided into two options: subscribed capital and paid-up capital.

Subscribed capital is the capital that shareholders have agreed to invest in a company, while called-up capital refers to the capital that has actually been invested. 

What is the difference between equity capital and share capital?

Share capital is the capital invested by shareholders in a company. Equity capital includes share capital and also other sources of finance such as profits. 

The advantage of increasing a company's share capital is that it strengthens its financial position, allowing it to take on more ambitious projects or absorb greater risks.

Increasing a company's share capital brings several advantages. Among these advantages are:

• Greater credibility for lenders and investors;
• The higher the social capital, the easier it is to get bank loans.;
• Share capital functions as a form of monetary reserve in difficult financial situations;
• Having a larger social capital allows a company to have a greater investment capacity. 

Can the share capital be altered?

Yes, it is possible to alter the share capital. This can happen to increase or decrease the value of the share capital. This change can be made at a general meeting with the responsible partners present for the decision-making.

Increase in Share Capital:

• It can be used to finance new projects, attract investors or strengthen the company's financial position. 
• This can be done through cash contributions, assets, or the incorporation of reserves. 
• The decision to increase capital generally requires the approval of a majority of the partners' votes, with specific rules for each type of company (e.g., public limited companies and limited liability companies). 

Reduction of Share Capital:

• It can be made to cover losses, release excess capital, or for other specific reasons.
• The reduction also requires a deliberate decision by the partners, with specific procedures and requirements, such as the disclosure of the end of the reduction in the notice of the general meeting.

It is advisable to reduce share capital in the following circumstances:

There are situations where a reduction in share capital is recommended, such as:

• When a company has accumulated losses;
• In situations where the company has surplus share capital, and therefore can return the excess to investors;
• In situations of financial restructuring, where the aim is to improve the company's financial condition. 

The role of a lawyer in share capital operations is to provide legal advice and guidance throughout the process. This includes: * **Structuring:** Advising on the most appropriate legal structure for share capital operations, such as the issuance of new shares, buybacks, or reorganisations. * **Documentation:** Drafting and reviewing all necessary legal documents, including share purchase agreements, subscription agreements, and company resolutions. * **Compliance:** Ensuring compliance with all relevant laws and regulations, such as company law, securities law, and tax law. * **Due Diligence:** Conducting legal due diligence to identify any potential risks or liabilities associated with the operation. * **Negotiation:** Assisting in negotiations with other parties involved in the transaction, such as investors, sellers, or regulatory bodies. * **Registration:** Overseeing the registration of share capital changes with the relevant authorities, such as the Companies House.

Mm Solicitor It is a fundamental piece when it comes to social capital operations. A legal professional is someone who is responsible for the management and drafting of documents, provides legal advice, and oversees operations. 

No Lawyers in Braga Find legal professionals with the necessary qualifications to provide support in all quadrants on the theme of social capital. 

Conclusion 

Share capital is essentially when a company is in its initial stage. The money for share capital comes from partners who provide money or material assets, such as equipment, so that the company can begin to operate. 

The value of the share capital can be changed, thus it can be increased or reduced, according to the needs of the company and the people involved. For this, there must be a general meeting of the partners, then the situation must be documented and formalised at a notary's office, after which the action must be communicated to the Tax Authority. 

Having a lawyer present is very important, as this professional assists with matters related to legislation and is a support and advisor regarding operations linked to share capital.