1. ¿What are the net assets of a company?
Net assets are the results obtained when subtracting the liabilities (debts and obligations) from the assets of the company (assets and rights). Once all debts and obligations of the Company are cleared, the remaining assets and rights are the net assets.
2. What do we understand by asset imbalance?
A company is in a situation of asset imbalance when the value of its net assets amounts to less than half of Company’s share capital.
3. What are the consequences of an asset imbalance?
Consequences for shareholders: none, except for the loss of the real value of the shares held.
Consequences for the director: The director of the Company will respond jointly with the Company regarding the obligations undertaken by the Company following its entering into the situation of asset imbalance if the director does not comply with his obligation of summoning a shareholders’ meeting within two months as from the ocurrence of such an asset imbalance.
4. Actions to take in the event of an asset imbalance.
In the case of an asset imbalance, the shareholders’ meeting must adopt one of the below mentioned decisions:
a) Increase the share capital in order to restore the asset balance, whether through the increase of nominal value of the existing shares or the issue of new shares.
b) Reduce the share capital in order to restore the asset balance, whether through the reduction of the nominal value of each share, their redemption, or their grouping in order to be exchanged.
c) Carry out an “accordion operation”, which consists in a reduction of the share capital to 0€ followed by an increase in the share capital to reach at least the minimum required by law according to the type of Company.
d) To dissolve the company.
An alternative option to those mentioned above is to obtain third-party financing (whether from shareholders of the company or not), through an equity loan. However, it must be taken into account that an equity loan would acquire a subordinated position in relation to the rest of the debts and obligations undertaken by the Company, which means that the lender assumes a similiar risk to the shareholders of the Company.
Bearing in mind the different options available, in order to provide the right solution, a detailed analysis of the circumstances of each specific case would be necessary.
Vilá Abogados
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24th July 2015
