Viktor Arkhipov, Partner, Head of Tax Practice at Nadmitov, Ivanov & Partners, commented on the article “A Participant Loans the Society. How to increase the authorized capital and not give back the debt ”in the magazine“ Corporate Lawyer ”, No. 5, 2018.
Increasing the charter capital of an LLC by offsetting homogeneous monetary claims is not a very popular way. It was expressly banned until 2010 in the LLC Law. And for banks, this method is currently prohibited by the Law on Banks and Banking Activities (Art. 11), the exception is the offset of claims for the payment of declared dividends in cash. The Law on LLC also establishes increased quorum requirements for a decision to increase the authorized capital by offset. If the usual decision to increase the charter capital requires two-thirds of the total votes of the LLC participants, then to increase the charter capital by offsetting, a unanimous decision of all company participants is required. That is, in practice, it works more likely for societies consisting of one participant. For this reason, LLC participants in most cases decide not to get involved with this method of increasing the authorized capital, but to choose simpler and more reliable methods.
Nadmitov, Ivanov and Partners provides services in corporate law.