What conditions must a debt meet to be set off against a French share subscription?
A subscriber seeking to pay for new shares by debt set-off must hold a liquid and due claim against the issuing company. An accounting liability does not, on its own, establish every legal condition. The origin, holder, amount and repayment terms of the claim must be examined at the relevant date.
The holder of the claim
The subscriber must personally be a creditor of the company whose capital is increased. The obligations must be reciprocal: the subscriber owes the issue price and the company owes the subscriber under the claim used for set-off. A claim held by another person or against another group company cannot simply be substituted.
An assignment of the claim, if contemplated, requires its own analysis. Evidence of the underlying obligation may include a shareholder current account agreement, loan agreement, invoices or another relevant contract.
A liquid and due claim
The amount of a liquid claim is established or ascertainable from the documents. A due claim can be demanded at the time of the transaction. The amount used must be sufficient to cover the part of the subscription price to be settled by set-off.
A future maturity, blocked shareholder account, repayment condition or dispute may prevent an immediate set-off. These matters should be addressed before the resolutions and subscription forms are finalised.
The shareholder current account
A credit balance may qualify, but a trial balance alone is not always enough. The account holder, underlying entries, statement date, agreement and any repayments must be examined. Interest and adjustments should be reconciled with the amount used in the corporate documents.
Movements after the account statement may change the amount available. The company and its advisers should disclose them before a certificate is issued.
Cases requiring closer review
An assignment of the claim, insolvency proceedings or financial difficulties can affect the proposed transaction. The mere existence of an accounting debt cannot determine whether a certificate can be issued.
See also the articles on the documents required and the conversion of a shareholder loan in a French SAS.
Discuss your proposed capital increase
Send the available corporate and accounting documents to the office for an initial review of the transaction and the scope of the requested notarial work.
Professionals & partners
Notarial assistance for adviser-led transactions
Advisers may submit a claim whose amount, due date or holder requires preliminary examination. The evidence needed for any notarial certificate is assessed on the particular file.
