Capital Increase with a Foreign Investor: How Can the Funds Be Deposited in France?
A French company may decide to finance its development by bringing a foreign investor into its share capital.
The investor may be an individual, a foreign company, an international group or an investment vehicle.
When the investment takes the form of a share capital increase in cash, a practical question quickly arises: how can a foreign investor transfer and deposit the subscription funds in France?
Where the applicable legal conditions are satisfied, the funds may be deposited with a French notary, including when the investor is based abroad and the subscription amount is transferred from a foreign bank account.
Can a Foreign Investor Invest in a French Company?
In principle, yes.
French law generally allows foreign individuals and companies to invest in French companies.
An investor does not have to be a French national or a French resident to subscribe for shares issued as part of a capital increase.
The subscriber may therefore be:
- an individual residing outside France;
- a foreign company;
- an international corporate group;
- an investment company or holding company;
- or another foreign legal entity.
However, certain investments in French companies operating in sensitive sectors may be subject to the French foreign investment control regime and may require prior authorization.
For most companies carrying out ordinary business activities, the main practical issues are instead the identification of the foreign investor, verification of its beneficial ownership where applicable, the origin of the funds and the organisation of the international transfer.
Does a Foreign Investor Need a French Bank Account?
Not necessarily.
A foreign investor does not generally need to open a French bank account solely for the purpose of subscribing to a share capital increase in a French company.
Subject to prior review and acceptance of the transaction, the subscription funds may be transferred directly from a bank account located outside France.
The transfer must nevertheless be consistent with the subscription documentation.
The person or company making the payment should therefore correspond to the investor identified as the subscriber.
Where the funds are transferred by another person or company, additional explanations and supporting documents may be required.
Can a Foreign Company Subscribe to a Capital Increase in France?
Yes.
A foreign company may subscribe for shares in a French company and become one of its shareholders.
However, the depositary must be able to establish the legal existence of the foreign company and identify the individuals who ultimately control it.
Depending on the country of incorporation and the legal form of the investor, the required documents may differ significantly.
The review will generally seek to establish:
- the company’s legal existence and registration;
- its registered office;
- its articles of association or equivalent constitutional documents;
- the identity of its legal representative;
- the authority of the person acting on its behalf;
- its ownership structure;
- and its ultimate beneficial owners (UBOs).
Additional documentation may be requested where the ownership structure involves several companies or jurisdictions.
What Documents Must a Foreign Investor Provide?
The documentation depends on whether the investor is an individual or a legal entity.
For an individual investor, identification documents will generally be required, together with any documents necessary to understand and verify the origin of the subscription funds.
For a foreign company, the file may include:
- a recent official company registration document;
- articles of association or equivalent constitutional documents;
- details of the company’s legal representative;
- evidence of the representative’s authority;
- information concerning the company’s shareholders or owners;
- information identifying its ultimate beneficial owners;
- and supporting documents relating to the source of the investment funds where required.
Documents issued in a foreign language may also need to be accompanied by a translation, depending on their nature and the circumstances of the transaction.
The exact requirements therefore need to be determined on a case-by-case basis.
Why Are International Capital Increases Subject to Additional Checks?
A capital increase involving an international investor is not prohibited simply because the investor or the funds are located abroad.
However, the depositary must be able to understand the transaction and identify the parties involved.
This can require additional work where the investor is a foreign company because corporate registers and company documents differ considerably from one country to another.
The ownership structure must also be sufficiently clear to identify the relevant ultimate beneficial owners.
The origin of the funds must be consistent with the investor and the proposed investment.
These checks form part of the applicable identification and anti-money laundering requirements. Using a French notary as depositary does not remove or reduce these obligations.
Can the Capital Increase Funds Be Transferred from Abroad?
Yes, subject to prior review and acceptance of the file.
Once the documentation has been reviewed, the investor can receive the appropriate payment instructions and transfer the subscription funds to the account designated for the capital increase.
The payment reference and originating bank account should allow the transfer to be clearly connected with the relevant investor and subscription.
Where several investors participate in the capital increase, each payment must be capable of being matched with the corresponding subscription.
For this reason, funds should not be transferred before the file has been reviewed and payment instructions have been provided.
Are There Restrictions on Transferring Funds from Certain Countries?
The French rules governing the capital increase are only one part of an international transaction.
The investor must also comply with the laws applicable in the country from which the funds are transferred.
Some jurisdictions impose foreign exchange controls, reporting requirements or restrictions on investments made abroad.
An investor may therefore need to obtain an authorization or provide documentation to its local bank before the funds can be transferred to France.
These requirements depend on the investor’s country and should be examined before initiating the international payment.
Can a French Notary Act as Depositary of the Funds?
Where the applicable conditions are satisfied, a French notary can act as depositary of the subscription funds for a share capital increase.
The company first provides the documentation relating to the proposed capital increase and the investors.
For international transactions, the documents relating to the foreign subscriber, its beneficial owners and the origin of the funds can therefore be reviewed before the transfer is made.
Once the file has been approved, the subscription funds can be transferred in accordance with the payment instructions provided.
After receipt of the funds and completion of the required checks, the notary can issue the depositary’s certificate required for the capital increase.
Does the Foreign Investor Need to Travel to France?
In many cases, no.
The preliminary documentation can generally be submitted electronically.
This is particularly useful for capital increases involving shareholders or investors located outside France.
Once the file has been reviewed and accepted, the funds can be transferred internationally in accordance with the payment instructions provided.
The investor therefore does not generally need to travel to France solely for the purpose of depositing the subscription funds.
What Happens After the Depositary’s Certificate Is Issued?
Once the subscription funds have been received and the required checks completed, the notary can issue the depositary’s certificate.
The French company can then proceed with the corporate and registration formalities necessary to complete the share capital increase.
After the capital increase has been definitively completed and the required supporting documents have been provided, the deposited funds can be released to the company.
Share Capital Increase with an International Investor: How Can Our French Notary Office Assist?
Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French companies with the deposit of funds for share capital increases.
Our office can review transactions involving foreign individual investors, foreign companies, international corporate groups and subscription funds transferred from abroad.
The documentation is reviewed before the transfer so that the documents required for the foreign investor and the transaction can be identified in advance.
Once the file has been approved and the funds received, the office can issue the depositary’s certificate required to proceed with the share capital increase.
Deposit Capital Increase Funds from Abroad with a French Notary
Chassaint & Cerclé Notaires can assist with the deposit of funds for a share capital increase in a French company, including transactions involving foreign shareholders and international transfers.
The procedure can generally be initiated remotely by submitting the corporate and investor documentation for preliminary review.
For further information about the required documents, the deposit procedure and submission of your file, please visit our dedicated share capital increase page, click here.
