Can a Chinese Company Invest in a French Company Through a Share Capital Increase?

Yes. A Chinese company can subscribe to a share capital increase of a French company and become a shareholder of that company.

The transaction requires the Chinese company’s legal existence and representation to be established, its ownership structure and ultimate beneficial owners to be identified, and the transfer of the subscription funds to France to be organised.

For a cash share capital increase, the funds may be deposited with a French notary, subject to prior review of the file and completion of the required checks.

Particular attention should also be paid to the rules applicable in China to outbound investments, foreign exchange and international transfers of capital.

Can a Chinese Company Invest Directly in a French Company?

Yes.

A company incorporated in China can, as a general principle, subscribe directly to the share capital of a French company.

It may invest in, for example:

• a French SAS;
• a French SASU;
• a French SA;
• a French SARL;
• or another French company where permitted by the rules applicable to that legal form.

The Chinese company may become a shareholder for the first time through the share capital increase or increase an existing shareholding.

It is not generally necessary to establish an intermediary company in France solely for the purpose of making the investment.

Chinese corporate investors are also subject to the broader requirements applicable to foreign companies subscribing to a share capital increase in France.

What Documents Are Required from the Chinese Company?

The documentation must allow the French notary to establish the Chinese company’s legal existence and identify the persons who represent, own and control it.

Depending on the corporate structure and the characteristics of the transaction, the required documentation may include:

• a recent document evidencing the company’s registration and legal existence;
• its articles of association or equivalent constitutional documents;
• information concerning its legal representative;
• evidence of the authority of the person acting in connection with the investment;
• an ownership structure chart;
• documentation concerning intermediate companies, where applicable;
• and information and supporting documents identifying the ultimate beneficial owners.

The precise list of documents will depend on the structure of the Chinese investing company and should be determined following an initial review of the file.

Do Chinese Corporate Documents Need to Be Translated into French?

A translation may be required.

The French notary must be able to review the documents establishing the Chinese company’s legal existence, representation and ownership structure.

Where the relevant documents are available only in Chinese, a French translation may therefore be requested.

Depending on the nature and intended use of the documents, a certified translation may be required.

It is generally preferable to submit the available corporate documents first so that the documents that actually require translation can be identified before unnecessary translation costs are incurred.

Do Chinese Documents Need an Apostille for Use in France?

Not necessarily in every case.

Mainland China joined the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, which entered into force for China on 7 November 2023.

For public documents falling within the scope of the Convention and requiring authentication for use abroad, an apostille may therefore replace the previous legalisation procedure.

This does not mean that every corporate document submitted in connection with a French share capital increase must automatically be apostilled.

The requirement depends on the nature of the document and the purpose for which it is being used.

It is therefore advisable to have the documentation reviewed before arranging apostilles or other authentication formalities.

How Are the Ultimate Beneficial Owners of a Chinese Company Identified?

The ownership and control structure of the investing company must be understood.

Where the Chinese company is directly owned by a small number of individuals, identifying its ultimate beneficial owners may be relatively straightforward.

Where the investment is made through a corporate group involving several companies or holding entities, the ownership chain may need to be documented through to the individuals who ultimately own or control the structure.

An ownership chart may therefore be required together with supporting documents relating to intermediate companies and their shareholders.

This can be particularly relevant where a Chinese group invests in France through a holding company established in another jurisdiction.

Does the Chinese Company Need a French Bank Account?

Not necessarily.

A Chinese company does not generally need to open a French bank account solely in order to subscribe to a share capital increase.

Subject to prior review of the file, the subscription funds may be transferred from a foreign bank account held by the subscribing company to the account specified by the depositary.

However, the ability to receive funds in France must be distinguished from the ability to transfer those funds out of China.

Can the Subscription Funds Be Transferred Directly from China to France?

The transfer must be considered in light of the Chinese rules applicable to foreign exchange, capital movements and outbound investments.

China maintains foreign exchange controls and regulates certain outbound investments.

Depending on the nature of the investor, the amount invested and the characteristics of the transaction, registrations, filings, approvals or banking procedures may be required before the funds can actually be transferred outside China.

The investing company should therefore confirm the applicable requirements with its advisers and bank in China before initiating the transfer.

The fact that a French notary is able to receive the subscription funds does not circumvent Chinese foreign exchange or outbound investment regulations.

Consequently, particular attention should be paid to the payment arrangements. See our guide to transferring share capital increase funds from a foreign bank account to France.

Can the Funds Be Transferred from a Bank Account Outside China?

A Chinese company or corporate group may hold funds in a bank account located in another jurisdiction.

Whether those funds can be used for the subscription will depend on the structure of the transaction, the identity of the account holder and the source of the funds.

If the bank account is held by another group company rather than the company legally subscribing to the share capital increase, this should be disclosed before any transfer is initiated.

The depositary must be able to understand the relationship between the subscriber, the account holder and the funds being invested.

Additional supporting documentation may therefore be required.

What Source-of-Funds Documents May Be Required?

Depending on the characteristics of the transaction, the Chinese company may be required to provide documents establishing the source of the investment funds.

These may include:

• bank statements;
• annual accounts or financial statements;
• evidence of available corporate cash reserves;
• financing documentation;
• documents relating to the sale of an asset;
• or other documents providing a coherent explanation of the origin of the funds.

The documentation required will depend on factors such as the amount invested, the structure of the corporate group and the overall characteristics of the transaction.

Can a Chinese Investment Be Subject to French Foreign Investment Screening?

Yes, in certain circumstances.

France operates a foreign investment screening regime covering certain investments in French companies engaged in sensitive or strategic activities.

An investment by a Chinese company may therefore require prior authorisation from the French Ministry for the Economy depending on the activities of the French company and the characteristics of the proposed investment.

This issue must be considered separately from the deposit of the subscription funds with the French notary.

The notary’s ability to receive the funds does not constitute approval of the investment under the French foreign investment screening regime.

How Can a Chinese Company Deposit the Funds with a French Notary?

The file must be submitted to the French notary before any international transfer is initiated.

The French company provides the documents relating to the share capital increase together with the documentation concerning the Chinese corporate subscriber.

The notary reviews the information required to identify the subscriber, its representatives and ultimate beneficial owners and to understand the source of the funds. Additional documentation may be requested where necessary.

Once the file has been accepted, payment instructions are provided.

The investing company can then transfer the subscription funds in accordance with those instructions.

After receipt of the funds and completion of the required checks, the French notary can issue the depositary’s certificate required to proceed with the definitive completion of the share capital increase.

For a broader overview, see How can a foreign investor acquire a stake in a French company?

Chinese Company Investing in France with Chassaint & Cerclé Notaires

Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French companies with the deposit of funds for share capital increases involving companies and investors established in China.

The file can be submitted remotely for review before any transfer is made.

The office can review the documentation concerning the Chinese company, its representatives, ownership structure and ultimate beneficial owners and identify any translation or document authentication requirements.

Once the file has been approved, payment instructions are provided to the subscribing company.

After receipt of the subscription funds, the depositary’s certificate can be issued within 24 business hours, provided that the file is complete and the required checks have been completed.

For further information and to submit a share capital increase involving a Chinese investor, please visit our dedicated share capital increase page, click here.