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. These documents enable a French notary to assess whether payment for the shares by debt set-off can be certified.
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.
The amount and due date examined by a French notary
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.
Shareholder current account evidence to provide to a notary
A credit balance may qualify, but a trial balance alone is not always enough. A notary examines the account holder, underlying entries, statement date, agreement and any repayments. 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 these changes to the notary handling the file 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 by a French notary and the conversion of a shareholder loan in a French SAS.
Discuss your capital increase with a French notary
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
A French notary working with lawyers and accountants
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.
