Can a Foreign Company Subscribe to a Share Capital Increase of a French Company?

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

The subscribing company may be established in another European Union country or outside the European Union. As a general principle, it does not need to establish a French subsidiary or branch before investing in the share capital of a French company.

The transaction must, however, allow the foreign company, its legal representative, the persons authorised to act on its behalf, its ownership structure and its ultimate beneficial owners to be clearly identified.

For a cash share capital increase, the subscription funds may, subject to prior review of the file, be transferred directly from the foreign company’s bank account outside France and deposited with a French notary.

Can a Foreign Company Become a Shareholder of a French Company?

Yes.

A legal entity incorporated outside France may hold shares in a French company.

A foreign company may therefore subscribe to a share capital increase of, for example:

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

The foreign company may subscribe as a new investor or increase an existing shareholding.

The French company’s articles of association and the rules governing the transaction should nevertheless be reviewed, particularly where approval procedures or other restrictions apply to the admission of new shareholders.

A foreign corporate subscriber will notably require identification of its ownership chain and ultimate beneficial owners. For a broader overview, see How can a foreign investor acquire a stake in a French company?

Does the Foreign Company Need a Branch or Subsidiary in France?

Not necessarily.

A foreign company can generally invest directly in a French company without first incorporating a French subsidiary or opening a French branch solely for the purpose of making the investment.

The foreign company itself then acts as the subscriber.

It must, however, be able to provide sufficient documentation establishing its legal existence in its country of incorporation and identifying the person authorised to represent it in connection with the transaction.

What Documents Are Required from a Foreign Company?

The exact documents required will depend on the country of incorporation, the company’s legal form and its ownership structure.

The documentation will generally need to establish:

• the company’s legal existence;
• its registration in its country of incorporation;
• its articles of association or equivalent constitutional documents;
• the identity of its legal representative;
• the authority of the person acting in connection with the transaction;
• its ownership structure;
• and the identity of its ultimate beneficial owners.

A recent extract from the relevant foreign company register, certificate of incorporation or equivalent document may be required.

Where the ownership structure includes several intermediate companies, documentation concerning those entities may also be required in order to trace the ownership chain through to the individuals who ultimately own or control the subscribing company.

Do Foreign Corporate Documents Need to Be Translated into French?

It depends on the documents and the language in which they are issued.

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

A translation may therefore be required where the original documents cannot be satisfactorily reviewed in their original language.

Depending on the nature of the documents and the circumstances of the transaction, a certified translation may be required.

It is generally advisable to submit the available documents for preliminary review before arranging translations, so that unnecessary translation costs can be avoided.

Do Foreign Documents Need an Apostille or Legalisation?

Not systematically.

Whether an apostille, legalisation or another authentication formality is required will depend on several factors, including:

• the country in which the document was issued;
• the nature of the document;
• the applicable international conventions;
• and the purpose for which the document is required.

It is therefore generally unnecessary to have every corporate document apostilled or legalised before the file has been reviewed.

The documents can first be submitted to the French notary, who can identify any additional authentication requirements applicable to the transaction.

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

Identification of the ultimate beneficial owners (UBOs) is an important part of reviewing a transaction involving a foreign corporate subscriber.

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

Where the company is directly owned by individuals, this may be relatively straightforward.

Where the company is held through several holding companies or intermediate entities, additional documentation may be required, such as:

• an ownership structure chart;
• company register extracts for intermediate entities;
• their constitutional documents where necessary;
• and documents identifying the individuals who ultimately own or control the structure.

Preparing this information at the beginning of the process can considerably facilitate the review of the transaction.

Does the Foreign Company Need a French Bank Account?

Not necessarily.

A foreign 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 company may transfer the subscription funds directly from its bank account outside France to the account specified by the depositary.

The originating bank account must be identifiable, and the connection between the account holder and the subscribing company must be clear.

This can be particularly useful for international groups making their first investment in France and which do not yet have a French banking relationship.

Where the funds are held outside France, payment may, subject to the required checks, be made by transfer from a foreign bank account.

What Source-of-Funds Documents May Be Required?

The foreign company may be required to provide supporting documentation concerning the source of the funds used for the investment.

Depending on the amount and characteristics of the transaction, this 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 documentation providing a coherent explanation of the origin of the investment funds.

The precise requirements will depend on the circumstances of each transaction.

Are Some Foreign Investments in France Subject to Specific Restrictions?

Yes.

Although financial relations between France and foreign countries are generally free, specific restrictions apply to certain investments.

In particular, some foreign investments in French companies operating in sensitive or strategic sectors may fall within the French foreign investment screening regime.

Depending on the activity of the French company, the identity of the investor and the characteristics of the investment, prior governmental authorisation may be required.

This issue is separate from the deposit of the subscription funds. The ability of a French notary to receive the funds does not remove the need to determine whether the investment itself is subject to a specific regulatory regime.

Any foreign exchange or capital transfer restrictions applicable in the foreign company’s home jurisdiction must also be considered.

We also provide specific guidance on share capital increases involving a Chinese company.

How Can a Foreign Company Deposit the Subscription Funds with a French Notary?

The file should mandatory be submitted to the French notary before any international transfer is made.

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

After reviewing the file and completing the required checks, the notary provides the relevant payment instructions.

The foreign company can then transfer the subscription funds from its bank account in accordance with those instructions.

Once the funds have been received and the required checks completed, the French notary can issue the depositary’s certificate required to proceed with the share capital increase.

Foreign Company Investing in a French Company

Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French companies with the deposit of funds for share capital increases involving foreign corporate subscribers.

The file can be submitted remotely for preliminary review.

The office reviews the documentation required to identify the foreign company, its representatives, ownership structure and ultimate beneficial owners and can indicate whether foreign documents need to be translated or supplemented.

Once the file has been approved, the subscription funds may, subject to the circumstances of the transaction, be transferred directly from the foreign company’s bank account outside France.

After receipt of the 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 your file, please visit our dedicated share capital increase page, click here.