Can a Foreign Shareholder Participate in a Share Capital Increase of a French Company?
Yes. A foreign individual or foreign company can, in principle, subscribe to a share capital increase of a French company.
The subscriber does not need to be a French national or a French resident. A foreign company, holding company or other legal entity may also become a shareholder of a French company by subscribing for new shares.
However, where a foreign shareholder participates in a capital increase, particular attention must be paid to the identification of the subscriber, its ultimate beneficial owners where applicable, the source of the funds and the arrangements for transferring the investment to France.
Does a Shareholder Have to Be French to Subscribe to a Capital Increase?
No.
French nationality or residence in France is not, in principle, a requirement for subscribing to a share capital increase of a French company.
The subscriber may therefore be:
- a foreign individual;
- an individual residing outside France;
- a French citizen living abroad;
- a foreign company;
- a foreign holding company;
- or an investment vehicle established outside France.
The foreign investor can therefore become a shareholder of the French company through the subscription of newly issued shares.
Depending on the company’s activities and the nature of the investment, certain transactions may nevertheless fall within the scope of the French foreign investment control regime.
Can a Foreign Company Become a Shareholder of a French Company?
Yes.
A company incorporated outside France can subscribe to a share capital increase and receive shares in a French company.
The fact that the subscribing company is incorporated abroad does not, by itself, prevent the transaction.
However, the legal existence of the foreign company and the identity of the persons acting on its behalf must be established.
Depending on the jurisdiction concerned, the required documents may include:
- a recent official company registration document;
- the articles of association or equivalent constitutional documents;
- the registered office of the company;
- the identity of its legal representative;
- evidence of the authority of the person acting on behalf of the company;
- information concerning its ownership structure;
- and identification of its ultimate beneficial owners (UBOs).
Where the foreign shareholder is owned through several holding companies, documentation concerning the different entities in the ownership chain may be required in order to identify the individuals who ultimately control the subscriber.
Does a Foreign Shareholder Need a French Bank Account?
Not necessarily.
A foreign shareholder does not generally need to open a French bank account solely in order to participate in a share capital increase of a French company.
Subject to prior review and acceptance of the transaction, the subscription funds may be transferred from a bank account located outside France.
The account from which the funds are transferred should mandatory be consistent with the identity of the subscriber.
How Can a Foreign Shareholder Transfer the Subscription Funds to France?
Before transferring the funds, the documents relating to the French company, the proposed capital increase and the foreign subscriber should be submitted for review.
This allows the transaction to be examined before the investment leaves the subscriber’s bank account.
Once the file has been reviewed and accepted, payment instructions can be provided.
The transfer should clearly identify the relevant subscriber and allow the payment to be matched with the corresponding subscription.
Where several investors participate in the same capital increase, each payment must be capable of being connected with the relevant subscriber and subscription amount.
For this reason, the funds should not be transferred before the file has been reviewed and the appropriate payment instructions have been provided.
How Is the Source of the Funds Verified?
The source of the subscription funds is an important part of the review.
The supporting documents required will depend on the amount invested, the identity and activity of the subscriber and the circumstances in which the funds were obtained.
For an individual investor, the funds may, for example, come from personal savings, investment income or the sale of an asset.
For a corporate investor, the subscription may be financed from the company’s available cash or resources generated by its business activities.
Depending on the circumstances, supporting documentation may include bank statements, financial statements, sale agreements or other documents establishing the origin of the funds.
The purpose of these checks is to establish consistency between the investor, its financial situation or business activities and the amount being invested.
Are Foreign Investments in French Companies Subject to Restrictions?
The presence of a foreign shareholder does not automatically mean that prior authorization is required.
France does, however, operate a foreign investment control regime for certain investments involving companies carrying out activities considered sensitive from the perspective of public order, public security or national defence.
Where the French company operates in a relevant sector, the transaction should therefore be reviewed to determine whether prior authorization is required.
The foreign investor must also comply with any foreign exchange controls, reporting requirements or restrictions applicable in the country from which the investment is made.
Can a French Notary Receive Funds from a Foreign Shareholder?
Where the applicable conditions are satisfied, a French notary can act as depositary of the subscription funds for the share capital increase.
The documentation concerning the foreign subscriber can be reviewed before any funds are transferred.
Once the file has been accepted, the subscription amount 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 allowing the French company to proceed with the completion of its share capital increase.
Does the Foreign Shareholder Need to Travel to France?
No.
The documents can generally be submitted electronically for preliminary review.
Once the file has been accepted, the foreign shareholder can transfer the subscription funds from abroad.
The investor therefore does not generally need to travel to France solely for the purpose of depositing the funds relating to the capital increase.
This makes the procedure particularly suitable for French companies raising capital from shareholders located in different countries.
What Happens After the Funds Have Been Deposited?
After the subscription funds have been received and the required checks completed, the notary can issue the depositary’s certificate.
The French company can then complete the corporate and registration formalities relating to the share capital increase.
Once the capital increase has been definitively completed and the required supporting documents have been provided, the deposited funds can be released to the company.
How Can Chassaint & Cerclé Notaires Assist Foreign Shareholders?
Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French companies with the deposit of funds for share capital increases involving shareholders established outside France.
Our office can review files involving both foreign individuals and foreign companies.
The documents relating to the subscriber, its ultimate beneficial owners and the source of the subscription funds can be reviewed before the transfer is made.
Once the file has been approved and the funds received, the office can issue the depositary’s certificate required for the capital increase.
The procedure can generally be initiated remotely, allowing foreign shareholders to participate in the transaction without travelling to France solely for the deposit of funds. For more informatio, click here.
