A French company may increase its share capital through a payment of funds or, subject to the applicable requirements, by setting off a claim held against the company. The practical difference lies in the way the new shares are paid for: a cash payment brings new funds into the company, while a debt set-off reduces an existing liability to the subscriber. A French notary may act as depositary for a cash contribution or issue a certificate recording payment by debt set-off, depending on the transaction.

A cash contribution deposited with a French notary

When a subscriber pays for new shares by transferring money, the depositary receives the funds and issues a certificate on the basis of the subscription forms. The documents must connect the subscriber, subscription price and actual payment. The company, transaction and source of funds are examined before payment instructions are provided.

This route produces an inflow of funds. The procedure for depositing funds is explained in our existing share capital increase section.

Debt set-off: the certificate issued by a French notary

For a debt set-off, the subscriber must hold a liquid and due claim against the issuing company. The claim is used to discharge the corresponding obligation to pay for the new shares. The company’s debt is reduced to the extent of the set-off, without a new transfer of funds for that portion.

The corporate resolutions, subscription forms, account statement and accounting entries must be consistent. The certificate required for the set-off records payment for the shares; it does not certify the receipt of money. The conditions applicable to a shareholder loan and the certificate issued by a French notary are explained in separate articles.

Can the methods be used together?

A transaction may include both a debt set-off and a cash payment. The resolutions and subscription forms must identify, for each subscriber, how much of the issue price is settled in each manner. The evidence and certificates serve different purposes and the documents must distinguish the relevant amounts.

The file should therefore state the identity of each subscriber, the claim held against the company and any amount to be paid by transfer. A form designed solely for cash deposits does not, by itself, describe a debt set-off.

Preparing the file for review by a French notary

The company should provide its legal form, the proposed issue, the origin and amount of the claim, relevant payment terms and the allocation between set-off and cash payment. Available articles, draft resolutions, subscription forms, agreements and accounting evidence can be supplied for an initial review.

A notary at the office can then specify further checks, the scope of the work, fees and timetable. The timeframe for a straightforward deposit of funds cannot automatically be applied to the examination of a claim.