How to Carry Out a Cash Share Capital Increase in a French SARL
A French SARL (société à responsabilité limitée) can increase its share capital through new cash contributions made by existing shareholders or by new shareholders joining the company.
The transaction generally involves determining the terms of the capital increase, approving the operation, subscribing for the new shares, paying and depositing the subscription funds, obtaining the depositary’s certificate, and completing the share capital increase.
Where the subscription funds are required to be deposited, they may be deposited with a French notary, who can issue the depositary’s certificate after receiving the funds and completing the required checks.
What Is a Cash Share Capital Increase in a French SARL?
A cash share capital increase allows a French SARL to increase its registered share capital through new monetary contributions.
The transaction generally involves the creation of new shares (parts sociales) subscribed for by existing shareholders or new investors.
A share capital increase may be used to:
- strengthen the company’s equity;
- finance its development;
- bring a new shareholder into the company;
- or change the ownership structure between existing shareholders.
The amount paid by each subscriber may include the nominal value of the new shares and, where applicable, a share premium.
Who Decides on a Share Capital Increase in a French SARL?
A share capital increase involves an amendment to the articles of association of the French SARL.
The transaction must therefore be approved by the shareholders in accordance with the applicable French corporate law requirements and the company’s articles of association.
The relevant corporate decisions will generally determine:
- the amount of the share capital increase;
- the number of new shares to be issued;
- their nominal value;
- any applicable share premium;
- the persons entitled to subscribe;
- and the conditions under which the transaction will be completed.
The company’s articles of association and the corporate decisions relating to the transaction should therefore be reviewed before the subscription funds are transferred.
Who Can Subscribe for the New Shares?
The new shares may be subscribed for by shareholders who already hold an interest in the French SARL.
A share capital increase can also be used to bring a new shareholder into the company.
In that situation, the company must determine whether the applicable shareholder approval requirements, including any agrément procedure, must be followed.
The new subscriber may be either an individual or a legal entity.
A foreign individual or foreign company may also subscribe for the new shares, subject to the required checks and any specific rules applicable to the investment.
Where Are the Funds for a French SARL Capital Increase Deposited?
Where the subscription funds are required to be deposited, they may be deposited with a French notary.
The company first submits the documentation relating to the French SARL, the proposed share capital increase and the subscribers.
Once the file has been reviewed and accepted, payment instructions can be provided.
Each subscriber can then transfer the amount corresponding to its subscription.
Where several shareholders or investors participate in the transaction, each payment must be capable of being matched with the relevant subscriber and subscription.
What Documents Are Required?
The exact documentation depends on the structure of the transaction and the identity of the subscribers.
The file will generally include:
- the current articles of association of the French SARL;
- recent evidence of the company’s registration;
- the corporate decisions or draft decisions relating to the share capital increase;
- the subscription documentation;
- information concerning the company’s manager;
- identification documents for individual subscribers;
- and, for corporate subscribers, documents establishing their legal existence, representation and ownership structure.
Where a subscriber is a legal entity, information concerning its ultimate beneficial owners (UBOs) may also be required.
Depending on the circumstances, supporting documents relating to the source of the subscription funds may be requested.
When Should the Subscription Funds Be Transferred?
The subscription funds should mandatory not be transferred until the file has been reviewed and the relevant payment instructions have been provided.
This preliminary review makes it possible to verify that the corporate documentation, subscriptions and amounts to be transferred are consistent.
Once the file has been accepted, each subscriber can transfer the amount corresponding to its subscription.
The originating bank account and payment reference should allow the payment to be clearly connected with the relevant subscriber and transaction.
Payments made by third parties should be disclosed in advance and may require additional supporting documentation.
When Is the Depositary’s Certificate Issued?
After the subscription funds have been received and the required checks completed, the French notary can issue the depositary’s certificate evidencing the subscriptions and payments made in connection with the share capital increase.
The French SARL can then use this certificate to proceed with the remaining steps required to complete the transaction.
The processing time therefore depends primarily on the completeness of the file and actual receipt of the subscription funds.
How Is the Share Capital Increase Completed?
The deposit of the subscription funds is only one stage of the transaction.
The French SARL must then complete the share capital increase in accordance with the corporate decisions adopted by its shareholders.
The company’s articles of association must be amended to reflect the new amount of share capital and, where applicable, the new distribution of shares between the shareholders.
The required publication and corporate registration formalities must then be completed so that the company’s official information reflects its new share capital.
When Are the Funds Released to the French SARL?
The subscription funds are not immediately available to the company when they are deposited.
They remain deposited while the share capital increase is being completed.
Once the transaction has been definitively completed, the French SARL provides the depositary with the required supporting documentation.
After these documents have been reviewed, the funds can be released and transferred to the company’s bank account.
Can a Foreign Shareholder Participate in a French SARL Capital Increase?
Yes.
A French SARL may carry out a share capital increase involving a shareholder established outside France.
The foreign subscriber may be either an individual or a legal entity.
Additional documentation may be required to identify the subscriber, its legal representative where applicable, its ultimate beneficial owners and the source of the investment funds.
Subject to prior review and acceptance of the file, the subscription funds may also be transferred from a foreign bank account directly to France.
A foreign shareholder does not therefore necessarily need to open a French bank account solely to participate in the share capital increase.
Can the Procedure Be Handled Remotely?
In many cases, yes.
The corporate and subscriber documentation can generally be submitted electronically for preliminary review.
Once the file has been approved, payment instructions can be provided and the subscribers can transfer the funds.
This is particularly useful where one or more shareholders of the French SARL are established outside France.
Deposit the Funds for Your French SARL Capital Increase with a Notary
Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French SARL companies with the deposit of funds for cash share capital increases.
The office reviews the documentation relating to the company, the transaction and the subscribers before the funds are transferred.
After approval of the file and receipt of the subscription funds, the office can issue the depositary’s certificate required to proceed with the share capital increase.
The procedure can generally be handled remotely and may also involve foreign shareholders, foreign companies and subscription funds transferred from abroad.
For further information about the procedure, required documentation and submission of your file, please visit our dedicated share capital increase page, click here.
