How to Carry Out a Cash Share Capital Increase in a French SAS

A French SAS (société par actions simplifiée) can increase its share capital by issuing new shares subscribed for in cash by existing shareholders or new investors.

A cash share capital increase generally involves several steps: approval of the transaction, subscription for the new shares, payment and deposit of the subscription funds, issuance of the depositary’s certificate, completion of the capital increase and, finally, release of the funds to the company.

Where the applicable conditions are satisfied, the subscription funds 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 SAS?

A cash share capital increase allows a French SAS to increase its registered share capital through new monetary contributions.

The company generally issues new shares that may be subscribed for by:

• existing shareholders;
• one or more new investors;
• or a combination of existing shareholders and new investors.

The transaction can therefore provide the company with additional financial resources while also allowing new shareholders to acquire an interest in the company.

The amount paid by each subscriber may include both the nominal value of the new shares and, where applicable, a share premium.

Who Decides on a Share Capital Increase in a French SAS?

One of the main characteristics of the French SAS is the flexibility of its corporate governance.

The procedure for approving a share capital increase must therefore be examined in light of both French law and the company’s articles of association.

The transaction will generally require a decision of the shareholders in accordance with the rules set out in the articles.

Depending on the structure of the transaction, the shareholders may approve the terms of the capital increase directly or delegate certain powers necessary for its implementation.

Before the subscription funds are transferred, the relevant corporate decisions or draft decisions should therefore clearly establish the terms of the proposed capital increase.

How Are the New Shares Subscribed For?

Each person or company participating in the capital increase subscribes for a specified number of newly issued shares.

The subscription documentation should make it possible to identify:

• the subscriber;
• the number of shares subscribed for;
• the nominal value of those shares;
• any applicable share premium;
• and the total amount payable by the subscriber.

These figures must be consistent with the corporate decisions approving the capital increase and with the funds actually deposited.

Where several investors participate in the transaction, each payment must be capable of being matched with the corresponding subscription.

Where Are the Funds for a French SAS Capital Increase Deposited?

Where French law requires the subscription funds to be deposited, they must be placed with an authorised depositary.

A French notary can act as depositary of the funds for a share capital increase where the applicable conditions are satisfied.

The company first provides the documentation relating to the SAS, the proposed capital increase and the subscribers.

Once the file has been reviewed and accepted, payment instructions can be provided.

The subscribers can then transfer their respective subscription amounts in accordance with those instructions.

What Documents Are Required?

The exact documentation depends on the structure of the capital increase and the identity of the subscribers.

The file will generally include documents relating to:

• the existence and registration of the French SAS;
• its current articles of association;
• the corporate decisions or draft decisions relating to the capital increase;
• the terms of the issuance of the new shares;
• the subscription documentation;
• the company’s legal representative;
• and the identity of the subscribers.

Where a subscriber is a company or other legal entity, additional documentation may be required to establish its legal existence, identify its representative and verify the representative’s authority.

Information concerning the subscriber’s ownership structure and ultimate beneficial owners 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 funds must not be transferred until the file has been reviewed and the relevant payment instructions have been provided.

This preliminary review allows the documentation relating to the capital increase to be checked before any funds are moved.

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.

This is particularly important where several investors participate in the same capital increase.

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.

The French SAS can then use this certificate to proceed with the remaining steps required to complete the capital increase.

The processing time therefore depends primarily on two factors:

• receipt of a complete and compliant file; and
• actual receipt of the subscription funds.

Once these conditions are satisfied, the certificate can be issued promptly.

How Is the Share Capital Increase Completed?

The deposit of the funds is only one stage of the transaction.

The French SAS must then complete the capital increase in accordance with the corporate decisions adopted for the transaction.

The company’s articles of association must in particular be updated to reflect the new amount of share capital.

The required corporate registration and publication formalities must also be completed so that the company’s official information reflects its new share capital.

When Are the Funds Released to the French SAS?

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 company provides the depositary with the required supporting documents.

After these documents have been reviewed, the funds can be released and transferred to the bank account of the French SAS.

Can a Foreign Investor Participate in a French SAS Capital Increase?

Yes.

A French SAS may carry out a share capital increase involving an investor established outside France.

The subscriber may be either a foreign individual or a foreign company.

Additional documentation may be required to identify the foreign subscriber, its legal representative and, where applicable, its ultimate beneficial owners.

The source of the investment funds must also be identifiable.

Subject to prior review and acceptance of the file, the subscription funds may be transferred from a foreign bank account directly to France.

The foreign investor does not therefore necessarily need to open a French bank account solely to participate in the 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 for French SAS companies whose shareholders or investors are located abroad.

Deposit the Funds for Your French SAS Capital Increase with a Notary

Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French SAS 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.