Can a US Investor Participate in a Share Capital Increase in France?

Yes. A US investor can subscribe to a share capital increase of a French company, whether the investor is an individual or a company incorporated in the United States.

The investor may subscribe directly to the new shares issued by the French company. As a general principle, the investor does not need to establish a company in France or open a French bank account before making the investment.

For a cash share capital increase, the subscription funds may, subject to prior review of the file, be transferred from the United States and deposited with a French notary.

The transaction must nevertheless allow the investor to be clearly identified. Where the subscriber is a US company, its legal existence, representatives, ownership structure and ultimate beneficial owners must also be established. The source of the investment funds must be documented where required.

The general principles are explained in our guide to share capital increases in France involving foreign investors.

Can a US Investor Invest Directly in a French Company?

Yes.

An individual residing in the United States or a US company may, as a general principle, subscribe directly to a share capital increase of a French company.

The investment may be made in, for example:

• a French SAS;
• a French SASU;
• a French SA;
• a French SARL;
• or another French company where permitted by the rules applicable to its legal form.

The US investor may become a shareholder for the first time through the share capital increase or increase an existing shareholding.

It is generally unnecessary to establish an intermediary French company solely for the purpose of making the investment.

Can a US Company Subscribe Directly to the Share Capital Increase?

Yes.

A US corporation, LLC or other legal entity may subscribe directly to a share capital increase in France, provided that its legal existence and the authority of the person acting on its behalf can be established.

One particular feature of the United States is that corporate law is largely governed at state level.

The documents available and their terminology may therefore differ depending on whether the company was incorporated in Delaware, California, New York or another state.

The objective is not necessarily to obtain a US document equivalent in name to a French Kbis extract, but to obtain reliable documentation establishing the company’s legal existence and identifying the persons authorised to represent it.

Where an LLC, corporation or other US entity subscribes directly, see also our guide to foreign companies subscribing to a French share capital increase.

What Documents Are Required from a US Company?

Depending on the state of incorporation, legal form and ownership structure of the investor, the required documentation may include:

• a Certificate of Incorporation, Certificate of Formation or equivalent document;
• a recent document confirming the company’s existence or status;
• bylaws, an operating agreement or other relevant constitutional documents;
• information concerning the company’s directors, officers or managers;
• evidence of the authority of the person making the investment;
• an ownership structure chart;
• and documentation identifying the company’s ultimate beneficial owners.

Additional documents may be required where the US investor belongs to a corporate group involving several companies or holding entities.

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

The French notary must be able to understand the ownership and control structure of the US entity.

Where the company is directly owned by a small number of individuals, identification of the ultimate beneficial owners may be relatively straightforward.

Where one or more holding companies are involved, it may be necessary to document each level of ownership through to the individuals who ultimately own or control the structure.

An ownership chart accompanied by the relevant corporate documentation can facilitate this review.

Identifying the subscribing US company alone may therefore not be sufficient where its ownership structure is more complex.

Do US Corporate Documents Need to Be Translated into French?

A translation may be required depending on the nature and complexity of the documents.

As US corporate documents are generally issued in English, they may often be easier to review than documents issued in other languages.

This does not mean that a translation will never be required.

A French translation, potentially a certified translation, may be requested where justified by the nature of the document, its intended use or the circumstances of the transaction.

It is generally preferable to submit the available documents before arranging translations so that the documents actually requiring translation can first be identified.

Do US Documents Need an Apostille for Use in France?

Not systematically.

Both France and the United States are parties to the Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents.

Where a US public document requires authentication for use in France and falls within the scope of the Convention, an apostille may be used.

This does not mean that every document relating to a US company must automatically be apostilled for the purposes of a French share capital increase.

Whether an apostille is required will depend on the nature and intended use of the document.

The documentation should therefore preferably be reviewed before unnecessary authentication formalities are arranged.

Does a US Investor Need a French Bank Account?

Not necessarily.

A US investor does not generally need to open a French bank account solely in order to participate in a share capital increase.

Subject to prior review of the file, the subscription funds may be transferred directly from a US bank account to the account specified by the depositary. In that case, please see transfer from a foreign bank account.

The originating account must be identifiable and the payment must be capable of being matched with the subscriber and the relevant subscription.

No transfer must therefore be initiated before the depositary has provided the appropriate payment instructions.

Can the Subscription Funds Be Transferred in US Dollars?

The payment arrangements should be agreed with the depositary before the transfer is initiated.

The share capital of a French company is denominated in euros. It is therefore important to ensure that the amount actually received corresponds to the amount that must be paid in respect of the subscription.

Where the investor holds the funds in US dollars, particular attention should be paid to:

• currency conversion into euros;
• the applicable exchange rate;
• bank charges;
• and fees deducted by intermediary banks.

A difference between the expected amount and the amount actually received may result in the subscription not being fully paid.

The payment instructions provided by the depositary should therefore be followed carefully to avoid a shortfall caused by currency conversion or banking fees.

What Source-of-Funds Documents May Be Required?

Depending on the investor’s profile and the amount invested, supporting documentation concerning the source of the funds may be required.

For an individual investor, this may include documentation relating to:

• savings;
• income;
• personal assets;
• the sale of an asset;
• or another event explaining the origin of the investment funds.

For a US company, relevant documentation may include:

• bank statements;
• financial statements;
• evidence of available corporate cash reserves;
• financing documentation;
• or other documents consistent with the stated source of the funds.

The precise documentation required will depend on the characteristics of the transaction.

Can a US Investment Be Subject to French Foreign Investment Screening?

Yes, in certain circumstances.

France operates a foreign investment screening regime covering certain investments in French companies engaged in sensitive or strategic activities.

An investment by a US individual or company may therefore require prior authorisation from the French Ministry for the Economy where the relevant conditions are met.

This issue is separate from the deposit of the subscription funds.

The ability of a French notary to receive the funds does not constitute approval of the investment under the French foreign investment screening regime.

How Can Funds Be Transferred from the United States to a French Notary?

The file should preferably be submitted to the French notary before any transfer is initiated.

The French company provides the documents relating to the share capital increase together with the documentation concerning the US investor.

The notary reviews the information required to identify the subscriber and, where the investor is a legal entity, its representatives and ultimate beneficial owners. Source-of-funds documentation is also collected where required.

Once the preliminary checks have been completed and the file has been accepted, payment instructions are provided.

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

After the funds have actually been received and the required checks completed, the French notary issues the depositary’s certificate required to proceed with the definitive completion of the share capital increase.

US Investor Participating in a French Share Capital Increase

Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French companies with the deposit of funds for share capital increases involving investors established in the United States.

The investor may be an individual or a US company, including a corporation or LLC.

The file can be submitted remotely before any transfer is made so that the documentation concerning the subscriber, its authority, ultimate beneficial owners and source of funds can be reviewed.

Once the file has been approved, payment instructions are provided to the investor.

Subject to the circumstances of the transaction, the subscription funds may be transferred directly from a US bank account.

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 a share capital increase involving a US investor, please visit our dedicated share capital increase page, click here.