Why Use a French Notary to Deposit Funds for a Share Capital Increase?
When a French company carries out a cash share capital increase, the subscription funds must, where required by law, be deposited with an authorised depositary.
A French notary can receive the subscription funds and issue the depositary’s certificate required to complete the share capital increase.
This option is still relatively unfamiliar to many companies and investors. Businesses often approach their bank automatically, even though depositing the funds with a French notary can be particularly suitable where the transaction involves new investors, foreign shareholders, foreign companies or international bank transfers.
Importantly, the notary’s role as depositary is separate from the role of the legal adviser drafting the corporate documentation. A French notary can therefore be instructed specifically to receive the funds, carry out the required checks and issue the depositary’s certificate.
To understand the differences between the available options, see our comparison Bank or French notary: where should share capital increase funds be deposited?
What Is the Role of a French Notary in a Share Capital Increase?
When acting as depositary, the French notary receives the funds paid by the subscribers and holds them until the conditions for their release have been satisfied.
Once the required funds have been received and the necessary checks completed, the notary issues the depositary’s certificate allowing the company to proceed with the share capital increase.
After the transaction has been definitively completed and the required supporting documents have been provided, the deposited funds can be released and transferred to the company’s bank account.
The notary therefore performs three important functions:
- receiving the subscription funds;
- certifying their deposit;
- releasing the funds once the share capital increase has been definitively completed.
Does the French Notary Have to Draft the Corporate Documents?
No.
Using a French notary to deposit the funds does not necessarily mean instructing the notary to draft the shareholders’ resolutions, corporate minutes or amended articles of association.
The legal documentation for the share capital increase may therefore be prepared by the company’s lawyer, accountant, legal department or other advisers, while a French notary is separately instructed to act as depositary.
This distinction is particularly useful for law firms, accounting firms, corporate service providers and in-house legal teams that wish to retain control of the corporate documentation while using a French notary for the deposit of the subscription funds.
Is a French Notary an Alternative to a Bank for Depositing the Funds?
Yes.
Where subscription funds must be deposited as part of a share capital increase, a French notary is one of the professionals who may act as depositary.
The company is therefore not necessarily required to use its usual bank for this purpose.
Using a French notary may be particularly useful where:
- the company’s bank does not provide the required deposit service;
- the bank’s processing time is incompatible with the transaction timetable;
- the company prefers to use a depositary independent from its usual bank;
- the capital increase involves new investors;
- some subscribers are located outside France;
- or the subscription funds are being transferred from several bank accounts.
Using a French notary does not, however, provide a means of circumventing regulatory requirements or compliance checks. The notary is subject to its own obligations and must carry out the checks required for the transaction.
Preparing the file in advance is important for efficient processing. See the documents required by a French notary for a share capital increase and how long it takes to obtain the depositary’s certificate.
Why Can a French Notary Be Particularly Useful for Foreign Investors?
International share capital increases often involve additional practical considerations.
The subscriber may be:
- an individual residing outside France;
- a foreign company;
- a holding company belonging to an international group;
- or an investment fund or other investment vehicle.
The subscription funds may also originate from a bank account outside France.
In these circumstances, the subscriber, its representatives where applicable, its ultimate beneficial owners and the source of the funds must be capable of being identified.
Working with a French notary experienced in international capital deposits allows these matters to be reviewed before the funds are transferred, reducing the risk of discovering a difficulty only after an international payment has been initiated.
Does a Foreign Investor Need a French Bank Account?
Not necessarily.
Subject to prior review of the file and acceptance of the originating account, a foreign subscriber may transfer the subscription funds directly from a bank account outside France.
A foreign investor therefore does not necessarily need to open a French bank account solely in order to participate in the share capital increase.
Where several investors are subscribing, each investor may also make a separate transfer, provided that the payments can be identified and matched with the corresponding subscriptions.
Can the Procedure Be Handled Remotely?
Yes, in many cases.
The documentation can be submitted electronically for review before the subscription funds are transferred.
Depending on the transaction, the French notary may review:
- documents concerning the French company;
- documentation relating to the share capital increase;
- identification documents for the subscribers;
- corporate documents for foreign companies;
- information concerning ultimate beneficial owners;
- details of the originating bank accounts;
- and source-of-funds documentation where required.
Once the file has been accepted, payment instructions are provided to the subscribers.
The subscription funds can then be transferred without the investors having to attend the notary’s office solely for the purpose of depositing the funds.
How Long Does It Take to Obtain the Depositary’s Certificate?
The timing depends primarily on two factors:
- whether the file is complete;
- and when the subscription funds are actually received.
Where the documentation has been reviewed in advance, the depositary’s certificate can be issued promptly after receipt of the funds.
This is particularly useful for international transactions because the review of the documentation can be completed separately from the time required for the international bank transfer.
At Chassaint & Cerclé Notaires, the depositary’s certificate can be issued within 24 business hours after receipt of the funds, provided that the file is complete and the required checks have been completed.
Can a French Notary Receive Several Transfers for the Same Capital Increase?
Yes, subject to prior organisation of the transaction.
A share capital increase may involve several subscribers, each paying its own subscription amount.
This is common in investment rounds involving several investors.
The depositary must therefore be able to match each payment with:
- the relevant subscriber;
- the amount of its subscription;
- and the relevant share capital increase.
Subscribers should therefore follow the payment instructions and references provided by the French notary.
Can a French Notary Receive Funds Transferred from Abroad?
Yes, subject to prior review of the file and the regulations applicable to the transfer.
The fact that the subscription funds originate from a foreign bank account does not, by itself, prevent them from being deposited with a French notary.
Two separate issues should nevertheless be distinguished:
- whether the French notary can receive the funds in France;
- whether the subscriber is permitted to transfer the funds from the country in which they are held.
Some jurisdictions operate foreign exchange controls or impose restrictions on outbound investments and capital movements.
Using a French notary as depositary does not circumvent these regulations. The subscriber must ensure that the transfer is permitted under the rules applicable in the country of origin.
What Are the Practical Advantages of Using a French Notary?
Depending on the transaction, using a French notary as depositary can provide several practical advantages:
- a dedicated professional responsible for the deposit of the funds;
- review of the file before the bank transfers are initiated;
- the ability to handle both individual and corporate subscribers;
- experience with foreign investors and foreign companies;
- the possibility, subject to prior approval, of receiving transfers from foreign bank accounts;
- the ability to handle several subscribers within the same transaction;
- prompt issuance of the depositary’s certificate after receipt of the funds;
- and subsequent release of the funds once the share capital increase has been definitively completed.
The role of the notary therefore goes beyond merely receiving a bank transfer. It provides a secure and traceable framework for the entire flow of funds associated with the share capital increase.
Is Using a French Notary Reserved for Large Capital Increases?
No.
Depositing the subscription funds with a French notary is not limited to major fundraising rounds or transactions involving international groups.
A notary may also act as depositary for a more straightforward share capital increase involving existing shareholders.
The relevance of using a French notary depends on the practical characteristics of the transaction rather than simply the amount being invested.
How Do You Deposit Share Capital Increase Funds with a French Notary?
The procedure can be organised relatively simply:
- the company submits the documents relating to the share capital increase;
- documentation concerning the subscribers is provided;
- the French notary carries out the required checks;
- once the file has been accepted, payment instructions are sent to the subscribers;
- the subscribers transfer the funds to the depositary;
- once the required funds have been received, the depositary’s certificate is issued;
- after the share capital increase has been definitively completed, the documents required for the release of the funds are provided;
- the funds are then transferred to the company’s bank account.
Reviewing the file before the payments are made helps identify potential issues before subscribers initiate their transfers.
Finally, once the transaction has been definitively completed, the depositary can proceed with the release of the share capital increase funds.
Deposit Your Share Capital Increase Funds with a French Notary
Chassaint & Cerclé Notaires, a French notary office based in Paris, assists French companies with the deposit of funds for cash share capital increases.
The office can act specifically as depositary without taking over the drafting of the corporate documentation. It can therefore work directly with companies as well as with their lawyers, accountants, corporate service providers and other professional advisers.
Files can be handled remotely and may involve foreign shareholders or investors, foreign companies and international bank transfers.
Once the file has been reviewed and accepted, payment instructions are provided to the subscribers.
After receipt of the full amount and completion of the required checks, the depositary’s certificate can be issued within 24 business hours.
Once the share capital increase has been definitively completed and the required supporting documents have been provided, the office can release the funds to the company.
For further information about the procedure, required documents and submission of your file, please visit our dedicated share capital increase page, click here.
