The share capital of a SARL may be contributed in cash or in kind (by the contribution of assets).
The amount of share capital must be indicated in the company’s bylaws, as well as on all documents issued by the company, such as contracts, letters, invoices, advertisements, etc.
Cash contributions
Only an amount corresponding to 1/5th of the amount of registered share capital (that is, the amount indicated in the company’s bylaws) must be paid on incorporation of the company. The remaining amount must however be paid within a maximum period of 5 years following the company’s incorporation.
It should be noted however that a share capital increase may not be carried out unless the entire registered share capital of the company has been paid.
The cash contributions corresponding to the company’s share capital must be deposited in the name of the company with a notary or a bank.
The name of the bank establishment having received the contributions corresponding to the company’s share capital, as well as the fact that such contributions have been paid, must be mentioned in the bylaws.
Failure to indicate the above constitutes a criminal offence punishable by 6 months imprisonment and a fine up to 9.000€ (art. L. 241-1 of the French commercial code). False indications contained in the bylaws regarding the payment of a company’s share capital are punishable by 3 years imprisonment and a fine up to 45.000€.
The amount of share capital deposited with a bank or notary in the name of the company may be withdrawn only after the company has obtained its registration number (“numéro RCS”) from the competent commercial court and upon presentation of a certificate of incorporation delivered by the court.
The contributors may however withdraw the amount of their contributions if the company bylaws have not been signed by all shareholders or the company registration has been refused by the commercial court. In such case, the contributors must require an authorization from the commercial court to individually withdraw their contributions, or appoint a proxy to withdraw all of their contributions and refund each contributor.
Contributions of assets (contributions in kind)
Any asset, including contracts, lease rights, intellectual property rights or receivables, may be contributed in kind to a SARL.
The value of each of such contributions in kind must be appraised and indicated in the bylaws. In principle, the shareholders may appraise the value of the contributions in kind only in light of a report prepared by a certified appraiser (“commissaire aux apports”), which report must be attached to the bylaws.
The appraisal of the contributions in kind by a certified appraiser is however not obligatory if: (i) none of the contributions in kind has a value in excess of 30.000€; (ii) the value of all contributions in kind does not exceed 50% of the company’s share capital, and (iii) the shareholders have unanimously decided not to appraise the value of the contributions by a certified appraiser. A valuation by a certified appraiser of the contributions in kind is obligatory in all other cases.
Only statutory auditor or experts inscribed on the list of experts maintained by the competent commercial court may be appointed as appraisers.
The appraiser is appointed either by unanimous decision of all shareholders or, failing such decision, by the competent commercial court at the request of a shareholder.
The appraiser is responsible for the evaluation of the contribution in kind and may be held liable for damage suffered by the company, its shareholders or third parties as a result of a breach of its duties. For example, the French Supreme Court has ruled that a shareholder is entitled to indemnification from an appointed appraiser for the damage suffered as a result of an excessive valuation of a contribution in kind, which has resulted in an excessive dilution of the shareholder’s shareholding participation in the company (Cass., com., 28 June 2005).
The appraiser may also incur criminal liability if it has fraudulently valued an asset at a value which exceeds its real value (“valeur réelle”). It should be noted that the shareholders are not obliged to retain the value indicated by the appraiser. However, if the value retained by the shareholders exceeds that indicated by the appraiser, the shareholders may be held responsible for damage suffered by the company or third parties as a result of such excessive valuation. The fraudulent valuation of a contribution in kind in excess of its real value (“valeur réelle”) is punishable by 5 years imprisonment and a fine up to 375.000€.
Contributions of work or services
Contributions of work or services may be made in consideration of shares which give right only to dividends, but not to the share capital of the company. The conditions relating to the contributions and the rights conferred by the shares must be specified in the bylaws, failing which the shares issued in consideration for such contributions will be deemed non-existent. The shares issued in consideration for contributions in kind consisting in the provision of work or services are automatically cancelled when such work or services cease to be provided.
