Reducing the social capital of the business
Verified 20 February 2023 - Directorate for Legal and Administrative Information (Prime Minister)
Social capital is not fixed. The business may reduce its capital whether or not caused by losses. The steps to be taken vary according to the legal form of the business (SARL/EURL, SA or SAS/SASU).
SARL/EURL
Social capital is the original assets business. It is composed of all the resources provided by the partners when the business is created.
Thus, the capital reduction is an operation which consists in to reduce the amount of share capital business.
FYI
The reduction of share capital is governed by a principle ofequal treatment of members. This means that the fall in capital must be distributed evenly proportional between each partner.
What's the point?
Depending on the financial situation of the business, the reduction in the share capital may be made for one of the following 2 reasons :
- Either it is driven by losses : when a business suffers losses that cannot be absorbed by its reserves or a deficit carry-over, the capital reduction may make it possible to reconstitute the equity so that they are again greater than half of the share capital.
- Either it is not motivated by losses : when the share capital is no longer in line with the size of the business or its volume of business (e.g. after the sale of an industry), the capital reduction may allow the business to communicate a more credible image to its partners. The capital reduction may also allow certain members to to recover part of their contributions done at the creation of the business.
FYI
Where the business is in financial difficulties and its equity is less than half of the share capital, the capital reduction may be followed by a capital increase. This technique allows to discharge liabilities, this is called a " accordion shot ”.
How does it work?
The capital reduction may take one of the following forms, at the option of the members:
- Decrease in the number of shares
- Decrease in the nominal value of shares
- Purchase of shares by the business manager with a view to their cancelation (only applicable if the capital reduction is not loss-driven)
Répondez aux questions successives et les réponses s’afficheront automatiquement
Decreased number of titles
The number of shares is decreasing. However, their nominal value remains unchanged.
Example :
A business has a share capital of €500,000 divided into 5,000 shares in €100 each.
The business reduces the number of securities to 3,000 shares, thus reducing the share capital to €300,000.
Decrease in securities value
The nominal value of the shares is decreasing. However, their number remains unchanged.
Example :
A business has a share capital of €500,000 divided into 5,000 shares in €100 each.
The business reduces the value of each share to €50, thus reducing the share capital to €250,000.
Redemption of securities by business
The manager buys, on behalf of the business, the shares held by the members in order to cancel them.
The purchase of shares is useful in particular when a member wishes to withdraw from the business and his co-members refuse both to approve the proposed purchaser and to buy back (or have a third party buy back) the shares whose disposal is envisaged.
Achieving a capital reduction requires accomplishing several formalities. These differ depending on whether the reduction is loss-driven or not.
Loss-driven reduction
1. Intervention of the auditors
Social leaders must to communicate to the auditors business (if any) of the proposed capital reduction.
At the end of this communication, the auditors shall to draw up a report in which they make known their assessment of the causes and conditions of the capital reduction operation.
The report must be presented to the partners at least 45 days before the extraordinary general meeting (AGE) to decide on the capital reduction.
2. Collective decision of the members
A capital reduction implies a amendment of the statutes :
- SARL incorporated before 4 August 2005 : the decision must be adopted by the members representing at least 3/4 of the shares. There's no pitch of quorum required. A minimum number of participants present or represented at the AGE is not required.
- SARL incorporated after 4 August 2005 : the general meeting may validly deliberate only if the partners present or represented possess at least 1/4 shares (on first notice) and 1/5 of these (on second notice). If not, a new meeting must be convened within 2 months. If the quorum is respected, the amendments must then be decided by a majority of 2/3 of the shares held by the members present or represented.
The decision shall be recorded in minutes.
FYI
In theEURL, all the powers normally vested in the shareholders’ meeting in the SARLs belong to thesole partner pronounced in the form of unilateral decisions. There are no rules to be applied with regard to calling, voting or quorum. On the other hand, each decision must be recorded on a special register held at the registered office. This register must be marked and initialed by the judge of the commercial court, by the judge of the judicial court, or by the mayor or deputy mayor of the commune of the registered office.
3. Publish legal announcements in a media
Where an increase in the share capital has been decided, the legal representative (the manager) of the company must carry out a publishing legal announcements in a medium. This advertisement is used to inform third party the evolution of business.
The advertisement notice shall contain mandatory particulars following:
- Name of company followed, where appropriate, by the initials of the business
- Legal form, followed, where appropriate, by the words ‘open-ended’
- Amount of former share capital (before planned reduction)
- Address of registered office
- SIREN number RCS endorsement, followed by the name of the city of the registry in which the business has registered
- Retained track to carry out the capital reduction (reduction in the number of securities or their nominal value)
- New Number of Titles or New Value in euro of each of them
- Amount of new share capital
- Article number of the amended articles of association
- Management body who took the decision on the capital reduction
- Date of decision and effective date (which may be different).
The legal advertisement must be published in a 1-month period from the date of the decision. The business then receives a certificate of publication.
4. Declaring reduction
The capital reduction must also be reported in one of the following ways:
- on the website of the company formalities office.
- either on-site Infograft (until 30 June 2023)
Auto-insert at Bodacc: titleContent return the capital increase enforceable against third parties.
When reporting, you must submit the supporting documents following:
- Copy of the minutes of the capital reduction (certified by the manager as being in conformity)
- Copy of the updated articles of association (certified by the manager)
- Certification of publication of the change notice in a legal advertisement medium
If the capital reduction results in a change in beneficial ownership, it must also be declared on the formalities window.
FYI
The reduction of share capital is exempt from registration company Tax Service (SIE).
Non-loss driven reduction
1. Intervention of the auditors
Social leaders must to communicate to the auditors business (if any) of the proposed capital reduction.
At the end of this communication, the auditors shall to draw up a report in which they make known their assessment of the causes and conditions of the capital reduction operation.
The report must be presented to the partners at least 45 days before the extraordinary general meeting (AGE) to decide on the capital reduction.
2. Collective decision of the members
A capital reduction implies a amendment of the statutes :
- SARL incorporated before 4 August 2005 : the decision must be adopted by the members representing at least 3/4 of the shares. There's no pitch of quorum required. A minimum number of participants present or represented at the AGE is not required.
- SARL incorporated after 4 August 2005 : the general meeting may validly deliberate only if the partners present or represented possess at least 1/4 shares (on first notice) and 1/5 of these (on second notice). If not, a new meeting must be convened within 2 months. If the quorum is respected, the amendments must then be decided by a majority of 2/3 of the shares held by the members present or represented.
The decision shall be recorded in minutes.
FYI
In theEURL, all the powers normally vested in the shareholders’ meeting in the SARLs belong to thesole partner pronounced in the form of unilateral decisions. There are no rules to be applied with regard to calling, voting or quorum. On the other hand, each decision must be recorded on a special register held at the registered office. This register must be marked and initialed by the judge of the commercial court, by the judge of the judicial court, or by the mayor or deputy mayor of the commune of the registered office.
In order to reduce capital, the meeting may also decide on the redemption by business of its own shares to cancel them.
To do this, the business must present to all its partners a offer to purchase their securities. Such an offer shall be the subject of a notice published in a legal listing support and the Bulletin of mandatory legal announcements (Balo).
The opinion shall include following mentions :
- Identity of the business: name, legal form, address of registered office
- Amount of share capital (before reduction)
- Number of shares to be purchased
- Price offered by units and method of payment
- Time during which the offer is maintained (may not be less than 20 days)
The purchase of the shares is made in the three-month period from the expiry of the creditors' opposition period. This purchase carries the cancelation of the shares.
3. Publish legal announcements in a media
Where an increase in the share capital has been decided, the legal representative (the manager) of the company must carry out a publishing legal announcements in a medium. This advertisement is used to inform third party the evolution of business.
Warning
This is a different publication the provision for informing members in the context of a capital reduction by repurchase of securities by the business.
The advertisement notice shall contain mandatory particulars following:
- Name of company followed, where appropriate, by the initials of the business
- Legal form, followed, where appropriate, by the words ‘open-ended’
- Amount of former share capital (before planned reduction)
- Address of registered office
- SIREN number RCS endorsement, followed by the name of the city of the registry in which the business has registered
- Retained track to carry out the capital reduction (reduction in the number of securities or their value, redemption by the business)
- New Number of Titles or New Value in euro of each of them
- Amount of new share capital
- Article number of the amended articles of association
- Management body who took the decision on the capital reduction
- Date of decision and effective date (which may be different).
The legal advertisement must be published in a 1-month period from the date of the decision. The business then receives a certificate of publication.
4. Declaring reduction
The capital reduction must also be reported in one of the following ways:
- on the website of the company formalities office.
- either on-site Infograft (until 30 June 2023)
Auto-insert at Bodacc: titleContent return the capital increase enforceable against third parties.
When reporting, you must submit the supporting documents following:
- Copy of the minutes of the capital reduction, certified by the manager as having been completed
- A copy of the updated articles of association, certified as compliant by the manager
- Certification of publication of the change notice in a legal advertisement medium
If the capital reduction results in a change in beneficial ownership, it must also be declared on the formalities window.
FYI
The reduction of share capital is exempt from registration company Tax Service (SIE).
5. Possible opposition by creditors
Where the capital reduction is not loss-driven, a special procedure is intended to protect creditors possible from the business.
Indeed, the social creditors whose claim is born before transmission to the counter of the minutes of the meeting may form opposition to challenge the decision to reduce capital. This opposition must be made in the form of a subpoena before the Commercial Court of the seat of the business, in a 1-month period from the date of filing.
The Opposition suspend capital reduction operations (e.g. redemption of securities, allocation of dividends) until the court's decision.
Thus, the judge has a choice between 3 solutions following:
- Reject the creditors' opposition if it considers that it is not justified
- Order that the guarantees (e.g. pledge), if the business offers them and they are deemed sufficient
- Order the repayment of the claims
In either case, the creditors' opposition is not intended to invalidate the decision reduce social capital. It merely delays its practical implementation.
Please note
In practice, it is recommended that the implementation of the capital reduction be made conditional on the absence of objections or their rejection by the court.
When it is non-loss-drivenHowever, the capital reduction gives rise to the distribution of social funds to the members. These distributions are taxable and are taxed differently depending on the nature of the reduction of capital.
FYI
On the contrary, a capital reduction loss-driven shall not result in a distribution of profits to the members. Therefore, it does not give rise to no taxation.
Répondez aux questions successives et les réponses s’afficheront automatiquement
Decreased number of titles
The sums paid to the members are the responsibility of the distributed income scheme.
Please note
The sums with the character of reimbursement of contributions or emission allowances are exempt from taxation.
Decrease in nominal value of securities
The sums paid to the members are the responsibility of the distributed income scheme.
Please note
The sums with the character of reimbursement of contributions or emission allowances are exempt from taxation.
Business repurchase of securities
Where the business redeems its own shares, the sums allocated to the members shall be capital gains scheme :
- Capital gains regime for the transfer of securities and social law (for natural partners)
- Occupational capital gains scheme (for members of legal persons)
Please note
These sums are not not considered as distributed income (e.g. dividends).
SA
Social capital is the original assets business. It is composed of all resources contributed by shareholders when the business is created.
Thus, the capital reduction is an operation which consists in to reduce the amount of share capital business.
FYI
The reduction of share capital is governed by a principle ofequal treatment of shareholders. This means that the fall in capital must be distributed evenly proportional between each shareholder.
What's the point?
Depending on the financial situation of the business, the reduction in the share capital may be made for one of the following 2 reasons :
- Either loss-driven : when a business suffers losses that cannot be absorbed by its reserves or a deficit carry-over, the capital reduction may make it possible to reconstitute the equity so that they are again greater than half of the share capital.
- Either non-loss-driven : when the share capital is no longer in line with the size of the business or its volume of business (e.g. after the sale of an industry), the capital reduction may allow the business to communicate a more credible image to its partners. The capital reduction may also allow certain shareholders to to recover part of their contributions done at the creation of the business.
FYI
Where the business is in financial difficulties and its equity is less than half of the share capital, the capital reduction may be followed by a capital increase. This technique makes it possible to clear the liability, this is called a “ accordion shot ”.
How does it work?
The capital reduction may take one of the following forms at the option of the shareholders:
- Decrease in number of actions
- Decrease in par value of shares
- Redemption of shares by business for cancelation (applicable if the capital reduction is not loss-driven).
Répondez aux questions successives et les réponses s’afficheront automatiquement
Decreased number of titles
The number of actions decreases. However, their nominal value remains unchanged.
Example :
A business has a share capital of €500,000 divided into 5,000 actions of €100 each.
The business reduces the number of securities to 3,000 shares, thus reducing the share capital to €300,000.
Decrease in securities value
The par value of the shares is decreasing. However, their number remains unchanged.
Example :
A business has a share capital of €500,000 divided into 5,000 actions of €100 each.
The business decreases the value of each share to €50, thus reducing the share capital to €250,000.
Redemption of securities by business
The business buys the shares owned by the shareholders in order to cancel them.
The redemption of shares by the business is useful in particular when a shareholder wishes to withdraw from the business and his co-shareholders refuse both to approve the proposed acquirer and to repurchase (or to have a third party repurchase) the shares whose disposal is envisaged.
FYI
In the SA, the share capital cannot be less than €37,000. A capital reduction cannot therefore reduce its amount below this threshold.
Achieving a capital reduction requires accomplishing several formalities. These differ depending on whether the reduction is loss-driven or not.
Loss-driven reduction
1. Intervention of the auditors
Social leaders must to communicate to the auditors business (if any) of the proposed capital reduction.
At the end of this communication, the Commissioners must to draw up a report in which they make known their assessment of the causes and conditions of the capital reduction operation.
The report must be presented to the shareholders at least 15 days before the extraordinary general meeting (AGE) to decide on the capital reduction.
2. Shareholders' collective decision
A capital reduction implies a amendment of the statutes. Thus, the capital reduction must be voted at an extraordinary general meeting (AGE) on the qualified majority of 2/3 the votes of shareholders present or represented. The decision shall be recorded in minutes.
Please note
AGE can delegate to the board of directors (or the Executive Board) any powers to carry out the operation. On the other hand, it remains solely competent to authorize the capital reduction.
3. Publish legal announcements in a media
Where an increase in the share capital has been decided, the legal representative (the managing director) of the company must carry out a publishing legal announcements in a medium. This advertisement is used to inform third party the evolution of business.
The advertisement notice shall contain mandatory particulars following:
- Name of company followed, where appropriate, by the initials of the business
- Legal form, followed, where appropriate, by the words ‘open-ended’
- Amount of former share capital (before planned reduction)
- Address of registered office
- SIREN number RCS endorsement, followed by the name of the city of the registry in which the business has registered
- Retained track to carry out the capital reduction (reduction in the number of securities or their nominal value)
- New Number of Titles or New Value in euro of each of them
- Amount of new share capital
- Article number of the amended articles of association
- Management body who took the decision on the capital reduction
- Date of decision and effective date (which may be different).
The legal advertisement must be published in a 1-month period from the date of the decision. The business then receives a certificate of publication.
4. Declaring reduction
The capital reduction must also be reported in one of the following ways:
- on the website of the company formalities office.
- either on-site Infograft (until 30 June 2023)
Auto-insert at Bodacc: titleContent return the capital increase enforceable against third parties.
When reporting, you must submit the supporting documents following:
- Copy of the minutes of the capital reduction, certified as correct by the legal representative (Director-General)
- Copy of the updated articles of association, certified by the Director-General
- Certification of publication of the change notice in a legal advertisement medium
If the capital reduction results in a change in beneficial ownership, it must also be declared on the formalities window.
FYI
The reduction of share capital is exempt from registration company Tax Service (SIE).
Non-loss driven reduction
1. Intervention of the auditors
Social leaders must to communicate to the auditors business (if any) of the proposed capital reduction.
At the end of this communication, the Commissioners must to draw up a report in which they make known their assessment of the causes and conditions of the capital reduction operation.
The report must be presented to the shareholders at least 15 days before the extraordinary general meeting (AGE) to decide on the capital reduction.
2. Shareholders' collective decision
A capital reduction implies a amendment of the statutes. Thus, the capital reduction must be voted at an extraordinary general meeting (AGE) on the qualified majority of 2/3 the votes of shareholders present or represented. The decision shall be recorded in minutes.
Please note
AGE can delegate to the board of directors (or the Executive Board) any powers to carry out the operation. On the other hand, it remains solely competent to authorize the capital reduction.
In order to reduce capital, the meeting may also decide on the redemption by business of its own shares to cancel them. It then fixes a fixed number of shares to be repurchased and the time limit set for the Board of Directors (or Executive Board) to make such a purchase.
To do this, the business must present to all its shareholders a offer to purchase their securities. Such an offer shall be the subject of a notice published in a legal listing support and the Bulletin of mandatory legal announcements (Balo).
The opinion shall include following mentions :
- Identity of the business: name, legal form, address of registered office
- Amount of share capital (before reduction)
- Number of shares to be purchased
- Offered price per share and method of payment
- Time during which the offer is maintained (may not be less than 20 days)
If all actions are nominative, the publications listed may be replaced by a registered letter (containing the same information) addressed to all shareholders.
FYI
Shareholders may not to follow up offer and retain their shares.
Once the redemption has been made, the shares must be canceled within a month after the expiry of the time limit for the shareholders to accept the purchase offer. Until they are effectively canceled, the actions are disenfranchised. Cancelation shall be recorded by a transfer to a direct debit account in the name of the business.
3. Publish legal announcements in a media
Where an increase in the share capital has been decided, the legal representative (the managing director) of the company must carry out a publishing legal announcements in a medium. This advertisement is used to to inform third parties the evolution of business.
Warning
This is a different publication the provision for the information of shareholders in the context of a capital reduction by repurchase of securities by the business.
The advertisement notice shall contain mandatory particulars following:
- Name of company followed, where appropriate, by the initials of the business
- Legal form, followed, where appropriate, by the words ‘open-ended’
- Amount of former share capital (before planned reduction)
- Address of registered office
- SIREN number RCS endorsement, followed by the name of the city of the registry in which the business has registered
- Retained track to carry out the capital reduction (reduction in the number of securities or their value, redemption by the business)
- New Number of Titles or New Value in euro of each of them
- Amount of new share capital
- Article number of the amended articles of association
- Management body who took the decision on the capital reduction
- Date of decision and effective date (which may be different).
The legal advertisement must be published in a 1-month period from the date of the decision. The business then receives a certificate of publication.
4. Declaring reduction
The capital reduction must also be reported in one of the following ways:
- on the website of the company formalities office.
- either on-site Infograft (until 30 June 2023)
Auto-insert at Bodacc: titleContent return the capital increase enforceable against third parties.
When reporting, you must submit the supporting documents following:
- Copy of the minutes of the capital reduction, certified as correct by the legal representative (Director-General)
- Copy of the updated articles of association, certified by the Director-General
- Certification of publication of the change notice in a legal advertisement medium
If the capital reduction results in a change in beneficial ownership, it must also be declared on the formalities window.
FYI
The reduction of share capital is exempt from registration company Tax Service (SIE).
5. Possible opposition by creditors
Where the capital reduction is not loss-driven, a special procedure is intended to protect creditors possible from the business.
Indeed, the social creditors whose claim is born before transmission to the counter of the minutes of the meeting may form opposition to challenge the decision to reduce capital. This opposition must be made in the form of a subpoena before the Commercial Court of the seat of the business, in a 20-day period from the date of filing.
The Opposition suspend capital reduction operations (e.g. redemption of securities, allocation of assets) until the court’s decision.
Thus, the judge has a choice between 3 solutions following:
- Reject the creditors' opposition if it considers that it is not justified
- Order the provision of security (e.g. pledge), if the business offers such security and it is considered sufficient
- Order the repayment of the claims
In either case, the creditors' opposition is not intended to invalidate the decision reduce social capital. It merely delays its practical implementation.
Please note
In practice, it is recommended that the implementation of the capital reduction be made conditional on the absence of objections or their rejection by the court.
When it is non-loss-driven, the capital reduction gives rise to the distribution of social funds to shareholders. These distributions are taxable and are taxed differently depending on the nature of the reduction of capital.
FYI
On the contrary, a capital reduction loss-driven does not result in profit distribution to shareholders. Therefore, it does not give rise to no taxation.
Répondez aux questions successives et les réponses s’afficheront automatiquement
Decreased number of titles
The amounts paid to shareholders are taxed on the distributed income scheme.
Please note
Amounts which, for shareholders, are reimbursement of contributions or emission allowances are exempt from taxation.
Decrease in nominal value of securities
The amounts paid to shareholders are taxed on the distributed income scheme.
Please note
Amounts which, for shareholders, are reimbursement of contributions or emission allowances are exempt from taxation.
Business repurchase of securities
Where the business redeems its own shares, the sums allocated to the shareholders shall be capital gains scheme :
- Capital gains regime for the transfer of securities and social law (for natural partners)
- Occupational capital gains scheme (for members of legal persons)
Please note
These sums are not not considered as distributed income (e.g. dividends).
SAS/SASU
Social capital is the original assets business. It is composed of all the resources provided by the partners when the business is created.
Thus, the capital reduction is an operation which consists in to reduce the amount of share capital business.
FYI
The reduction of share capital is governed by a principle ofequal treatment of members. This means that the fall in capital must be distributed evenly proportional between each partner.
What's the point?
Depending on the financial situation of the business, the reduction in share capital may be:
- Either loss-driven : when a business suffers losses that cannot be absorbed by its reserves or a deficit carry-over, the capital reduction may make it possible to reconstitute the equity so that they are again greater than half of the share capital.
- Either non-loss-driven : when the share capital is no longer in line with the size of the business or its volume of business (e.g. after the sale of an industry), the capital reduction may allow the business to communicate a more credible image to its partners. The capital reduction may also allow certain members to to recover part of their contributions done at the creation of the business.
FYI
Where the business is in financial difficulties and its equity is less than half of the share capital, the capital reduction may be followed by a capital increase. This technique allows to discharge liabilities, this is called a " accordion shot ”.
How does it work?
The capital reduction may take one of the following forms, at the option of the members:
- Decrease in number of actions
- Decrease in par value of shares
- Redemption of shares by business for cancelation (applicable if the capital reduction is not loss-driven).
Répondez aux questions successives et les réponses s’afficheront automatiquement
Decreased number of titles
The number of actions decreases. However, their nominal value remains unchanged.
Example :
A business has a share capital of €500,000 divided into 5,000 actions of €100 each.
The business reduces the number of securities to 3,000 shares, thus reducing the share capital to €300,000.
Decrease in securities value
The par value of the shares is decreasing. However, their number remains unchanged.
Example :
A business has a share capital of €500,000 divided into 5,000 actions of €100 each.
The business decreases the value of each share to €50, thus reducing the share capital to €250,000.
Redemption of securities by business
The business buys the shares owned by the shareholders in order to cancel them.
The repurchase of shares by the business is useful, in particular, when a member wishes to withdraw from the business and his co-members refuse both to approve the proposed acquirer and to repurchase (or to have a third party repurchase) the shares whose disposal is envisaged.
Achieving a capital reduction requires accomplishing several formalities. These differ depending on whether the reduction is loss-driven or not.
Loss-driven reduction
1. Intervention of the auditors
Social leaders must to communicate to the auditors business (if any) of the proposed capital reduction.
At the end of this communication, the Commissioners must to draw up a report in which they make known their assessment of the causes and conditions of the capital reduction operation.
The report must be presented to the partners at least 15 days before the extraordinary general meeting (AGE) to decide on the capital reduction.
2. Collective decision of the members
A capital reduction implies a amendment of the statutes. Thus, it must be adopted and approved under the conditions laid down in the statutes:
- Body empowered to take the decision : Governing Board, General Meeting
- Number of votes required
- Quorum required
The decision shall be recorded in minutes.
FYI
In the SASU, all the powers normally vested in the shareholders’ meeting in the SAS shall belong to thesole partner pronounced in the form of unilateral decisions. There are no rules to be applied with regard to calling, voting or quorum. On the other hand, each decision must be recorded on a special register held at the registered office. It is recommended that this register be marked and initialed by the judge of the commercial court, by the judge of the judicial court, or by the mayor or deputy mayor of the commune of the registered office.
3. Publish legal announcements in a media
Where an increase in the share capital has been decided, the company’s legal representative (president or chief executive officer) must carry out a publishing legal announcements in a medium. This advertisement is used to to inform third parties the evolution of business.
The advertisement notice shall contain mandatory particulars following:
- Name of company followed, where appropriate, by the initials of the business
- Legal form, followed, where appropriate, by the words ‘open-ended’
- Amount of former share capital (before planned reduction)
- Address of registered office
- SIREN number RCS endorsement, followed by the name of the city of the registry in which the business has registered
- Retained track to carry out the capital reduction (reduction in the number of securities or their nominal value)
- New Number of Titles or New Value in euro of each of them
- Amount of new share capital
- Article number of the amended articles of association
- Management body who took the decision on the capital reduction
- Date of decision and effective date (which may be different).
The legal advertisement must be published in a 1-month period from the date of the decision. The business then receives a certificate of publication.
4. Declaring reduction
The capital reduction must also be reported in one of the following ways:
- on the website of the company formalities office.
- either on-site Infograft (until 30 June 2023)
Auto-insert at Bodacc: titleContent return the capital increase enforceable against third parties.
When reporting, you must submit the supporting documents following:
- Copy of the minutes of the capital reduction, certified by the legal representative (President or Chief Executive Officer)
- Copy of the updated articles of association, certified by the legal representative
- Certification of publication of the change notice in a legal advertisement medium
If the capital reduction results in a change in beneficial ownership, it must also be declared on the formalities window.
FYI
The reduction of share capital is exempt from registration company Tax Service (SIE).
Non-loss driven reduction
1. Intervention of the auditors
Social leaders must to communicate to the auditors business (if any) of the proposed capital reduction.
At the end of this communication, the Commissioners must to draw up a report in which they make known their assessment of the causes and conditions of the capital reduction operation.
The report must be presented to the partners at least 15 days before the extraordinary general meeting (AGE) to decide on the capital reduction.
2. Collective decision of the members
A capital reduction implies a amendment of the statutes. Thus, it must be adopted and approved under the conditions laid down in the statutes:
- Body empowered to take the decision : Governing Board, General Meeting
- Number of votes required
- Quorum required
The decision shall be recorded in minutes.
FYI
In the SASU, all the powers normally vested in the shareholders’ meeting in the SAS shall belong to thesole partner pronounced in the form of unilateral decisions. There are no rules to be applied with regard to calling, voting or quorum. On the other hand, each decision must be recorded on a special register held at the registered office. It is recommended that this register be marked and initialed by the judge of the commercial court, by the judge of the judicial court, or by the mayor or deputy mayor of the commune of the registered office.
In order to reduce capital, the meeting may decide to redemption by business of its own shares to cancel them. It then fixes a fixed number of shares to be repurchased and the time limit set for the Board of Directors (or Executive Board) to make such a purchase.
To do this, the business must present to all its partners a offer to purchase their securities. Such an offer shall be the subject of a notice published in a legal listing support and the Bulletin of mandatory legal announcements (Balo).
The opinion shall include following mentions :
- Identity of the business: name, legal form, address of registered office
- Amount of share capital (before reduction)
- Number of shares to be purchased
- Offered price per share and method of payment
- Time during which the offer is maintained (may not be less than 20 days)
If all actions are nominative, the publications listed may be replaced by a registered letter (containing the same information) addressed to all partners.
FYI
Associates can not to proceed with the offer and keep their shares.
Once the redemption has been made, the shares must be canceled within a month after the expiration of the period allowed to the partners to accept the purchase offer. Until they are effectively canceled, the actions are disenfranchised. Cancelation shall be recorded by a transfer to a direct debit account in the name of the business.
3. Publish legal announcements in a media
Where an increase in the share capital has been decided, the company’s legal representative (president or chief executive officer) must carry out a publishing legal announcements in a medium. This advertisement is used to inform third party the evolution of business.
Warning
This is a different publication the provision for informing members in the context of a capital reduction by repurchase of securities by the business.
The advertisement notice shall contain mandatory particulars following:
- Name of company followed, where appropriate, by the initials of the business
- Legal form, followed, where appropriate, by the words ‘open-ended’
- Amount of former share capital (before planned reduction)
- Address of registered office
- SIREN number RCS endorsement, followed by the name of the city of the registry in which the business has registered
- Retained track to carry out the capital reduction (reduction in the number of securities or their value, redemption by the business)
- New Number of Titles or New Value in euro of each of them
- Amount of new share capital
- Article number of the amended articles of association
- Management body who took the decision on the capital reduction
- Date of decision and effective date (which may be different).
The legal advertisement must be published in a 1-month period from the date of the decision. The business then receives a certificate of publication.
4. Declaring reduction
The capital reduction must also be reported in one of the following ways:
- on the website of the company formalities office.
- either on-site Infograft (until 30 June 2023)
Auto-insert at Bodacc: titleContent return the capital increase enforceable against third parties.
When reporting, you must submit the supporting documents following:
- Copy of the minutes of the capital reduction, certified by the legal representative (President or Chief Executive Officer)
- Copy of the updated articles of association, certified by the legal representative
- Certification of publication of the change notice in a legal advertisement medium
If the capital reduction results in a change in beneficial ownership, it must also be declared on the formalities window.
FYI
The reduction of share capital is exempt from registration company Tax Service (SIE).
5. Possible opposition by creditors
Where the capital reduction is not loss-driven, a special procedure is intended to protect creditors possible from the business.
Indeed, the social creditors whose claim is born before transmission to the counter of the minutes of the meeting may form opposition to challenge the decision to reduce capital. This opposition must be made in the form of a subpoena before the Commercial Court of the seat of the business, in a 20-day period from the date of filing.
The Opposition suspend capital reduction operations (e.g. redemption of securities, allocation of assets) until the court’s decision.
Thus, the judge has a choice between 3 solutions following:
- Reject the creditors' opposition if it considers that it is not justified
- Order the provision of security (e.g. pledge), if the business offers such security and it is considered sufficient
- Order the repayment of the claims
In either case, the creditors' opposition is not intended to invalidate the decision reduce social capital. It merely delays its practical implementation.
Please note
In practice, it is recommended that the implementation of the capital reduction be made conditional on the absence of objections or their rejection by the court.
When it is non-loss-drivenHowever, the capital reduction gives rise to the distribution of social funds to the members. These distributions are taxable and are taxed differently depending on the nature of the reduction of capital.
FYI
On the contrary, a capital reduction loss-driven shall not result in a distribution of profits to the members. Therefore, it does not give rise to no taxation.
Répondez aux questions successives et les réponses s’afficheront automatiquement
Decreased number of titles
The sums paid to the partners are taxed on the distributed income scheme.
Please note
The sums with the character of reimbursement of contributions or emission allowances are exempt from taxation.
Decrease in nominal value of securities
The sums paid to the partners are taxed on the distributed income scheme.
Please note
The sums with the character of reimbursement of contributions or emission allowances are exempt from taxation.
Business repurchase of securities
Where the business redeems its own shares, the sums allocated to the members shall be capital gains scheme :
- Capital gains regime for the transfer of securities and social law (for natural partners)
- Occupational capital gains scheme (for members of legal persons)
Please note
These sums are not not considered as distributed income (e.g. dividends).
Who can help me?
Find who can answer your questions in your region
Capital reduction in SARL
Creditors’ opposition to the capital reduction in SARL
Capital reduction in SA (applicable to SAS)
Capital reduction in SA (regulatory part)
Tax treatment of distributed income
Tax treatment of repurchase of securities by business
Online service
Online service
Online service
Service-Public.fr