All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

Article 1843-2 of the Civil Code states that each partner's rights in the share capital are proportional to their contributions at the time of the company's formation or during its existence. Therefore, to be considered a full partner, is a contribution indispensable, even within companies that do not have legal personality, such as joint ventures and de facto companies? A contribution is defined  …

Necessity of contributions

Article 1843-2 of the Civil Code states that each partner's rights in the share capital are proportional to their contributions at the time of the company's formation or during its existence. Therefore, to be considered a full partner, is a contribution indispensable, even within companies that do not have legal personality, such as joint ventures and de facto companies? A contribution is defined as the asset or service that the future partner of a company provides in exchange for obtaining equity rights . While essential for acquiring partner status, the contribution may nevertheless be considered unenforceable against the contributor's creditors if it reduces the value of their security and impoverishes the debtor .

For a person to fully acquire the status of associate through their contribution, it is necessary to distinguish between the subscription phase of the company's shares or stocks and their actual release. The subscription phase corresponds to the stage where the future associate commits to making a contribution. It is during the release that they will make the assets, subject of the contribution, available to the company. The terms of release of contributions vary depending on the form of the company and the content of the statutes. Consequently, an associate of a real estate civil company (SCI) who has fully released their contribution cannot compel other associates to do the same as long as they have carried out work on behalf of the company, the cost of which has been charged to their current account and offset against the amount of contributions due, in accordance with the situation accepted by all from the outset . The sum of the contributions made by the associates constitutes the share capital, commonly defined as the “creditors' guarantee.” The share capital not released by the former associate of an SCI constitutes a claim of the company against them, which does not extinguish when they withdraw from the company . Pursuant to Article 1843-3, the associate who has not fulfilled their promise of a cash contribution automatically becomes liable for interest on this amount from the day it was due, without prejudice to any potential damages. Furthermore, when calls for funds to fully release the capital have not been made within a legal timeframe, any interested party may request the president of the court ruling in summary proceedings to either order the administrators, managers, and directors to make these calls for funds under penalty, or to appoint a representative responsible for carrying out this formality . When the company is subject to a recovery plan, the plan's execution commissioner, who does not represent the debtor, cannot substitute for the company's legal bodies to demand that an associate release their contributions .

The absence or fictitious nature of the contribution has serious consequences. Indeed, they may lead to the invalidity of the company concerned, in accordance with Article 1844-10 of the Civil Code, which refers to Article 1832. Proof of the release of the contribution is therefore of crucial importance. The inclusion in the statutes of a SARL of a statement that a person has subscribed to shares and made the corresponding contribution is sufficient to consider that their contribution is valid . However, a person who certifies that each shareholder has paid their share into the share capital by taking out a loan from the company, when the amounts in question have never been repaid, is guilty of the offense of making false statements .

The fictitious nature of contributions primarily results from factual elements. Contributions to a real estate civil company (SCI) were deemed fictitious because the funds involved, which were used for the company's capital increase, originated from a loan granted to the company, even though some installments had been repaid by the partners .

The sanction of invalidity, provided by national law, does not appear to comply with European directives that very strictly define the cases of invalidity for SARLs and joint stock companies . In fact, the courts generally dismiss such actions based on the principle of primacy .

See however Cass. req., 8 January 1872, LawLex202300014061JBJ, stating that any agreement whereby one of the contracting parties undertakes to provide capital for the operation of a business or industry in return for a share in the profits to be generated does not necessarily constitute the formation of a limited partnership, but may instead amount to a simple loan transaction, in the absence of any intention to share in the losses.

Cass. 3e civ., 20 December 2000, LawLex202200004112JBJ, concerning the contribution of bare ownership of two buildings to an SCI.

CA Paris, 21 September 2001, LawLex200500009062JBJ, stating that the invalidity of a company cannot be declared on the grounds of the fictitious nature of the contribution of a business asset, denounced by one of the associates, or the lack of corporate purpose.

Cass. 3e civ., 28 November 2001, LawLex202200004114JBJ.

Cass. 3e civ., 17 January 2019, LawLex202200003095JBJ; Cass. 2e civ., 12 May 2016, LawLex202100003673JBJ on the attachability of this claim by a corporate creditor.

Cass. com., 7 July 2009, LawLex202200003096JBJ.

Cass. com., 12 October 2004, LawLex202200004115JBJ.

Cass. com., 20 September 2016, LawLex202200003094JBJ.

Cass. crim., 28 May 1979, LawLex202200003100JBJ.

Cass. 3e civ., 19 June 1996, LawLex202200003093JBJ.

Directive No 2017/1132 of 14 June 2017 codifying Directives No 2009/101 of 16 September 2009 and No 68/151 of 9 March 1968.

Company Law (en cours)

17. Necessity of contributions

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17. Necessity of contributions

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise