Reconstitution of Equity When a French SARL Loses Half Its Share Capital
Legal Framework — Article L.223-42 of the French Commercial Code (Updated 2023) When a French limited liability company (SARL) decides not to dissolve after its equity has fallen below half of its share capital, it must reconstitute its equity within a legally defined period. This obligation ensures that the company restores a sound financial base […]
Consulting SARL Shareholders upon loss of half of share capital
Loss of Half the Share Capital: Consulting Shareholders Within Four Months – a Mandatory Step to Preserve the Company’s Continuity When a French limited liability company (SARL) records accounting losses that reduce its equity below half of its share capital, the law imposes a specific procedure to determine the company’s future. This mechanism, set out […]
When a French SARL Company Loses Half Its Share Capital: Procedure, Consequences, and Recovery Options
Updated Legal Framework — Law No. 2023-171 of 9 March 2023 French law imposes strict safeguards to ensure that a company maintains sufficient equity (capitaux propres) to cover its share capital (capital social).When losses cause the company’s equity to fall below half the share capital, managers must act promptly. This legal mechanism—often referred to as […]
Auditor’s Alert Procedure in French SARLs: Safeguarding Business Continuity
1. Legal Framework and Supervisory Role In France, statutory auditors (commissaires aux comptes) have a legal duty not only to certify the company’s financial statements but also to monitor its financial health. Under Article L.234-2 of the French Commercial Code, the auditor must initiate an alert procedure when facts come to light that may compromise […]
Personal Guarantees for French SARLs: Rules, Risks, and Practical Protections
Personal guarantees sit at the heart of SME finance in France. Banks and landlords routinely require a director or shareholder of an SARL (société à responsabilité limitée) to “stand behind” the company’s obligations. The legal framework for these undertakings—cautionnements—was significantly clarified by the 15 September 2021 ordinance, which consolidated and modernised disparate rules in the […]
Shareholder Current Accounts in French SARLs: Legal and Tax Framework
1. Legal Basis and the PACTE Act Reform French law prohibits any company other than a licensed credit institution from habitually receiving repayable funds from the public or providing banking services. Breach of this rule is a criminal offence punishable by three years’ imprisonment and a €375,000 fine for managers, or €1,875,000 for the company […]
Bonds Issued by SARLs: Legal and Tax Framework under French Law
1. Introduction Although the Société à responsabilité limitée (SARL) is historically a closed company form designed for small and medium enterprises, it has gradually gained access to more flexible financing methods. Among these, the issuance of bonds — once reserved for joint-stock companies — is now possible for SARLs under certain strict conditions. The issuance […]
The Family SARL: A Transparent Tax Regime for Close Relatives
1. Definition and Legal Foundation The “SARL de famille” is a form of limited liability company (SARL) whose partners are members of the same family and who opt for taxation under the partnership regime. This option replaces the default corporate income tax (IS) with income tax (IR), allowing profits and losses to be directly attributed […]
Corporate Income Tax (IS) or Pass-Through (IR) for a French SARL: Legal Framework, Options, and Consequences
Selecting the tax regime for a Société à responsabilité limitée (SARL) is not a mere formality. It conditions the pace at which profits are taxed, the possibility to monetise early losses, the deductibility of managers’ remuneration, the treatment of dividends at partner level, and the timing of cash flows. French law establishes corporate income tax […]
Publication and Filing of Annual Accounts in a French SARL: Legal Framework and Practical Compliance
Publishing annual accounts is not a mere administrative formality in France—it is a legal obligation that ensures transparency and protects partners, creditors, and public authorities. For a Société à responsabilité limitée (SARL), the filing of annual accounts with the commercial court registry (“greffe du tribunal de commerce”) is a critical step that confirms the proper […]
