Contributions in Industry in French SARLs

Introduction

French company law recognizes three categories of shareholder contributions in the formation and operation of companies: cash contributions (apports en numéraire), contributions in kind (apports en nature), and contributions in industry (apports en industrie). While the first two categories directly form part of the company’s share capital, the third occupies a special position.

In the context of the société à responsabilité limitée (SARL), contributions in industry are legally valid and expressly permitted. However, their legal treatment differs significantly from that of traditional capital contributions. The purpose of this article is to provide a detailed account of the validity, legal regime, statutory requirements, and corporate implications of apports en industrie within French SARLs.

1. Principle of Validity of Contributions in Industry in French SARLs

Pursuant to Article L. 223-7 of the French Commercial Code, contributions in industry are admitted in SARLs without restriction. The conditions under which industry shares may be subscribed are left to the discretion of the articles of association (statuts).

By definition, such contributions consist in the provision of technical expertise, services, or work. They do not generate capital in the strict sense; therefore, every SARL must still include cash or in-kind contributions in order to constitute the freely determined share capital required by law.

The statuts must set out the distribution of industry shares alongside the allocation of capital shares.

2. Characteristics of Contributions in Industry

The nature of industry contributions distinguishes them from capital contributions. Their principal characteristics include:

• Successive performance: Contributions in industry are often provided progressively throughout the life of the company.
  
• Intangible subject matter: They may consist of non-patentable know-how, professional services, or other lawful activities.
  
• Non-pecuniary valuation: Such contributions are not readily susceptible to monetary assessment.
  
• Non-seizable: They cannot be subject to forced execution for the benefit of company creditors.
  
• Absence of subordination: The contributor is not bound to the company by an employment contract. They remain an independent partner, notwithstanding the nature of their activity.
  

Contribution of know-how

The contribution may be limited to the transmission of specific know-how. In such cases, performance may be instantaneous, rather than continuous. 

3. Civil Law Regime

The French Civil Code provides the framework for the rights and obligations of industry contributors:

• Right to profits and obligation to losses: Article 1843-2 specifies that contributions in industry, though not part of share capital, confer entitlement to a share in profits and net assets, with the corresponding obligation to contribute to losses.
  
• Default rule on profit sharing: Under Article 1844-1, the industry contributor’s share is equal to that of the partner who has contributed the least, unless the articles of association provide otherwise.
  
• Duty to account for gains: Article 1843-3 requires the industry partner to account to the company for any personal gains derived from the activity that forms the object of their contribution. In the event of liabilities, such gains may be forfeited.
  

Dual role of manager and industry contributor

Where the industry partner also acts as gérant, caution is required: remuneration received as manager may be characterised as gains deriving from the contribution in industry, which would then revert to the company. It is therefore essential to distinguish the partner’s two roles with precision.

4. Personal Nature of Industry Shares

Industry shares are intuitu personae:

• They are inseparable from the contributor’s personal qualities.
  
• They are neither transferable nor inheritable.
  
• They are annulled when the partner loses shareholder status (Cass. civ., 9 Feb. 1955, Bull. civ. I, n° 67).
  

This personal nature reflects the dependency of the contribution on the individual’s presence and activity.

5. Voting Rights and Limitations

Industry shareholders may exercise voting rights according to the number of industry shares allocated to them.

However, they are excluded from exercising certain prerogatives reserved to capital shareholders, such as the right to request a management audit (expertise de gestion). This reflects the principle that some corporate rights are intrinsically linked to the possession of capital.

6. Role of the Articles of Association

Given the distinctive features of industry contributions, the articles of association play a central role in defining their scope. The statuts must, with particular precision, determine:

• The nature, extent, and duration of the services to be provided;
  
• The number of shares attributed in return;
  
• Whether exclusivity is required of the contributor;
  
• The contributor’s financial rights and participation in profits;
  
• Procedures governing withdrawal or exclusion, including calculation of reimbursement of rights in light of unperformed services.
  

The articles may adopt the default Civil Code rule aligning the rights of the industry partner with those of the partner who contributed least, or they may establish more detailed rules—for example, proportional allocation of profits to industry shares.

Creation of new industry shares

The articles may also determine whether unanimity or qualified majority is required for the issuance of new industry shares during the company’s life, either to existing partners or to new entrants.

Capital increases and liquidation

Provisions must address the rights of industry shareholders in the event of:

• A capital increase (e.g., by incorporation of reserves or profits),
  
• The liquidation of the company.
  

Corporate transformations

• In the case of transformation into a société anonyme (SA), industry shares must be liquidated, as SAs do not permit them.
  
• In the case of transformation into a société par actions simplifiée (SAS), industry shares may subsist, as such contributions are valid in that form.
  

7. Practical Considerations and Risks

While legally valid, contributions in industry involve several practical challenges:

• Valuation uncertainty, which may give rise to disputes between partners;
  
• Dependence on personal performance, rendering the company vulnerable if the contributor withdraws or becomes unable to perform;
  
• Limitations on transferability, which restrict succession planning and exit strategies;
  
• Potential conflicts of interest, especially where an industry contributor also serves as manager.
  

Conclusion

Contributions in industry occupy a unique and complex space within French company law. They enable partners to contribute skills, expertise, and services rather than capital, thereby broadening participation in entrepreneurship—particularly in innovative sectors where human capital is as critical as financial investment.

At the same time, their non-capital nature, personal character, and valuation difficulties demand careful drafting of the articles of association and prudent management of partner relations.

For entrepreneurs and investors, understanding the precise legal framework of apports en industrie is essential to ensure both compliance and effective governance in French SARLs.