A new decree sets the thresholds below which companies with insufficient shareholders' equity that have not reconstituted up to half of their capital within the legal deadline are no longer exposed to the risk of dissolution. Here's what you need to know about these new rules.
A specific legal procedure
Prior to publication of the July 25, 2023 decree, SARLs, SASs and sociétés par actions whose shareholders' equity fell below half their capital had to follow the legal procedure set out in articles L 223-42 and L 225-248 of the French Commercial Code.
Under the old procedure, the company concerned had to hold an Extraordinary General Meeting (EGM) within 4 months of the Ordinary Annual General Meeting (OAGM) which had recognized the situation, in order to decide whether or not to dissolve the company. In the event of an unfavorable vote, the company had until the close of the second financial year following the date on which the loss was recognized to recover capital in excess of half its share capital.
Relaxed rules under the July 25 decree
The specific procedure applicable in the event of a loss of shareholders' equity, designed to prevent the company's difficulties from worsening, has been made more flexible by the decree of July 25. The risk of dissolution now only concerns companies that have not reduced their capital to a minimum threshold within 2 years.
This threshold differs according to the type of company:
- For SARLs and SASs: it corresponds to 1% of the company's balance sheet total at the last balance sheet date;
- For public limited companies: it corresponds to the higher of 1% of the company's balance sheet total at the last balance sheet date and 37,000 euros.
Since March 11, new rules have applied to commercial companies. If a company's shareholders' equity falls below half of its share capital, it must hold an EGM within 4 months of the AGOA to agree on dissolution. If the partners or shareholders decide to continue the company, it must reduce its share capital within 2 years to one of the aforementioned thresholds.
Published in the Journal Officiel on July 26, the decree contains a number of provisions of interest to SARLs and sociétés par actions. They are in line with those of the European Union, which are more flexible in this area.