How to increase the share capital of an LLC?

A SARL, or limited liability company, can increase your capital throughout his social life. Foundation-company-ricard details here methodology to follow for this operation and specify the conditions to be fulfilled previously :

1. Organize an extraordinary general meeting and modify the statutes
2. Pay registration fees
3. Publish a legal notice in a newspaper
4. Submit a file to update the Kbis extract

Increase in the nominal value of SARL shares

A capital increase of an LLC can materialize in two different ways:

• A rise in face value shares in the profits of existing partners;
• La creation de new shares for current partners or from a third party.

Approval procedure for third parties

When new shares are subscribed by a unrelated third party, approval procedure must be respected. This must be approved by a majority of partners representing at least half of the shares. In the absence of a statutory clause to the contrary, the ascendants, descendants or spouse of a partner may freely register for a capital increase.

Decision at an extraordinary general meeting (AGE)

All  SARL capital increase is decided by the partners according to the majorities and quorums provided for by the statutory changes. Approval of this decision rests with theextraordinary general meeting (AGE:

• SARL incorporated before The 4 August 2005

The capital increase is decided by the partners representing at least the three quarters of the shares, withoutno quorum is not required. It is not possible to derogate from this majority by means of a statutory clause. Companies incorporated before August 4, 2005 may submit to the regime for companies incorporated as from that date by a decision taken unanimously by the shareholders.

• SARL incorporated from of August 4, 2005

The decision to increase capital can only be taken if the shareholders present or represented own a minimum number of shares (" quorum ”):
- On first call, A quarter shares;
- On second call, a fifth of these.
Amendments are decided by a majority of two-thirds shares held by the partners present or represented. THE statutes of the LLC may provide for a higher quorum and a higher majority, without however being able to require unanimity with regard to the majority.

There are two exceptions with respect to majority:

• In the event of a capital increase by increasing the nominal value of the shares, the agreement of all the partners must be obtained;
• In the event of an SARL capital increase by incorporation of profits or reserves, the decision is taken by the partners representing at least half of the shares.

When'increase in capital is carried out within a EURL, it is up to the sole shareholder to make the decision.

Preferential subscription right (DPS)

Contrary to the provisions laid down for capital increases of simplified joint-stock companies (SAS) and public limited companies (SA) the law does not establish, for the benefit of the partners of SARL, a preferential subscription right (DPS). But the existence of this right can be provided for by the statutes. It gives shareholders the possibility of subscribing in priority to a capital increase.

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Procedure forincrease in the share capital of an LLC

Holding of an extraordinary general meeting (AGE)

When all the partners agree on theincrease, it is possible to convene a single EGM to approve new partners, note the implementation of the capital increase et modify the statutes.

If the partners do not agree, it will be necessary to organize two EGMs: one to define the framework of the operation (principle and methods of the capital increase) and the other to approve new partners et note the increase in capital.

In the case of an EURL, the sole shareholder must draw up a report of the decisions, to be kept in a special register. A resolution will be mentioned there for decide on the capital increase of the EURL and another for authorize the modification of the statutes of the EURL. When the sole shareholder is not the manager, he must decide on the basis of a special report written by the manager. In all cases, it is the manager who conducts capital modification operations.

Procedure to follow in case of cash contribution

Verification of the complete release of the old capital

When the'capital increase results in the subscription of new shares, initial capital must be fully released, under penalty of nullity of the capital increase operation. This obligation only applies in the case of the creation of new shares, it is quite possible to proceed with a capital increase by raising the nominal value of existing shares, without complete release of the initial capital.

Release of at least a quarter of the new shares

Upon subscription, the new shares have to be released byat least a quarter of their face value. The release of remainder must occur, on one or more occasions, within five years from the day the capital increase becomes final. The statutes or the EGM may impose a higher amount.

Deposit of funds within eight days

Funds from the release of units must be deposited within eight days of their receipt by the manager at the deposit and consignment fund, at a notary or at a bank.

Le retired funds can only be made by the agent of the company after the general meeting has recorded the completion of the capital increase and that the certificate of the depositary is drawn up.

Please note: : it is possible to release a subscription in cash by way of compensation with a liquid and payable claim on the company, provided that the partners or the articles of association have not ruled out this possibility. For the specific case of the incorporation of current accounts : I'capital increase by incorporation of partners' current accounts.

Procedure to follow in the event of a contribution in kind

Appointment of a contribution auditor

When the'capital increase of a SARL is carried out, in whole or in part, by contributions in kind, theintervention of a contribution auditor is obligatory. This is named:

• Unanimously of the partners or, failing that,
• By order of the president of the commercial court at the request of a partner or the manager.

The contributions auditor will be responsible forassess contributions in kind and write a investigation report. The latter must be filed with the registry of the commercial court at least eight days before the date of the general meeting deciding thecapital increase and must be appended to the deed recording the completion of the operation.

Arrangements can however be made to dispense with the intervention of the CAA for SARLs which carry out a capital increase under the following conditions:

• No contribution in kind exceeds 30 euros,
• The total value of contributions in kind does not represent more than half of the share capital,
• And the partners unanimously decided to dispense with the services of the CAA.

Procedure to be followed when increase in capital of an LLC

• 30 days before: request to a commercial court for the appointment of a contributions auditor (in the event of a contribution in kind) and unanimous appointment of the partners.
• 15 days before: establishment of a management report on the amount and reasons for the capital increase and invitation of the shareholders to the EGM.
• 8 days before: filing of the contribution auditor's report with the registry of the commercial court (in the event of a contribution in kind).
• Le D-Day : submission of the management report on the reasons for the capital increase and holding of the EGM (approval of the increase, setting of the amount, approval of subscribers, cancellation of preferential subscription rights, amendments to the articles of association).
• Receipt of funds (if increased by cash contribution). Deposit of funds with a bank, a notary or the deposit and consignment fund within 8 days.
• Convocation of the shareholders to the EGM to confirm the final completion of the capital increase before 5 1/2 months.
• Holding of the EGM before 6 months to confirm the completion of the formalities and the definitive nature of the capital increase.
• Withdrawal of funds from the custodian in view of the minutes of the EGM having noted the completion of the capital increase.
• 1 month after the last EGM: registration of the EGM minutes noting the completion of the capital increase, completion of publication formalities, subscription and sending of a file to the Business Formalities Center.

Please note: : when the SARL has a auditor for the legal control of its accounts, the latter cannot exercise the mission of contribution auditor.

People who have subscribed to a increase in capital by contributions in kind and who choose to assign them a value different from that proposed by the contributions auditor remain responsible for the value assigned for 5 years. Similarly, in the absence of the appointment of a contribution auditor, the capital increase is not null and void but the manager, as well as the contributing partners, remain responsible for the value attributed to the contributions.

A criminal sanction applies to any person who has fraudulently attributed to a contribution in kind a valuation higher than its real value: five years' imprisonment and a fine of €375.

Procedures to be carried out in the event of an increase in the capital of SARL

It exists 3 steps to take to increase the capital of a SARL:

1. Register the act of increase,
2. Write a notice in a journal of legal announcements,
3. Submit a file to the registry of the commercial court.

Recording of the minutes deciding the capital increase of the SARL

The minutes of the extraordinary general meeting (PV of AGE) deciding the capital increase of the SARL must be filed with the tax authorities (recording center). The company has a period of 30 days.

The LLC must pay a registration price of €375 or €500 (depending on whether the capital is less or more than €225), unless it carries out its capital increase by incorporating profits, reserves or provisions of any kind. In the latter case, registration is free.

Publication of a notice of capital increase in a journal of legal announcements

To be enforceable against third parties, the capital increase of the SARL must be the subject of a publication in a newspaper of legal announcements (JAL) of the location of the registered office. This is a notice of capital increase. It must contain mandatory information.

Submission of a complete file to a Business Formalities Center (CFE)

Finally, a file must be drawn up and sent to the CFE (or filed online on the internet). The registry of the commercial court must, in fact, make changes to the commercial and companies register. The file contains the following documents:

• A copy of the minutes of the extraordinary general meeting registered with the tax authorities noting the completion of the capital increase as well as a copy, certified true by the manager, of the decision to increase the capital, if this this was the subject of a separate deliberation:
• A copy of the certificate of publication in a newspaper of legal announcements;
• A copy of the statutes updated and certified true by the manager;
• A duly completed and signed M2 form;
• A check for the settlement of formalities at the registry of the commercial court.

Any capital increase of a SARL requires a formalism consequent, detailed in this file. It also leads to a cost non-negligible for society.

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