When own funds by company are reduced to less than half of the capital, the procedure of recovery of resources must be followed. Foundation-company-ricard presents a fact sheet on steps to take when the losses exceed the half of the capital.
When own funds by Company – SARL, EURL, SAS or SASU – are reduced to less than half of the capital, Foundation-company-ricard offers you an explanatory sheet on the steps to take for replenishment. The procedure should be performed if the losses cause thelowering equity less than the half of the capital.
Companies affected by the formalities related to the decline in equity
Companies concerned
Only the following are covered by the reconstitution of equity :
- SARL (limited liability companies),
- EURL (sole proprietorships with limited liability),
- SA (public limited companies),
- SCA (partnerships limited by shares),
- SAS (simplified joint-stock companies),
- SASU (single-person simplified joint-stock companies).
Statement of equity
The own funds of these companies must be reduced by significant losses. They must represent less than half of the share capital of the society :
Equity capital < 1/2 share capital
With shareholders' equity = share capital + reserves (legal, optional, statutory) + creditor retained earnings – debit retained earnings + regulated provisions + investment grants + profit for the year – loss for the year.
Measures to be adopted if equity is less than half of share capital
The regulations provide for the implementation of a third party alert system and the improvement of stocks. For the SAS, SASU, SA, these provisions are governed by thearticle L. 225-248 of the Commercial Code. For the SARL and EURL,Article L.223-42 of the same code applies.
Decision on the survival of the company
In a delay of four months following the ordinary general meeting recording the loss, a extraordinary meeting must be summoned. The partners will then have to choose between dissolution of the company and its continuation.
Failure to comply with this procedure is subject to serious penalties. Indeed, any interested person can ask the commercial court to dissolve the society.
Information of third parties and legal notice
The decision must be published in a newspaper of legal announcements to inform stakeholders. Note that this legal notice must contain specific information.
If the shareholders decide to continue the business despite the loss, a dossier must be filed at graft of the commercial court, in particular to mention the difficulties of the company on its extract Kbis. Here are the documents to provide:
- A copy of the minutes of the extraordinary general meeting deciding on the continuation of the activity, certified by the legal representative.
- Un M2 form duly completed and signed.
- A copy of thecertificate of publication in a newspaper of legal announcements.
Restoration of the situation
The situation must be restored at the latest at the end of the second following financial year the period in which the losses were recognized. This can be done in different ways:
- Generation of benefits significant: the company obtains substantial profits which will make it possible to make up for the losses and to raise the equity to the level of the share capital.
- Capital reduction : the company carries out a capital reduction of an amount equivalent to the losses recorded.
- Capital increase : the company increases its capital.
- Operation accordion : the company decreases and increases its capital simultaneously.
Result of the procedure
If the situation has been restored within the time allowed, the shareholders must make a request foramending registration at the registry (to remove the special mention from the KBis extract).
If the situation has not been restored, the capital must be reduced by the amount of the losses which have not been charged to the reserves. Anyone can then request the dissolution of the company, unless the situation has been regularized before the judgment.
When a company experiences significant losses and the equity falls below more than half of the share capital, it must apply a specific procedure: convening of a general meeting, publication of a legal notice and request for amending registration. at RCS.
1. What is the loss of more than half of the registered capital?
Answer: Loss of more than half of the registered capital is a situation in which the registered capital of a company decreases considerably due to a financial loss or a large debt.
2. What are the effects of losing more than half of the share capital?
Answer: The effects of the loss of more than half of the share capital are multiple and can include the cancellation of shareholders' rights, the dissolution of the company and the liquidation of its assets.
3. What measures should be taken in the event of loss of more than half of the share capital?
Answer: The actions to be taken in the event of a loss of more than half of the share capital depend on the situation of the company and the options available to it. Owners may consider cutting costs, doing a buyout or debt restructuring, reorganizing the company, or taking steps to increase share capital.
