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E-library Corporate Law Refusal by a shareholder to pay the amount of unpaid capital

Refusal by a shareholder to pay the amount of unpaid capital

20 Feb 2013

On incorporation of a French company, the shareholders are obliged to subscribe for the entire issued share capital of the company (that is, the share capital registered in its bylaws), although they may pay up only a fraction thereof (for example, 50% of the issued share capital of a SAS and 25% of the issued share capital of a SARL). The amount of unpaid share capital must however be paid up within a maximum period of 5 years.

If a shareholder refuses to pay the amount of called up and unpaid share capital, such shareholder may incur the following sanctions:

  • the company may claim payment of the amount of unpaid share capital plus damages
  • the voting and dividend rights attaching to the shares held by the defaulting shareholder will be suspended as of right if the notification requiring payment has remained without effect for a period of 30 days
  • the shares of the defaulting shareholder may be sold to any third party

The sale of the shares of the defaulting shareholder does not preclude the company from claiming, and obtaining, payment of the unpaid share capital from such shareholder. The defaulting shareholder will continue to be held responsible for the payment of the unpaid share capital jointly with the purchaser of the shares.

Payment of the registered share capital of a SAS
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