Dissolving and Liquidating a SARL or EURL

Closing a French company is a two-stage process: first the company is dissolved - the decision to end it - and then it is liquidated, meaning its affairs are wound up, its assets sold, its debts paid, and whatever is left shared among the shareholders before it is struck off the register. For a SARL, and for most EURLs, that means appointing a liquidator, holding two shareholder meetings, publishing two legal notices, settling the tax that a closure triggers, and finally applying to strike the company off the register. For an EURL owned by a company, the route is different and simpler - a universal transmission with no liquidation at all. This guide walks through the whole sequence: the causes of dissolution, the liquidator's role, the two meetings and publications, sharing the surplus, the tax consequences, and how the EURL rules diverge depending on who the sole shareholder is.

Two things are worth holding in mind throughout. First, a solvent, voluntary closure is a deliberate legal process with a fixed shape - it is not the same as merely ceasing to trade, and skipping its steps leaves a company still legally alive with obligations attached. Second, a company that cannot pay its debts is in different territory altogether: that is an insolvency, governed by court procedures with their own deadlines and director-liability risks, and it must not be handled as an ordinary wind-up. This guide is about the voluntary closure of a solvent company; the insolvency route is flagged where the two meet.

What causes a SARL to be dissolved

A SARL can be dissolved for several reasons, and it helps to know which is in play, because it shapes the process. The most common is a voluntary early dissolution: at any time the shareholders can decide, by an extraordinary decision, to dissolve the company and appoint one or more liquidators. That decision is final - once taken, the shareholders cannot reverse it, even unanimously. The company can also dissolve automatically on the expiry of its term (unless extended) or on the realisation or extinction of its object, though a mere pause in activity is not enough for the latter.

There are involuntary routes too. A court can order an early dissolution for just cause on a shareholder's application - notably where a shareholder fails to perform their obligations, or where a deadlock between shareholders paralyses the company; the applicant must have a legitimate interest and not be responsible for the deadlock. A SARL in cessation of payments with no prospect of recovery ends through judicial liquidation, closing for insufficiency of assets. And dissolution can be a criminal penalty imposed on a company for its own criminal liability.

Some events that end other structures do not dissolve a SARL. The death of a shareholder does not dissolve it unless the articles rarely say so; and gathering all the shares in one hand does not dissolve it either - the SARL continues as an EURL. Knowing that these events are not dissolution causes matters, because owners sometimes assume a death or a buy-out ends the company when in fact it carries on, and a positive decision is needed to close it.

Two further triggers are worth flagging because they force the question of closure. A SARL that comes to have more than 100 shareholders is dissolved after a year unless it regularises - by reducing the number or transforming into a form that admits more members. And where the company's equity falls below half its capital, a mandatory procedure requires the shareholders to decide whether to continue or dissolve; failing to run that procedure exposes the company to a dissolution any interested party can ask a court to order. Neither is a routine wind-up, but both can lead to a dissolution if not addressed in time.

Dissolution opens the liquidation

The moment a SARL is dissolved - for whatever reason - it enters liquidation (the one exception being an EURL whose sole member is a company, where the assets pass up by universal transmission with no liquidation). The company does not vanish on dissolution: its legal personality survives for the needs of the liquidation, right up to the closing, so that its rights and obligations can be wound up. But the dissolution only takes effect against third parties once it is published at the trade and companies register.

Two consequences follow immediately. First, the manager's powers end as soon as the liquidator is appointed (or, for a judicial dissolution, at the date of the court's decision) - the liquidator takes over the running of the wind-up, and the gérant is divested. Second, the company must add the words "Société en liquidation" and the liquidator's name to all its documents intended for third parties - letters, invoices, notices - so that everyone dealing with it knows it is being wound up.

During the liquidation, the shareholders keep their right to information on the same terms as before, and can go to the commercial court's president if the liquidator refuses to communicate the documents. The company is, in effect, frozen into a wind-down mode: still a legal person, still able to sue and be sued on pre-liquidation rights and obligations, but now directed entirely toward realising its assets and settling its affairs rather than carrying on its business.

The liquidator: appointment and powers

Where the dissolution results from the term or is decided by the shareholders, the liquidator is appointed by a majority in capital of the shareholders; if they cannot agree, the president of the commercial court appoints one on any interested party's application. The liquidator can be the former manager, a shareholder or an outside professional, but cannot be someone barred from managing a company. The mandate lasts up to three years, renewable, and the liquidator's remuneration is fixed by the decision appointing them (or by the court).

The liquidator represents the company and holds the widest powers to realise the assets, including by private sale; restrictions in the articles or the appointment are not enforceable against third parties. In practice the liquidator collects what is owed to the company, sells its assets, pays its creditors, and prepares the accounts of the liquidation. Certain powers are limited - some acts need shareholder authorisation - and the liquidator carries real responsibility: they are liable to the company and to third parties for faults committed in office, and face heavy penalties for misusing the assets or credit of the company in liquidation.

The liquidator also has reporting duties. Within six months of appointment they must call a shareholders' meeting and report on the company's assets and liabilities and the time needed to finish; within three months of each year-end they draw up the annual accounts and a report on the year's liquidation operations; and, unless excused by the court, they call an annual meeting to approve those accounts. Failing these duties can cost the liquidator part of their remuneration. These obligations keep the shareholders informed while the wind-up runs its course.

Two meetings and two publications

A liquidation is bookended by two shareholders' meetings, each followed by a publication. The first is the dissolution meeting: the shareholders decide to dissolve, appoint the liquidator and confer their powers, and this is published so the dissolution takes effect against third parties. Within a month, the liquidator files the dissolution decision - with their appointment, the address for the liquidation, and proof of publication - at the registry.

The second is the closing meeting. Once the assets are realised and the debts paid, the shareholders are convened to rule on the final liquidation accounts, to give the liquidator discharge (quitus) for their management, and to record the closing of the liquidation. If the liquidator fails to convene this meeting, any shareholder can have the court appoint an agent to do so. The closing is then published in turn, completing the pair of notices that frame the whole process.

After the closing, the liquidator applies for the company to be struck off the register (radiation), which the registrar carries out on proof that the formalities are complete. Only then does the company finally cease to exist as a legal person, and its personality, which the law had kept alive solely for the needs of the wind-up, comes to a definitive end. The two-meeting, two-publication structure is the backbone of a voluntary liquidation, and keeping to it - with the right filings at each stage - is what makes the closure clean, final and safe from any later challenge.

Sharing the surplus - or bearing the loss

When the assets have been realised and the creditors paid, what remains is shared among the shareholders. First the nominal value of the shares is repaid; then, unless the articles say otherwise, the surplus of the equity is divided between the shareholders in proportion to their stakes. That surplus above the repaid capital is the liquidation surplus (boni de liquidation). The sharing is normally amicable; a judicial partition is needed only where the shareholders are in dispute or some lack capacity.

The liquidator may, subject to the creditors' rights, distribute available funds during the liquidation rather than waiting for the final partition - useful where cash is realised early and there is no risk to creditors. Where, instead, the liquidation shows a loss - the shareholders do not get all their capital back - that capital loss cannot be set against an individual shareholder's taxable income. The outcome for the shareholders therefore ranges from recovering their capital plus a taxable surplus, to losing part of what they put in.

For an EURL with an individual sole member, the same logic applies but there is naturally no partition: after the debts are cleared, the surplus and the remaining assets return to the single shareholder alone. The appropriation of the whole of the assets by the sole shareholder, against taking on the liabilities, does not in principle give rise to transfer duty - unless the assets had been contributed by someone other than that sole shareholder, in which case duty can be due.

The tax consequences of closing

A closure is treated, for tax, as a cessation of business, and it produces all the effects of one. It triggers taxation of the operating profit since the last taxed period up to the cessation, of deferred profits and provisions whose taxation had been postponed, and of the gains on fixed assets (the difference between sale price or value at dissolution and net book value), including long-term gains whose taxation was deferred. The company must itself liquidate and pay the company tax due, and file the required declarations within the statutory deadlines through the single-window portal.

The liquidation surplus is taxed on the shareholders. All attributions to shareholders at the end of the company's life are treated as distributed income to the extent they exceed the repayment of their contributions; for individuals, the surplus is taxed as investment income. The surplus is, in essence, the difference between the net proceeds of the liquidation and the contributions that can be taken back tax-free. Where there is a loss rather than a surplus, an individual shareholder cannot deduct it.

On registration duties, a dissolution act that carries no transmission of assets between shareholders or others is registered free of charge. But the partition of the company's acquired assets among the shareholders in proportion to their stakes attracts a partition duty of 2.5%, calculated on the gross value of the assets shared less the liabilities charged on them (the repayment of a shareholder's current account is not caught). Where a shareholder takes an asset for more than their share, transfer duty is due on the balancing payment. These duties, alongside the cessation tax, mean the tax cost of closing should be estimated in advance.

The EURL: two different routes

For an EURL, the route to closure depends entirely on who the sole shareholder is - and it is not a choice, but a rule fixed by their status. Where the single shareholder is an individual, the law excludes universal transmission: the company must go through a normal liquidation, exactly like a multi-member SARL. The shareholder loses the manager role but can appoint themselves liquidator; the surplus and assets return to them after the debts are cleared; and the dissolution is enforceable against third parties only from its publication.

Where the single shareholder is a legal person, the opposite applies. The dissolution triggers a universal transmission of the company's whole patrimony to the parent, with no liquidation at all, once the creditors' objection period has run - enabling, in effect, a simplified merger into the parent. Creditors have thirty days from publication to object, and a court then rejects the objection or orders repayment or guarantees. The catch is significant: the parent takes the liabilities as well as the assets, and its liability is no longer capped, so where liabilities exceed assets the parent can avoid the effect by transferring a few shares before dissolution so the company is no longer one-member.

The neatest way to remember it: an individual owner liquidates the company; a company owner absorbs it. The death of the single shareholder, incidentally, does not dissolve the EURL unless the articles say so - the shares pass under succession law and the company continues. Choosing to close a one-member company therefore starts with identifying which regime applies, because the whole procedure, timetable and risk profile flow from that single fact.

The three routes at a glance

The table compares how a closure runs depending on the company and its ownership.

The dividing line is the company-owned EURL, which alone escapes a formal liquidation by passing everything up to its parent. Everywhere else, the closure runs through the liquidation machinery - a liquidator, the realisation of assets, the payment of creditors, and the sharing of what is left.

How long a liquidation takes

A liquidation is not instantaneous - it runs for as long as it takes to realise the assets and settle the liabilities, within a framework of deadlines. The liquidator's mandate is capped at three years, renewable by the shareholders or the court, which sets the outer horizon for a straightforward wind-up. Within that, the rhythm is set by reporting: a first report to the shareholders within six months of appointment, and annual accounts drawn up within three months of each year-end with a report on the year's operations.

Where the liquidation is simple, the shareholders (or the court) can dispense the liquidator from drawing annual accounts and holding the annual meeting, which streamlines a small, quick wind-up. That dispensation changes how the liquidation is taxed: with annual accounts, the liquidation is divided into independent tax years; with the dispensation, the whole liquidation - however long - is treated as a single period, with the definitive result struck only at the close. A liquidator who is dispensed must still declare each year's profit or loss for tax.

The date of cessation for tax coincides with the approval of the final liquidation accounts, which starts the clock for the final declaration. In practice a clean liquidation of a small company with few assets can be completed relatively quickly, while one with property, disputed debts or slow-selling assets can run much longer. Planning the timetable - and choosing whether to seek the accounts dispensation - is part of running the wind-up efficiently rather than letting it drift toward the three-year limit.

The decision is final: plan before you vote

The single most important discipline in closing a company is that a voluntary dissolution cannot be undone. Once the shareholders vote the early dissolution, the act is definitive - they cannot reverse it even by unanimous agreement. There is no cooling-off, no second thoughts: the company is set on the path to liquidation and strike-off. That finality is exactly why the decision should be the last step in the planning, not the first.

Before the vote, the picture should be complete: the tax cost estimated (the cessation-of-business charge, the taxation of the surplus, and the 2.5% partition duty on any assets shared in kind); the creditors identified and provided for, since they are paid before anything reaches the shareholders; and the liquidator chosen, with their powers and remuneration settled. Where assets will be distributed in kind rather than sold, the duty consequences of who receives what should be worked through, because an asset going to a shareholder who did not contribute it can attract transfer duty.

It is also worth confirming that dissolution is the right answer at all. Where the company still has value, a sale of the shares or the business may serve the owners better than a wind-up; where the problem is a deadlock, other remedies may resolve it; and where the company cannot pay its debts, an insolvency procedure, not a voluntary liquidation, is the correct and legally required route. Closing a solvent company is a deliberate choice, and the time to test whether it is truly the best option is before the irreversible vote is cast, not after.

Frequently asked questions about dissolving a SARL or EURL

This article states general principles of French law as at its date of publication and is provided for information only. It does not constitute legal or tax advice and creates no lawyer-client relationship. Rates, thresholds and time limits evolve; verify the current position before acting, and take advice on your specific situation.