How Much Capital Should a French SCI Have?

How much capital should a French SCI have?

There is no minimum capital for a French SCI (société civile immobilière), and no maximum - but the amount matters. It shapes the tax on a later sale of the shares, the signal the company sends to a lender, and how easily the shares can be gifted or sold. Most SCIs are set up with a deliberately low capital, financed by a company loan and by shareholder loan accounts rather than by paid-in capital; some are set up with a capital close to the value of the property. The right figure depends on how the purchase is funded and on the plan for the property. This guide sets out how to think about the capital of an SCI, and the consequences of setting it low or high.

One principle governs everything below, and it surprises many first-time shareholders: a shareholder's rights in the company follow their share of the capital, not the amount they actually put in. A shareholder who funds most of the purchase through a loan account, but holds a small share of the capital, has a correspondingly small right to the profits and to the proceeds on a winding-up. Getting the capital allocation right is therefore not only a tax question - it decides who is entitled to what.

Is there a minimum capital for an SCI?

No. There is no minimum capital for an SCI. Only cash and in-kind contributions form the capital - contributions of skill or work do not count towards it - and the amount is fixed freely by the shareholders. But the capital cannot be nil: an amount must be stated in the articles (C. civ. Art. 1835), and it appears on the company's documents, in the legal notice and in the registration request. An SCI with a stated capital of a token amount is perfectly valid; an SCI with no capital at all is not.

The capital is divided into shares of equal unit value (C. civ. Art. 1845-1), and the articles are free to fix that unit value - the law imposes no minimum value per share. Historically many family SCIs were formed with a symbolic capital of a few hundred euros, unrelated to the value of the property they would hold, and that remains a common and lawful choice. The question is therefore not whether a low capital is permitted - it is - but whether it is the right choice for a given SCI, which turns on how the purchase is financed and what the shareholders intend to do with the shares.

Capital versus shareholder loan accounts: the standard funding model

The reason most SCIs are set up with a low capital is that the property is usually financed in two other ways: a bank loan taken by the company, and advances from the shareholders recorded in loan accounts (comptes courants d'associés). Understanding the difference between capital and a loan account is the key to setting the capital.

Capital is fixed. It confers rights - a share of the profits and of the proceeds on a winding-up - and it cannot simply be withdrawn. A shareholder loan account is a loan the shareholder makes to the company: more flexible than capital, it makes the shareholder a creditor rather than giving them additional rights in the capital. The account can be fed by rents that the shareholders leave at the company's disposal, and - unlike in a commercial company - a shareholder's loan account in an SCI may run into debit. Unless the account is blocked by agreement, the shareholder can, in principle, ask for repayment at any time, though repayment depends on the company's means; in practice the articles or a separate agreement set the repayment terms. And where capital is not remunerated, a loan account may bear interest - interest that, in an SCI under income tax, is deductible from the property income where the account funded the purchase of the company's building.

This is why the low-capital model works. The shareholders put in a token capital, lend the rest through their accounts, and let the rents repay the bank loan and, over time, the accounts. The capital stays small; the funding runs through debt. But there is a consequence that must be understood before adopting the model, and it concerns who is entitled to what.

How the capital allocation decides shareholder rights

A shareholder's rights are determined by their share of the capital, not by their actual contribution. Money placed at the company's disposal beyond a shareholder's share of the capital - through a loan account - is not taken into account in fixing their rights. This rule holds throughout the company's life, and it produces results families do not expect.

Take a concrete illustration drawn from practice. Three people form an SCI with a capital of €1,500, divided into 100 shares - one of them, call them C, holding 20 % of the shares. To buy a building costing €150,000, the shareholders fund the purchase through their loan accounts in unequal amounts: one of them, A, funds 70 % of the price, while C funds only 10 %. Some years later the building is sold for €220,000 and the shareholders wind up the company and divide the proceeds. The surplus on the winding-up is divided by shareholding: C, who funded just 10 % of the purchase, receives 20 % of the surplus, because C holds 20 % of the shares; A, who funded 70 %, receives only 60 %, matching A's shareholding. The loan accounts are repaid separately, but the profit follows the shares.

The lesson is that the allocation of capital, not the pattern of funding, decides entitlements - so the capital and the shareholdings must be set to reflect what the shareholders actually intend. A shareholder who will fund most of the purchase should either hold a matching share of the capital, or accept that their extra funding is a loan to be repaid rather than a claim on the profit. This is a drafting decision to make deliberately at the outset, not a technicality to leave to a template.

How should you fund your SCI: capital or loan accounts?

Pick the description closest to your plan - the check shows how to set the capital and the loan accounts.

When a higher capital makes sense

A low capital is not always the right choice, and there are three situations where a higher capital is preferable.

The first is a contribution of property. Where a building is contributed to the SCI rather than bought with borrowed cash, the capital must at least correspond to the value of the contribution, increased by a small cash contribution for the second shareholder. This produces a high capital by necessity - and a contribution to an SCI under income tax gives rise to no registration duty on the capital itself. The second is borrowing: a capital close to the value of the investment is a positive factor when the company needs to turn to creditors, and to a bank in particular, because it signals substance. The third is the capital-gains position on a later share sale: where the shares' original value is proportional to the investment - that is, where the capital is high - the gain recorded on a sale of the shares should be small, subject to any sharp rise in property values not absorbed by the holding-period allowance.

The trade-off, then, runs both ways. A low capital keeps early gifts cheap and matches the debt-financed model, but records a larger gain on a later share sale unless the shareholder loan accounts absorb it. A high capital reassures lenders and limits the share-sale gain, but requires the money to be found up front and, where a property is contributed, brings the contribution's own tax treatment into play. The choice is a balance, and it is taken with the funding, the lender and the transmission plan all in view.

Capital and the tax when shares are sold

The capital and the loan accounts are taxed differently on a sale of the shares, and this shapes the low-capital model. When a shareholder sells their shares, the 5 % registration duty on the transfer applies to the value of the shares alone; the part of the price corresponding to the loan account transferred with them bears only the fixed duty, not the 5 %. The €23,000 abatement that applies to ordinary share transfers does not apply to property-dominant companies such as an SCI (C. mon. fin. and CGI Art. 726). The sale deed must therefore split the price between the part attributable to the shares and the part attributable to the transferred loan-account claim.

This is the tax reason the low-capital-plus-loan-account model is so common. Because a large loan account moves at the fixed duty rather than at 5 %, and because on a winding-up the proceeds first repay the loan accounts - a repayment not subject to the partition duty - a structure that funds the purchase largely through loan accounts rather than capital carries a lighter transfer-tax load. The capital-gain itself, by contrast, follows the shares: each individual shareholder is taxed on their share of the gain in proportion to their shareholding, whatever their share of the loan-account funding, under the private capital-gains regime with its 22-year and 30-year exemptions. The buyer who borrows to fund the purchase of the shares and the loan account cannot deduct the interest attributable to the loan-account part from their property income.

Paying in the capital: all at once or in stages

The subscribed capital does not have to be paid in all at once. Deferred payment of cash contributions is permitted by most articles, and in SCIs formed with a very high capital, that capital is often released progressively, in step with the instalments of the loan the company has taken to finance the property - a technique that requires proper bookkeeping. The manager calls the unpaid balance as the project needs it.

Staged payment has consequences on a later transfer that the shareholders should anticipate. Where shares are sold before the capital is fully paid in, the transfer of the payment obligation to the buyer - which results from an agreement between the parties, since a change of debtor is not automatic - is a charge that increases the price and therefore the base of the 5 % duty. And where the unpaid capital corresponds to the amount of the investment financed by the company's loan and since repaid out of rents, a selling shareholder remains a debtor for the unpaid amount of their contribution, so a capital reduction may have to take place before the sale. An SCI formed with a high but progressively-released capital is a legitimate structure, but its later transfers need to be planned with the state of the capital in mind.

Variable capital: a flexible alternative

An SCI can also be formed with a variable capital. The Commercial Code rules on variable capital apply to civil companies (C. civ. Art. 1845-1), so the articles fix a floor below which the effective capital cannot fall and a ceiling up to which it can rise. Within those limits, the capital can vary without any publicity formality - it moves as approved new shareholders come in and existing shareholders withdraw. The articles must state the maximum authorised capital; without it, any increase requires a shareholders' decision amending the articles.

Variable capital brings flexibility for companies that expect members to come and go - family holdings taking gradual funding, for example - but it carries a specific rule and no tax advantage. A shareholder who leaves, whether voluntarily or by exclusion, remains liable for five years, towards the other shareholders and towards third parties, for all the obligations existing at the time of their departure (C. com. Art. L. 231-6). And variable capital brings no fiscal advantage, in particular none for the capital-gains calculation. It is a governance convenience for a company with a moving membership, not a tax device.

Low capital or high capital: which is right for you?

The best capital depends on what you are optimising for. Pick your priority - the check shows which way it points.

SCI capital: low versus high at a glance

Frequently asked questions about the capital of an SCI

This article is for general information only and states French law as published in the sources available at the date shown above. It does not constitute legal or tax advice. The right capital for an SCI depends on the funding, the borrowing, the tax position and the transmission plan. Always seek qualified legal advice - and coordinate with the notary where a property is contributed - before fixing the capital of an SCI.