Loss of Half the Capital in a French SAS: The Procedure After the 2023 Reform

Losses have eaten half your capital — what the law now actually requires

When a French SAS's net equity (capitaux propres) falls below half its share capital because of accumulated losses, a specific procedure switches on under Art. L 225-248 of the Commercial Code. It used to be a fast track to a dissolution threat; since the loi of 9 March 2023 (2023-171) it is a far more forgiving sequence. Two things still have to happen: the shareholders must be consulted, within four months of the accounts that revealed the loss, on whether to dissolve the company or continue it; and, if they continue, the company must regularise its position over the following years. What changed in 2023 is the back end — the dissolution risk is now pushed much further out, and a new extra window lets a company reduce its capital rather than face the court.

This guide sets out the loss-of-half-capital procedure as it stands after the 2023 reform — how the trigger is measured, the four-month consultation and the publicity it requires, the regularisation options and the extended timetable, the new capital-reduction window and its 1%-of-balance-sheet threshold, and when dissolution can still be sought. It is written for the founder and president of a loss-making but viable SAS who needs to know the deadlines that bind them and the room the reform has created. The recapitalisation techniques themselves — a capital increase, or the zero-then-raise « coup d'accordéon » — are covered in our companion guide to the accordion recapitalisation, and the wind-up route it may lead to in our guide to closing down a French SAS.

The trigger: net equity below half the share capital

The procedure switches on where the SAS's capitaux propres — the net equity shown in the accounts — fall, because of losses recorded in the accounting documents, below half the share capital (C. com. Art. L 225-248). It is a balance-sheet test, not a cash-flow one: a company can be losing equity to accumulated losses while still paying its bills, which is exactly why this is a corporate-law regularisation duty and not, by itself, an insolvency. A SAS that can no longer pay its debts as they fall due is in a different situation — cessation des paiements — with its own 45-day filing duty, treated in our guide to closing down a French SAS.

The measure is taken at the close, on the approved accounts. Because the trigger is read off the annual accounts, the loss-of-capital question is part of the same year-end exercise as the accounts approval and deposit — the moment the accounts show equity below half the capital, the four-month clock starts. The president (or the body the bylaws empower) is the one who must set the consultation in motion; leaving it undone is what exposes the company to an outside application, as the next section explains.

The four-month consultation — the one step the reform left intact

Once the loss is established, the shareholders must be consulted within four months of the approval of the accounts that revealed it, to decide whether to dissolve the company early or continue it (C. com. Art. L 225-248). This first step was not changed by the 2023 reform. The decision to consult falls on the president or the empowered body; where no consultation is held, any interested party can ask the court to dissolve the company — so the risk of inaction sits squarely on the management, not on the shareholders who are never asked.

The decision the shareholders take is subject to publicity, and the filing is what makes the regularisation effective and visible. The decision — whether to dissolve or to continue — is published in a legal-announcements medium of the registered-office district (C. com. Art. R 225-166, al. 2) and filed at the commercial court registry and entered on the register (Art. L 225-248 and R 225-166, al. 1), through the Guichet unique. In practice the shareholders almost always vote to continue where the business is viable; dissolution here is a choice, not an automatic consequence, and the reform has made continuing considerably safer. Where the company later reconstitutes its equity within the two-year window, that regularisation decision is filed too.

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Regularising: reconstitute the equity, or reduce the capital

Where the shareholders vote to continue, the company must regularise its position within two years of the end of the financial year in which the loss was recorded (C. com. Art. L 225-248, al. 2). There are two ways to do it. The company can reconstitute its net equity to at least half the share capital — by trading back to profit, by a fresh capital increase, or by the zero-then-raise « coup d'accordéon » that wipes out the losses and brings in new money in one operation (see our accordion recapitalisation guide). Or it can reduce the share capital to a level that restores the equity-to-capital ratio, absorbing the losses against the capital account.

Whichever route is used, the regularisation decision is filed at the registry when done — a reconstitution within the two years is deposited like the original continuation decision. The choice between reconstituting and reducing is partly commercial (new money versus a smaller capital base) and partly about optics with banks and counterparties, who read the public filings. What the 2023 reform changed is the consequence of not completing this first window in time, which the next section sets out — and it is a genuinely different, gentler regime than the pre-2023 rule.

The 2023 reform: an extra window instead of a dissolution

The loi of 9 March 2023 (2023-171) rewrote the back end of the procedure to reduce the dissolution risk for companies in this position (Art. 14). The first step — the four-month consultation — is unchanged. What changed is what happens if, at the end of the two-year regularisation window, the company still has not brought its equity back to at least half the capital. Under the old rule, that opened the door to a judicial dissolution. Under the reform, two things now apply.

First, a further window. Where, after the two years, net equity is still below half the capital and the share capital exceeds a threshold set by decree, the SAS gets a new period of two financial years to reduce its capital to a figure below that threshold (C. com. Art. L 225-248, al. 4). For a SAS the threshold is 1% of the total balance sheet at the last close (Art. R 225-166-1) — and the balance sheet to use can be the most recent one drawn up for the period, even if it is finalised a couple of months after the period end, so the freshest figures apply (ANSA, comité juridique, 3 July 2024, n° 24-031). Second, the dissolution risk is pushed out: dissolution can no longer be sought at the end of the first two-year window. It becomes available only if the company still fails to reduce its capital by the end of the additional window, at which point any interested party can ask the court to dissolve (Art. L 225-248, al. 4 and 6) — and even then, the court can grant up to six more months to regularise (al. 6). A residual rule closes the loop: if the company later raises capital while still short, it must bring itself back into line by reducing the capital below the threshold before the close of the second financial year after that raise (al. 5).

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The practical consequences — and what to watch

The loss-of-capital decision is a public filing, so it is visible to anyone who consults the register — banks reviewing covenants, suppliers running credit checks, counterparties in due diligence. The continuation decision reassures them that the shareholders have addressed the position; an unfiled or absent decision does the opposite. Managing that signal is part of handling the situation: a clean continuation-and-regularisation trail reads very differently from silence followed by an outside dissolution application.

Two boundaries deserve attention. First, this is a corporate-law regularisation, not an insolvency test — but a company burning through equity is often heading toward cash trouble, and the two can arrive together. If the SAS reaches cessation des paiements, the loss-of-capital timetable is overtaken by the insolvency duties (a 45-day filing obligation), and continuing to run the equity clock while unable to pay debts exposes the director personally. Where the company is under strain but still solvent, France's confidential pre-insolvency tools — the mandat ad hoc and conciliation — can restructure the position quietly, as our guide to confidential pre-distress restructuring explains. Second, the president's exposure is real if the four-month consultation is skipped: it is the omission that lets any interested party seek dissolution, so the safest course is always to run the consultation on time, file the decision, and use the generous post-2023 window to recover.

Frequently asked questions about losing half the capital in a French SAS

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 accounting advice. The loss-of-capital and insolvency rules evolve and interact; always verify the current framework and seek qualified advice before acting on a loss-of-capital situation.