The pre-emptive subscription right, from entitlement to renunciation

When a French SAS raises cash capital, every existing shareholder has a pre-emptive right (droit préférentiel de souscription — DPS) to subscribe the new shares before they are offered to anyone else. The right is a structural protection against dilution. It comes in two layers — irreducible and reducible — and it can be renounced, transferred, or suppressed in defined cases. The mechanics of who exercises the right, how it is allocated when shares are dismembered, and what happens when a shareholder renounces shape the cap-table outcome of every cash capital raise.

This guide covers what the right is, the two layers, the rules on transfer and renunciation, the special configurations (usufruct, married shareholders, pledged shares), the variable-capital exception, and the practical uses of the right at a fundraise. For the full procedure of the raise itself, see our step-by-step guide to the cash capital raise; for the suppression procedure in favour of a lead investor, our guide on how to raise capital covers it in detail.

Pro-rata
The irreducible pre-emptive right entitles every shareholder to subscribe new shares in proportion to their existing stake
Express decision
The reducible right operates only where an express decision installs it — otherwise unsubscribed shares fall outside the pool
5 trading days
The minimum subscription window after the pre-emptive right is opened

What pre-emptive rights mean in a French capital raise

The pre-emptive subscription right (droit préférentiel de souscription — DPS) gives every existing shareholder of a French SAS the right to subscribe new shares issued in a cash capital raise, in proportion to their existing holding, before the new shares are offered to anyone else.

The right is set out in Art. L 225-132 of the Commercial Code. It applies to every cash capital raise where the new shares are paid up in cash or by set-off of a liquid and due claim against the company. It does not apply to capital raises by incorporation of reserves (where the new shares are allocated pro-rata by definition) or to in-kind contributions (where the contribution is to a defined contributor and the right is incompatible with the structure).

Two layers of the right exist:

The irreducible right (à titre irréductible) entitles each shareholder to subscribe new shares up to their pro-rata share of the issue. The right is automatic; the shareholder does not need to ask for it.

The reducible right (à titre réductible) lets shareholders subscribe more than their pro-rata share, against the unsubscribed pool left by shareholders who did not exercise their irreducible right. The reducible right operates only where an express decision installs it — by the shareholders in the capital-raise decision or, on delegation, by the president or the authorised body (C. com. Art. L 225-133).

A shareholder who wants to maintain their percentage of the cap table exercises their irreducible right in full. A shareholder who wants to increase their percentage uses the reducible right (where it operates) to take up the unsubscribed balance. A shareholder who wants out of the round renounces the right, individually, in writing.

The right can be suppressed for designated investors under a specific procedure with an auditor's report. The suppression is the standard route at every fundraise involving a lead investor.

The irreducible pre-emptive right in a French capital raise

The irreducible right is the core of the DPS regime.

Each existing shareholder is entitled to subscribe new shares in proportion to the existing holding. A shareholder holding 30 % of the existing shares can subscribe 30 % of the new shares as a matter of right. The shareholder takes up the right by signing a subscription bulletin within the subscription window.

The right attaches to fully paid shares only (C. com. Art. L 225-132). A shareholder whose existing shares carry an unpaid balance cannot exercise the irreducible right — in practice the point resolves itself, because the company must in any event call and collect the entire unpaid capital before launching a new cash raise.

The right is opened to existing shareholders for a defined period. The minimum subscription window is five trading days from the opening of the subscription (C. com. Art. L 225-141); the capital-raise decision can set a longer one. The window starts when the company notifies the existing shareholders of the new issue, by registered letter or by the form the bylaws set, with the legally required information attached.

The notification covers the mandatory mentions of Art. R 225-120 of the Commercial Code, including the existence of the pre-emptive right, the conditions of its exercise, and — where the right is detached from negotiable shares — the modalities of its negotiation.

Where the existing shareholders subscribe the entire issue under their irreducible right, the operation closes without third-party participation. Where some shareholders do not subscribe, the unsubscribed shares fall into a pool that is allocated next: to the reducible right (where it operates), then to designated third parties (where the capital-raise decision installs a third-party allocation), or the issue is scaled down — the decision can authorise the president to limit the increase to the subscriptions received, provided they reach at least three quarters of the projected amount.

The company cannot exercise the pre-emptive right attached to its own treasury shares (C. com. Art. L 225-210).

The reducible pre-emptive right in a French capital raise

The reducible right operates only where an express decision installs it. It is not a default.

When installed, the reducible right works as follows:

The shareholders who have used their irreducible right and want to subscribe more than their pro-rata share express their reducible interest in writing, in the form the decision sets, within the same subscription window. The expression of interest names the additional number of shares the shareholder is willing to subscribe.

After the close of the subscription window, the company tallies the pool of unsubscribed shares (those left by shareholders who did not exercise their irreducible right). The pool is then allocated to the shareholders who asked for more than their pro-rata share — in proportion to their existing rights and within the limit of their demands (C. com. Art. L 225-133). No shareholder receives more than they asked for; the allocation runs until the pool is exhausted or the demands are served.

Where the pool is fully absorbed by the reducible interest, the operation closes with the existing shareholders subscribing 100 % of the issue. Where the reducible interest does not absorb the pool, the residual unsubscribed shares are dealt with under the capital-raise decision — sometimes the issue is scaled down within the three-quarters limit, sometimes the residue is allocated to designated third parties under a third-party-allocation provision.

The reducible right is most useful in capital raises where the company wants to keep the cap table closed — to avoid third-party entry — even where some shareholders are not willing to subscribe their pro-rata. The mechanism redistributes the slack among the willing shareholders.

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Pre-emptive rights and ownership splits in a French capital raise

Three configurations affect how the pre-emptive right is exercised when the underlying shares are split between several rights-holders.

Dismembered shares (usufruct and bare ownership). Where shares are subject to a usufruct (the usufruitier receives the dividends and the nu-propriétaire holds the right of disposition), the pre-emptive subscription right belongs to the nu-propriétaire (C. com. Art. L 225-140). The bare owner exercises the right. If the bare owner sells the subscription rights, the proceeds — or the assets acquired with them — remain subject to the usufruct.

If the bare owner neglects to exercise the right, the usufruitier can step in: the usufruitier can subscribe the new shares in the bare owner's place, or sell the rights. The mechanism prevents the usufruct from being silently eroded by the bare owner's inaction. The new shares are themselves dismembered between bare ownership and usufruct.

Where the bare owner or the usufruitier pays in funds of their own to make or complete a subscription, the new shares belong to the bare owner and the usufruitier (in dismembered form) only up to the value of the subscription rights; the excess belongs in full ownership to the one who paid (C. com. Art. L 225-140).

Married shareholders. Spouses married under a separation-of-property regime each hold the pre-emptive right attached to the shares they own. Each exercises or renounces alone — and a spouse short of funds can borrow from the other, on terms agreed between them, to take up the subscription.

Under the community-of-property regime, each spouse freely exercises the rights attached to the shares that are their own separate property (biens propres). The new shares acquired by exercising the right are an accretion to that separate property under Art. 1406 of the Civil Code. On liquidation of the community, the community may have a recompense claim — in principle equal to the subsisting profit — if it supplied some or all of the funds used to pay up shares still in the subscriber's estate.

Pledged shares. Shares pledged as collateral stay in the pledgor's name, and the pledgor — still the owner — exercises the pre-emptive right. Whether the newly subscribed shares fall under the pledge depends on the drafting of the pledge agreement; the point should be checked before the round.

These configurations matter most at the time of the round. A founder whose shares are dismembered — for estate-planning or tax reasons — needs to coordinate between the bare owner and the usufruitier before the subscription window closes. A married founder under community of property needs to consider the recompense claim if the community funds the subscription.

Renouncing the pre-emptive right in a French capital raise

A shareholder who does not want to subscribe can renounce the pre-emptive right. The renunciation is individual, in writing, and addressed to the company by registered letter (C. com. Art. R 225-122). One timing rule frames it: the renunciation can only be made after the collective decision has been taken and the subscription window has opened — a renunciation staged before or during the decision itself, to sidestep the suppression procedure, is contrary to the texts and risks being read as a fraud on the procedure.

The renunciation can be:

Without designating a beneficiary. The corresponding shares increase the pool available to the reducible right, where it operates. And where the renunciation reaches the company at the latest by the date of the decision recording the realisation of the increase, the corresponding shares are put at the disposal of the other shareholders for the exercise of their own preferential right (C. com. Art. R 225-122).

In favour of designated beneficiaries. The renunciation transfers the subscription rights — irreducible and, where it operates, reducible — to the named beneficiaries, who subscribe in the renouncing shareholder's place. The renunciation in favour of designated beneficiaries must be accompanied by the beneficiaries' acceptance (C. com. Art. R 225-122).

The renunciation can give rise to a payment from the beneficiary to the renouncing shareholder. The payment is treated as a transfer of the pre-emptive right itself, with the tax consequences attached to that characterisation — a point to clear with the tax adviser where the amounts are material.

Effect on the timing of the round. The renunciation accelerates the subscription window. Where the increase is fully subscribed after the non-subscribing shareholders have renounced individually, the company can close the subscription window early — by anticipated closing — under Art. L 225-141 of the Commercial Code. The mechanism is useful in time-pressed rounds where the timing of the K-bis matters more than the formal subscription window.

A renunciation received after the close of the window is not effective as such; the right has simply lapsed unexercised — which has the same practical effect as a renunciation without beneficiary, but without the acceleration benefit.

Automatic renunciation of the pre-emptive right in a French capital raise

Some shareholder decisions automatically include the renunciation of the pre-emptive right, by operation of law, without the need for an individual letter.

Four categories of decisions trigger automatic renunciation (C. com. Arts. L 225-132 al. 5 and 6, L 225-197-1 and L 228-101):

Conversion of preference shares. A shareholder decision converting preference shares (actions de préférence) into ordinary shares automatically includes the renunciation of the existing shareholders' pre-emptive right against the shares created by the conversion.

Issuance of securities giving access to capital. A shareholder decision authorising the issuance of warrants (BSA), convertible bonds, BSPCE, or other instruments giving access to capital includes the automatic renunciation of the pre-emptive right against the underlying shares that will be issued upon exercise of the instruments. The pre-emptive right plays out at the time the instruments are issued (against the instruments themselves), not at the time the underlying shares are issued.

Free-share grants. A shareholder decision authorising a free-share grant (attribution gratuite d'actions) to employees or officers automatically includes the renunciation of the existing shareholders' pre-emptive right against the granted shares.

Approval of a merger by the absorbing company. Where the shareholders of the absorbing company approve a merger, the approval automatically includes the renunciation of their pre-emptive right against the new shares created to be allocated to the shareholders of the absorbed company.

The automatic renunciation operates without further documentation. The shareholder decision is enough; no individual letter is required from each shareholder. The mechanism simplifies the documentation of complex transactions involving multiple capital movements.

Pre-emptive rights and a variable-capital French SAS

The pre-emptive right does not operate in the same way in a French SAS with variable capital.

A variable-capital SAS admits new shareholders within the capital autorisé range without a formal capital-increase decision and without the procedural overhead of the décision collective. The Cour de cassation has held that a variable-capital company can carry out capital increases without reserving any pre-emptive right to the existing shareholders (Cass. crim. 13 November 1990, n° 89-83233), and on the prevailing reading the solution extends to the variable-capital SAS: by subscribing to a variable-capital company, the shareholders accept in advance the maximum dilution that would result from the allocation of the not-yet-subscribed part of the capital maximum fixed in the bylaws.

Founders incorporating with variable capital therefore lose the protection of the pre-emptive right against rolling admissions. Where one or more shareholders need protection against rolling dilution, the bylaws must install an alternative — a contractual pre-emption right, an anti-dilution clause, or a class of shares with a built-in protection.

The point matters most for control-sensitive shareholders in a variable-capital structure. A founder who wants to maintain a defined percentage of the cap table cannot rely on the statutory DPS in a variable-capital SAS; the protection has to come from the bylaws.

Pre-emptive rights at fundraising: practical interactions in a French capital raise

The pre-emptive right interacts with several practical elements of a fundraise.

Negotiation with a lead investor. A lead investor typically wants a clean entry — to subscribe at a defined price for a defined number of shares, without facing the existing shareholders' pre-emptive right competing for the allocation. The standard structure is therefore to suppress the pre-emptive right in favour of the designated lead investor, with the president's report, the auditor's special report (an SAS without an auditor appoints one specially for a raise reserved to named persons), and the suppression vote from which the beneficiary is excluded. The full suppression procedure — reports, price discipline, the 18-month realisation deadline for reserved raises — is covered in our companion guide on raising capital.

Allocation among existing shareholders. Where a round is not reserved to a lead investor and the existing shareholders subscribe under their pre-emptive right, the allocation follows the irreducible-then-reducible mechanism. The reducible right is normally installed by the capital-raise decision to redistribute slack among willing shareholders.

Renunciation in favour of co-founders. A founder whose family has accumulated shares over the years can renounce the pre-emptive right in favour of a co-founder, allowing the co-founder to consolidate their position without going through a separate transfer at a later date. The renunciation in favour of designated beneficiaries — with the beneficiary's acceptance — is the legal mechanism.

Combining suppression and pre-emptive right. A capital raise can combine a suppression of the pre-emptive right for designated investors and a retention of the right for existing shareholders for the rest of the increase. The shareholder decision sets out the breakdown — for example, 60 % of the new shares reserved to a lead investor (with suppression of the pre-emptive right for that tranche) and 40 % open to existing shareholders under their pre-emptive right.

Pre-emption clauses in the bylaws. A bylaws-installed pre-emption clause on share transfers is a separate mechanism from the statutory pre-emptive right on capital increases. The two can coexist: the pre-emption clause governs transfers between existing shareholders and to third parties, the pre-emptive right governs new issues. The two mechanisms cover different cap-table events and use different procedures.

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Frequently asked questions about pre-emptive rights in a French capital raise

Does every French SAS have a statutory pre-emptive subscription right?

Yes, on every cash capital raise — the right of Art. L 225-132 applies to the SAS. It falls away in defined situations only: where the shareholders suppress it for a given raise under the formal procedure, where a shareholder renounces individually, where a decision carries an automatic renunciation (convertibles, free shares, preference-share conversion, merger), and — on the prevailing reading — in a variable-capital SAS for issues within the capital autorisé range.

What is the difference between a pre-emptive right (DPS) and a pre-emption clause?

The DPS is the statutory right of existing shareholders to subscribe new shares in a capital raise, before the new shares are offered to anyone else. The pre-emption clause is a bylaws-installed restriction on transfers of existing shares — when a shareholder sells, the others have the right to buy first. The DPS protects against new issues; the pre-emption clause protects against transfers. The two coexist in most investor-grade bylaws.

Can a foreign shareholder of a French SAS exercise the pre-emptive right?

Yes. The right attaches to the shareholder, not to the shareholder's nationality. A foreign individual or a foreign legal entity holding shares in a French SAS exercises the pre-emptive right on the same terms as a French shareholder.

Can the pre-emptive right be suppressed without the consent of the existing shareholders?

No. The suppression requires a décision collective of the shareholders, taken at the majority the bylaws set for capital changes (typically two-thirds), on the president's report — with the auditor's special report where the company has an auditor (or, for a raise reserved to named persons, an auditor appointed specially for the operation). Designated investors who would benefit from the suppression are excluded from the vote where they are existing shareholders, and their shares are deducted from the quorum and majority computation.

How long is the pre-emptive subscription window?

At least five trading days from the opening of the subscription (C. com. Art. L 225-141). The capital-raise decision can set a longer window. The window closes early — by anticipated closing — once the issue is fully subscribed and the shareholders who do not want to subscribe have renounced individually.

Can a shareholder transfer the pre-emptive right separately from the underlying shares?

Yes. Where the right is not detached from negotiable shares, it is transferable under the same conditions as the share itself. Where it is detached from negotiable shares, the right is negotiable from the second trading day before the opening of the subscription window until the second trading day before its close (C. com. Arts. L 225-132 and R 225-117-1). In a closely held SAS, the same result is usually reached through a renunciation in favour of a designated beneficiary, with the beneficiary's acceptance.

What happens if no shareholder exercises the pre-emptive right?

The unsubscribed shares fall into a pool dealt with under the capital-raise decision — allocated to the reducible right (where it operates), then to designated third parties (where the decision installs a third-party allocation). Where the issue is not fully taken up, the decision can authorise the president to limit the increase to the subscriptions received, provided they reach at least three quarters of the projected amount; otherwise the round is re-run on fresh terms.

What happens if a capital increase is carried out in breach of the pre-emptive right?

The operation is exposed to annulment. Until 30 September 2025, breaches of the capital-increase rules could trigger nullity as of right; since 1 October 2025, under the reformed nullities regime, the court weighs the breach before voiding the operation. The existing shareholder's remedy targets the decision and the company — supplemented, where loss is shown, by damages. The practical lesson runs the other way: document the notifications, the window, and the renunciations so the round is unassailable.

Key takeaways on pre-emptive rights in a French capital raise
Every existing shareholder of a French SAS has a pre-emptive subscription right on every cash capital raise (C. com. Art. L 225-132), in proportion to their existing holding — attached to fully paid shares, exercised within a window of at least five trading days.
The right has two layers: the irreducible right (pro-rata, automatic) and the reducible right (additional subscription against the unsubscribed pool) — the latter only where an express decision installs it, allocated in proportion to rights and within the limit of demands.
Renunciation is individual, written, and after the window opens — with or without a named beneficiary (whose acceptance is required), possibly against payment treated as a transfer of the right. Full subscription plus individual renunciations lets the round close early.
Four decisions carry an automatic renunciation: conversion of preference shares, issuance of securities giving access to capital, free-share grants, and the absorbing company's approval of a merger.
Split ownership needs coordination: the right belongs to the bare owner (the usufruitier can step in on inaction), community-property spouses exercise the rights attached to their separate shares with a possible recompense to the community, and pledge documentation decides whether new shares fall under the pledge.
The right does not operate against rolling admissions in a variable-capital SAS — protection there comes from the bylaws — and it can be suppressed for designated investors only through the formal procedure, never through a staged collective renunciation.
Managing pre-emptive rights on a French capital raise?

Petroff Avocats handles the full pre-emptive right machinery on cash capital raises in French SAS, including the notification of existing shareholders under Art. R 225-120, the irreducible and reducible right administration, the management of dismembered ownership, community-property and pledged-share configurations, the renunciation mechanics (individual and in favour of designated beneficiaries, with the tax framing of paid renunciations), the suppression of the pre-emptive right for designated investors with the auditor's report and a defensible issue price, and the bylaws drafting for variable-capital structures that need contractual dilution protection. We also coordinate with co-counsel for foreign investors stepping into French rounds. See our SAS incorporation mandate for the full scope.

Talk to a French business lawyer

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 advice. The right structure for a pre-emptive right exercise or suppression depends on the cap table, the round structure, and the founders' control objectives. Always seek qualified legal advice before launching a cash capital raise in France.