Reserving a French Capital Raise for a Named Investor: Lifting the Pre-emptive Right

Lifting the shareholders' pre-emptive right for a reserved round

When a French SAS reserves a capital raise to one or more named investors — a venture capital fund, a strategic partner, a lead investor — the existing shareholders' pre-emptive subscription right (droit préférentiel de souscription — DPS) must be lifted for the relevant tranche. The procedure is more demanding than an ordinary capital raise: a specific shareholder decision, a report from the president, a special report from the statutory auditor, an exclusion of the named investor from the suppression vote, and a price set at a level that protects existing shareholders against dilution at a discount.

This guide covers the conditions under which a French SAS can reserve a capital raise to designated persons, the two reports required, the voting rules, the price-setting protections, the four configurations the statutory auditor's report can take, and the 18-month deadline for realising a reserved raise. For the mechanics of the pre-emptive right itself — the two layers, renunciation, ownership splits — see our companion guide on pre-emptive rights; for the raise procedure end to end, our step-by-step guide on the cash capital raise.

When a French capital raise is reserved to a named investor

A capital raise reserved to one or more designated persons is the standard structure at every fundraise involving a lead investor. The lead negotiates terms with the company; the existing shareholders agree to the round; the new shares are subscribed by the lead at the agreed price. The pre-emptive right of the existing shareholders has to step aside to make room.

Three configurations cover most reserved capital raises:

A capital raise reserved to one named investor. A single venture capital fund, a single strategic partner, or a single corporate investor subscribes the entire issue. The shareholder decision names the investor and the price; the existing shareholders' pre-emptive right is suppressed in the investor's favour.

A capital raise reserved to a category of beneficiaries. The shareholders define a category answering determined characteristics — for example, holders of a specific instrument issued earlier (BSA, convertibles), or members of a specific group (venture funds with a defined profile, employees of the group). The category does not name individuals at the time of the decision, but it must be defined tightly enough that the population is identifiable when the round closes.

A capital raise combining a reserved tranche and a tranche open to existing shareholders. A typical Series A or Series B structure. A defined number of new shares is reserved to the lead investor (with the pre-emptive right suppressed for that tranche); the rest is open to existing shareholders under their pre-emptive right (with no suppression). The shareholder decision sets out the breakdown.

In every configuration, the pre-emptive right is lifted for the tranche reserved to the named investor or the category, not for the rest of the round (where any).

The two ways to lift pre-emptive rights in a French capital raise

The Commercial Code provides two paths to lift the pre-emptive right.

Suppression by the shareholder decision. The shareholders decide expressly to suppress the pre-emptive right, in favour of named investors or a defined category, as part of the décision collective that authorises the capital increase (C. com. Art. L 225-138). The suppression decision must be supported by the president's report and the statutory auditor's special report, and the named investor cannot vote on the suppression.

Renunciation by the existing shareholders. Each existing shareholder can renounce the pre-emptive right individually, in writing, by registered letter to the company. Where every existing shareholder renounces, the right is fully waived and the round can be subscribed by the named investor. The renunciation route is rare in practice for a reserved capital raise involving a lead investor — it is too easy for a single shareholder to refuse to renounce and block the operation. Suppression by shareholder decision is the standard route.

A specific risk applies to the renunciation route. Where all existing shareholders try to renounce at the time of the shareholder decision, in order to avoid the suppression procedure, the practice can be characterised as a fraud on the suppression rules. The texts give a renunciation effect only after the subscription window opens, not before or during the shareholder decision; a wholesale collective renunciation staged at the time of the decision is treated as a circumvention of the procedural protections built into the suppression mechanism. Founders should therefore use the suppression procedure properly rather than attempt a collective renunciation.

Suppression in favour of named investors: the basic procedure

The suppression of the pre-emptive right for named investors follows a defined procedure under Art. L 225-138 of the Commercial Code.

The shareholders take a décision collective authorising the capital increase and including a separate resolution suppressing the pre-emptive right of the existing shareholders in favour of the named investors. The decision must:

• name the designated investors (or define the category by its characteristics);
• exclude the named investors from the suppression vote where they are also existing shareholders — their shares are deducted from the quorum and majority computation;
• be taken on a report from the president (or from the body authorised to issue it) stating the reasons of the increase and of the suppression, the price and its basis;
• be taken on a special report from the statutory auditor of the company on the price conditions — and where the SAS has no statutory auditor, an auditor is appointed specifically for the operation to issue it (C. com. Art. L 225-138, II).

One procedure that does not apply: the special-benefits procedure (avantages particuliers, with its separate commissaire) is not triggered by a suppression in favour of named persons. That procedure belongs to the issue of preference shares to named persons — a different operation, even when the two happen in the same round.

The suppression decision is taken in the form the bylaws set for capital changes, with the majority the bylaws set for those changes (typically two-thirds). The named investors who are also existing shareholders are excluded from the count: their shares do not vote on the suppression resolution, and they are deducted from the quorum where one applies.

Once the suppression is voted, the round proceeds: the bulletins are signed, the cash is deposited, the registry filing is run, and the K-bis is updated.

The president's report on the suppression of pre-emptive rights in a French capital raise

The president's report on the suppression covers two layers, set out in Art. R 225-114 of the Commercial Code:

The rationale of the increase and of the suppression. The maximum amount of the increase, the reasons for it, and the reasons for the proposal to suppress the pre-emptive right — typically the lead investor's role (capital, expertise, network, governance), the importance of a clean entry, and the negotiation between the company and the investor on the terms of the round.

The price and the impact on existing shareholders. The price at which the new shares will be issued (par value plus any premium) or the method for setting it, the basis on which the price was set (a defensible valuation reference — often a recent transaction, a third-party valuation, an EBITDA multiple, a discounted cash flow), the name of the designated beneficiaries (or the category definition), and the impact of the proposed issue on the situation of the existing shareholders and of the holders of securities giving access to capital — in particular on their share of equity at the close of the financial year (C. com. Arts. R 225-114 and R 225-115). In practice the report quantifies the dilution: the percentage drop in each existing shareholder's stake post-issuance.

Where the capital increase is happening more than six months after the close of the most recent financial year, the company must produce an interim financial position (situation financière intermédiaire), giving the existing shareholders a current view of the company's finances at the time of the suppression (C. com. Art. R 225-115).

The report is made available to the shareholders in the timing the bylaws set — typically at least eight days before the décision collective. It is part of the information package the shareholders use to vote on the suppression.

The statutory auditor's report on the suppression: four configurations

The regime on the auditor's report was reshaped by the Loi Pacte 2019-486 of 22 May 2019, which trimmed the statutory auditor's role in many corporate operations. Four configurations apply since the first financial year closed after 26 May 2019.

Configuration 1: pure delegation of competence to the president. The shareholders delegate competence to the president to decide on the capital increase, fixing the duration and the cap (C. com. Art. L 225-129-2). No prior auditor's report is required at the time of the delegation. Once the president uses the delegation, the auditor — where the SAS has one — issues a report on the definitive conditions of the operation, presented to the next collective decision (C. com. Art. L 225-135, al. 4).

Configuration 2: delegation of powers for the modalities. The shareholders decide the increase but delegate to the president the power to carry it out on the conditions they have fixed (C. com. Art. L 225-129-1). Where the SAS has an auditor, the decision is taken on a report from the auditor, complementing the president's report; the auditor also reports on the definitive conditions at the next collective decision.

Configuration 3: capital raise reserved to designated persons. The shareholder decision reserves the increase to one or more named investors or a defined category. The price — or the conditions for setting it — must be determined on a special report from the company's statutory auditor; where the SAS has no auditor, one is appointed specially for the operation (C. com. Art. L 225-138, II). The auditor's report is the central document of the suppression — it addresses whether the price basis is defensible.

Configuration 4: the shareholders set the conditions themselves, with no delegation. The shareholders decide and fix the conditions of the capital increase without delegating. The decision is taken on the auditor's report where the SAS has one (C. com. Art. L 225-135, al. 3); no separate report on definitive conditions is needed, because the shareholders have already set them.

Note the asymmetry: in configurations 1, 2 and 4, an SAS without a statutory auditor simply proceeds without the report — the law does not force an appointment (C. com. Art. L 225-135). Only the reserved raise of configuration 3 forces a one-off appointment.

Configuration 3 is the most common in practice — most fundraises reserved to a lead investor follow this path. The auditor's special report is the central protection for the existing shareholders against an issue at a price that does not reflect the company's value. The auditor's fees for the special report are paid by the company; they are negotiated at appointment and reflect the complexity of the valuation work.

The voting rules: the named investor cannot vote on the suppression

The named investor's existing shares — where the named investor is already a shareholder of the SAS — are excluded from the suppression vote (C. com. Art. L 225-138). The exclusion runs at two levels:

Quorum. The named investor's shares are deducted from the quorum required for the décision collective, where the bylaws set one (some SAS bylaws do, others rely only on a majority threshold). The quorum is then computed against the remaining shares.

Majority. The named investor's shares do not vote on the suppression resolution, and the majority is computed against the remaining shares only.

The exclusion applies regardless of whether the named investor would have voted in favour or against the suppression. It is structural — built into the rule to prevent the named investor from supporting the suppression in their own favour.

In practice, the rule means that the existing shareholders of the SAS — minus the named investor — must approve the suppression at the bylaws-set majority. Where the named investor holds a significant minority stake (for example, an investor with 30 % of the existing capital pre-round), the suppression vote requires the bylaws-set threshold to be met within the remaining 70 %. The arithmetic should be run before the round closes to ensure the suppression will pass.

The exclusion applies only to the suppression vote itself. The named investor can vote on the underlying capital-increase decision, on the bylaws amendments, and on any other related shareholder resolution where the exclusion rule does not attach.

Run the suppression-vote arithmetic before the round

Enter the total shares, the named investor's existing shares, and the majority your bylaws require — and see the vote base after the deduction and the votes the suppression needs to pass.

The price of new shares when pre-emptive rights are lifted in a French capital raise

The price at which the new shares are issued — the issue price, including par value and any premium — is the central protection for existing shareholders against a discount issue.

The price is set by the shareholder decision (or determined by the president under a delegation, on the auditor's special report) against a defensible valuation reference. Three principles drive the price:

No discount to the underlying value. The price should align with the company's underlying per-share value. Where the company has accumulated reserves or has a defensible going-concern value above the par value of its shares, the issue price reflects that value through an issue premium. A price materially below the underlying value dilutes existing shareholders unfairly and can be challenged.

A defensible valuation methodology. The auditor's report sets out the methodology used to determine the price (market comparables, EBITDA multiple, discounted cash flow, recent transactions, third-party valuation). The methodology must be appropriate to the company's profile and consistent with valuation practice in the company's sector.

Negotiation with the named investor. The price is also the outcome of the negotiation between the company and the lead investor. The lead has its own valuation analysis and a target ownership percentage; the founders have a defensible valuation reference of their own. The price typically lands at a level that reconciles the two while sitting within the auditor's defensibility opinion.

A price set materially below the company's underlying value is a real risk. Existing shareholders who are not part of the round can challenge the dilutive effect of the suppression. Where the courts read the dilution as a breach of the existing shareholders' rights, the operation is exposed to annulment — with the reformed nullities regime giving the court a weighing role since 1 October 2025 — and the round's credibility rarely survives the dispute. Founders should therefore not rush the price-setting step; the auditor's report and the negotiation with the lead are the protections that hold the operation defensible.

Suppression in favour of categories of beneficiaries in a French capital raise

The Commercial Code allows the suppression of the pre-emptive right in favour of categories of persons answering determined characteristics, rather than named individually (C. com. Art. L 225-138). The category must be defined tightly enough that the population is identifiable when the round closes, but the individual subscribers do not need to be named in the shareholder decision.

Common category definitions include:

Holders of a specific instrument. A category defined as "the holders of the BSA-X warrants issued on [date]" or "the holders of convertible bonds issued under the agreement of [date]". The subscribers are identifiable from the company's books.

A defined investor profile. A category defined as "venture capital funds investing primarily in early-stage technology companies with assets under management above [threshold]". The category is broader than a single named investor but still identifiable.

Employees and officers. A category defined as "the employees and officers of the company and of the controlled subsidiaries on [date]". The category is identifiable from the company's payroll and the subsidiaries' registers.

The category raise runs on the same machinery as the named-investor raise: the president's report, the auditor's special report on the price conditions — with the one-off appointment where the SAS has no auditor. The vote-exclusion rule operates where a beneficiary is individually named: an unnamed category member is by definition not identified at the time of the decision, so where a shareholder is known to be the intended subscriber, the drafting should name them and apply the exclusion rather than hide them in a category. Where the category definition opens up to a population that cannot be identified with reasonable certainty, the definition should be narrowed before the shareholder decision; a loose category gives the existing shareholders no meaningful information about who will subscribe, and invites challenge.

A category-based suppression is more flexible than a named-investor suppression — the company can fill the round with subscribers who fit the definition without naming each one in the decision. The price of that flexibility is drafting precision at the time of the decision.

The 18-month deadline on a reserved capital raise in a French SAS

A capital increase decided by the shareholders must normally be realised within five years of the decision. When the pre-emptive right is suppressed in favour of designated persons, that window shrinks dramatically: the reserved increase must be realised within 18 months of the decision (C. com. Art. L 225-138, III).

The shortened deadline reflects the heavier protection the law gives existing shareholders where a raise excludes them: the authorisation to dilute them in favour of a named person does not stay open for years. A reserved raise that has not closed within 18 months lapses; a new round requires a fresh decision, fresh reports, and a fresh vote.

The deadline interacts with the delegation rules. A delegation of competence to the president (C. com. Art. L 225-129-2) runs for a maximum of 26 months as a delegation — but where the operation it covers is a raise reserved to designated persons, the 18-month realisation deadline governs the closing. In practice, founders running serial reserved raises should treat 18 months as the planning horizon: the shareholder authorisation must be renewed at least that often, and each renewal means updated reports and an updated price basis.

The deadline does not stop the company from running multiple reserved tranches within the window, where the decision or delegation provides for them. And it does not apply to increases that result from the exercise of previously issued instruments (warrants, convertibles) — those run on the instrument's own schedule.

Founders running serial fundraises with a lead investor often combine the two tools: a delegation for the open tranches, and properly renewed 18-month authorisations for the reserved ones. The constraint is real, but it is workable for a typical seed-to-Series-A trajectory.

Which suppression route fits your round?

Pick the structure closest to yours and see the procedure it triggers — and the point to settle before the decision is drafted.

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

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 reserved capital raise in a French SAS depends on the cap table, the lead investor's profile, the price-setting methodology, and the timing of the round. Always seek qualified legal advice before launching a reserved capital raise in France.