SARL Share Capital and Contributions: Cash, In-Kind and Industry

SARL share capital is fixed freely in the articles — the law imposes no minimum, and a company can be formed with a few euros. What the law does regulate is what goes in and how. Cash contributions need only be one-fifth paid up at incorporation, with the balance called within five years. Contributions in kind must be valued in the articles, paid up in full, and confirmed by a valuation auditor unless every founder unanimously waives it — which is possible only below two thresholds that apply together. Contributions in industry, meaning skills and work, are allowed in a SARL but count for no capital at all. This guide covers each type, the valuation rules and the personal liability they carry, and how much capital your company actually needs.

The three types of contribution to a SARL

A cash contribution is the provision of a sum of money that goes to form the capital — which is what distinguishes it from a loan. Every contribution of property other than money is a contribution in kind. In principle all immovable and movable property, tangible or intangible, can be contributed to a SARL, and in any of four ways: in full ownership, in bare ownership, in usufruct, or in enjoyment only. Land, buildings, a business including its goodwill, trade name, leasehold right and other intangible elements, equipment, furniture, securities, shareholdings, receivables and stock all qualify.

A contribution in industry is different in nature: the contributor devotes their activity to the company's business and places their technical or professional knowledge, experience and connections at its disposal. The articles set the terms on which shares in industry can be subscribed.

The tax classification runs on a different axis and matters at incorporation: contributions are pure and simple where they are paid for in shares, for consideration where the contributor receives cash or has debts assumed instead, and mixed where both apply. That distinction drives the registration duty, and it is covered in how to set up a SARL in France.

Cash contributions and paying up the SARL capital

All shares must be subscribed in full — each contributor is committed for the whole amount of their contribution. But the shareholders may pay up only a fraction of each cash contribution, at least one-fifth, with the balance called by the manager in one or more instalments within five years of registration (C. com. Art. L. 223-7). No minimum sum can be demanded.

The paid-up portion must be handed over before the articles are signed, and the articles must record both the paying-up and the deposit. The funds must be deposited within eight days of receipt, on behalf of the company in formation, with a notary or a bank — the Caisse des dépôts, though still named in the texts, has refused these deposits since 1 June 2021 — and only credit institutions approved by the French prudential authority may receive them, which rules out a bank in the founder's own country. A deposit into a French lawyers' settlement fund is accepted. Where payments are staggered, the eight-day rule applies to each one.

The money is frozen until registration: a bank that lets the manager use it incurs liability, and while the lock lasts, seizures by the shareholders' personal creditors have no effect. Release comes only after registration, to a representative of the company, on production of the registration certificate. If the company is not formed or registered within six months of the first deposit, contributors can recover their money — individually with an authorisation from the president of the commercial court, or collectively through a representative acting for all of them, without a court order.

Deferred paying-up is a genuine cash-flow tool, and it has a matching duty. The manager must call the outstanding funds; failing to do so within the legal period lets any interested person ask the court, in summary proceedings, to order the calls under penalty or appoint a representative to make them — though the order cannot personally condemn the manager to pay up a shareholder's contribution. Unpaid capital is a debt of the shareholder to the company that survives their departure. One point of principle protects the shareholder register: a person who subscribed shares under the articles and made the corresponding contribution is a shareholder with all the attaching rights, whatever the arrangements by which the contribution was financed — including where a co-shareholder actually paid it.

Contributions in kind: valuation, the auditor and five years of liability

The articles must state the identity of each contributor in kind, the valuation of each contribution and the number of shares issued in exchange (C. com. Art. L. 223-9). That valuation is made on a report annexed to the articles, drawn up under their own responsibility by a valuation auditor (commissaire aux apports) appointed unanimously by the future shareholders or, failing agreement, by order of the president of the commercial court on the application of the most diligent of them. Where the company is formed by a single person, the founder chooses the auditor and no court appointment applies. The auditor must be chosen from the registered statutory auditors, or from the experts on the lists drawn up by the courts.

When you can waive the valuation auditor

The founders may decide unanimously that no valuation auditor is required, but only where two conditions are met together: no single contribution in kind exceeds €30,000, and the total value of the contributions in kind not submitted to an auditor's valuation does not exceed half of the capital (C. com. Art. L. 223-9). The arithmetic follows: 

• for a single contribution in kind worth €30,000, 
• the capital must be at least €60,000 for the waiver to be available. 

For the purposes of this exemption, the value of the asset is assessed on its gross value, before deduction of liabilities, not on its net value. Because the waiver must be unanimous, record the agreement in the articles signed by all the founders.

A worked example makes the double test concrete. A SARL is formed with a capital of €80,000. Beyond the cash contributions, three contributions in kind are made: office equipment, a stock of goods, and the leasehold right to the commercial premises. The shareholders can unanimously waive the auditor if no one of those assets, taken separately, is worth more than €30,000 and the three together do not exceed €40,000 — half of the capital.

What overvaluing a contribution costs

Shareholders may waive the auditor, or adopt a value different from the one the auditor proposed. Using that freedom carries two exposures. Civilly, they are jointly liable towards third parties for five years for the value attributed to contributions in kind where there was no auditor, or where the value retained differs from the auditor's (C. com. Art. L. 223-9). Criminally, fraudulently attributing to a contribution in kind a value higher than its real value is punished by five years' imprisonment and a fine of €375,000 (C. com. Art. L. 241-3). The criminal route is not theoretical: a shareholder and a valuation auditor were convicted for knowingly concealing the existence of security interests encumbering a business that was being contributed.

Undervaluation carries its own risk from the other direction: the tax authorities can challenge the valuation and reassess the base of the registration duties, or argue that the undervaluation amounts to a disguised gift in favour of the contributor's co-shareholders. Two situations call for extra discipline. Where a minor is among the shareholders, follow the auditor's conclusions — the five-year joint liability cannot be imposed on a minor. And because contributing property to a company is generally an act of disposal, the parents of a contributing minor need the guardianship judge's authorisation for contributions of buildings or a business, while a guardian acting for a protected adult needs the authorisation of the family council or the guardianship judge.

One misconception is worth correcting. The requirement that the articles state the valuation of contributions in kind exists to establish the value of the contributions, not their reality — so the mention, or absence of mention, of a contribution cannot be used to claim or contest ownership of the asset.

Contributing a lease, a business, IP or an entire sole trader's estate

Particular assets carry particular formalities, and skipping them is expensive.

A commercial lease

Since October 2016 the assignment of a contract passes to the assignee with the other party's agreement, which can be given in advance — in which case the assignment takes effect against that party when the assignment contract is notified to them or they acknowledge it (C. civ. Art. 1216), and registered post suffices. Commercial leases keep a special rule: the landlord cannot prohibit the tenant from assigning the lease to the buyer of their business (C. com. Art. L. 145-16), and where the landlord does not agree, the formalities of Article 1690 of the Civil Code must be followed — service of the assignment on the landlord by a judicial officer. Some leases impose Article 1690 in terms, which again requires a judicial officer or a notary. Where service is required and omitted, the lease is unenforceable against the landlord, who can refuse renewal to the assignee with no indemnity or seek termination — leaving the tenant unable to rely on the commercial-lease protections at all. The courts have validated assignments without service where the landlord's positive conduct showed unequivocal acceptance, but knowledge alone is not enough.

Leases frequently add conditions or a required form for an assignment. Restrictive or approval clauses are valid provided they do not amount to a general and absolute prohibition on any assignment, and formal requirements — such as assignment by notarial act with an enforceable copy delivered to the landlord — must be respected on pain of termination or refusal of renewal without indemnity.

A business (fonds de commerce)

The contribution deed can be a private or an authenticated act; the mandatory particulars formerly required in it were abolished in 2019. Contributing a business to an existing or forming company follows the same publicity formalities as a sale: notice in an authorised legal-announcements medium and in the official bulletin within fifteen days, with exceptions for a contribution to an EURL or one arising from a merger, demerger or partial asset transfer. Within ten days of the last publication, any unregistered creditor of the contributor must declare their status and the sum owed to the commercial court registry. Where the contribution is for consideration and treated as a sale, creditors follow the price-opposition formalities applying to sales of a business. Shareholders then hold an option: unless one of them applies within the following fortnight to annul the company or the contribution, and unless annulment is granted, the company is jointly liable with the principal debtor for the liabilities declared, where justified. A declaration in the contribution agreement that the company assumes the contributor's trade debts does not release the contributor towards their creditors — only the creditors' express acceptance does that.

Three further formalities complete the operation. The contributor and the company's qualified representative must endorse a document showing monthly turnover between the last accounting year-end and the month preceding the contribution. A dossier goes to the single-window portal, with a cessation declaration to the tax service within 45 days and a result declaration within 60 days. And the contributor must, on request, make available to the company for three years from its entry into enjoyment all the accounting records of the three financial years preceding the contribution. Where the business contains a trademark or a patent, the specific publicity formalities at the industrial property institute apply.

Municipal pre-emption is the trap that catches unadvised founders. Communes that have created a safeguard perimeter for local commerce and craft hold a pre-emption right over transfers of businesses, craft businesses and commercial leases within it — and the contribution of a business or a commercial leasehold right to a company is treated as a transfer. The contributor should obtain a certificate that no perimeter exists or that the premises fall outside it, and annex it to the articles or the contribution deed. Where a perimeter does exist, a prior declaration is filed with the commune, which has two months to decide; a decision not to pre-empt can be express or result from silence over those two months. Insert a condition precedent in the contribution agreement that the commune does not exercise its right.

Trademarks, patents and a sole trader's whole professional estate

The contribution of a trademark to a company, in ownership or in enjoyment, is valid against third parties only once entered on the national trademark register at the industrial property institute (C. propr. intell. Art. L. 714-7); the same applies to a patent (Art. L. 613-9). The application for entry must be accompanied by a copy or extract of the deed recording the contribution and proof of payment of the fee.

The 2022 reform of sole-trader status created a universal transfer mechanism for the professional estate, which eases the passage into a company: the sole trader can contribute the entirety of their professional estate without liquidating it (C. com. Art. L. 526-27), excluding social-contribution debts. The transfer is formalised in a single act and passes indivisibly all the rights, property, obligations and security interests useful to the business. It becomes enforceable against third parties only from the publication of a notice in the official bulletin, at the latest one month after completion, and creditors may oppose the transfer within the month following publication.

Where a contribution consists of assets held in community property by a married couple, the spouse must be informed in advance, on pain of nullity, for every such contribution (C. civ. Art. 1832-2). The consequences differ by asset: for a business, buildings, an operation, non-negotiable corporate rights and tangible movables whose transfer is subject to publicity, both spouses must make the contribution together, even though only one will be a shareholder (C. civ. Art. 1424). For other community assets, notably cash, the spouse's intervention allows them to claim shareholder status. Because cash is presumed to be community property in almost every case, a sole contributing spouse should systematically notify the other, unless able to prove the separate origin of the funds under the reinvestment formalities. That subject is developed in spouses, community property and SARL shares.

Contributions in industry: allowed, but they build no capital

Contributions in industry are admitted without restriction in a SARL, and the articles determine the terms on which shares in industry may be subscribed (C. com. Art. L. 223-7). They consist in placing technical knowledge, work or services at the company's disposal. Because they do not contribute to the capital, the company still needs cash or in-kind contributions to form the capital fixed in the articles — a capital, however small, must exist. The allocation of shares in industry is stated in the articles like any other.

The mechanics follow the civil-law rules. Shares in industry give the right to share in the profits and in the net assets, with a corresponding duty to contribute to the losses (C. civ. Art. 1843-2). Failing a clause to the contrary, the share of a shareholder who contributed only their industry equals that of the shareholder who contributed least (C. civ. Art. 1844-1). The contributor owes the company an account of all the gains they realise through the activity that is the subject of their contribution (C. civ. Art. 1843-3) — and where there are losses, the industry contributor loses their gains. Shares in industry are not transferable, and they carry no nominal value.

Two practical characteristics matter. The contribution is in principle successive, performed as the company's life unfolds, though it may also be a one-off — the transmission of unpatentable know-how, or a lawful service — in which case performance can be instantaneous. And it is hard to value in money and cannot be enforced against by creditors: the industry contributor is an independent shareholder, not in a relationship of subordination with the company, and holds no employment contract.

One drafting trap deserves flagging. Where the industry contributor is also the manager, the manager's remuneration could be analysed as a gain realised within the scope of the contribution — and therefore owed back to the company. Keep the manager's role and the contributor's activity clearly distinguished in the articles and in the remuneration decision.

How much SARL share capital do you actually need?

The founders fix the capital freely, and it can be a few euros. The amount should follow the nature and volume of the activity, the size of the company and its capital needs. A very low capital is attractive to a founder, especially in services where start-up capital requirements are small — but the subscribed capital corresponds to the extent of the founder's personal exposure, and it must match the economic requirements of the project the business plan describes. Undercapitalisation has consequences beyond the obvious.

The first is guarantees. Undercapitalisation prompts significant creditors to demand contractual security, and the personal guarantee of the manager and their family becomes the substitute for the capital that is not there. The second is the loss-of-half-capital procedure. Where losses bring the equity below half of the share capital, the shareholders must decide, within four months of approving the accounts that revealed it, whether to dissolve the company early; if it is not dissolved, the situation must be regularised within a set period (C. com. Art. L. 223-42). A thin capital risks triggering that procedure in the first year — forcing a capital increase to survive. The full procedure is in your French company has lost half its share capital.

The third is the manager's liability. The insufficiency of the contributions at incorporation is attributable to the shareholders, not the manager, and cannot as such constitute a management fault. But the manager cannot ignore the company's equity: they must call the unpaid contributions, and must convene the shareholders where the equity falls below half of the capital. The courts have gone further. A liquidator sought to make a director bear part of an unpaid liability of nearly €2.5 million; the courts ordered €1 million, holding that the director should have attempted a capital increase given the company's difficulties. The Cour de cassation upheld it: while contributions of funds are the shareholders' business rather than the director's, a management fault can be found where the director did not try to obtain an increase that was necessary to the company's survival — and this director knew from the start of the mandate that the company would be insolvent without rapid recapitalisation. The counterpoint is equally instructive: a manager cannot be ordered to make good the liabilities for failing to regularise the equity position before insolvency proceedings opened where the period allowed for doing so had not yet expired.

The capital must be stated in the articles and on all acts and documents issued to third parties; where the second obligation is ignored, any interested person or the public prosecutor can seek a summary order compelling the manager to comply, under penalty.

The variable-capital SARL

A SARL can be formed with variable capital under specific rules (C. com. Arts. L. 231-1 to L. 231-8), with the same one-fifth paying-up rule applied to the capital stated in the articles. The articles must state two figures: the statutory capital actually subscribed, freely fixed with no minimum, together with a ceiling above which no free variation can occur — failing which any increase must, on pain of nullity, be decided by the shareholders under the ordinary conditions — and a floor below which the capital cannot be reduced, which cannot be less than one-tenth of the capital stipulated in the articles (C. com. Art. L. 231-5). Between floor and ceiling, the capital varies freely and without formality, through successive payments by shareholders or the admission of new ones, in both directions and at any time.

Two consequences follow for shareholders. Each holds a statutory right to withdraw, taking back their contributions and, where applicable, a share of the reserves, on the terms set by the articles and after deduction of their share of the losses — but the resulting reduction cannot take the capital below one-tenth of the subscribed capital. And the articles may authorise the exclusion of a shareholder, a serious decision reserved to the extraordinary meeting: the specific rule requires the exclusion to be decided by the meeting at the majority required to amend the articles, and a clause meeting that requirement is valid even where it does not exhaustively define the grounds for exclusion. Introducing a variability clause during the company's life requires unanimity, because it increases the shareholders' commitments. And where shareholders have paid up their cash contributions in full, a judicial liquidation cannot require them to top the capital up to the statutory maximum.

Categories of SARL shares and what they can carry

Capital shares are those created at incorporation or on later capital increases, to pay for the cash and in-kind contributions. Beyond them, the articles can create three variants. Enjoyment shares arise where profits or reserves are applied to the full amortisation of capital shares; they confer the same rights as capital shares except the right to repayment of capital on liquidation and the right to any statutory interest — an operation the texts contemplate for companies by shares, which does not appear to be closed to the SARL, though tax considerations make it rare. Preference shares can be created by the articles, carrying rights superior to ordinary shares: a priority dividend, cumulative or not, a preference on the liquidation surplus, or a preferential subscription right on future cash increases; the advantages can be permanent or temporary. The legislation is silent rather than prohibitive, and in practice such shares are exceptional — a SARL is a simple and usually modest structure, and sophisticated profit-allocation clauses are not its natural home. Shares in industry follow the rules set out above and are not transferable.

One limit is absolute: multiple voting rights cannot be granted to any share. Each shareholder has a number of votes equal to the number of shares they hold, and any clause to the contrary is deemed unwritten (C. com. Art. L. 223-28).

The capital is divided into equal shares, and every reference to a minimum nominal value has been abolished — the shareholders may agree to fix no nominal value at all. Shares in industry, which do not form part of the capital, carry no nominal value, though they can be given a valuation comparable to that used for contributions in enjoyment. Shares cannot be represented by negotiable instruments (C. com. Art. L. 223-12): each shareholder's rights flow from the articles, the amending acts and the transfer deeds. Every shareholder may at any time obtain from the registered office a certified copy of the articles in force on the day of the request, with the list of managers and any statutory auditors annexed, for a charge that cannot exceed €0.30 — and anyone, including a third party, can obtain certificates, copies or extracts of the register entries and the annexed filings from the commercial court registry.

Frequently asked questions about SARL share capital and contributions

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. Figures, rates and thresholds evolve; verify them against the texts in force before acting, and take advice on your specific situation.