The "Accordion" Recapitalisation: Zero-Then-Raise to Save a Distressed French Company

The coup d'accordéon: reduce to absorb, raise to restart

When a French SAS has accumulated losses that eat into — or exceed — its capital, the standard route for new investors to come in is the coup d'accordéon — the accordion recapitalisation. The mechanism reduces the existing capital (down to zero if needed) to absorb the historic losses, then immediately raises new capital at the same shareholder meeting. The two operations close together; the historic losses are wiped from the balance sheet; the new investors enter on a fresh structure.

This guide covers what the accordion is, when it makes sense, the step-by-step procedure, the validity themes the French courts test, the perspective of the new investors and the existing shareholders, the inverted order for losses exceeding the capital, and the place of the accordion in the loss-of-half-capital cycle reformed by the loi 2023-171 of 9 March 2023. For the reduction machinery itself, see our capital-reduction guide; for the increase leg and the suppression of the pre-emptive right, our raising-capital and reserved-round guides.

What the "accordion" recapitalisation is in a French company

The accordion recapitalisation — coup d'accordéon in French — is a structured pair of capital operations executed together.

Step one: capital reduction motivated by losses. The shareholders absorb the company's accumulated losses by reducing the share capital. The reduction can be partial (the capital falls but stays positive) or total (the capital falls to zero). The bilan is cleared of the losses before the new money arrives.

Step two: capital increase. Immediately after the reduction, the same shareholder meeting authorises a capital increase. New investors — or existing shareholders willing to put fresh cash in — subscribe new shares at a defined price. The capital rises again, the new cash enters the company, and the company has a clean balance sheet plus working capital.

The two operations are inseparable, and the logic is commercial before it is legal: new investors will only participate if the losses are borne by the old shareholders — no one subscribes fresh cash into a structure where historic losses absorb it. And even where the existing shareholders themselves fund the increase, clearing the losses by reduction is the condition of ever resuming dividend distributions.

The mechanism is named after the instrument: the capital first contracts (the reduction), then expands (the increase) — two movements, one operation.

The accordion is most often used in distressed-company situations, but it also appears in non-distressed contexts: cleaning up a balance sheet before a fundraise, eliminating a problematic share class, or rebuilding a holding structure after an exceptional loss event.

When the accordion makes sense for a distressed French SAS

Three configurations call for the accordion in practice.

The company has lost more than half its capital. Where the company's equity falls below half its share capital, the statutory procedure applies: consultation of the shareholders on dissolution within four months of the approval of the accounts recording the loss (a deadline the texts do not allow to be extended), then — if the company continues — a two-year regularisation window. Reconstitution can come from returning profits, from a capital increase in cash or in kind (a mere capitalisation of existing reserves changes nothing), or from the accordion. Where the existing shareholders cannot or will not put fresh cash in and a new investor is needed, the accordion is the practical mechanism — the investor refuses to enter alongside historic losses, and the existing shareholders accept the loss absorption to make the round possible.

The company is approaching insolvency but is not yet in a formal procedure. Before the cessation des paiements threshold, the company can still negotiate a private restructuring with new investors. The accordion is the standard equity-restructuring tool — combined, where applicable, with a debt restructuring negotiated separately with the creditors. Note that once the company is in sauvegarde or redressement judiciaire, or under a continuation plan, the loss-of-half-capital provisions no longer apply — the formal procedure's own rules take over.

The company is in a conciliation procedure. A procédure de conciliation is a confidential pre-distress framework for negotiating with creditors. The accordion can be one of the equity components of a conciliation outcome.

The accordion is not the right mechanism for a company without accumulated losses — a simple capital increase suffices where the balance sheet needs no cleanup. And it is not a substitute for a formal restructuring where the company is already in cessation des paiements; there, the court-supervised procedures govern.

How the accordion recapitalisation works step by step

The accordion is executed at a single shareholder meeting that votes both the reduction and the capital increase, in that order.

Step 1: convene the shareholders. The president (or the body authorised by the bylaws) convenes the shareholders. The notice describes both the reduction and the increase, with the financial documentation supporting the reduction (the accounts showing the accumulated losses) and the terms of the increase (the price, the investor, the suppression of the pre-emptive right where applicable). The information layer is not decorative: shareholders voting an increase in a company whose equity has fallen below half the capital are entitled to clear, specific information on the reasons, size and usefulness of the operation against the company's prospects — and refusing to vote without that information is not abusive (Cass. com. 20 March 2007, n° 05-19225).

Step 2: vote the reduction motivated by losses. The shareholders approve the reduction. The accumulated losses are absorbed against the capital; the new (lower or zero) figure is fixed. As a loss-driven reduction, this leg opens no creditors' opposition window.

Step 3: vote the capital increase. Immediately after, the same meeting votes the increase — conditioned and calibrated so that the capital lands at or above the minimum the bylaws set. The increase can take the capital above or below its original level, depending on the new money's size.

Step 4: where applicable, vote the suppression of the pre-emptive right. Where the increase is reserved to a new investor, the meeting also votes the suppression under the Art. L 225-138 procedure — president's report, auditor's special report (one appointed specially where the SAS has none), and the beneficiary excluded from the suppression vote.

Step 5: subscribe and close. The investor signs the subscription bulletin, pays the cash to the depositary, and the depositary issues its certificate. The bylaws are amended to reflect the post-accordion capital; the legal notice is published; the registration update is filed at the Guichet unique.

Step 6: K-bis update and release of funds. The K-bis shows the resulting capital figure — not the intermediate zero — and the depositary releases the funds against it.

The linked execution is critical. The reduction is decided conditionally on the increase completing; a reduction voted alone, with the raise left for another day, loses the structural protection that makes the accordion work — and, on the case law below, a reduction to zero whose increase fails simply never takes effect.

The "reduce-to-zero" mechanism: what the courts require for an accordion to be valid

The Cour de cassation polices the accordion on two fronts: the structure and the substance.

The structure: zero is only a transit point. A reduction of the capital to zero is lawful only if it is followed by a capital increase bringing the capital back to a level at least equal to the minimum the bylaws set. And the protection is self-executing: where the follow-on increase is suspended, the reduction to zero produces no effect — the shareholder structure remains as it was (Cass. com. 4 January 2023, n° 21-10609). An aborted accordion does not leave the company capital-less or the old shareholders wiped; it leaves everything unchanged.

The substance: the operation must serve the company's interest. The accordion must be carried out in the interest of the company, and the courts rule on its validity on a bundle of indicators (faisceau d'indices). The Cour de cassation's reference decision lists the kind of facts that are weighed: the survival of the company (does the operation keep the business alive?), the timing of the subscription window (a subscription period set in August, when the diluted shareholders can hardly react, reads badly), the creation — or absence — of real treasury (an increase that produces no fresh cash undermines the operation), and the objective pursued through the suppression of the existing shareholders' pre-emptive rights (Cass. com. 11 January 2017, n° 14-27052).

The substance test matters most where the existing shareholders are heavily diluted — or wiped, in a reduction to zero where they do not re-subscribe. The new investors enter at a price reflecting the post-loss-absorption value, typically low. Where the accordion is structurally sound — the company genuinely needs the capital, the price is defensible, the investor's commitment is real — the dilution is the consequence of the company's situation, not an abuse. Where the operation is engineered — a below-value price without justification, a friendly party collecting a bargain, no genuine restructuring purpose — the courts can set it aside. The classic abuse claims frame the analysis on both sides: an abus de majorité where the majority uses the accordion to squeeze out a minority with no genuine corporate need, and an abus de minorité where a minority blocks a survival-critical recapitalisation without legitimate reason — sanctioned by damages and, in the established case law, by the appointment of a court representative to vote in the recalcitrant minority's place at a new meeting.

Procedural integrity completes the picture: the convening rules, the information requirements, the auditor's report where due, and the suppression procedure must each be respected, with defects exposing the operation to annulment under the nullities regime — reformed, from 1 October 2025, into a generalised judicial weighing of breaches.

Simulate your accordion: losses in, capital out

Enter the current capital, the accumulated losses, and the fresh cash coming in — and see the reduction leg, any losses left over, and the post-accordion capital.

The new investor's perspective in an accordion recapitalisation

A new investor coming in through an accordion typically wants three things.

A clean structure. No historic losses on the balance sheet, no overhanging legacy claims, no preferred-share class with a liquidation preference that would absorb the new investor's exit value. The accordion delivers it — the reduction absorbs the losses, the increase brings in the new investor, and the bylaws amendment can clean up legacy classes if needed (cancellation, conversion, redemption).

A defensible entry price. The price at which the new investor subscribes should reflect the post-loss-absorption value of the company. The per-share economics are favourable by construction — but the auditor's report on the suppression of the pre-emptive right (where the round is reserved) must defend the price as a fair reflection of the company's actual situation, and the court's substance test watches the same point from the other side.

A clear path forward. The accordion is part of a broader restructuring plan: new investor, new strategy, possibly new management, possibly a debt restructuring on the side. The investor wants the bylaws to reflect the new structure (governance seats, reserved matters, exit mechanics) and the pacte d'associés to lock in the side terms.

The structure protects the investor on three fronts: the historic losses cannot resurface to absorb the new equity; the existing shareholders cannot pre-empt the reserved tranche — the suppression is voted at the same meeting; and the entry economics reflect the company's current value, not its historic capital figure.

In practice, accordion-driven rounds are negotiated like any restructuring round, with one additional layer: the existing shareholders' position is critical. Where a minority blocks the operation without a legitimate reason while the company's survival is at stake, the abus de minorité framework applies — damages, and a court-appointed representative to vote at a new meeting in the minority's place.

The existing shareholders' perspective in an accordion recapitalisation

The existing shareholders face a hard choice in an accordion. Their options:

Subscribe the new round themselves. Where the existing shareholders can put fresh cash in, they can take the increase and avoid the dilution an external investor would create. The accordion still happens — the loss absorption proceeds — but the new equity comes from inside. Even here the reduction leg earns its keep: without clearing the losses, no dividend can be resumed.

Allow a new investor in. Where they cannot or will not fund, the new investor takes a large stake at a low price, and the existing shareholders are diluted — or wiped, where the reduction goes to zero and they do not re-subscribe. The dilution is the consequence of the company's situation; the accordion does not create it, it crystallises it.

Refuse. A refusal leaves the company without fresh capital, drifting toward the formal procedures where the shareholders' position is weaker still. A refusal without a legitimate reason, where the operation is survival-critical, is exposed to the abus de minorité framework.

The shareholders' protection has two layers. First, information: on an increase in a company whose equity has fallen below half the capital, the shareholders must receive clear, specific and circumstantiated information on the reasons, size and usefulness of the operation against the company's prospects — and a shareholder kept in the dark commits no abuse by voting no (Cass. com. 20 March 2007, n° 05-19225). The president's report and the auditor's report, where due, are the documentary basis; an accordion should never run on thin papers. Second, procedural and substantive fairness: the price, the suppression procedure, the investor's identity and terms — the courts' bundle-of-indicators review covers them all, and the abus de majorité claim polices an accordion engineered to squeeze a minority out without genuine corporate need.

The accordion vs other ways to recapitalise a French SAS

The accordion is one of several routes to reconstitute the equity of a distressed French SAS.

Returning profits. Where the company returns to profit, the profits absorb the losses on the balance sheet — no shareholder decision needed. The route works only where the business can generate enough profit fast enough within the regulatory deadlines; a company expecting a good year can wait for the result before choosing its route.

Simple capital increase without prior reduction. Where the shareholders will fund and the losses do not demand absorption, a cash or in-kind increase alone reconstitutes the equity — a mere capitalisation of reserves already on the balance sheet changes nothing and does not qualify. The historic losses stay on the books, offset by the new equity; dividends stay blocked until the retained losses clear, but the half-capital threshold is passed.

The accordion. Where the losses are too large, or the new investors require a clean balance sheet, the accordion is the tool: reduction absorbs, increase refills, cap table resets.

The inverted accordion — increase first, then reduce. Nothing forbids inverting the usual order: raise the capital first, then reduce it. The inversion becomes necessary where the losses exceed the capital — the capital cannot go negative, so a reduction alone cannot absorb everything; the increase first builds enough capital to absorb the full loss on the way back down. The inversion is often combined with an abandon de créances: a creditor — most often the parent company or the controlling shareholders — writes off a debt, the write-off generates a profit that absorbs part of the losses, and the capital operations handle the rest. The combination is the standard architecture of intra-group rescues.

The choice between the routes depends on the size of the losses, the shareholders' willingness to fund, and the requirements of any incoming investor. Where simple measures work, the accordion is unnecessarily heavy; where the losses are structural, it is the only effective route.

The accordion at the end of the loss-of-half-capital cycle

The loi 2023-171 of 9 March 2023 softened the loss-of-half-capital procedure: more time to regularise, and a dissolution sanction pushed to the end of the road. The cycle, post-reform:

Step one — the consultation. The equity falls below half the share capital in the approved accounts. The shareholders must be consulted on dissolution within four months of the approval of the accounts recording the loss — a deadline the texts do not extend. In practice, the shareholders almost always vote to continue.

Step two — the first regularisation window. The company then has until the close of the second financial year following the loss-recording year to regularise: reconstitute the equity to at least half the capital (profits, increase, accordion), or reduce the capital so the equity clears the half mark. The equity measured is the equity in the accounts at the close of the year in which regularisation must occur — including any further losses in the meantime.

Step three — the second window (the 2023 addition). Where the two years pass without reconstitution and the capital still exceeds the decree threshold — for the SAS, 1 % of the balance-sheet total at the last close — the company has a further two financial years, running from the first deadline's expiry, to reduce its capital to at or below that threshold. The accordion is one of the routes to that reduction.

Step four — the sanction, at last. Only after the second window can any interested party seek dissolution in court — and even then, the court can grant up to six months to regularise. Officers are rarely blamed for the state of the equity while the regularisation clocks run; what exposes them is failing to consult the shareholders once the deadlines expire.

The accordion fits the cycle at two points: as the reconstitution mechanism in the first window — one operation closing the whole procedure — and as the capital-alignment mechanism in the second, where the reduction leg does the compliance work and the increase leg brings in whatever fresh equity is available.

Which accordion configuration fits your situation?

Pick the situation closest to yours and see the structure it calls for — and the point to settle before convening the shareholders.

Frequently asked questions about the accordion recapitalisation in France

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 an accordion recapitalisation in a French SAS depends on the company's loss situation, the existing shareholders' positions, the new investor's profile, and the broader restructuring plan. Always seek qualified legal advice before launching an accordion recapitalisation in France.