When a company is set up, the partners contribute share capital. The amount of these contributions determines the distribution of shares to each partner in the company's capital.
All companies registered with the RCS (Registre du Commerce et des Sociétés) are required to state the amount of their share capital. There are three types of contribution: in kind (equipment, clientele, brand, patent, etc.), in industry (work carried out by a partner, skills, etc.) and in cash (sums of money).
The latter is the most common form of contribution when setting up a company.
Let's find out everything you need to know about cash contributions to a company.
A cash contribution is a sum of money deposited in the company's accounts.
A cash contribution is useful to help a company launch its business, but also to build up the cash flow (working capital requirements) needed for day-to-day operations.
A cash contribution is made by one or more partners in the company, in return for which they receive a certain number of shares in the company.
It should not be confused with a current account contribution, which is a cash advance made by associates to the company, and which must be repaid. A current account contribution is not a contribution to the company's capital, and does not allow shares in the company to be allocated to an individual.
The conditions for cash contributions are governed by law. On the one hand, a minimum share capital is required on the day the company is creation of the company. The amount stipulated by law depends on the legal status of the company. For example, €1 is enough to set up a SARL, while a minimum of €37,000 is required to create a SA.
In most cases, funds are deposited directly with your usual banking institution.
Funds are placed in an escrow account pending their release. Cash contributions may be paid in instalments, in accordance with the rules laid down by law or in the company's articles of association.
The payment of cash contributions refers to a partner's promise to make a contribution. He is said to "pay up his contribution". The rules governing the payment of contributions depend on the legal status of the company.
At SARL and EURLit is compulsory topay up at least 20% of the total amount of contributions when the company is created. For SA, SAS and SASUit is compulsory to pay up at least 50% of the total amount of contributions when the company is created.
Cash contributions must be deposited before the articles of association are signed.
Cash contributions can be paid in three ways:
- Your usual bank. This is the most frequently used solution.
- Caisse des dépôts et des consignations
- A notary
It can be made in cash, by bank transfer or by cheque issued by a bank domiciled in France. The funds are deposited in an escrow account. A certificate of deposit is issued by the entity receiving the funds, certifying that the transaction has been completed.
For SARLs, EURLs, SAs, SASs and SASUs, cash contributions must be deposited within 8 days of being paid up. For other legal forms, the deadline is set out in the articles of association.
Contributions are released only after the company has been officially registered.
Once the complete business creation file has been approved by the commercial court clerk's office, a K-bis extract will be issued. It must be presented to the institution holding the contributions in order to release them.
Cash contributions may be partially paid up, in order to stagger their payment over time. The legal deadline for paying up the entire share capital depends on the company's legal status.
In SARL or SAS, the balance can be paid in one or more instalments at a date specified in the bylaws, no later than 5 years after the company's registration.
In the case of a public limited company (SA), the balance may be paid in one or more instalments at a date set by the Board of Directors or the Management Board, no later than 5 years after the company's registration. In the case of SNCs, the payment period is freely defined in the articles of association.
A cash contribution is essential to enable a company to get off to a positive start, which is why it's important to know the rules governing its release, deposit and unblocking.
Written by our expert Paul LASBARRERES-CANDAU
June 25, 2021
