A share represents a title of ownership held by a partner within a company. A share therefore corresponds to a fraction of the company's capital. A partner can buy or sell shares.
Sales usually happen in three situations: first, if someone wants to withdraw their capital from the company; second, if they want to reduce their stake in the company's capital, meaning they only sell part of their shares; and finally, if they want to transfer their shares to a new partner without increasing capital.
You'll need to follow a specific process to make this change smoothly.
Let's explore together everything you need to know about selling shares within a company.
Transferring a share in a company means selling an ownership title that represents a portion of the company's capital to someone else. The seller transfers their shares to a buyer, who then becomes the owner. This can happen through a sale agreed upon by both parties, a donation, or an inheritance.
We talk about share transfers when shares of the capital of a SARL (Limited Liability Company), an EURL (Single-member Limited Liability Company), a SNC (General Partnership), a SCS (Limited Partnership) or a SCI (Real Estate Civil Company) are exchanged.
If your company has a different legal status, we don't talk about shares but about stocks.
The transfer of shares is subject to a specific process. The first step is to prepare an approval procedure between the two parties. An approval clause makes the sale of shares by a partner subject to the approval of the general meeting of partners.
It is mandatory for SARL, EURL, SNC, SCS, or SCI companies. Otherwise, it remains optional.
It's mandatory to inform the general assembly of partners about a partner's intention to sell their shares, either by registered letter with acknowledgment of receipt or through a bailiff's act. The assembly then votes on the approval request submitted by the seller, with a majority of the votes cast (unless otherwise stipulated in the company's articles of association).
If the partners reject the transfer, they have three months to suggest a new buyer or buy the shares themselves.
Next, you need to get the agreement of both parties involved in the transfer. It must be given freely and with full knowledge of the facts.
Then, it's necessary to draw up a transfer deed, either through an authenticated instrument or a private agreement. This must specify the names of the parties, the identity of the company, the number of shares transferred, their designation, the transfer price, and any terms and conditions governing the transaction.
Each party approves and signs the document. Two copies must be filed with the registry of the commercial court.
The transfer of shares de facto entails the transfer of a property right from the transferor to the transferee. The latter therefore becomes the owner of the shares and can enjoy all the associated rights.
The seller no longer owns the shares and can no longer enjoy the associated rights.
For the company, this means that a partner's name is being changed. It's required to update the articles of association accordingly.
The transfer of shares is strictly regulated under French law and requires great attention. Any error may result in the transaction being voided if challenged in court.
Written by our expert Paul LASBARRERES-CANDAU
July 19, 2021
