A share is a title of ownership held by a partner in a company. A share therefore corresponds to a fraction of the company's capital. A shareholder can buy or sell shares.
The sale generally takes place in three circumstances. Firstly, if he wishes to withdraw from the company's capital. Secondly, if he wishes to reduce his stake in the company's capital, meaning that he sells only a portion of his shares. Finally, if you wish to sell your shares to a new partner without increasing the company's capital.
In order to carry out this operation smoothly, it is necessary to follow a regulated procedure.
Let's find out everything you need to know about selling shares in a company.
The transfer of a share is the sale of a title representing a portion of a company's capital to a third party. The transferor passes on his shares to a transferee, who becomes the owner. This operation can take place as part of a sale between two parties, a donation or an inheritance.
Share transfers are those involving the exchange of shares in the capital of a SARL (Société à Responsabilité Limitée), EURL (Entreprise Unipersonnelle à Responsabilité Limitée), SNC (Société en nom collectif), SCS (Société en commandite simple) or SCI (Société civile immobilière).
If your company has a different legal status, we don't talk about shares but about stocks.
The transfer of shares follows a precise 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 SARLs, EURLs, SNCs, SCSs and SCIs. Otherwise, it remains optional.
It is therefore mandatory toinform the shareholders' meeting of a shareholder's wish to sell his or her shares, by registered letter with acknowledgement of receipt or by bailiff's deed. The meeting then votes on the transferor's request for approval by a majority of votes cast (unless otherwise stipulated in the company's bylaws).
If the shareholders reject the transaction, they have three months in which to propose a new transferee, or buy back the shares themselves.
Next, it is necessary toobtain the agreement of both parties involved in the transfer. This agreement must be given freely and with full knowledge of the facts.
A deed of sale must then be drawn up, either in the form of a notarial deed or a private deed. This must specify the names of the parties, the identity of the company, the number of shares sold, their designation, the sale price and any terms and conditions governing the transaction.
Each party approves and signs the document. Two copies must be filed with the clerk's office of the commercial court.
The transfer of shares involves the de facto transfer of a property right from the seller to the buyer. The transferee thus becomes the owner of the shares, and is entitled to all associated rights.
The seller is no longer the owner of the shares and can no longer enjoy the associated rights.
For the company, this means changing the name of a partner. The articles of association must be amended accordingly.
The transfer of shares is strictly regulated under French law, and requires great care. Any error is liable to render the transaction null and void in the event of recourse to the courts.
Written by our expert Paul LASBARRERES-CANDAU
July 19, 2021
