You want to start your own business, but you're not sure which legal form to adopt. Does your project involve real estate? Why not set up an SCI?
An SCI, or Société Civile Immobilière, refers to a company whose objectives are related to the real estate sector.
Like other types of company, this legal form enables the company to have separate assets focused solely on its business activity, which in this case is property management.
It's an extremely popular legal form in France today, with around a third of all new business start-ups opting for this model.
Despite this, and unlike other legal forms of commercial enterprise, SCI partners are "indefinitely liable for the debts" of their company on their personal assets. This means that their personal assets may be at risk if the SCI runs into difficulties.
As with a number of other types of company, it is possible to sell shares in an SCI.
Nevertheless, a few clarifications are in order!
To begin with, it's important to define what a share is. A partnership share is a title to the capital of a company with several shareholders.
As such, a share may be owned by a member of a commercial enterprise, or by a member of a mutual or other cooperative. Ownership of a share confers a number of rights on its owner.
In fact, the latter enables its holder to receive dividends in the case of companies, or interest in the case of mutuals and cooperatives.
Here, with the SCI, we talk about dividends
A share may also entitle the holder to vote at the Annual General Meeting.
It's important not to confuse the latter with shares, which are accessible via the stock market.
The transfer of shares refers to the act of selling all or part of one's shares to another partner. It can be paid for or free of charge.
The sale of shares in a non-trading property company (Société Civile Immobilière ) is an attractive option, particularly in the case of so-called family-owned SCIs (non-trading property companies).
However, any transfer requires the prior approval of all associates.
It must be unanimously approved at the Annual General Meeting.
However, the partners may, if they wish, determine more flexible rules when drafting the articles of association.
If no agreement can be reached between the partners on the sale price, then an independent third party will have to value the shares concerned.
However, it is also possible to sell shares free of charge or as a gift.
This deed is often carried out at the time of a partner's succession to his children, so that they can dispose of a real estate asset.
This procedure provides tax benefits in the form of tax allowances, amounting to around €100,000 every 15 years.
It is this aspect in particular that is often taken into account when choosing an SCI. This makes it a real asset transfer tool.
However, the sale of shares in an SCI is subject to certain tax rules.
Firstly, any purchaser of shares in an SCI is liable for a registration fee of 5% of the amount of the share transfer.
This registration must be made with the tax authorities within one month of the date of the transfer.
There is also a capital gains tax on the sale of SCI shares.
Capital gains are calculated as the difference between the sale price and the purchase price: if the difference is positive, a capital gain is recorded.
In an SCI, these will be taxed at a rate of 19%, not including social security contributions.
Finally, we need to ask ourselves what formalities need to be completed.
Once the partners have given their unanimous consent, and paid the necessary registration fees, a number of documents must be submitted to the relevant CFE (Centre de Formalités des Entreprises).
This list of documents must include :
- The original deed of transfer of shares in the SCI
- A copy of the Extraordinary General Meeting held to modify the distribution of shares.
- A copy of the amended and dated articles of association.
In the event of a change in the SCI's manager, an M3 document must be attached, together with the minutes recording the change.
In conclusion, you need to take a number of precautions before embarking on the SCI adventure, particularly as you may be putting your personal capital at risk.
It's all about knowing your project, asking the right questions, and taking stock of the advantages of this legal form for your project.
Written by our expert Quentin Moyon
April 27, 2018
