A SCI (Société Civile Immobilière) (Real Estate Civil Company) is a company agreement by which several people decide to pool one or more properties in order to share the profits or benefit from the savings that may result. It has many advantages.
The partners in a SCI share its profits, but also agree to contribute to losses with respect to creditors.
An SCI is a legal entity with its own legal identity. There are different types of SCI, but its purpose is exclusively real estate. However, it's common for SCI partners to decide to separate for various reasons.
Then it should be dissolved and liquidated
Depending on certain special cases, this type of procedure may have some specific features that you need to understand in order to carry out the operation properly and in accordance with the law.
The law identifies 8 official reasons for dissolving an SCI (article 1844-7 of the Civil Code).
One of these reasons must be given to justify your decision.
So, we can distinguish:
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Early dissolution by decision of the partners. This decision must be formalized in a general meeting. The partners have the right to dissolve a SCI whenever they wish.
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The fulfillment of the corporate purpose. If the purpose for which the company was created has been fulfilled, then it no longer has any reason to exist and is dissolved.
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The expiration of the time for which the company was formed. Each SCI is created for a period of 99 years, renewable by a vote of the shareholders meeting in the GA at the end of the period. If the vote does not result in a renewal, it is automatically dissolved.
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A court decision to dissolve the company if a partner obstructs social action, in the event of total paralysis of the company's operation, etc.
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In the event of significant financial difficulties. If the SCI is no longer able to honor its debts or operate correctly, a judge may order its dissolution.
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Cancellation of the company contract if the partners break the law repeatedly. In this case, the contract binding the partners is not valid, and the company does not respect the reasons for which it originally existed.
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Judicial dissolution if the company no longer has enough partners. A company consists of at least 2 partners minimum. If one of them dies (without descendants), all the capital ends up in the hands of a single partner. The law grants the partner a period of one year to find a new one. Otherwise, the SCI will be dissolved.
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Any other reason provided for in the articles of association (if the result is in deficit for several years, if the quantity of goods to be managed proves insufficient, etc.).
Successfully dissolving a SCI requires following certain essential steps.
The decision must be formalized by signing a dissolution report during a general meeting.
The SCI appoints a liquidator who must notify the registry of the commercial court. Finally, it must provide its closed accounts to the same body to obtain effective removal of the SCI from the Trade and Companies Register (RCS).
Following these 3 steps is essential to always comply with the law.
The liquidation of the SCI takes place after the company's closing accounts have been established.
If there's a surplus (known as a liquidation bonus), it's then distributed among the partners in proportion to their shareholdings. By the way, the government takes a 2.5% tax on this transaction.
If, on the other hand, losses are recorded (this is known as liquidation deficit), then the partners are required to repay their debts. As their liability is unlimited, their personal assets may be at risk. Again, each partner assumes their share of the debt calculated pro rata to the shares they hold in the SCI's capital.
The dissolution and liquidation of an SCI isn't a complex procedure as long as you know the steps to take.
Be thorough and carefully follow each of these steps to avoid breaking the law.
Written by our expert Paul LASBARRERES-CANDAU
November 5, 2018
