You live in London, New York, Dubai or Singapore. Your French company — usually a SAS (société par actions simplifiée, the flexible joint-stock company most foreign founders choose) or a SARL (société à responsabilité limitée, the limited liability company) — has just closed a bad year. The accountant sends the draft accounts and warns you that equity has fallen below half of the share capital. You are tempted to treat this as an accounting detail to fix later. Under French law, it is not. From the day the accounts showing the loss are approved, a strict legal clock starts: within four months the shareholders must formally vote whether to dissolve the company early or to continue the business, publish that decision at the greffe (the registry office of the commercial court), and then repair the balance sheet no later than the end of the second financial year following the loss. If nothing is done, any interested party — a creditor, a minority shareholder, a former business partner — can ask the court to dissolve your company, and the directors who let the situation drift can be ordered to pay the shortfall out of their own pocket when the company later goes into liquidation. This article explains, for a foreign shareholder living abroad, how to read the warning, which vote to organise, which filing to make, and how to choose between putting fresh money in, reducing the capital, or closing the company cleanly.

The stakes are practical as well as legal. French banks read the Kbis (the official identity card of a company, issued by the greffe) and the filings attached to it before renewing an overdraft. Suppliers check the BODACC (Bulletin officiel des annonces civiles et commerciales, the official gazette where company life events are published) before granting payment terms. A published decision to continue trading despite the losses, followed within the deadline by a visible recapitalisation, reassures them. A file with no decision, no publication and no repair does the opposite, and it invites creditors to move first. The good news is that the procedure can be handled entirely from abroad if it is organised methodically: remote shareholder decisions, filings through the Guichet unique (the single online filing portal run by the INPI, the French intellectual property and companies office), and a French accountant and auditor preparing the paper trail. For the general steps of running a French company from abroad — bank account, Kbis, VAT and first hire — readers can also consult our complete guide to setting up a company in France as a foreign founder.

I. How French law detects the loss of half the capital and forces a decision within four months

A. How do you know your French company has lost half its capital?

The test is arithmetic, and it is set by statute. For a SARL, Article L223-42 of the Commercial Code provides: “Si, du fait de pertes constatées dans les documents comptables, les capitaux propres de la société deviennent inférieurs à la moitié du capital social, les associés décident, dans les quatre mois qui suivent l’approbation des comptes ayant fait apparaître cette perte s’il y a lieu à dissolution anticipée de la société.” For a public limited company the mirror provision is Article L225-248 of the Commercial Code, which states that “le conseil d’administration ou le directoire, selon le cas, est tenu dans les quatre mois qui suivent l’approbation des comptes ayant fait apparaître cette perte, de convoquer l’assemblée générale extraordinaire à l’effet de décider s’il y a lieu à dissolution anticipée de la société.” The SAS follows the same regime because Article L227-1 of the Commercial Code makes the rules governing public limited companies applicable to the SAS where compatible with its specific provisions, and the courts apply the half-capital procedure to the SAS on that basis, as confirmed by the decision discussed below of 13 March 2024 concerning a SAS bakery company.

Three vocabulary points matter for a foreign reader. The capital social (share capital) is the nominal amount written in the articles, for example 10,000 euros. The capitaux propres (equity) is what remains for the shareholders after all debts are subtracted: share capital plus reserves, retained earnings and the result of the year, minus accumulated losses. The documents comptables (accounting documents) are the approved annual accounts. The comparison is therefore simple: take equity as shown in the approved balance sheet and ask whether it is below half of the registered share capital. A company with a capital of 10,000 euros whose equity has fallen to 4,000 euros after a loss of 9,000 euros has crossed the line. A company with a capital of 50,000 euros and equity of 24,000 euros has crossed it too. The official guidance published by the French administration confirms this reading: the service-public page on the subject, verified 24 April 2026, states that the expression loss of half of the share capital means the situation in which a business finds, having regard to its losses, that its equity has become less than half the share capital, and it lists the SARL, EURL, SAS, SASU, SA, SCA, SELARL and SELAS as concerned (see Loss of half of equity — Entreprendre Service Public). Partnerships without a fixed capital concept, such as the SNC and SCS, are not subject to the same mandatory replenishment scheme.

The trigger date is not the end of the loss-making year. It is the approval of the accounts that reveal the loss, normally the annual general meeting held within six months of the year end. That distinction matters for your calendar. If your financial year ends on 31 December 2025 and the meeting approves the accounts on 15 May 2026 showing equity below the threshold, the four-month period runs from 15 May 2026, not from 31 December 2025. The two-year repair period described below runs from the financial year in which the loss was recorded, so the two clocks overlap but start from different reference points. Foreign shareholders sometimes discover the problem late because the French accountant writes in French and the notice of the meeting arrives by post at the registered office (siège social) while they live abroad. Organise your information flow now: ask the accountant for the draft balance sheet with the equity-to-capital ratio computed explicitly, require an English summary of the meeting documents, and give your French address for service clear instructions to forward registered letters the same day. The cost of a missed letter can be a missed deadline, and these deadlines are enforced by the courts.

One common misunderstanding should be cleared up immediately. Reducing the share capital on paper without following the procedure, or injecting cash informally without recording it in the accounts, does not cure the situation. The courts look at the published decision, the filings at the greffe and the registered accounts. An unpublished private arrangement between shareholders is invisible to creditors, banks and judges. Everything in this procedure must be voted, minuted, published and filed. That formality is precisely what protects a foreign shareholder later: it proves that the rules were followed and that creditors were informed through the official channels, the legal announcements gazette and the commercial court registry.

B. What must the shareholders vote within four months, and where must the decision be published?

Once the accounts reveal the loss, the shareholders face a binary choice: early dissolution (dissolution anticipée) or continuation of the business (poursuite de l’activité) with an obligation to repair the balance sheet. In a SARL, the shareholders themselves decide; in a SA and in practice in a SAS, the board or the president convenes an extraordinary meeting of the shareholders for that purpose. The majority required is the majority for amending the articles. Article L223-29 of the Commercial Code provides that in meetings decisions are adopted by one or more shareholders representing more than half of the shares, with a second consultation on a majority of votes cast if the first quorum fails, unless the articles say otherwise — and most SAS articles set their own reinforced majorities, which must be checked before convening. If dissolution is voted, the company enters liquidation under the ordinary rules. If continuation is voted, the company must, no later than the end of the second financial year following the one in which the loss was recorded, either rebuild equity to at least half of the capital or reduce the capital by the amount needed so that equity is at least equal to half of its amount. The statute adds a further reduction obligation for large-capital companies above a balance-sheet threshold, but most foreign-owned small and medium subsidiaries will deal with the standard alternative: recapitalise or reduce.

The decision must then be made public, and this step is frequently neglected by companies run from abroad. Article R223-36 of the Commercial Code states that “la décision des associés prévue à l’article L. 223-42 est publiée dans un support habilité à recevoir les annonces légales dans le département du siège social, déposée au greffe du tribunal de commerce du lieu de ce siège et inscrite au registre du commerce et des sociétés.” In plain English: publish a legal notice in an authorised announcements outlet of the department where the registered office sits, file the decision at the greffe of the local commercial court, and have it recorded in the trade and companies register (RCS). The SA is subject to an equivalent publication requirement for the resolution adopted by its meeting. Since 2023 all filings pass through the Guichet unique operated by the INPI, which routes the file to the competent greffe; the greffe then records the mention and the BODACC carries the public notice. Keep every receipt: the certificate of publication from the legal announcements outlet, the filing receipt from the Guichet unique, and the updated Kbis showing the mention. Banks, landlords and the tax administration ask for them, and in litigation they are your proof that creditors were warned through the proper channel.

Two practical warnings for foreign shareholders. First, the four-month period is short when shareholders live on different continents. Convening notices, powers of attorney, remote voting rules and translation of documents all take time. Check today what your articles allow: videoconference, written consultation, electronic signature. If the articles are silent or outdated, amend the convening mechanics before the crisis meeting, not during it. Second, the decision to continue must be accompanied from the start by a credible repair plan, because the second deadline — the end of the second following financial year — arrives faster than expected. A company whose 2025 accounts approved in May 2026 reveal the loss must have repaired its equity by the close of the 2028 financial year at the latest. That leaves two full years of trading to return to profit, find fresh funds or execute a capital reduction. Starting the reflection only in 2028 is a recipe for a forced court dissolution. The serious approach is to vote continuation with a dated financing roadmap attached to the minutes: expected profits, planned cash injection, or planned reduction, with the accountant tasked to measure the ratio at each year end.

The annual accounts themselves must also be filed on time, since the whole procedure rests on them. Article L232-22 of the Commercial Code requires every SARL to file its annual accounts at the greffe within one month of their approval, or two months when filing electronically. Late filing draws penalties and, more importantly for a foreign owner, it deprives the file of the very documents that prove the loss was identified and handled. File the accounts, file the continuation decision, and keep the timeline consistent across all documents. Inconsistencies between the filed accounts, the meeting minutes and the published notice are exactly what an opposing party exploits when it later asks the court to dissolve the company or to hold the directors liable.

II. How a foreign shareholder repairs the balance sheet or closes cleanly without personal liability

A. How do you rebuild equity from abroad before the two-year deadline?

French practice offers four main repair routes, which can be combined. The first is the simplest to understand: make profits again. If the business returns to profit in the following years, retained earnings rebuild equity automatically and no capital transaction is needed, provided the threshold is met by the final deadline. This route suits a one-off loss — a bad contract, a delayed client payment, a first-year deficit — followed by a healthy recovery. It requires no filing beyond the annual accounts, but it demands honest forecasting: the accountant should model the equity ratio at each year end so the shareholders know well in advance whether profits alone will be enough. The second route is a cash capital increase (augmentation de capital en numéraire). The foreign parent or the individual shareholders subscribe new shares and pay the funds into the company account; the capital and the cash both rise, and the ratio is restored. For a company with a capital of 10,000 euros and equity of 2,000 euros, an increase of 8,000 euros fully paid brings equity to 10,000 euros against a capital of 18,000 euros — still short of half (9,000 euros is the minimum, so this example passes). Larger injections may be needed where losses are deep, and the exact arithmetic should be validated by the accountant before the meeting votes the increase, because an increase voted too small wastes notary, publication and filing fees without curing the breach.

The third route is the conversion of a shareholder loan into capital, the tool most foreign groups actually use. Parent companies routinely fund a French subsidiary through a current-account advance (compte courant d’associé), which is debt, not equity, and therefore does not repair the ratio while it remains a loan. Converting it — by setoff of the loan against new shares (compensation de créance) — moves the amount from debt to equity in a single transaction. The claim must be certain, liquid and due, and in most cases an auditor (commissaire aux comptes) or the statutory certificate procedure must verify the reality of the claim and the regularity of the setoff. From abroad, this requires coordination: the loan agreement and account statements proving the advance, a board report describing the transaction, the auditor’s certificate, the shareholders’ vote, and the filing at the Guichet unique. Done properly, it is fast and it avoids moving fresh cash across borders. Done informally — a mere bookkeeping entry without a vote or certificate — it is worthless against creditors and can be challenged in later proceedings. A partial waiver of the loan (abandon de créance), often with a return-to-better-fortunes clause, is a variant that also improves equity, but its tax treatment must be checked in advance with the French tax adviser because waivers between related companies are closely scrutinised.

The fourth route is the capital reduction, sometimes called the accordion operation (coup d’accordéon) when a reduction to absorb losses is immediately followed by an increase bringing in new money. Reducing the capital lowers the bar: with equity of 2,000 euros, reducing the capital from 10,000 to 4,000 euros makes 2,000 euros exactly half, and the ratio is restored without any new money. But this route has strict conditions. Creditors have a right to object to capital reductions that return value or reduce their security, the reduction must respect the minimum capital rules where applicable, and the formalities — auditor’s report where required, shareholders’ vote, publication, opposition period, filing — take several months. A reduction motivated solely by losses, with no distribution to shareholders, is generally smoother, yet it still requires the full procedure. Many foreign shareholders combine the two movements: reduce to absorb the past losses, then immediately increase to fund the restart, so the company emerges with a clean balance sheet and fresh cash. Whichever route is chosen, the resolution must be published and filed exactly like the initial continuation decision, and the updated articles, the new Kbis and the filed accounts must tell one consistent story.

A final technical route exists — the elective revaluation of assets (réévaluation libre du bilan) — but it should be mentioned with caution. Revaluing real estate or other fixed assets upwards increases equity on paper, and the administration’s guidance lists it among the options. In practice it requires a qualified valuer, it creates a revaluation reserve with specific tax consequences, and it invites challenge if the valuation is optimistic. For a foreign-owned company, it is rarely the first choice unless the company genuinely holds appreciated property. Whatever the chosen combination, commission the accountant early to certify the post-transaction ratio in writing, keep the bank transfer proofs and auditor certificates with the corporate records at the registered office, and file everything through the Guichet unique without delay. The repair is only effective against third parties once published and registered; an unfiled internal recapitalisation does not stop a creditor from petitioning for dissolution.

B. What happens if nothing is fixed: court dissolution, director liability and the Paris practical path?

If the second deadline passes without repair, the sanction is severe and it is open to outsiders. The Cour de cassation restated the rule on 13 March 2024 in a case about a French SAS bakery owned by two shareholders, appeal number 22-15.164 (Cour de cassation, commercial chamber, 13 March 2024, No. 22-15.164): “Il résulte du second de ces textes que si, à la clôture du deuxième exercice suivant celui au cours duquel la constatation des pertes est intervenue, la dissolution de la société n’a pas été prononcée et, à défaut, soit de réunion de l’assemblée générale chargée de se prononcer sur la réduction du capital, comme dans le cas où cette assemblée n’a pas pu délibérer valablement, soit d’application de la décision de réduction de capital, soit de reconstitution des capitaux propres à concurrence d’une valeur au moins égale à la moitié du capital social, tout intéressé peut la demander en justice.” Any interested party can therefore petition the court for dissolution once the deadline has expired without a cure. In that case the court had to decide whether the former president could obtain dissolution after two meetings in 2015 and 2016 had voted to continue, and the Cour de cassation quashed the appeal judgment for failing to check “si les capitaux propres étaient effectivement devenus inférieurs à la moitié du capital social à l’issue de l’assemblée générale de 2015 et si aucune décision de reconstitution du capital social n’avait été prise à la clôture de l’exercice se terminant au 31 décembre 2017, ou si les capitaux propres n’avaient pas été reconstitués”. The lesson for a foreign shareholder is direct: voting continuation twice does not protect the company if the accounts never recover. The court examines the figures at the deadline, not the good intentions expressed in earlier minutes. It may grant the company a maximum of six months to regularise, and it cannot pronounce dissolution if regularisation has occurred by the day it rules on the merits — so even a late repair remains useful — but once the petition is filed, the timetable belongs to the judge, not to the shareholders.

The second danger is personal liability of the directors if the company later collapses into judicial liquidation with a shortfall. Article L651-2 of the Commercial Code provides: “Lorsque la liquidation judiciaire d’une personne morale fait apparaître une insuffisance d’actif, le tribunal peut, en cas de faute de gestion ayant contribué à cette insuffisance d’actif, décider que le montant de cette insuffisance d’actif sera supporté, en tout ou en partie, par tous les dirigeants de droit ou de fait, ou par certains d’entre eux, ayant contribué à la faute de gestion.” The liquidator will systematically look for management faults, and letting a half-capital situation drift is a classic allegation. The Cour de cassation set the limits of that allegation on 8 September 2021, appeal number 19-23.187 (Cour de cassation, commercial chamber, 8 September 2021, No. 19-23.187). A manager had been ordered to contribute 120,000 euros to the shortfall for failing to draw the consequences of unreconstructed equity. The Court quashed the conviction: “En se déterminant ainsi, sans dire en quoi consistait précisément la faute de gestion imputée à Mme [L], quand, en application de l’article L. 223-42, alinéa 2, du code de commerce, elle disposait d’un délai n’expirant qu’à la clôture de l’exercice 2013, deux ans après la constatation des pertes, pour provoquer la régularisation de la situation des capitaux propres et que, dans l’intervalle, la société ayant été mise en redressement judiciaire, les dispositions du texte précité ne s’appliquaient pas, la cour d’appel n’a pas donné de base légale à sa décision.” Two teachings emerge. First, the director has the full two-year period to bring about regularisation; a court cannot treat the mere expiry of a few months as a fault. Second, the fault must be precisely characterised — which decision was not convened, which filing was omitted, which warning was ignored — and it cannot be inferred from the mere existence of losses. Moreover, the half-capital provisions do not apply once the company is in safeguard or judicial recovery proceedings. For a foreign director, the practical consequence is a discipline of written traces: convene the meetings on time, minute the votes, file the publications, commission the accountant’s ratio notes, and keep copies of every instruction sent from abroad. If the liquidator later alleges passivity, that file is the defence.

If the shareholders prefer to close rather than repair, French law offers an orderly path that should be taken before a creditor forces dissolution. Voluntary early dissolution voted by the shareholders, followed by amicable liquidation, keeps control of the timetable: appointment of a liquidator, settlement of creditors, sale of assets, payment of remaining debts, distribution of any balance, and closing accounts. Article L237-2 of the Commercial Code recalls that the company is in liquidation from the moment of its dissolution and that its name is followed by the words “société en liquidation”, with legal personality surviving for the needs of the liquidation until its closure. Dissolution takes effect against third parties only from its publication in the register. Employees, where the company has staff, must be dealt with under the labour rules on dismissal with notice, severance and notification to the administration — a chapter that deserves its own advice as soon as the workforce exceeds the founder alone. Tax clearance is equally important: final corporate tax return, VAT balance, and where applicable the employer filings with URSSAF (Unions de recouvrement des cotisations de sécurité sociale et d’allocations familiales, the social security collection agencies) and the DSN (déclaration sociale nominative, the monthly payroll declaration). A strike-off (radiation) obtained while tax or social debts remain unpaid does not extinguish them, and directors who have neglected the filings face the same liability actions described above.

For companies registered in Paris and the Île-de-France region, the practical circuit is well defined. The competent greffe is that of the Paris commercial court for a registered office in Paris, with legal notices published in an outlet authorised for the department concerned and filings routed through the Guichet unique. Deadlines in Paris practice are the same as elsewhere, but two local points deserve attention. First, the Paris greffe examines filings rigorously: inconsistent company names, outdated articles, or missing auditor documents trigger rejections that consume weeks, so have a Paris-based formalist or accountant review the file before submission. Second, hearings on dissolution petitions and liability actions are heard by the Paris commercial court or the Paris judicial court according to the nature of the claim, with experienced commercial chambers that expect complete documentary bundles — accounts, minutes, publications, Kbis history — rather than general statements. Prepare the bundle bilingually from the start: French originals for the court, English summaries for the foreign shareholder, so decisions can be taken quickly when the judge sets a short timetable. Whether in Paris or elsewhere, the method from abroad is the same: one French coordinator holding the calendar, one accountant certifying the figures, and one secure data room where every vote, publication receipt and filing acknowledgment is stored.

Conclusion

A French company that has lost half its capital is not condemned, but it is on a statutory timetable that no foreign shareholder can afford to ignore. Identify the crossing of the threshold in the approved accounts, vote continuation or dissolution within four months, publish and file the decision at the greffe for the RCS and the BODACC, and then use the two following financial years to rebuild equity — through profits, a cash increase, a documented conversion of shareholder loans, or a properly conducted capital reduction — or to close the company in an orderly liquidation with employees, tax and social filings settled. Past that deadline, any interested party can ask the court for dissolution, and directors who left no trace of the required steps face contribution claims in a later liquidation. Handled early and in writing, the same procedure becomes a demonstration of serious management that reassures banks, suppliers and future partners. The ratio of equity to half the capital should therefore join the small set of figures every foreign owner of a French company reviews each year, alongside cash, VAT position and payroll compliance: a single number, checked at each approval of the accounts, that determines whether the company continues, recapitalises, reduces or closes — on the shareholders’ timetable rather than the court’s.