{"id":2107690,"date":"2026-08-26T08:07:58","date_gmt":"2026-08-26T06:07:58","guid":{"rendered":"https:\/\/kohenavocats.fr\/2026\/08\/26\/preferred-shares-french-sas-foreign-investor-rights-approval-filing\/"},"modified":"2026-08-26T08:07:58","modified_gmt":"2026-08-26T06:07:58","slug":"preferred-shares-french-sas-foreign-investor-rights-approval-filing","status":"publish","type":"post","link":"https:\/\/kohenavocats.fr\/en\/2026\/08\/26\/preferred-shares-french-sas-foreign-investor-rights-approval-filing\/","title":{"rendered":"Preferred Shares in a French SAS for a Foreign Investor: Rights, Approval and Filing"},"content":{"rendered":"

A foreign investor does not have to accept a one-size-fits-all shareholding when entering a French company. A French soci\u00e9t\u00e9 par actions simplifi\u00e9e<\/em> (SAS), meaning a simplified joint-stock company, can create classes of preferred shares that separate economic return, voting power, information rights and exit protection. That flexibility is useful for a foreign parent, a venture fund, a family office or an international founder bringing a French subsidiary into a wider group. It also creates a risk: the rights are not safely secured by a short investment term sheet if they are not correctly implemented in the articles of association and in the corporate approvals.<\/p>\n

The legal question is therefore not simply whether a foreign investor may subscribe for French shares. The practical questions are more precise: whether the proposed rights are permitted, whether the investor is named or merely subscribes to a category, whether an independent report is required, whether the operation needs foreign-investment clearance, and which documents must reach the French business registry. This guide addresses a non-resident investor and a French SAS, whether the preferred shares are created at incorporation or issued later in a capital increase. It also explains the difference between a new issue and a transfer of existing shares, because the approval, tax and filing sequence is not the same.<\/p>\n

Service-Public confirms that a foreign national may create a company in France without residing there, while effective work in France can require a residence title: see its official guidance for foreign founders<\/a>. That distinction matters here: this article addresses the corporate rights and closing file of a non-resident investor, not the immigration status of an individual relocating to France. For the wider formation and corporate-law map, see the firm\u2019s French company-formation and corporate-law page<\/a>.<\/p>\n

I. Can a foreign investor use preferred shares in a French SAS?<\/h2>\n

A. What a French SAS can offer to a foreign shareholder<\/h3>\n

There is no general rule requiring the shareholder of a French SAS to be French, resident in France or physically present at the signing. The shareholder can be an individual, a foreign company or another investment vehicle, subject to identity, anti-money-laundering and sector-specific checks. A foreign company may therefore subscribe to the capital of a French subsidiary, while the French company remains governed by French corporate law and registered in France.<\/p>\n

The starting point is Article L. 227-1 of the French Commercial Code<\/a>. It states: \u201cUne soci\u00e9t\u00e9 par actions simplifi\u00e9e peut \u00eatre institu\u00e9e par une ou plusieurs personnes qui ne supportent les pertes qu’\u00e0 concurrence de leur apport.\u201d In English, the investor\u2019s exposure is normally limited to the amount contributed, subject to the ordinary rules on fraud, abuse, unpaid capital and personal liability. The same article makes the rules governing public limited companies applicable to an SAS only where they are compatible with the special SAS regime. That qualification matters: a foreign investor should not import a template designed for a French soci\u00e9t\u00e9 anonyme<\/em> (SA) or a common-law preferred-stock term sheet without adapting the decision-making process to the SAS articles.<\/p>\n

Article L. 228-11 of the French Commercial Code<\/a> expressly permits preferred shares. Its opening sentence provides: \u201cLors de la constitution de la soci\u00e9t\u00e9 ou au cours de son existence, il peut \u00eatre cr\u00e9\u00e9 des actions de pr\u00e9f\u00e9rence, avec ou sans droit de vote, assorties de droits particuliers de toute nature, \u00e0 titre temporaire ou permanent.\u201d The provision allows the class to be created at incorporation or later. It also makes the articles of association the central document: the particular rights must be defined there.<\/p>\n

In practice, the foreign investor may receive a category with one or several of the following features:<\/p>\n\n\n\n\n\n\n\n\n\n
Investor objective<\/th>\nPossible French-law mechanism<\/th>\nDrafting point to settle<\/th>\n<\/tr>\n<\/thead>\n
Recover invested money before ordinary shareholders<\/td>\nPriority dividend, liquidation preference or a preferred distribution waterfall<\/td>\nDefine the trigger, calculation, solvency limits and interaction with distributable profits<\/td>\n<\/tr>\n
Protect strategic decisions<\/td>\nEnhanced voting rights, a separate class vote or consent rights written into the articles<\/td>\nIdentify the decisions, majority, duration and consequences of a deadlock<\/td>\n<\/tr>\n
Preserve an exit route<\/td>\nConversion, redemption or a transfer mechanism attached to the preferred class<\/td>\nSet the price formula, valuation date, notice period and funding limits<\/td>\n<\/tr>\n
Protect a foreign parent\u2019s technology or brand<\/td>\nInformation, audit and reserved-matter rights combined with contractual undertakings<\/td>\nSeparate statutory rights from confidential obligations in the investment agreement<\/td>\n<\/tr>\n
Give employees or founders a different incentive<\/td>\nA separate class with vesting, conversion or loss of preference on a prohibited transfer<\/td>\nCheck leaver, transfer and tax consequences before the shares are issued<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The class belongs to the shares, not merely to the investor\u2019s personal promise. If a foreign fund sells its preferred shares, the buyer normally takes the class rights unless the articles provide for conversion or loss of preference on transfer. Conversely, a private shareholders\u2019 agreement may bind only its signatories. A right that must be enforceable against the company, future shareholders or a transferee should generally be reflected in the articles, with the agreement used for confidentiality, implementation obligations and remedies.<\/p>\n

A recent tax decision illustrates why the legal characterization of a foreign company cannot be assumed from its English label. In Conseil d\u2019\u00c9tat, 25 July 2025, no. 489925<\/a>, the court examined the characteristics of a British private limited company and compared them with French corporate forms. The decision states that, when the relevant documents showed ordinary shares, \u201cl\u2019\u00e9mission d\u2019actions de pr\u00e9f\u00e9rence est seulement une facult\u00e9 ouverte par l\u2019article L. 228-11\u201d. The lesson for a foreign parent is practical: the French tax and corporate analysis follows the actual rights and governing documents, not the name used in the parent company\u2019s home jurisdiction.<\/p>\n

B. Which preferred rights can be granted without losing legal control?<\/h3>\n

The most common mistake is to describe \u201cpreferred shares\u201d as if they were a single product. French law permits a broad range of rights, but each right needs a precise legal and economic definition. \u201cInvestor gets priority\u201d is not enough. The articles should say priority over what, on which date, after which expenses, and whether the right is cumulative, participating, capped, convertible or extinguished on a transfer.<\/p>\n

Economic preferences should be drafted against realistic French accounting and company-law constraints. A priority dividend cannot force a distribution when the company has no distributable profit or when another mandatory rule prevents payment. A liquidation preference should state whether the investor receives the original subscription amount, a multiple, an accrued preferred return, or a participating share of the balance. The waterfall should also explain whether ordinary shareholders receive anything before the preferred amount is satisfied. If the company is insolvent, a contractual preference does not turn equity into secured debt.<\/p>\n

Governance rights need the same precision. Article L. 228-11 permits voting rights to be arranged for a determined or determinable period, suspended or removed. It also imposes a ceiling: shares without voting rights may not represent more than half of the share capital of a non-listed company. The text says: \u201cLes actions de pr\u00e9f\u00e9rence sans droit de vote ne peuvent repr\u00e9senter plus de la moiti\u00e9 du capital social.\u201d The cap is not a safe way to create unlimited control with no economic exposure. The articles must identify how votes are counted, which class votes separately, and which matters require the investor\u2019s consent.<\/p>\n

The Court of cassation has treated preferred-share rights as substantive rights rather than decorative wording. In Commercial Chamber, 13 March 2024, no. 22-12.205<\/a>, the official decision considered a French SAS whose articles gave one class 100 votes per share and another class one vote per share. The court stated, in the context of the law applicable to the historical transaction, that \u201cLa proc\u00e9dure des avantages particuliers pr\u00e9vue \u00e0 ce texte n’est donc pas incompatible avec les dispositions particuli\u00e8res r\u00e9gissant les soci\u00e9t\u00e9s par actions simplifi\u00e9es.\u201d The decision concerned an earlier version of the law and must be read with the current statutory provisions, but it confirms that a foreign investor\u2019s class rights can trigger a formal procedure and should not be left to informal corporate practice.<\/p>\n

Modification rights are equally important. A French SAS may later want to reduce a preferred dividend, change conversion terms or remove a veto. In Commercial Chamber, 10 July 2024, no. 22-15.836<\/a>, the Court of cassation held: \u201cConstitue une conversion d’actions au sens et pour l’application de l’article L. 228-15, alin\u00e9a 2, du code de commerce, toute op\u00e9ration emportant modification des droits attach\u00e9s aux actions converties.\u201d In the same decision, it required the individual consent of holders where the articles did not provide the method for modifying their rights. For a foreign investor, the drafting task is therefore twofold: define the original rights and define the lawful process for changing them.<\/p>\n

Before agreeing on a price, the parties should prepare a rights schedule covering at least:<\/p>\n