You live in London, New York or Dubai. Your French company just closed another loss-making year, and your accountant writes that equity has fallen below half the share capital. French law does not treat this as a private accounting detail. It triggers a mandatory legal procedure with a four-month fuse, a published shareholder vote, a two-year repair clock and, at the end of the road, a court-ordered dissolution that any interested party can request. This guide explains, in plain English, what the Commercial Code requires of a foreign owner, what two French appeal courts decided on this exact question in 2026, and how to fix the situation from abroad without boarding a plane to Paris.<\/p>\n
French company law uses a vocabulary worth decoding first. The capital social<\/em> is the share capital stated in the articles. The capitaux propres<\/em>, or equity, are what remains for shareholders once liabilities are subtracted from assets: roughly, capital plus reserves plus retained profits minus accumulated losses. When losses eat through reserves and half the capital is gone, the alarm bells of article L. 223-42 (for the SARL, the limited liability company) and article L. 225-248 (for the SA and, through a bridge provision, the SAS, the simplified joint-stock company most foreign founders choose) start ringing. The greffe<\/em> is the clerk’s office of the commercial court where filings are made. The RCS (Registre du commerce et des soci\u00e9t\u00e9s<\/em>) is the company register, the Kbis is the official registration certificate that proves your company exists, and the BODACC (Bulletin officiel des annonces civiles et commerciales<\/em>) is the gazette where corporate events are published. Filings now pass through the INPI single portal, the guichet unique<\/em>, the one-stop online desk for business formalities. Keep these six acronyms in mind; they appear in every step below.<\/p>\n The scenario is common. A foreign group injects 50,000 or 100,000 euros into a new SAS, the first two years burn cash on salaries and rent, the balance sheet shows equity of 20,000 euros against a capital of 100,000, and the threshold is crossed. The trap for non-residents is distance: the letter from the accountant arrives by email, the shareholders’ meeting must still be convened on French soil in legal terms, and every decision must be published in a French legal-notices paper and filed at the greffe<\/em> of the registered office. Ignoring the procedure does not freeze the clock. It hands every creditor, every minority shareholder and even the public prosecutor a potential right to ask a court to dissolve your company.<\/p>\n No, the law does not dissolve your company automatically, and a negative bank balance alone proves nothing. But it forces you to make a formal choice quickly, and it punishes silence. This first part explains how to tell whether the threshold is really crossed and what two 2026 court decisions teach foreign shareholders about the vote that follows.<\/p>\n The trigger is strictly accounting-based. French courts look at one document only: the approved annual accounts. For a SARL, article L. 223-42 of the Commercial Code<\/a> provides that “les associ\u00e9s d\u00e9cident, dans les quatre mois qui suivent l’approbation des comptes ayant fait appara\u00eetre cette perte s’il y a lieu \u00e0 dissolution anticip\u00e9e de la soci\u00e9t\u00e9”, meaning the shareholders must decide, within four months after approving the accounts that reveal the loss, whether the company should be dissolved early. For a SA, and for your SAS, article L. 225-248<\/a> imposes the equivalent duty on management: “le conseil d’administration ou le directoire, selon le cas, est tenu dans les quatre mois qui suivent l’approbation des comptes ayant fait appara\u00eetre cette perte, de convoquer l’assembl\u00e9e g\u00e9n\u00e9rale extraordinaire \u00e0 l’effet de d\u00e9cider s’il y a lieu \u00e0 dissolution anticip\u00e9e de la soci\u00e9t\u00e9”. In an SAS, the president convenes the shareholders, and in a single-shareholder SAS or SARL the sole shareholder simply records the decision in writing. The four months run from the approval of the accounts, not from the year-end, so late approval compresses your reaction time rather than extending it.<\/p>\n Two points matter enormously for a foreign owner. First, only the balance sheet counts. A low or overdrawn bank balance is not equity, and equity is not cash. Equity is an accounting measure: capital, premiums, reserves and retained earnings, minus losses, plus or minus regulated items. A company can show a nearly empty bank account while its equity remains intact, for instance because a shareholder loan sits in liabilities while funded assets sit on the balance sheet, and conversely a comfortable cash position funded by debt does not repair negative equity. This confusion is the single most frequent mistake non-resident shareholders make, and as shown below, an appeal court threw out an entire dissolution claim in April 2026 for exactly this confusion. Before panicking, ask your French accountant (expert-comptable<\/em>) for the equity figure in the approved accounts and compare it with half the stated capital. If capital is 100,000 euros, the red line is 50,000 euros of equity.<\/p>\n Second, the correct legal basis depends on your company form, and mixing them up is fatal in court. The SARL follows article L. 223-42 of the Commercial Code<\/a>. The SA follows article L. 225-248 of the Commercial Code<\/a>. The SAS has no dedicated provision: it borrows the SA rule through article L. 227-1 of the Commercial Code<\/a>, which makes SA rules applicable to the SAS insofar as they are compatible with the SAS chapter, and article L. 225-248 is not among the excluded provisions. So if you own a SAS, and most foreign-owned French companies are SAS vehicles, your procedure is convened by the president under L. 225-248 applied through L. 227-1. Pleading the SARL article for a SAS, or vice versa, gets your claim dismissed before the merits are even examined.<\/p>\n The shareholders’ meeting then votes on early dissolution. In practice, healthy groups vote to continue: dissolving a viable subsidiary over a bad year wastes the brand, the contracts and the bank history. The vote to continue is the normal outcome and the law expressly organizes it. But continuation is not a free pass. It starts the repair clock described in part II, and the resolution itself must be published: for a SARL, article R. 223-36 of the Commercial Code<\/a> requires that “la d\u00e9cision des associ\u00e9s pr\u00e9vue \u00e0 l’article L. 223-42 est publi\u00e9e dans un support habilit\u00e9 \u00e0 recevoir les annonces l\u00e9gales dans le d\u00e9partement du si\u00e8ge social, d\u00e9pos\u00e9e au greffe du tribunal de commerce du lieu de ce si\u00e8ge et inscrite au registre du commerce et des soci\u00e9t\u00e9s”. For a SA or SAS, article R. 225-166 of the Commercial Code<\/a> requires that “la d\u00e9cision de l’assembl\u00e9e g\u00e9n\u00e9rale pr\u00e9vue au premier alin\u00e9a de l’article L. 225-248 est d\u00e9pos\u00e9e au greffe du tribunal de commerce du lieu du si\u00e8ge social et inscrite au registre du commerce et des soci\u00e9t\u00e9s”, with additional publication in a legal-notices outlet. Concretely, your lawyer publishes a notice in a SHAL (support habilit\u00e9 \u00e0 recevoir les annonces l\u00e9gales<\/em>, an authorized legal-notices newspaper) of the department of the registered office, files the minutes through the INPI single portal to the greffe<\/em>, and the RCS entry is updated with a mention that equity fell below half the capital. Your next Kbis will carry that mention until the situation is repaired, which banks and counterparties can read. That publicity is deliberate: the law warns third parties while giving you time to fix the balance sheet.<\/p>\n Miss the four-month consultation entirely, and the sanction is severe. Both statutes, article L. 223-42<\/a> for the SARL and article L. 225-248<\/a> for the SA and SAS, allow “tout int\u00e9ress\u00e9”, any interested party, to petition the court for dissolution of the company: “tout int\u00e9ress\u00e9 peut demander en justice la dissolution de la soci\u00e9t\u00e9”. A creditor chasing an unpaid invoice, a minority shareholder in conflict with you, or the public prosecutor can pull that trigger. The court is not a machine, however: “le tribunal peut accorder \u00e0 la soci\u00e9t\u00e9 un d\u00e9lai maximal de six mois pour r\u00e9gulariser sa situation. Il ne peut prononcer la dissolution, si, au jour o\u00f9 il statue sur le fond, cette r\u00e9gularisation a eu lieu.” The judge may grant up to six months to repair and cannot dissolve if the books are fixed by the day of judgment on the merits. Repair remains possible almost until the last minute, which is precisely why acting early from abroad beats waiting for a summons.<\/p>\n Two recent appeal decisions, both rendered in 2026 and both freely available on the official case-law portal, show how French judges apply these rules when shareholders disagree, and both contain lessons a foreign owner should memorize.<\/p>\n The first lesson concerns the SAS vote itself. On 19 February 2026, the Court of Appeal of Caen ruled in a dispute between shareholders of a SAS with a capital of 600,000 euros, RG 24\/02752, a decision published as CA Caen, 19 February 2026, RG 24\/02752<\/a>. The facts read like a textbook shareholder conflict: the general meeting of 14 November 2022 approved the 2019 to 2021 accounts, noted that equity had fallen below half the capital, and put early dissolution to the vote under article L. 225-248. The resolution was rejected unanimously by those present, who held 14,000 of the 24,000 shares, about 58.33 percent of the voting rights. The absent minority shareholder then attacked the resolution, arguing that the articles required a three-quarters majority to continue the business and that the four-month consultation rule had been breached.<\/p>\n The court confirmed the first-instance judgment on every point and dismissed the dissolution claims. It recalled, in CA Caen, 19 February 2026, RG 24\/02752<\/a>, that “Les dispositions de cet article sont applicables aux SAS en vertu de l’article L 227-1 al 3 du m\u00eame code”, confirming the bridge that brings L. 225-248 into SAS law. On majorities, the Caen court<\/a> held that where the articles do not refer to shareholders present or represented, majorities are measured against all existing votes: “En l’absence de r\u00e9f\u00e9rence aux ‘associ\u00e9s pr\u00e9sents ou repr\u00e9sent\u00e9s’, il y a lieu de consid\u00e9rer que les majorit\u00e9s sont \u00e9dict\u00e9es par rapport \u00e0 la totalit\u00e9 des voix existantes.” And crucially, the resolution put to the vote proposed dissolution, not continuation, so no qualified majority for continuation applied, and since the text obtained neither the absolute majority nor the three-quarters threshold, “c’est valablement que l’assembl\u00e9e g\u00e9n\u00e9rale a rejet\u00e9 la d\u00e9cision de dissolution anticip\u00e9e soumise au vote, la soci\u00e9t\u00e9 poursuivant alors son activit\u00e9”. A rejected dissolution resolution means lawful continuation. For a foreign majority shareholder, the message is reassuring but demanding: run the vote properly, count majorities against the right base, and document everything in minutes, because an excluded or distant minority will challenge the arithmetic.<\/p>\n The Caen court then addressed the repair deadline, and this is where the 2023 reform changed the game. In principle, regularization was due by 31 December 2024, the close of the second financial year following the 2022 observation. But the court applied the newer fourth paragraph of L. 225-248: where equity has not been rebuilt and capital exceeds a decree-set threshold linked to the balance-sheet size, the company gets a second two-year period to reduce its capital down to that threshold. That threshold, fixed by article R. 225-166-1 of the Commercial Code<\/a>, equals “1 % du total du bilan de cette soci\u00e9t\u00e9, constat\u00e9 lors de la derni\u00e8re cl\u00f4ture d’exercice” for companies like the SAS that have no statutory minimum capital. The company’s 600,000-euro capital exceeded 1 percent of its 2024 balance-sheet total, so “Il s’ensuit que la SAS RDI dispose d’un nouveau d\u00e9lai, soit de deux exercices suppl\u00e9mentaires \u00e0 compter du 31 d\u00e9cembre 2024, pour r\u00e9duire le capital avant d’encourir la dissolution, ce d\u00e9lai expirant le 31 d\u00e9cembre 2026”, as the Caen decision<\/a> states. The dissolution claims were dismissed. A foreign owner should grasp the practical consequence: since the March 2023 reform, a large-capital company that misses the first two-year window is not automatically doomed; it may still shrink its capital toward the 1-percent-of-assets threshold within a second window. Small-capital subsidiaries, by contrast, will often sit below that threshold already and must rebuild equity or dissolve within the first window.<\/p>\n The second lesson, from the Court of Appeal of Aix-en-Provence on 30 April 2026, RG 22\/04239, published as CA Aix-en-Provence, 30 April 2026, RG 22\/04239<\/a>, punishes sloppy legal reasoning. A shareholder of a SAS with a capital of just 1,000 euros demanded judicial dissolution, arguing that the company’s bank account showed less than 500 euros, so half the capital was necessarily lost and dissolution followed as of right. The court dismantled the claim in three strokes. First, the wrong text: “l’article L 223-42 du code de commerce […] ne s’applique pas \u00e0 la soci\u00e9t\u00e9 litigieuse qui est une SAS et non une SARL. Seul l’article L 225-248 du m\u00eame code s’applique.” Second, the wrong evidence: L. 225-248 “ne prend pas en compte le relev\u00e9 de compte bancaire mais le bilan comptable de la soci\u00e9t\u00e9”, and “le fait que le compte bancaire de la soci\u00e9t\u00e9 soit inf\u00e9rieur \u00e0 500 euros ne signifie pas qu’elle est en perte de la moiti\u00e9 du capital”. Third, the result: “le moyen oppos\u00e9 par l’intim\u00e9 tir\u00e9 de l’article L 225-248 du code de commerce est inop\u00e9rant et la cour ne peut que rejeter la demande de M. [X] [Z] de dissolution judiciaire de la SAS”. Bank statements never substitute for approved accounts, the SARL article never governs a SAS, and dissolution is never automatic. Any foreign shareholder tempted to short-circuit the procedure, or any local partner threatening you with instant dissolution over a bank balance, should read this decision before spending a euro on litigation.<\/p>\n Together, the two rulings draw a clear map. Convene the right body under the right article, count votes against the right base, publish the outcome, and use the repair windows the 2023 reform opened. Courts protect companies that follow the procedure and punish parties who improvise. The remainder of this guide turns that map into an action plan you can execute from outside France.<\/p>\n Once the shareholders vote to continue, you face a business choice with legal guardrails: inject fresh money or shrink the capital to match reality, or shut the company down cleanly. Both routes can be handled remotely with a French lawyer and accountant, but the calendars, filings and costs differ sharply. This part walks through each route and marks the insolvency line you must never cross unknowingly.<\/p>\n The repair obligation is binary in its target but flexible in its means. By the close of the second financial year following the year the loss was recorded, equity must stand at or above half the capital, or the capital must have been reduced so that equity reaches at least half of the reduced amount. Suppose your SAS has a capital of 100,000 euros and the 2024 accounts, approved in June 2025, show equity of 30,000 euros. You must restore the ratio by 31 December 2026. Three classic tools exist, often combined.<\/p>\n The first tool is a cash capital increase subscribed by the foreign shareholder. The parent company or the individual owner wires fresh funds, new shares are issued, and equity rises by the amount subscribed. For a SAS, the procedure follows the articles and the SA capital-increase framework, with a shareholders’ decision, subscription forms, deposit of funds with a bank or notary, an auditor’s certificate where required, and filing through the INPI single portal. Funds can come from abroad without restriction in most sectors, though your bank will run know-your-customer checks on a non-resident subscriber, so allow several weeks for the deposit certificate. The increase must then be published and registered, and the resulting Kbis shows the new capital. If the company first reduces its capital to absorb losses and immediately increases it back with fresh money, practitioners call this an accordion operation, a coup d’accord\u00e9on<\/em>: it wipes the slate clean in one sequence but requires careful sequencing of the two votes and, depending on amounts, the involvement of a commissaire aux comptes<\/em>, the statutory auditor.<\/p>\n The second tool is a plain capital reduction to absorb the losses, the r\u00e9duction de capital motiv\u00e9e par des pertes<\/em>. No money moves; the stated capital is simply written down, for instance from 100,000 to 40,000 euros, so that the 30,000 euros of equity again exceed half. This costs less than an increase and suits a subsidiary that will stay small, but it shrinks the company’s display capital, which some clients and landlords read as weakness, and in an SA it cannot breach the 37,000-euro floor of article L. 224-2 of the Commercial Code<\/a> except under a conditional increase or a change of company form. Since the 2023 reform, remember the Caen lesson: if the first deadline passes with equity still unrestored and capital still above 1 percent of the balance-sheet total, a second two-year window opens to reduce capital down to that threshold. Check the arithmetic with your accountant before assuming the extra time applies to you.<\/p>\n The third tool is the shareholder current account, the compte courant d’associ\u00e9<\/em>, a loan from the shareholder to the company. A straight loan does not rebuild equity, since debt is not equity, but two variants do the job: a waiver of the receivable, the abandon de cr\u00e9ance<\/em>, often with a return-to-better-fortunes clause, or a conversion of the loan into capital. Foreign parents routinely park cash in the subsidiary’s current account first for speed, then convert or waive once the accounts and tax position are mapped. The waiver has corporate-tax consequences in France, so coordinate the accounting entry with your expert-comptable<\/em> before the year-end close rather than after.<\/p>\n Whichever tool you choose, the repair must be made visible to third parties through the same publicity circuit as the initial decision: legal-notices publication, filing at the greffe<\/em> via the single portal, RCS update and BODACC notice. Only when the registry reflects restored equity does the Kbis stop carrying the warning mention, which matters the next time a French bank reviews your overdraft or a client runs a compliance check. Keep every proof: convening notices, attendance sheets, minutes, the legal-notices certificate, the greffe<\/em> filing receipt and the updated Kbis. If a creditor later seeks dissolution, that paper trail plus a repaired balance sheet is exactly what lets the judge refuse it, since the court cannot dissolve where “au jour o\u00f9 il statue sur le fond, cette r\u00e9gularisation a eu lieu”. The full texts to verify each step are article L. 223-42<\/a> for the SARL, article L. 225-248<\/a> for the SA and SAS, and their implementing decrees R. 223-36<\/a>, R. 225-166<\/a> and R. 225-166-1<\/a>.<\/p>\n Distance changes the logistics, not the law. Shareholder decisions can be taken by videoconference if the articles allow it, or by written consultation, and most foreign shareholders sign minutes electronically and grant a power of attorney to their French counsel for the filings. The practical sequence from abroad is: first, a diagnostic call with the accountant to fix the exact equity figure and the deadline; second, a shareholders’ decision to continue plus the chosen repair route, drafted bilingually so you understand what you sign; third, the funds transfer with complete KYC documentation; fourth, publication and filing by your counsel with powers of attorney; fifth, collection of the updated Kbis and verification that the BODACC notice is correct. Budget several hundred euros for the legal-notices publication and registry fees, plus counsel fees for drafting and filing, and count six to twelve weeks end to end when money crosses borders. Our guide for newcomers, Setting Up a Company in France as a Foreign Founder: Bank Account, Kbis, VAT and Your First Hire<\/a>, explains the Kbis, bank and filing ecosystem this procedure plugs into.<\/p>\n Sometimes the honest answer is that the French venture has failed and good money should not follow bad. Dissolving early, while the company can still pay its debts, is far cheaper and safer than waiting for the repair clock to expire with a creditor-initiated court dissolution or, worse, an insolvency filing. The voluntary route, the dissolution anticip\u00e9e suivie de liquidation amiable<\/em>, starts with the same shareholders’ decision described above, except the vote goes the other way: the meeting resolves to dissolve. It appoints a liquidator, very often the SAS president or the SARL manager, publishes the dissolution in a legal-notices paper, files it at the greffe<\/em>, and the RCS notes that the company is in liquidation. The liquidator then sells the assets, pays the creditors, closes the accounts and calls a final meeting that approves the liquidation, distributes any remainder and requests the striking-off, the radiation<\/em>, from the register. Only at that point does the company legally disappear and a final Kbis of radiation issue. From abroad, the foreign shareholder votes by proxy or written resolution, the liquidator handles the French paperwork, and the whole sequence typically takes several months, longer if a commercial lease must be surrendered or employees must be dismissed under French dismissal rules.<\/p>\n Dissolution also has a tax tail to price before voting. Distributing the liquidation surplus, the boni de liquidation<\/em>, to a non-resident shareholder can trigger French withholding tax, with treaty relief depending on your country of residence, and the company’s final corporate-tax return must be filed. Ask for a full exit costing, including the lease, payroll and tax items, before choosing between recapitalizing and closing, because the cheapest legal route is not always the cheapest overall route. A dormant alternative exists in theory, the mise en sommeil<\/em>, which suspends activity for up to two years, but it does not suspend the equity-repair clock and rarely helps a loss-making subsidiary, so treat it as a pause button for a viable business, not a cure for negative equity.<\/p>\n The absolute boundary is insolvency. The equity procedure assumes the company, though loss-making, can still pay its debts as they fall due. If it cannot, a different and stricter regime takes over. Article L. 631-1 of the Commercial Code<\/a> opens judicial recovery to any debtor that, “dans l’impossibilit\u00e9 de faire face au passif exigible avec son actif disponible, est en cessation des paiements”, unable to meet due liabilities with available assets. From that moment, the director must request the opening of proceedings “au plus tard dans les quarante-cinq jours qui suivent la cessation des paiements”, within forty-five days at the latest, as article L. 631-4 of the Commercial Code<\/a> provides, unless conciliation has been sought. Missing that deadline exposes a foreign director to personal liability for the shortfall and to a potential management ban, the interdiction de g\u00e9rer<\/em>. The warning signs are concrete: unpaid URSSAF social charges, the social-security collection agency, unpaid VAT, wages paid late, suppliers suing in the commercial court. If any of these appear alongside negative equity, stop reasoning in terms of the two-year repair clock and take same-week advice, because the forty-five-day clock overrides everything else. Note also that the equity-repair articles themselves step aside once collective proceedings open: neither L. 223-42 nor L. 225-248 applies to companies in safeguard or judicial recovery or under a plan.<\/p>\n One final procedural shelter deserves mention. Even if a creditor files for judicial dissolution over unrestored equity, the judge may grant the company up to six months to repair the situation, and dissolution is off the table if the repair lands before judgment on the merits. Both 2026 decisions illustrate judges using these safety valves rather than killing companies on technicalities. But valves are for emergencies, not strategy. A foreign owner who discovers the problem in the accountant’s email, convenes the meeting within four months, publishes the continuation, wires the recapitalization or votes an orderly dissolution, and files everything at the greffe<\/em> will never need them.<\/p>\n A French company that has lost half its capital is not dead, but it is on a legal timer that only a formal shareholder decision can manage. Check the equity figure in the approved accounts, not the bank balance. Convene under the right article, L. 223-42 for a SARL and L. 225-248 through L. 227-1 for a SAS. Publish the decision at the greffe<\/em> and in a legal-notices paper so the Kbis tells a clean story. Then either rebuild equity or reduce capital within the two-year window, keeping the 2023 reform’s second window in mind, or dissolve early while the company still pays its bills. The 2026 Caen and Aix-en-Provence rulings confirm that judges reward shareholders who follow this sequence and dismiss claims built on the wrong article or the wrong documents. Run from abroad with counsel holding powers of attorney, keep every filing receipt, and watch the separate forty-five-day insolvency deadline if cash runs short. Handled this way, a bad year stays a bad year instead of becoming a court case.<\/p>\n Talk to a business lawyer at the firm by phone within 48 hours: call +33 6 46 60 58 22<\/a> (Ma\u00eetre Reda Kohen). Or send your Kbis and latest accounts through our contact page<\/a> for a fixed-fee diagnostic of your deadlines and repair options, in Paris and across \u00cele-de-France or fully remotely from abroad.<\/p>\n","protected":false},"excerpt":{"rendered":" Equity below half the capital forces a four-month shareholder vote in France. Deadlines, filings, 2026 court rulings and how foreign owners fix it from abroad.<\/p>\n","protected":false},"author":251031309,"featured_media":16528,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kj_source_type":"","_kj_official_id":"","_kj_official_url":"","_kj_judilibre_id":"","_kj_jur":"","_kj_lieu":"","_kj_chambre":"","_kj_rg":"","_kj_date":"","activitypub_content_warning":"","activitypub_content_visibility":"","activitypub_max_image_attachments":4,"activitypub_interaction_policy_quote":"anyone","activitypub_status":"federated","footnotes":""},"categories":[80314,80313],"tags":[],"class_list":["post-2124183","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-decryptage","category-doing-business-in-france"],"yoast_head":"\nI. My French company lost half its capital: must I dissolve it or can I keep it running?<\/h2>\n
A. How do you know the threshold is crossed, and what must happen within four months?<\/h3>\n
B. What did French courts decide in 2026 when shareholders fought over the procedure?<\/h3>\n
II. Recapitalize or close: the practical path for an owner living abroad<\/h2>\n
A. How do you rebuild equity or cut capital, and which filings prove it?<\/h3>\n
B. When is dissolving the company the cheaper option, and where does insolvency begin?<\/h3>\n
Conclusion<\/h2>\n
Need a quick opinion on your case<\/h2>\n