The English Investor

You own the property. You have the keys. You have even navigated the initial setup. But now, a year has passed, and a quiet panic sets in. You have a shoebox full of receipts for roof repairs, a bank statement showing mortgage payments, and a vague memory that someone mentioned an “Annual Assembly.”

For the British investor, accustomed to the rigorous filing demands of Companies House, the French Société Civile (Civil Company) can seem deceptively relaxed. There is no public filing of accounts for most SCIs. No angry letters from the taxman demanding a balance sheet by return of post (usually).

But do not be fooled. Beneath this veneer of informality lies a rigid skeleton of civil code obligations. Ignore them, and you risk not just administrative headaches, but personal liability, tax audits, and even “fictitious company” accusations.

Based on the latest JurisClasseur legal guidelines (updated September 2020), this comprehensive guide pulls back the curtain on the accounting life of your French company. We will cover the “Invisible Ledger,” the mandatory annual rituals, the distribution of profits (and losses), and why a simple Excel spreadsheet might not be enough.

Part 1: The Myth of “No Accounting”

Let us address the biggest myth immediately: “I don’t need to do accounts for my SCI because it’s not a commercial company.”

Technically, this is true—but legally, it is a trap.

The Legal Void (and Why You Should Ignore It)

It is a quirk of French law that no specific text explicitly commands the Manager (Gérant) of a standard Société Civile to keep books. Unlike a SARL or SAS (commercial companies), you are not bound by the strict commercial code to produce a formal Balance Sheet (Bilan) and P&L (Compte de Résultat) unless you hit specific, high thresholds.

However, operating in this “legal void” is dangerous for three reasons.

1. The Taxman is Watching While civil law is vague, tax law is ruthless. Article L. 94 A of the Book of Tax Procedures states clearly: if the administration asks, you must present “accounting documents and other pieces of receipts and expenses”. If you cannot prove your expenses with a dated, organized accounting trail, the taxman can simply reject them. Suddenly, your deductible roof repair is not deductible, your taxable profit jumps, and you are facing penalties. Furthermore, if you ever sell the property, you will want to calculate capital gains tax (plus-value). Proper accounts allow you to determine the “mathematical value” of the shares and prove the value of works done, potentially saving you thousands in tax.

2. The “Fictitious Company” Risk A company must have a life of its own. If you treat the company bank account as your personal piggy bank, mixing expenses and failing to track who paid for what, a judge can declare the company “fictitious.” This pierces the corporate veil, making your personal assets vulnerable to creditors.

3. The “Caisse” vs. “Engagement” Dilemma For small SCIs, a simple “Cash Accounting” (Comptabilité de trésorerie)—recording money in and money out—is often tolerated. However, experts strongly recommend “Commitment Accounting” (Comptabilité d’engagement). This records debts when they are incurred, not just when paid. Why? Because if you have a massive invoice dated December 30th but pay it January 2nd, cash accounting distorts your year-end result. Commitment accounting gives a true picture of the company’s health.

The English Investor Rule: Treat your SCI like a business, not a hobby. Open a dedicated bank account. Keep a ledger. If the numbers get complex, hire a French Expert-Comptable (Accountant). It is an insurance policy against future chaos.

Part 2: The Annual Ritual – The Manager’s Duty

Even if you don’t hire an accountant, the Manager (Gérant) has a non-negotiable duty to report to the owners. This is known as the Reddition de Comptes (Rendering of Accounts).

The “Report on Activity”

Once a year, the Manager must produce a Written Report (Rapport de Gérance). This is not just a polite email. It is a legal document mandated by Article 1856 of the Civil Code. It must contain:

• A summary of the company’s activity during the year.
• The profits realized (or foreseeable).
• The losses incurred (or foreseen).

Warning: The failure to produce this written report is a cause for nullity of the annual assembly decisions. If you hold a meeting to approve the accounts but the Manager never wrote a report, a disgruntled associate could sue to have the approval cancelled years later (provided they can prove this irregularity caused them harm).

The Right to Know (Article 1855)

You, as an associate, are not a passive observer. Article 1855 of the Civil Code gives you a powerful weapon: The Right of Communication. At least once a year, you have the right to inspect all books and documents at the head office. You can demand to see contracts, invoices, and bank statements. Furthermore, you can submit written questions to the Manager about the management of the company. The Manager is legally compelled to answer these in writing within one month.

The “Regulated Agreements” Trap

Does your SCI rent a property to you? Did the SCI borrow money from your brother? These are “Regulated Agreements” (Conventions Réglementées). If the SCI has an “economic activity” (which includes renting property), the Manager must produce a specific report on any agreements signed between the company and its managers or associates. This report details the nature of the deal, the amounts involved, and the terms. The goal is transparency—to prevent the Manager from siphoning off company assets via sweetheart deals. Note that “standard operations” (like buying stamps or minor expenses) are exempt.

Part 3: The Assembly – How to Approve the Numbers

You have your accounts (however simple) and your Manager’s Report. Now you must make them official. This happens at the Annual General Assembly (AGO).

1. Timing the Meeting

While commercial companies have a strict 6-month deadline after year-end to hold this meeting, Civil Societies are freer. The law simply says “at least once a year”. However, for tax reasons, it is wise to hold this before May to align with your personal French tax returns.

2. The Convocation (The Paper Trail)

You cannot just call your partners and say “Meeting on Tuesday.”

• The Method: You must send a Registered Letter (Lettre Recommandée) at least 15 days before the meeting.
• The Content: The letter must include the Agenda (Ordre du jour), clearly drafted so associates understand what they are voting on without needing to call for clarification.
• The Attachments: You must include the Manager’s Report, the text of the proposed resolutions, and the accounts (Balance Sheet/P&L).

Can we skip the formalities? Yes, but be careful. If all associates are present and nobody complains, a verbal convocation can be valid. However, if one person is absent or disputes the meeting later, the lack of a registered letter is fatal.

3. The Vote

Unless your statutes say otherwise (and you should check them!), decisions at the AGO are taken by the unanimity of associates. This is a critical distinction from UK companies. In a standard French SCI, a 1% shareholder can often veto the approval of accounts. If your statutes allow for majority voting, verify the specific majority required for “Ordinary Decisions.”

4. Written Consultation

Does everyone have to fly to France? No. Article 1853 allows for Written Consultation—but only if your statutes explicitly permit it. If your statutes are silent, you technically must hold a physical meeting (or a video conference if the statutes allow). Alternatively, Article 1854 allows for a decision to be taken by a “Deed signed by all associates”. If you can get everyone to sign the same piece of paper (Minutes), you avoid the convocation rules entirely.

COVID-19 Update: During the pandemic, the government allowed for greater flexibility (email voting, closed-door meetings). While the acute phase has passed, these precedents have highlighted the need for modern statutes that allow remote decision-making permanently.

Part 4: Show Me the Money – Allocating Profits

The accounts are approved. The spreadsheet shows a profit (or a loss). What happens next? This is the “Affectation du Résultat.”

The Concept of “Distributable Profit”

Just because there is cash in the bank does not mean there is a profit. Conversely, just because there is no cash does not mean there isn’t a taxable profit (e.g., if you used income to pay down the capital of a loan). A dividend only legally exists when the assembly notes the existence of distributable sums and votes to allocate them to associates. Until that vote, the money belongs to the company.

Where does the money go?

The assembly has three main choices:

1. Distribution: Pay it out to associates as dividends.
2. Reserves: Put it in a “Reserve” account for future projects (e.g., “Reserve for Roof Repairs”).
3. Retained Earnings: Leave it in the “Report à Nouveau” (carry forward) account to be dealt with next year.

The “Clause Léonine” (The Lion’s Share) You might want to allocate all profits to one partner (perhaps the one with the lowest tax rate). Be careful. Article 1844-1 forbids “Leoline Clauses”—clauses that give all the profit to one associate or exempt one associate from all liability. Such clauses are deemed “unwritten” (void). However, you can have unequal distribution. If you own 50/50 but do 90% of the work, the statutes can validly give you 70% of the profits, provided the other partner isn’t totally deprived.

The Revaluation Trap

SCIs often own property that increases in value. It is tempting to update the accounts to show the property’s new, higher value. This creates a “Revaluation Variance” (Ecart de réévaluation) on the balance sheet. Can you distribute this “paper profit” as a dividend? A high-profile Conseil d’État case (Sté Cofathim, 2013) suggests this is highly risky. Tax law may view distributing this unrealized gain as a “taxable event,” triggering capital gains tax immediately on the property—even though you haven’t sold it! Furthermore, it can lead to double taxation later when you actually sell the shares. The Advice: Do not touch the Revaluation Variance. Leave it on the balance sheet. Do not try to pay it out as cash.

Part 5: The Dark Side – Allocating Losses

Not every year is a vintage year. Sometimes, the SCI loses money. Who pays?

The Liability of Associates

In a UK Limited company, your liability is capped. In a French SC, associates are indefinitely responsible for debts. However, unlike a commercial partnership, this liability is conjoint (proportionate), not solidary. If you own 10%, creditors can only demand 10% of the debt from you—and only after they have unsuccessfully sued the company first.

Dealing with Accounting Losses

When the accounts show a loss, the assembly must decide where to put it.

1. Carry Forward: The most common option. You put the loss in “Report à Nouveau” (negative) and hope future profits will wipe it out.
2. Imputation: You can write off the loss against existing Reserves.
3. Reimbursement: You can ask associates to put their hands in their pockets and pay cash to cover the loss immediately.

Important: You cannot force an associate to pay cash to cover a loss during the life of the company unless the statutes explicitly say so. This is an “increase in engagement”, which requires unanimous consent. Without that clause, creditors can sue the associates, but the company itself cannot force an internal cash call to balance the books.

Part 6: When You Must Go “Commercial”

There is a threshold where this relaxed civil regime stops. If your SCI becomes too successful, it might be forced to adopt full commercial accounting rules.

The Thresholds

If your SCI crosses two of the following three thresholds at year-end:

1. 50 employees (unlikely for a property holding company).
2. €3.1 million in turnover (rents).
3. €1.55 million in Total Balance Sheet (value of assets).

Then you must:

• Adopt full commercial accounting (Plan Comptable Général).
• Appoint a Statutory Auditor (Commissaire aux Comptes).
• Produce a Management Report (Rapport de Gestion).

Most private family SCIs will stay under these limits. But if you hold a high-value portfolio (e.g., a large Parisian building or a vineyard), check your Balance Sheet total. Crossing that €1.55m line changes the game.

The Tax Switch

Also, if you opt for Corporation Tax (IS), you automatically submit yourself to commercial accounting rules. You cannot enjoy the flat tax benefits of the IS regime while keeping your accounts on the back of a napkin.

Conclusion: The Peace of Mind Ledger

For the English Investor, the takeaway is simple: Formalize to Protect.

The “relaxed” nature of the Civil Society is a double-edged sword. It gives you freedom, but it gives you enough rope to hang yourself if a dispute arises or the taxman knocks.

Your Annual Checklist:

1. The Books: Are all receipts filed? Is the bank statement reconciled?
2. The Report: Has the Manager written the annual report on activity?
3. The Meeting: Have you held the AGO (or signed the Minutes) to approve the accounts?
4. The Result: Have you clearly voted on where the profit/loss goes?
5. The Archive: Is this all printed and stored in a “Registre des Assemblées”?

Doing this takes perhaps two hours a year. But those two hours forge the armor that protects your French asset.

Disclaimer: Always consult with a French Expert-Comptable or Notary regarding your specific tax and accounting situation.

You have done it. The Société Civile Immobilière (SCI) is set up. The property is bought. The keys are in your pocket. You might think the administrative marathon is over, and you can simply enjoy the French art de vivre.

But life, as they say, happens. Perhaps you moved house? Maybe you want to change the company name because “SCI 12 Rue de la Paix” lacks imagination? Or perhaps you have realized that requiring a unanimous vote for buying a coffee machine was a terrible idea?

Welcome to the world of Statutory Modifications.

In the UK, changing the Articles of Association is a relatively dry corporate affair. In France, because a Société Civile is a contract based heavily on the person (intuitu personae), changing the rules is akin to rewriting the sacred texts. It requires strict adherence to the Civil Code, precise publicity formalities, and often, the (unanimous) consent of everyone involved.

This guide explores every nook and cranny of changing your SCI’s statutes. We will cover the rules of voting, the specific danger of “increasing engagements,” the paperwork marathon, and the penalties for getting it wrong.

Part 1: The Golden Rule of Unanimity (and How to Break It)

The starting point for any British investor is to understand the default setting of a French civil society. Unlike a commercial company where “majority rules,” the civil society is built on consensus.

The Default: Article 1836

According to Article 1836, paragraph 1 of the Civil Code, the statutes can only be modified by the unanimous agreement of all associates. This is the statutory bedrock. If you and your business partner have a falling out, and your statutes are silent on the matter, you are legally gridlocked. You cannot change a single comma in the bylaws without their signature.

The Escape Route: Derogations

Fortunately, the law allows you to opt out of this straitjacket—but only if you planned ahead. The statutes themselves can stipulate that decisions will be taken by a majority. This flexibility is immense. Your statutes can define:

• Quorum: The minimum number of shares present to vote.
• Majority Types: You can choose a majority based on the number of associates (headcount), a majority based on capital (shares), or a double majority (both).
• Weighted Voting: You could even assign double or triple voting rights to certain shares.
• Different Tiers: You can distinguish between “Ordinary Decisions” (simple majority) and “Extraordinary Decisions” (supermajority).

Investor Tip: If your statutes are currently silent, you need unanimity to change them to allow for majority voting. It is the classic “chicken and egg” problem.

The Written Consultation

While Article 1853 suggests that associates make decisions in an “Assembly” (a physical meeting), the statutes can derogate from this too. You can write a clause allowing for “Written Consultation.” This is particularly useful for British investors who do not wish to travel to France just to vote on an administrative change. Furthermore, even without a specific clause, Article 1854 allows for a decision to be taken if all associates sign a deed recording their consent. This “deed” method bypasses the formalities of convening a meeting entirely.

Part 2: Increasing Your Commitments

There is one area where no majority vote can ever force your hand: increasing the Engagements of an Associate.

Article 1836, paragraph 2 of the Civil Code is absolute: “In no case can the engagements of an associate be increased without their consent.” This implies that even if your statutes say “99% majority rules,” the 99% cannot force the 1% to accept an increase in liability or financial burden.

What Constitutes an “Increase in Engagement”?

This is a litigious area, and the courts have been very specific.

1. Financial Contribution: An increase in engagement is any aggravation of the debt you owe to the society or third parties. It is a demand for a fresh financial effort.
2. Restricting Freedom: It is not just about money. A decision that restricts your professional freedom (e.g., adding a non-compete clause that wasn’t there before) counts as an increase in engagement.

The “Call for Funds” Trap

Here is a scenario many investors face. The roof of the chateau is leaking. The SCI has no cash. The manager calls an assembly to vote on a “Cash Call” (Appel de fonds). The majority votes yes. You, the minority, vote no. Can they force you to pay? According to a landmark decision by the Cour de Cassation (July 10, 2012), the answer is NO. The court ruled that an associate’s refusal to respond to a call for funds not foreseen by the statutes does not constitute a fault. Even if the lack of funds jeopardizes the project or causes a delay, the associate is within their rights. The reasoning is that forcing an associate to inject new cash is an “increase in engagement.” The Lesson: If you want to be able to force associates to cover cash flow shortages, you must write this obligation into the statutes from Day One. A simple clause saying “associates contribute to losses” is insufficient to demand cash during the life of the company.

What is NOT an Increase?

Conversely, a decision that merely reduces your rights (dilution) or deprives you of interest in the society is not necessarily an increase in engagement. For example, using current profits to cover past losses (rather than distributing them) has been ruled valid by majority vote, provided it follows the statutory rules.

Part 3: Types of Modifications

When we talk about “modifying statutes,” we are usually talking about five specific events.

1. Transferring the Head Office (Siège Social)

This is the most common modification.

• The Manager’s Power: To avoid convening a full assembly just to move the office down the street, statutes often allow the Manager (Gérant) to decide on a transfer within the same city or department. However, this decision usually must be ratified by the next Ordinary General Assembly.
• The Risk of Non-Ratification: If the Assembly refuses to ratify the move, the Manager’s decision becomes void. You technically have to move the office back (and pay for a new set of legal announcements!).
• Moving Abroad: Be very careful. If you move the Head Office outside of France, the company changes nationality. It is no longer a French entity subject to French law. Because this fundamentally changes the “social contract,” it always requires unanimous consent (Article 1837 Civil Code).
• Moving to the Manager’s Home: It is legal to move the HQ to the Manager’s personal home (domiciliation), but specific rules apply regarding the duration (often limited to 5 years if there are lease restrictions).

2. Changing the Name (Dénomination Sociale)

Perhaps “SCI Smith” causes confusion. You can change it. Note that changing the name requires a full update of the statutes and full publicity (Legal Gazette + Registry).

3. Extending the Duration (Prorogation)

Most SCIs are set up for 99 years. But if you set yours up for a shorter term (e.g., the duration of a mortgage), you must vote to extend it before the expiry date. Warning: If you miss the deadline, the company dissolves automatically. There is a “catch-up” procedure (Article 1844-6), where a judge can appoint a proxy to instigate the extension, but it is stressful and costly.

4. Changing the Financial Year (Date de Clôture)

You might want to align your SCI’s tax year with the UK tax year (April) rather than the calendar year. This is a statutory change. Interestingly, while this requires a deposit at the Registry, it is one of the few changes that does not strictly require an advertisement in a Legal Gazette (JAL), though the Registry (Greffe) must still be notified to update the K-bis.

5. Changing the Object (Objet Social)

This defines what the company does (e.g., “owning and renting property”). Changing this is rare. The Trap: The “Object” in the statutes is different from the “Activity” listed on your K-bis. If you change the statutory object but the actual activity remains “renting property,” you might not need a newspaper announcement. However, if the actual activitychanges, you must declare it.

Part 4: The Paperwork Marathon – Step by Step

You have held your vote. You have your signed Minutes (Procès-Verbal). Now the real work begins. French law demands “Publicity” to protect third parties. If you don’t publish it, it didn’t happen (legally speaking).

Step 1: The Legal Gazette (Journal d’Annonces Légales – JAL)

You must publish a notice in an authorized newspaper in the department of the Head Office. Since the “Pacte Law” of 2019 (updated April 2023), you can also use authorized online press services to publish this.

When is it Mandatory? You must publish an ad if you change:

• The Name.
• The Form (e.g., changing from SCI to SARL).
• The Capital (amount or variability).
• The Address (Head Office).
• The Duration.
• The Managers (Appointments/Resignations).

When is it NOT Mandatory? You generally do not need a newspaper ad for:

• Changing the closing date of the financial year.
• Changing clauses about AGMs or voting rights.
• Changing the “Object” (unless it changes the main activity listed on the K-bis).
• Changing clauses about share transfer approval (Agrément).

What must the Ad contain? The notice is strict. It must list the old details and the new details:

1. Name and Sigle (Acronym).
2. Form (SCI).
3. Capital amount.
4. Address.
5. Registration Number (SIREN) and the city of the Greffe.
6. The modification itself (e.g., “Effective [Date], the seat is transferred to [Address].”)

Step 2: The Deposit at the Greffe (Registry)

Within one month of the decision, you must file a dossier. Historically, this was done at the Centre de Formalités des Entreprises (CFE). However, note the April 2023 Update: The law has created a “Guichet Unique Électronique”(Single Digital Window) to replace the traditional CFE networks. This centralized digital platform is now the primary route for formalities.

What goes in the dossier?

1. The Form: Usually the “M2” form (Declaration of Modification).
2. The Evidence: A copy of the Minutes (Procès-Verbal) deciding the change.
3. The Statutes: A copy of the new statutes, updated.
   • Vital: The Manager must certify this copy. You must write “Certified true to the original” (Pour copie certifiée conforme à l’original) and sign it.
   • Update: Since July 2012, you only need to submit one copy (previously two).
4. The Proof of Ad: The “Attestation de Parution” from the Legal Gazette.
5. The Check: The filing fee (Greffe fees are regulated but inevitable).

Step 3: The BODACC

Once the Greffe accepts your file, they will update the RCS (Register of Commerce and Companies). They then handle the final step: publishing a notice in the BODACC (Bulletin officiel des annonces civiles et commerciales). You do not do this yourself. The Greffier does it within 8 days of the inscription. This is the final seal of “opposability” to third parties.

Part 5: The Transfer of Seat – A Special Case

Moving your office requires specific attention because it involves two jurisdictions if you move departments.

Scenario: You are moving your SCI from Paris to Nice.

1. Decision: Shareholders vote to move.
2. Old JAL: You publish an ad in a Paris legal gazette saying “We are leaving.”
3. New JAL: You publish an ad in a Nice legal gazette saying “We are arriving.”
   • The Nice ad must list the details of the old registration (Paris RCS number) and the new address.
4. Registry: You file at the new Registry (Nice). They will contact Paris to transfer the file.

Scenario: Moving to Belgium? As mentioned in the 2014 “SCI Financière Echo” case, it is possible to transfer a seat to another EU country without dissolving the legal entity, provided you follow the continuity rules of both countries. However, this is advanced legal territory requiring unanimous consent.

Part 6: Sanctions – The Price of Failure

What happens if you just… don’t do it? What if you change the address but forget to tell the Greffe?

1. Inopposability to Third Parties

This is the main civil sanction (Article L. 123-9 Commercial Code). If you haven’t published the change, you cannot use it against others.

• Example: You revoke a Manager but don’t publish it. The old Manager goes out and signs a contract with a supplier. The supplier can force the company to honor the contract because, as far as they knew, he was still the Manager.
• The “Bad Faith” Exception: If you can prove the third party knew about the change despite the lack of publicity, they cannot claim ignorance. (Case Law: Cass. Com, March 9, 2010).

2. Civil Liability of the Manager

Article 1840 of the Civil Code states that Managers are solidarily liable for damages caused by the failure to perform publicity formalities. If a shareholder or a third party suffers a financial loss because the statutes weren’t updated, the Manager pays personally. The statute of limitations is 10 years.

3. Criminal and Administrative Sanctions

• False Information: Providing bad faith/inaccurate information to the Registry can lead to a fine of €4,500 and 6 months imprisonment (Article L. 123-5).
• Injunction: Any interested party (or the Prosecutor) can ask a judge to force the Manager to file the documents, under threat of a daily fine (astreinte).
• Note on Repeal: The specific fine of €3,750 for failing to defer to an injunction (old Article L. 123-4) was repealed in 2012, but the power of the judge to impose daily penalties remains very real.

4. Nullity (The Nuclear Option)

If the modification itself violated the rules of the statutes (e.g., you voted by majority when unanimity was required), the decision can be annulled by a judge. This wipes the change from the record retroactively. The limitation period for this action is 3 years from the date of publication (Article 1839 Civil Code).

Conclusion: The “Living” Contract

For the English Investor, the key takeaway is that an SCI is a “living” contract. It is not a “set and forget” vehicle.

When you want to change the rules, you are engaging in a formal amendment of a contract that binds people together indefinitely. The law protects the minority (through the unanimity rule on liabilities) and the public (through the rigorous publicity requirements).

Your Checklist for Modification:

1. Check the Statutes: Can we vote by majority? Or do we need everyone?
2. Check the Law: Does this increase anyone’s engagement? (If yes -> Unanimity).
3. The Decision: Hold the Assembly or sign the Written Act.
4. The Ad: Publish in the JAL (or online service).
5. The Deposit: File the M2 and modified statutes via the Guichet Unique/Greffe.
6. The K-bis: Wait for the new birth certificate of your company.

It is a bureaucratic hurdles race, but clearing these hurdles is what keeps your French asset secure and your liability contained.

So, you have successfully navigated the French bureaucracy. You have your Société Civile Immobilière (SCI), the K-bis is in the safe, and the champagne has been popped. You are officially a “associé.”

But unlike owning a freehold in the Cotswolds or shares in a PLC, owning parts sociales (social shares) in a French civil company comes with a unique set of strings attached. These strings can feel like a safety net—or a golden cage.

Here is the comprehensive guide to holding, selling, and passing on your French shares.

1. You Own Rights, Not Bricks

It is vital to remember that parts sociales are not negotiable instruments like stock market shares. You cannot simply trade them on an app. They are titles representing your rights in the company contract.

This distinction matters because these shares are considered movable property (biens meubles), but they are strictly tied to the person holding them (intuitu personae). This means the identity of your fellow shareholders matters legally, not just personally.

2. The Liability Warning (Read This First)

Before we discuss profits, we must discuss risk. In a UK Limited company, your liability is usually limited to your shares. In a French Société Civile, it is different.

The Rule of Indefinite Liability Associates are indefinitely responsible for the company’s debts.

• The Good News: You are not jointly and severally liable (unlike in a commercial partnership). This means a creditor cannot come after you for the whole debt just because you have the deepest pockets. You are only liable in proportion to your share of the capital.
• The Procedure: A creditor can only knock on your door after they have unsuccessfully pursued the company itself first.

3. Your Rights as an Associate

It is not all risk; you have fundamental rights that cannot be taken away.

• The Right to Stay: You cannot be expelled from the company against your will unless the statutes explicitly provide for an exclusion clause (e.g., for misconduct) or in specific legal cases like personal bankruptcy.
• The Right to Know: You are not a silent partner. At least once a year, you have the right to access the company books, invoices, and contracts at the head office. You can also submit written questions to the manager, who must answer within one month.
• The Right to Vote: This is a public order right. You cannot be deprived of your right to participate in collective decisions, even if you are a minority shareholder.

4. The Exit Strategy: Selling Your Shares (Cessions)

Many British investors assume that if they want out, they can just sell their stake. In France, it is rarely that simple.

The Approval Trap (L’Agrément)

By default, under Article 1861 of the Civil Code, you cannot sell your shares to a third party without the unanimous agreement of all other associates.

• The Risk: If you fall out with your business partner, they can effectively block your exit by refusing to approve your buyer.
• The Fix: Your statutes can modify this. You can lower the majority required for approval or even authorize the manager to give approval.

The Spousal Trap

If you are married under a community property regime (common in France), buying shares requires caution. If you use shared funds to buy shares, you must inform your spouse. If you fail to do so, your spouse can claim 50% of the shares later or even have the purchase annulled.

• Selling: If the shares are community property, you cannot sell them without your spouse’s consent.

What If They Say No?

If your associates refuse your buyer, they cannot keep you prisoner forever. If they refuse approval, the other associates (or the company itself) are legally obliged to buy your shares.

• The Price Dispute: If you cannot agree on a price, it will be fixed by a court-appointed expert under Article 1843-4 of the Civil Code. Be warned: this expert valuation is binding and often conservative.

5. The Escape Hatch: Withdrawal (Retrait)

If you cannot find a buyer, you might try to simply “withdraw” from the company. This is a distinct legal right under Article 1869 of the Civil Code.

• Voluntary Withdrawal: This is only possible if your statutes allow it or if the other associates agree unanimously.
• Court-Ordered Withdrawal: If you are stuck, you can ask a judge to authorize your withdrawal for “just causes” (justes motifs).
  • What is a Just Cause? Courts have accepted withdrawal when a shareholder was excluded from meetings, deprived of information, or when family conflict destroyed the affectio societatis (the willingness to work together).
  • The Payout: You are entitled to the value of your shares. However, you remain liable for debts incurred before your withdrawal becomes official.

6. The “Unwanted Heir”: Succession Rules

For many, the SCI is an inheritance planning tool. But does the company survive you?

Continuity

The default legal position is that the society does not dissolve upon the death of an associate. It continues with the heirs or legatees. This means your children automatically become associates… in theory.

The Approval Clause

Careful drafting is critical here. Statutes can stipulate that heirs must be approved by the surviving associates to join.

• If Refused: The heirs do not get the shares. Instead, they are entitled to the value of the shares calculated on the day of death. The surviving associates must buy them out.
• Status of Heirs: Until they are approved (if approval is required), heirs cannot vote. However, they are entitled to the value of the shares.

7. Usufruct & Bare Ownership: Who is the Boss?

It is common to split share ownership: parents keep the Usufruct (income/usage) and children get the Bare Ownership(Nue-propriété).

• The Vote: The bare owner generally has the right to vote. However, for decisions regarding the allocation of profits (e.g., dividends), the vote is reserved for the usufructuary.
• The Reform: Since 2019, the law explicitly states you can agree otherwise in the statutes, but you cannot deprive the bare owner of the right to at least participate in decisions.
• Status: Legally, the bare owner is the “associate.” The usufructuary is not strictly an associate, though they have rights to provoke deliberations on issues affecting their income.

8. Pledging Your Shares (Nantissement)

Can you use your SCI shares as collateral for a loan? Yes, shares can be pledged (nantis). This follows the rules of a “pledge without dispossession.”

• The Process: It requires a formal written deed and registration.
• The Risk: If you default, the creditor can force the sale of your shares. Interestingly, your fellow associates have a “right of substitution”—they can step in and buy the shares before the creditor takes them, preventing a stranger from forcing their way into the company.

The English Investor Bottom Line An SCI is not just a passive bucket for real estate; it is a living contract with serious implications for your liability and your estate. The rules regarding share transfers are designed to protect the group from outsiders—even if that “outsider” is your own heir.

Review your statutes today. Do they require unanimity? Do they block heirs? Do they allow for withdrawal? Knowing these clauses now is better than finding out in a French court.

Disclaimer: Always consult with a French Notary or legal professional before signing contracts.

For many British investors looking across the Channel, the dream of owning French property—whether a Parisian apartment or a farmhouse in Dordogne—often leads to a specific three-letter acronym: the SCI (Société Civile Immobilière).

While the term SCI is common parlance, legally speaking, you are creating a Société Civile (SC). This is a civil company (as opposed to a commercial one) that serves as a legal framework for managing assets.

Navigating French administration can feel like a contact sport. To help you prepare, we have broken down the strict legal requirements and formalities. Here is what every English investor needs to know about setting up an SC or SCI in France.

1. The Basics: Legal Personality

First, understand what you are creating. A Société Civile is a distinct legal entity. Like other companies, it is endowed with “legal personality,” but only from the moment it is registered (immatriculation).

Before this registration, even if you have signed the papers, the company has no legal existence. It cannot hold rights or obligations. This means you must follow the registration procedure strictly to ensure your entity can actually own that property you are eyeing.

2. The “British Check”: Foreign Investment Rules

Before diving into the paperwork, British investors often ask: “Am I allowed to do this?”

The short answer is yes. French law posits that financial relations between France and foreign countries are free. The old requirement for prior authorization from the Ministry of Economy for direct foreign investments in non-reserved sectors has generally been abandoned.

However, there are nuances:

• Sensitive Sectors: Authorization is still required for investments in “sensitive” sectors (e.g., defense, cryptology, gambling, and data security).
• Standard Real Estate: For most standard real estate or business investments (non-sensitive), a simple administrative declaration is usually sufficient, and some operations (like creating a new subsidiary) may even be dispensed from this declaration.

Note: Be aware of the transparency rules. Entities established in France must declare accounts used abroad.

3. The Preparation Phase: Due Diligence

You cannot simply sign a document and walk away. The “pre-constitutive” phase involves heavy verification.

Identity and Capacity

If you are setting up the company as an individual, you must provide:

• ID: A copy of your national identity card or passport.
• Civil Status: A birth certificate (often with a translation if not in French), and a sworn statement of non-condemnation signed by the manager (gérant).
• Nationality: Your capacity to act is judged by your national law. For a British investor, French law will look to UK law to confirm your capacity to enter the contract.

The Spouse Factor

This is a critical step often overlooked by foreign investors. If you are married under a community of property regime (common in France, less so in the UK, but depends on your specific settlement):

• You may need to alert your spouse if you are bringing community assets (like cash from a joint account) into the company.
• In some cases, the spouse’s explicit consent is required.

4. Drafting the Statutes (The Constitution)

A Société Civile cannot exist without a contract, known as the statutes (statuts). While you can draft these privately (sous seing privé), you must have as many originals as there are parties, plus copies for the administration.

Mandatory Mentions: Your statutes must include the following:

1. Apports: What each associate is contributing (cash or property).
2. Form: The type of company (Société Civile).
3. Object: What the company will do (e.g., owning and managing real estate).
4. Name: The dénomination sociale.
5. Seat: The registered office address (siège social).
6. Capital: The total amount of share capital.
7. Duration: How long the company will last (max 99 years).
8. Functioning: How the company operates.

Appointing the Manager (Gérant) You must appoint a manager. This can be done in the statutes, but it is often smarter to do it in a separate act or a collective decision shortly after. This avoids having to rewrite the public statutes every time you change managers.

5. The Real Estate Hurdles: Pre-emption Rights

If you are creating an SC to hold rural property or land, you must be aware of French pre-emption rights.

• SAFER (Rural Land Agency): The SAFER has a right of pre-emption on agricultural assets. If you are buying shares in a company that owns agricultural land, SAFER can sometimes intervene.
• Anti-Avoidance: You cannot use a company structure just to hide a sale. SAFER has a control right for 5 years over the capital distribution of a company to ensure the company wasn’t formed just to bypass their pre-emption.
• Urban Pre-emption (DPU): In cities, municipalities have a right of pre-emption (Droit de Préemption Urbain) to acquire property for public interest projects.

6. The “Reprise des Actes” (Crucial for Investors)

Often, investors are in a rush. You might sign a “promise to purchase” a property before your company is fully registered.

• The Risk: Until registered, the company has no legal existence. If you sign a contract “on behalf of the company in formation,” the company must formally take over (reprendre) these commitments once registered.
• The Trap: This takeover is not implied. For example, if you sign a lease for the company, it does not automatically mean the company also takes over a related renovation contract. You must be specific about every act you want the company to assume.

7. The Registration Process: Step-by-Step

Once the paperwork is signed, the administrative marathon begins.

Step 1: Registration with Tax Authorities The statutes must be registered. If you are contributing real estate to the company, this requires a “merged formality” (formalité fusionnée) at the mortgage registry (conservation des hypothèques). If you are contributing real estate, a Notary is mandatory.

Step 2: The Legal Announcement You must publish a notice in a legal gazette (Journal d’annonces légales) in the department of your registered office. This notice must publicly list:

• The company name and form.
• The capital amount.
• The address.
• The object (summary).
• The names of the managers and associates with general power to bind the company.

Step 3: Filing at the Registry (Greffe) You must file an application for registration (using form M0) at the Greffe du Tribunal de Commerce or the CFE (Centre de Formalités des Entreprises). This application includes:

• The statutes.
• The proof of the legal announcement.
• IDs and non-condemnation statements for managers.
• Proof of the office address (lease or title).

Step 4: The K-bis Once the clerk checks that everything complies with the law, the company is registered. You will receive the Extrait K-bis, which is the company’s birth certificate and ID card combined.

8. Post-Creation

Once you have your K-bis, you aren’t quite finished.

• Beneficial Owners: You must declare the beneficial owners (UBOs).
• The Minute Book: You are required to open a register for the minutes of general assemblies. This must be initialed (coté et paraphé) by a judge or the mayor.
• Accounting: You must set up proper accounting books.

Final Word: Creating a Société Civile is a powerful tool for asset management in France, but it is a procedure strictly governed by civil code and decrees. A missing document or a vague clause in the statutes can delay your registration or leave you personally liable for contracts.