Conditions, procedure, consequences and financing of a share buyback. Here are all the points you need to consider before taking the plunge.
What is a share ?
The share capital of certain companies such as SARL, EURL or SCI is represented by shares. A share is a property title that corresponds to a share of the company’s capital.
The distribution of shares among the partners of a company is provided for in its articles of association. Each share carries rights and obligations.
In principle, shares are not negotiable, which means that they are not freely transferable. As such, the sale of shares is subject to very specific rules.
What are the rules to follow for the repurchase of shares?
In order to buy back shares as a partner or as a third party, it is necessary to first meet the requirements of the approval procedure. The objective is to obtain the agreement of the partners of the company on the transfer of the shares of SCI or SARL and consequently on the arrival of a new partner.
In order to favour the good understanding of the partners and the stability of the company, it is necessary to obtain the favourable vote of the majority of the partners according to the rules provided for in the articles of association. In the absence of statutory details, the majority of the partners is equivalent to the favourable vote of the partners holding at least half of the shares. On the other hand, depending on the type of company, different rules may be applied.
The decision of approval must be taken in the framework of an extraordinary general meeting convened by the transferring partner. The proposed transfer must be attached to the notice of meeting.
However, if the person who proceeds to the purchase of the shares is another partner, the spouse, the ascendant or the descendant of the transferor, it is not necessary to go through the approval stage. However, as an exception, the articles of association may provide for an approval clause even in these cases.
What does the transfer of shares consist of ?
The repurchase of shares allows to enter the capital of a company. It allows to proceed to the repurchase of a company partially or totally depending on the quantity of shares purchased.
The taxation of a transfer of shares is to be taken into account and varies according to the legal status of your company.
How to proceed to the purchase of shares ?
In addition to the approval procedure, several steps must be respected for the purchase of shares.
First of all, a deed of transfer must be signed. It must mention :
- the identity of the transferor
- the identity of the transferee
- the price of the transaction;
- the respect of the approval clause, if any;
- the date of transfer of ownership of the securities;
- a non-competition clause if it has been negotiated;
- the publicity formalities.
Next, the company’s articles of association must be amended to take into account the new distribution of the share capital. Similarly, if the sale of the shares leads to a change of manager, the corresponding clause must be modified and an announcement must be published in a newspaper of legal announcements to warn third parties of the change of manager.
These changes must be registered with the tax authorities and the clerk of the Commercial Court. The file filed must contain
a copy of the minutes of the extraordinary general meeting ;
a copy of the updated articles of association;
the completed and signed M3 form;
a certificate of publication in a newspaper of legal announcements in case of change of manager;
a copy of the transferee’s identity document, a declaration of filiation and a certificate of non-conviction.
In addition, once the deed of sale has been signed, the company must be officially notified of the purchase of the shares by means of a bailiff’s deed or a deposit at the company’s head office against acknowledgement of receipt.
How to obtain a loan for the purchase of shares ?
To finance the purchase of shares, you can take out a bank loan.
You can borrow on a personal basis or create a holding company whose corporate purpose is precisely to acquire company shares.
To study your request, the bank will take into account your borrowing capacity as well as the situation of the company whose shares are bought. A personal contribution of about 30% of the amount of the transaction is generally required.
You now have all the key information in hand, so don’t hesitate to start the process of buying back shares. You have the possibility of being accompanied by a professional.