Financial Statements and Bylaw Amendments

Financial Statements

• Types of documents: balance sheet, income statement, explanatory notes, cash flow statement, reports of directors, statutory auditors, and auditors

• Actions to declare void or invalid: financial statements not conforming to the law are considered null (limitation art. 2434-bis)

• Reserves and Dividends: not all profits are distributable as dividends; 5% of annual profits are set aside for previous losses, deducted until the reserve reaches 20% of the share capital.

Amendments to Bylaws

• These refer to all changes in the bylaws or incorporation document.
• Procedure (art. 2346 c.c.):
  • Extraordinary shareholders' meeting resolution. (This may delegate amendment competence to an administrative body per art 2365, c.c.).
  • Non-listed companies require higher deliberative quorums for the second call of shareholder meetings.
  • Notary checks (art. 2346, par. 1, c.c.): notaries check the conditions, with an eventual judicial control if needed – minutes are compiled by a notary.
  • Recording in the Business Register: notary applies for registration within 30 days; the notary must promptly notify directors if the conditions aren't met; directors have options:
    • convene a shareholders' meeting to take action.
    • petition a court to verify the conditions.
• Effectiveness: the bylaws are not effective until legally recorded in the Business register.
• Legal Publicity: Updated bylaws are filed alongside the amendment resolution.
• Amendments: The removal or modification of clauses contained in the bylaws, or the introduction of new clauses, are considered amendments.

Right of Withdrawal

• The shareholder's right to withdraw from the company and receive the value of their shares.

• Grounds:

  • Mandatory: cannot be changed by the bylaws (e.g., amending the company’s purpose, transforming the company, revoking the liquidation status, etc.).
  • Derogable by bylaws
  • Provided for by bylaws (closed companies)
  • Indefinite Term Companies (art. 2437, par. 3, c.c., non-listed companies)
  • Delisting (listed companies, art. 2437-quinquies, c.c.)

• Terms and Procedure:

  • Registered letter
  • Within 15 days from the recording of the resolution in the Business register
  • If the withdrawal doesn't refer to a resolution, within 30 days from the day the shareholder became aware of the fact.

• Non-transferability & Deposit of shares: the right of withdrawal can't be exercised according to art. 2437-bis, par 3, c.c.

Criteria for Share Value

• Criteria to determine share value (art. 2347-ter, c.c.):
• Unlisted companies limited by shares: directors determine the value.
• Listed companies limited by shares: calculated mathematically.
• Shareholders' opposition: court expert may calculate the value.

Procedure to Liquidate Shares

• Offer to other shareholders (non-listed companies); or offer on regulated markets (listed companies)
• Reimbursement through purchase of own shares
• Capital reduction (with creditors' opposition) or dissolution of the company

Share Capital Amendments

• Increase and Decrease: the civil code has specific regulations for changes in share capital, including transformations, mergers, and divisions.
  • Increase types: material (paid) increase, nominal (free) increase
  • Decrease types: material, nominal (reduction for losses), cases other than losses where the reduction is mandatory
• Increase Procedure:
• New financial resources / new contributions
• Issuance of new shares
• Payment conditions (previous contributions paid in full)
• Time limits for subscriptions (maximun 5 years)
• Delegated capital increase allowed
• Non-divisible and divisible increase (if bylaws allow)
• Reduction Procedure:
• Causes and Conditions
• Ways of execution
• Recording, execution and creditors' opposition

Additional Directives (EU)

• Directives regarding decisions on increases and decreases of capital (including limits, periods, and provisions regarding creditors).
• Directives regarding payment up, issues arising from pre-emptive rights and safeguards for creditors in case of reduction affecting their claims.