Loss of half of equity
Verified 24 April 2026 - Entreprendre Public Service / Directorate of Legal and Administrative Information (Prime Minister)
The loss of half of the share capital reflects a alarming financial situation for business (SARL/EURL, SAS/SASU, SA, SCA, SELARL/SELAS). The occurrence of this situation leads either to the dissolution from business, or to the obligation for partners to replenish equity.
The expression ‘ loss of half of the share capital ” means the situation in which a business finds, having regard to its losses, that its equity become less than half the share capital.
In other words, the net business has fallen sharply, to the point of representing less than 50% of the contributions made by the partners or shareholders (when creating the business or a capital increase).
FYI
The capital to be retained for this comparison is share capital shown on the balance sheet for the year in which the losses were recorded, that it is released or not, depreciated or not. In the event of a capital increase decided but not yet carried out at the balance sheet date, the capital before increase.
The equity shall be calculated by adding together the following:
- Share capital
- Reserves
- Postponement again
- Issuance premiums
- Investment grants
- Profit for the year (profits or losses)
- Regulated provisions
Example :
A SARL has a share capital from €5,000. It records a loss of €9,000 during its accounting year.
In addition, it has:
- €3,000 of reserves
- €2,000 carry forward again
- €1,000 of regulated provisions
Thus, the amount of equity is calculated as follows: (5 000 + 3 000 + 2 000 + 1 000) - 9 000 = €2,000.
Thus, equity (€2,000) become less than half of the share capital (€5,000 / 2 = €2,500).
The business is therefore in situation of loss of half of its share capital.
Warning
Such a situation reveals a financial imbalance important and requires the business to react.
Definition of equity
The loss of half of the share capital constitutes a signal of financial fragility for business, which must be brought to the attention of third party and may appear on the proof of registration of the business. This situation can degrade the image of the business and make more difficult to obtain funding.
The investors and the banks are generally more cautious in the face of a solvency risk of the business.
The suppliers may also strengthen their business conditions, for example by requiring additional guarantees or a cash payment.
In the case of equity that has become less than half of the share capital, the business must comply with a specific procedure that includes the following steps :
- Consulting partners
- Collective decision of the partners: for or against the dissolution of the business
- Publication in a legal advertising medium
- Registration of company formalities at the counter
FYI
This regulation is not not applicable to businesses in proceedings for backup, judicial recovery or bankruptcy. The same applies to partnerships (CNS), limited partnerships (SCS) and civil real estate businesses (ICS) which have no obligation to comply if their capital is depleted by losses.
1. Consultation of members
In the event of a loss of half of the capital, the business manager must organize a consulting partners (or shareholders). This consultation concerns the advisability of dissolve or not the business. We are talking about a early dissolution.
The consultation shall give rise to a vote to intervene in a 4 months delay fromaccount approval having revealed this loss.
2. Collective decision of the members
The partners, meeting in extraordinary general meeting, must vote for or against dissolution business. Therefore, it is the rejection of dissolution that allows the continuation of social activity (the most frequent case).
Majority conditions vary according to the legal form business (SARL/EURL, SAS/SASU, SA or SCA).
SARL/EURL
The dissolution of the business shall be voted on under the conditions of majority laid down for the statutory amendments :
- SARL incorporated before 4 august 2005 : the decision must be adopted by the partners representing at least the 3/4 of the shares. There's no no quorum required. A minimum number of participants present or represented at the AGE is not required.
- SARL incorporated after August 4, 2005 : the general meeting may validly deliberate only if the members present or represented possess at least 1/4 shares (on first notice) and 1/5 of these (on second summons). Otherwise, a new assembly must be convened within 2 months at the latest. If the quorum is respected, the amendments must then be decided by a majority of 2/3 of the shares held by the shareholders present or represented.
The decision shall be recorded in a record.
FYI
In theEURL, all the powers usually vested in the shareholders’ meeting in SARLs belong to thesingle associate which is pronounced in the form of unilateral decisions. There are no rules to be applied in terms of summoning, voting or quorum. On the other hand, each decision must be recorded on a special register held at head office. This register must be side and initialed by the judge of the commercial court, by the judge of the judicial court, or by the mayor or deputy mayor of the commune of the registered office.
If the manager of a SARL has not brought the partners together to rule, or if they have not been able to take a valid decision, any interested party may request the commercial court to dissolve the business. It is then a question of judicial dissolution.
SAS/SASU
Dissolution of the SAS shall be voted in the majority conditions laid down in the statutes.
The decision shall be recorded in a record.
FYI
In the SASU, all the powers normally vested in the shareholders’ meeting in the SAS belong to thesingle associate which is pronounced in the form of unilateral decisions. There are no rules to be applied in terms of summoning, voting or quorum. On the other hand, each decision must be recorded on a special register held at head office. It is recommended to do side and initialed this register shall be kept by the judge of the commercial court, by the judge of the judicial court, or by the mayor or deputy mayor of the commune of the registered office.
If the president of an SAS has not brought the partners together to rule, or in the absence of a collective decision, any interested party may request the commercial court to dissolve the business. It is then a question of judicial dissolution.
SELARL
The SELARL being subject, except in the case of specific provisions, to the rules applicable to SARLs, the methods of decision of the members regarding the dissolution or continuation of the activity follow the SARL regime.
It is therefore appropriate to refer to the majority rules provided for in SARL/EURL.
SELAS
The SELAS being subject, except in the case of specific provisions, to the rules applicable to SAS, the methods of decision of the members in respect of the dissolution or continuation of the activity follow the SAS regime.
It is therefore appropriate to refer to the majority rules provided for in the SAS/SASU.
SA
Dissolution of the SA must be voted on by qualified majority of 2/3 the votes of the shareholders present or represented.
The decision shall be recorded in a record.
SCA
Dissolution of the SCA must be voted on by qualified majority of 2/3 the votes of the shareholders present or represented.
The decision shall be recorded in a record.
Warning
In a SCA, dissolution must be approved by both shareholders (sponsors) and by all partners liable indefinitely (sponsored).
3. Publication in a legal advertising medium
The decision taken (dissolution or continuation of the activity) must be published in a support authorized to receive legal notices in the headquarters department, in order toinform third parties the evolution of the business.
The amending notice shall contain the following statements :
- Mention of the decision taken: dissolution or continuation of the activity
- Company name of the business
- Legal form of the business
- Address of head office of the business
- Unique identification number of the business (Siren number)
- Amount of share capital of the business
- Mention " RCS ” followed by the name of the city of the registry where the business is registered.
The publication of the legal announcement must be made in a one month delay from the time of decision-making. Once the publication has been made, a certificate of publication the notice of amendment shall be issued to the business.
4. Registration of company formalities at the desk
The decision taken must also be recorded on the website of the company formalities window :
The following documents must be transmitted:
- Copy of the Minutes of Proceedings dissolve the business or to maintain the activity
- Copy of the updated statutes: dated and certified as true to the original by legal representative
- Certificate of publication of the notice in a support for legal announcements
Please note
He is not no need to renew these disclosure formalities in each financial year, even if the equity is still less than half of the share capital.
Shareholders' equity less than half of the share capital (SARL)
Publicity of the decision of the partners (SARL)
Reduction of share capital, minimum threshold (SARL)
Shareholders' equity less than half of the share capital (SA and SAS)
Publicity of the decision of the partners (SA and SAS)
Reduction in share capital, minimum threshold (SA and SAS)
Reference to AS rules (FAS)
In the absence of dissolution (and therefore in case of continuation of activity), the business has a 2 years to regularize its situation. That period shall run fromAGO: titleContent having approved the accounts for the previous financial year and showing the loss.
Example :
If the financial statements for the year ended December 31, 2026 are approved in 2027 and result in losses of more than half the capital, business has until December 31, 2029 to regularize its situation, and not until December 31, 2028.
The business has 2 possibilities:
1. Replenish its own capital to a value of at least half of the share capital:
- Earning sufficient profits to absorb losses.
- Increase in share capital :: the business requests the partners to inject new funds (para cash contribution or in kind) or welcomes new investors. These investors will need to be fully informed of the reasons for the transaction in view of the business' future prospects.
- Waiver of debts: to clean up the situation, the partners decide to abandon the repayment of the sums they have made available to the business ascash advances on current account.
2. Reduce its share capital in order to reduce equity capital to at least half of the share capital:
- Reduction of capital motivated by losses.
- Operation known as “ accordion stroke ”, combining capital reduction and then capital increase.
Please note
These different processes can be combined.
The objective is therefore that, at the end of the two-year accounting period, the shareholders' equity should be at least equal to half of the share capital.
Once the business has regularized its situation, it can request the deletion of the reference to the loss of half the capital on its proof of registration. To this end, the minutes of the General Shareholders’ Meeting establishing the replenishment of the shareholders’ equity on the website of the company formalities office :
Warning
If, at the end of the two-year period, the shareholders’ equity has not been replenished to the extent of half of the share capital, the business is, in principle, liable to judicial dissolution at the request of any interested party.
The business that has not replenished equity up to half of its share capital within the 2-year period has a new 2-year deadline to reduce its share capital to minimum threshold.
Thus, at the end of this reduction, the share capital must be less than or equal to 1% of the balance sheet total for the last financial year.
With regard to the SA and SCA, to which the law imposes a minimum share capital of €37,000, this threshold corresponds to the highest value between 1% the total balance sheet of the business and €37,000.
Failing compliance at the end of this new periodHowever, the business is subject to various sanctions.
Shareholders' equity less than half of the share capital (SARL)
Shareholders' equity less than half of the share capital (SA and SAS)
If half of the share capital is lost, failure to comply with the regularization procedure may give rise to several sanctions :
- Dissolution of the business
- Challenging the civil liability of leaders
- On-call injunction
1. Dissolution of the business
If the business does not meet the deadlines set for consulting the partners (4 months) or regularizing the situation (2 years + 2 additional years), the latter incurs the dissolution. We're talking about forced dissolution or judicial dissolution.
Please note
The court may grant the business a maximum period of 6 months to carry out the necessary steps.
Dissolution can be requested at the commercial court by any interested party (e.g. competitor, partner). The quality of creditor business is not sufficient to characterize this statutory interest.
However, the judge may not order the dissolution if, on the day on which he decides on the merits, the regularization has taken place.
2. Impugning the civil liability of the leader
The civil liability of the leader can be questioned if its inaction prevented the regularization of the situation (ex: the manager did not consult the partners). Thereafter, if the business is the subject of a bankruptcy, he can be convicted for mismanagement to settle all or part of the business' liabilities. This is what we call “ meeting the social liability ».
The sums paid by the convicted leader will be distributed among all creditors in proportion to their claims.
This sanction is combined with the dissolution of the business.
3. On-call injunction
The judge assigned to the supervision of the RCS: titleContent may direct on-call the business to carry out the advertising formalities if it is out of time. In other words, the business will have to pay a sum of money per day, week or month of delay.
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Definition of equity
Shareholders' equity less than half of the share capital (SARL)
Publicity of the decision of the partners (SARL)
Reduction of share capital, minimum threshold (SARL)
Shareholders' equity less than half of the share capital (SA and SAS)
Publicity of the decision of the partners (SA and SAS)
Reduction in share capital, minimum threshold (SA and SAS)
Reference to AS rules (FAS)
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