The reconstitution of equity capital is an operation which consists for a company whose capital has fallen below the legally fixed minimum to proceed to a regularization of its situation.

Indeed, Articles L. 223-42 and L.225-248 of the Commercial Code requires companies (SARL, EURL, SA, SCA, SAS, SASU) to always have equity capital of at least half of its if not, they will have to reconstitute said capital either by increasing it, reducing it or freely revaluing it.

NB  :

  • Share capital: This is all the contributions (contributions in kind and in cash) made and made available to the company by the partners or shareholders. It corresponds to the starting fund.
  • Equity: By equity, we mean all the resources available to a company. In addition to the share capital, they are made up of reserves (previous undistributed profits), retained earnings (undistributed and non-reserved profits), premiums and the result of the financial year net of dividends.

Thus, constituting a guarantee for companies as to their access to financing because it presents a faithful image of their financial health, equity or equity requires reconstitution when it is below the legal minimum.

Several possibilities are available to managers or directors to proceed with this regularization:

1- The increase of the social capital: It is the most frequent operation, because it allows to breathe a new soul into the company. Concretely, for the company whose capital is below the legal minimum, it is a question of injecting it with new liquidity either by calling on new investors in the event of the issue of new shares or shares or by incorporating social reserves. . Roughly speaking, it is a question of admitting new partners or shareholders or quite simply of incorporating the retained earnings in the capital to have new resources.

The increase can also be done by contributions in current account. That is, loans granted by an associate or associates of the company.

2- Reduction of share capital: In addition to increasing share capital, the reconstitution of equity can also be considered via the mechanism of its reduction.

However, this operation is not possible for all companies. Indeed, when the equity capital of a company is lower than the legal minimum, this supposes that this one has assets which are lower than its liabilities. However, the reconstitution of shareholders’ equity should make it possible to settle this liability.

However, the reduction in capital may also precede an increase in it. It is also a technique frequently used by companies. Because by reducing the capital to purge the liabilities, the increase comes to drain the third-party capital and thus solidify the confidence of the company with the partners.

3- Free capital revaluation: (Art. L123-18 of the Commercial Code).

Indeed, the reconstitution of a company’s own funds can also be done through the free revaluation of its capital. In fact, an operation which consists in re-evaluating the elements of tangible and financial assets, intangible assets being excluded in order to incorporate the difference that could exist between the capital investment and the date of its revaluation in said capital to reconstitute equity. In the business world, an increase in the value of the starting fund is quite possible. This is also a sign that augurs the profitability of the company. Thus, when the company sees its equity reduced, it can reassess the starting fund and incorporate the surplus into the capital. This therefore makes it possible to regularize the situation of the company.

However, the decision of the free revaluation of the capital is opposable to the partners.

NB  : Whatever the choice of the mechanism by the company with a view to reconstituting its own funds, the procedure is carried out in accordance with L.223-248 and L.223-42 of the Commercial Code.

The protection of know-how in the company:

Often neglected in SMEs, the legal protection of know-how is a significant instrument in the performance of companies. What is commonly called know-how is in fact the secret to the success of many companies.

It is recognized by the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), annexed to the Marrakesh Agreement of April 15, 1994, establishing the WTO. It is also protected in domestic law, both civil and criminal.

Thus, before considering its legal protection (2), it would be wise to recall what is meant by this expression (1)

1- Definition:

If it is not an expression unknown to the legislator, nevertheless the know-how does not have a legal definition strictly speaking.

Indeed, it is in the doctrine that we find some answers as to the definition of know-how. Thus, it is conceived as the set of theoretical, technical and practical knowledge available to a person or a professional body having commercial value and is in principle unknown to the public (Cass. 3e civ., 13 July 1966, no 64-12.946, Bull. civ. III, no 358, p. 316, JCP ed. G 1967, II, no 15131, note Durand P.)

In fact, know-how is linked to professional experience. Obtained through effort and investment, it is acquired time or professional experience. And as a result, has a market value.

This is why it should be protected to reward the creative genius of its author and thus encourage innovation.

2- The protection of know-how:

If know-how does not enjoy the same protection as property rights, the fact remains that it is also protected, even if this is because of its importance for companies. It should be emphasized, however, that know-how is not excluded from patentability when it fulfills the conditions.

Thus, several protection mechanisms can be considered. They are most often combined elsewhere.

a) The protection of know-how by contract law

In fact, the best protection of know-how is guaranteed by contract law. Indeed, the holder of the know-how can use the contract as an instrument to protect his rights. Thus, by including confidentiality or discretion clauses in employment or collaboration contracts allows it to bind its employees or partners by obligations of non-disclosure and non-exploitation beyond what has been agreed in the contract.

In doing so, in the event of non-compliance with these clauses, the holder can implement the mechanism of contractual liability to seek compensation for the damages suffered in accordance with article 1231-1 of the civil code (CA Rouen, Jan. 13, 1981). , PIBD 1981, III, p. 62).

Similarly, the holder of the know-how can initiate tort liability for unfair competition by a competitor under the terms of article 1240 of the civil code.

Finally, the protection of know-how can be envisaged by the mechanism of the communication contract which consists in subordinating the exploitation of know-how by others to the payment of a known sum of money in return. As a result, the holder undertakes to communicate the know-how to said person.

b) Criminal protection of know-how

In addition to the civil protection of know-how, it is also protected under criminal law.

Thus, in the event of a confidence opinion from a partner who breached his obligations or non-compliance with the obligation of discretion by an employee or collaborator, the holder of the know-how may initiate criminal proceedings in accordance with Articles respectively. 314-1 and 226-13 of the penal code.

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