SCI Share Purchase: Procedure, taxation and practical advice

The SCI share buyback is an important operation for the partners of a civil real estate company (SCI). Whether for a family transfer or a transfer of shares between partners, this procedure can be an effective way to manage and transfer real estate assets. Discover the main steps of this process, the associated tax implications, as well as practical advice for successfully buying back company shares. We will also cover the legal aspects and solutions to optimize this operation according to your objectives.

Understanding the Repurchase of Shares in an SCI

The repurchase of shares in an SCI is a common but complex operation, which can occur for various reasons, whether it is a transfer of assets, internal reorganization or transfer between partners. This process requires a good understanding of the legal, tax and financial issues to avoid any unpleasant surprises and ensure that the operation is carried out in compliance with legal rules. In this first part, we will look in detail at what the repurchase of shares in an SCI involves, its reasons, as well as the legal aspects that should be mastered before embarking on this procedure.

The reasons for buying back shares in a SCI

There are several reasons why partners may decide to buy back shares in an SCI:

• When a partner wishes to transfer his assets to his heirs, he can choose to buy back shares to transfer them to his co-partners or descendants. This option allows the donation to be prepared gradually, while respecting the tax rules relating to levies and inheritance tax . The purpose of this approach is to minimize the taxes linked to this transfer, in particular by taking advantage of certain allowances or by adjusting the price of the shares transferred according to the value of the assets.
• Sometimes, one person or several partners decide to withdraw from the company or reduce their stake in the capital. In this case, they can transfer their shares to other partners or to a third party, according to the pre-emption or approval clauses in the articles of association of the SCI. It is important to note that the transferee must comply with the conditions set by the articles of association and that the transfer of shares often results in a revaluation of the company's securities and share capital.
• The repurchase of shares may also be motivated by a desire to reorganize the management of the real estate assets held by the SCI. This may be necessary to rebalance decision-making rights or to better manage the involvement of each partner in the management of the company. For example, a partner wishing to increase his decision-making power may repurchase shares held by another transferee.

Legal implications of the repurchase of shares

The repurchase of shares entails legal obligations for the partners of the SCI . It is essential to comply with the formalities provided for by law and the company's statutes. Among the steps to be taken, we can cite:

• When buying back shares in a SCI, it is necessary to update the company's statutes to reflect the new distribution of shares. This involves an extraordinary SCI general meeting of partners, during which the modification of the statutes will be validated.
• All partners must be informed of the transaction and, depending on the statutes, it may be necessary to obtain their agreement before finalizing the transfer. This agreement can be formalized during the meeting, depending on the operating rules of the SCI. The date of this meeting is essential to comply with the formalities of the transfer.
• A deed of transfer of shares must be drawn up, signed by the parties concerned (the transferor and the transferee) and registered with the tax authorities. This deed of transfer must also comply with the rules of form provided for by law in order to ensure its validity, and allow for clear management of the shares within the company. The amount of the transfer as well as the social security contribution rates must be specified, depending on the value of the shares transferred. The registration of this deed must be done within a specific time limit, to avoid any incorrect taxation.
• In the event of a transfer of shares, it is important to check the tax implications , in particular the taxation on capital gains generated by the sale of the shares. Depending on the tax regime chosen, this taxation may vary and it is therefore recommended to carefully calculate the price of the shares before the transaction to limit the tax impacts.

The repurchase of shares in an SCI must be carried out with in-depth knowledge of legal and tax procedures. It is a structured process that involves collective decisions and important formalities, such as the valuation of shares, the drafting of a deed of transfer, and the updating of the statutes. The partners must be vigilant about pre-emption rights, approval clauses, as well as the taxes or social security contributions that may result from them. In addition, compliance with the registration deadline and the correct revaluation of the securities are essential to ensure the regularity of the transaction and avoid any unpleasant tax surprises.

Follow the procedure for buying back shares in an SCI

The procedure for buying back shares in an SCI may seem complex, but it is in reality well regulated by the legislation and statutes of civil companies. It includes several key steps that ensure the validity of the transaction and compliance with tax and legal rules. Let's examine the main steps to follow.

Assessment of the value of shares

One of the first steps in the share buyback procedure is the valuation of the shares. This valuation must be carried out objectively to determine a fair buyback price for all parties concerned. Several factors must be taken into account to determine the value of the shares of the SCI:

• The value of the real estate assets held by the SCI . This includes the appreciation of the assets in the current market, as well as their holding and possible changes in their value over time.
• The value of the shares also depends on the debts and obligations of the SCI. A poorly valued share buyback can lead to conflicts between partners or incorrect taxation of the capital gain. The valuation must be carried out carefully, taking into account the purpose of the SCI and the financial elements, in order to minimize tax and tax risks, including social security contributions applied to the gains.

Obtain the agreement of the partners

Once the assessment has been carried out, it is necessary to obtain the agreement of the partners to validate the transfer of shares. Depending on the statutes of the SCI , this approval may be subject to specific conditions, such as the presence of a pre-emption clause or an approval clause.

The articles of association may specify that the other partners have a right of pre-emption, which allows them to buy back the shares proposed for sale as a priority. This approval may take place at a general meeting or another meeting, depending on what is specified in the articles of association. The date of this meeting must be respected to guarantee the validity of the transaction and to ensure that the transferee is accepted by the remaining partners.

Formalization of the transfer of shares

After the partners' agreement, it is essential to formalize the transfer of the shares. This involves drafting the transfer deed. This document must be signed by the stakeholders and sent to the tax authorities for registration of the transfer deed.

Cerfa form No. 2759 must be completed and filed with the relevant tax authorities in order to register the transfer deed and pay the registration fees. The deadline for filing and registering the documents is important for the transaction to be considered legal and to avoid additional taxes in the event of a delay. Social security contributions may also apply if the value of the transferred shares is lower than their estimate, which could impact the income received by the partners. Transfer fees may vary depending on the amount of the sale, and it is essential to understand the tax regime applied to the transaction.

Update of statutes and registers

Once the transfer of shares has been made, it is necessary to update the statutes of the SCI to reflect the new distribution of shares . This involves a general meeting and registration of the changes in the register of partners, with notification to the registry of the commercial court. This modification must be made within a reasonable time to ensure the regularity of the information and avoid any legal ambiguity.

Updating the articles of association is also essential to avoid any ambiguity about the person of the new partner and to ensure that transfers of shares to third parties are fully compliant with the provisions of the company. In addition, this allows for taking into account any new clauses or rules concerning the transfer or repurchase of shares, as well as any adjustments concerning the share capital rates or taxes due.

The repurchase of shares in an SCI is a legal transaction that must comply with a certain number of formalities. This includes the correct valuation of the shares, obtaining the agreement of the partners, formalizing the deed of transfer and updating the company's statutes . By following these steps, you ensure not only the validity of the transaction, but also the tax and legal compliance of the transfer of shares in compliance with the rights of the partners and the company itself.

Taxation and costs of buying back shares in SCI

The repurchase of shares in an SCI has tax consequences that are important to anticipate. The taxation related to the repurchase depends on several factors, such as the capital gain realized, the nature of the SCI (IR or IS), and the situation of the partners. This process requires a good knowledge of the tax rules, the date of transfer, as well as the rates and potential allowances applicable.

Registration fees and their calculation

The repurchase of shares in an SCI is subject to registration fees, which are calculated based on the value of the shares transferred. As a general rule, these fees are paid by the buyer (or transferee), but they can also be divided between the parties according to the agreed terms. These fees are determined on the basis of the transfer of the shares, assessed in accordance with tax rules.

The calculation of registration fees varies depending on the amount of the transaction. In France, for example, registration fees for the transfer of SCI shares may be a fixed or progressive rate depending on the price of the transaction and the nature of the transfer (between partners or to third parties). The applicable rate generally varies between 3% and 5%, depending on the value of the shares transferred and may require the intervention of a real estate valuation expert.

Possible exemptions

Certain tax exemptions and reductions may apply in specific cases, in particular for family transfers or the transfer of assets by donation. For example, if the object of the transfer is a family transfer, inheritance tax deductions can reduce the tax burden of the transaction. In such situations, a special deduction is provided, especially when the transfers are made between close relatives.

The capital gain realized on the sale of shares

When a partner sells his shares, a capital gain may be generated if the sale price is higher than the initial acquisition value. This capital gain is subject to tax, the calculation of which depends on the tax regime of the SCI . It is therefore essential to understand how this capital gain, also called "value", will be taxed to avoid any surprises.

SCI subject to IR (Income Tax)

If the SCI is subject to the IR tax regime, real estate capital gains will be included in the partner's income, and will be taxed according to the progressive income tax scale. However, exemptions may apply depending on the length of time the shares are held or the amount of the capital gain made.

SCI subject to IS (Corporate Tax)

For an SCI subject to corporate tax (IS), the capital gain made is subject to the corporate tax rate, and this rate may be less advantageous than that of the IR regime. In addition, depending on whether a transfer is made for consideration or free of charge, the conditions for calculating the tax vary.

Other costs related to the redemption of shares

In addition to registration fees and capital gains taxes, the repurchase of shares in an SCI may result in various additional costs. These costs include:

• Notary fees for drafting the deed of transfer of shares, especially if the SCI owns real estate assets. The notary's fees are calculated based on the amount of the transaction and may vary depending on the complexity of the formalities.
• If there is difficulty in estimating the value of the shares, an independent expert appraisal may be required to accurately assess the shares. This appraisal is generally charged as an additional fee and may be essential if the shares are transferred to a third party.
• Finally, administrative costs are often incurred for the amendment of the company's articles of association. These amendments include updating the SCI's registers and registering with the commercial court registry. In some companies, these costs may include the preparation of documents relating to the shareholders' meeting.

These costs and procedures are all elements to be anticipated to guarantee a successful transfer in compliance with tax and legal rules.

Practical advice for optimizing the repurchase of shares in SCI

One of the main strategies to optimize the taxation related to the repurchase of shares in an SCI is to anticipate a gradual repurchase or to apply certain tax measures to reduce registration fees, the transfer deed and the capital gains tax. Here are some recommended approaches to minimize taxes and optimize the tax regime of the transfer:

Family buyout and progressive donation

When the buyout is between members of the same family, considering a gradual donation can be advantageous. This approach allows you to benefit from tax deductions on registration fees and avoid a high tax rate on the transfer of shares. In this case, the date of the buyout is essential to properly plan the application of these tax advantages. In addition, the formalities may include an assessment of the real estate securities to guarantee a transfer price of the shares in accordance with the rules of the tax administration. It is important to consult a meeting of partners to obtain approval for this approach, ensuring that a certain period of time is respected before the transfer.

Sale at a price lower than the real value

In some cases, it is possible to transfer the shares at an amount lower than their real value. However, this approach involves tax risks, particularly if the securities are valued too low, which could result in additional social security contributions. A meeting of partners must generally approve such a transaction to validate the transfer in accordance with the company's articles of association. Caution is required to avoid any conflict with the administration regarding the tax regime of the transfer applied. It is essential that the transferee respects the values and objectives of the SCI.

Anticipate the Redemption to Reduce Costs

Anticipation of the repurchase of company shares can also be a solution to reduce the tax burden. By reorganizing the structure of the SCI, it becomes possible to reduce transfer costs and optimize transfer rights. This also involves a modification of the company's statutes, integrating adapted clauses such as pre-emption or approval clauses. These clauses make it possible to limit transfers of company shares to third parties and to organize more efficiently the arrival of new partners. In addition, a period of holding the shares before the sale makes it possible to benefit from certain tax deductions on the capital gain, which can reduce the final cost of the repurchase. The sale of the transferred shares can thus be planned to reduce value added taxes.

Using the right legal mechanisms to reduce costs

Reducing the costs associated with the repurchase of shares is not limited to registration fees and capital gains . Legal mechanisms also play a key role in this optimization. For example:

• An approval clause in the SCI statutes makes it possible to control the quality of the transferee and to ensure that the transfer of shares respects the values and objectives of the company. This mechanism is particularly useful for avoiding unwanted transfers to outside parties.
• In SCIs with significant real estate assets, structuring transfers in the form of legal arrangements makes it possible to reduce the additional costs associated with formalities. In this context, choosing an advantageous tax regime for the transfer of shares for the repurchase, such as the specific social security regime or a possible reduction, can reduce the taxes to be paid and the costs associated with capital.

Finally, opting for the progressive scale of income tax in certain situations can be a solution to limit taxation, particularly in the case of the transfer of shares to relatives. Tax optimization should not be done to the detriment of good legal practices. On the contrary, it must be done within a clear and well-defined framework to ensure the sustainability of the SCI and the satisfaction of all parties involved. It is essential to consult a tax or legal expert to ensure that each step is properly respected and that the transaction takes place under the best possible conditions.

Conclusion

In summary, the SCI buyout of shares is a strategic operation that can have major implications for the management and transmission of real estate assets. Although it is complex, this procedure offers opportunities to adjust the distribution of share capital, optimize management and facilitate the transmission of assets . Understanding the legal, tax and financial issues is essential to successfully carry out this operation. With adequate preparation and appropriate tax strategies, the buyout of shares can be an effective way to meet the needs of the partners while preserving the sustainability of the SCI.