An investor wants to take a stake in my company: where should I start legally?

Objective

Bringing an investor into the capital requires immediate definition of the legal mechanics, governance and timetable. This guide provides an operational roadmap (SAS/SARL), useful legislation and documents to prepare to avoid invalidity and disputes.

Step 1 — Assess your current framework

1) Company form and articles

• SARL: any transfer of interests to a third party requires shareholder approval (art. L.223-14 C. com.; see Legifrance). For a capital increase reserved for a third party, the collective decision in practice admits the new shareholder and must meet statutory majority requirements.
• SAS: approval and pre-emption rights derive from the articles. Carefully check approval, pre-emption and exclusion clauses, and the procedure for waiving preferential subscription rights.

2) Cap table, existing rights and commitments

• Map securities (founders, employees, BSA/BSPCE) and specific rights (pre-emption, enhanced information, veto) already in place.
• Inventory constraints: existing shareholders' agreement, security interests, key contracts (change of control), commitments to public funders.

If you anticipate a structured round, reread our guide to the legal steps in a seed funding round to align milestones.

Step 2 — Choose the entry route: transfer, capital increase or hybrid securities

• Transfer of existing securities: entry by buying from a shareholder. Requires approval (SARL) and/or compliance with the articles (SAS). No funds enter the company, but shareholders change.
• Capital increase (cash and/or in kind): new securities issued and subscribed by the investor. Amends the articles and dilutes all shareholders. The form-dependent regime refers to capital increase provisions (see “Capital increase” subsection on Legifrance). For practical mechanics, follow the capital increase procedure.
• Hybrid securities (BSA/BSA-AIR, OCA/ORA): more flexible for iterating on valuation, but require precise resolutions and an adapted shareholders' agreement. Conditions for issuing bonds and convertibles refer to capital payment and issuance-capacity rules (see legislation on Legifrance). For a bridge round, see our guide to Convertible notes and BSA-AIR.

Step 3 — Structure negotiations (NDA, letter of intent, term sheet)

• NDA before sharing sensitive information (finance, IP, roadmap). Carefully define confidential information and duration.
• Letter of intent / Term sheet: amount, pre/post‑money valuation, instrument (capital increase/convertibles), timetable, exclusivity, conditions precedent, preferential rights (liquidation preference, anti-dilution, information), governance. See our guide to understanding and negotiating a term sheet.

Tip: start thinking about liquidation preference and anti-dilution clauses early to avoid renegotiating under pressure.

Step 4 — Due diligence and data room

Build a structured data room (governance, contracts, IP, compliance, HR). This accelerates legal due diligence and reduces the risk of overly broad conditions precedent.

• IP: ownership documents (trademarks/patents, evidence of founder/provider rights assignments). Consult the INPI for registrations.
• GDPR: processing records, DPAs with processors, data security. Good practices are available from the CNIL.
• Commercial contracts and key accounts (termination clauses, exclusivity, penalties).

Step 5 — Document the transaction

1) Corporate resolutions and articles

• Draft proposed resolutions (extraordinary general meeting): waive preferential subscription rights if necessary, issue securities, delegate powers, amend the articles accordingly.
• Prepare subscription forms, payment certificates and updated articles (new capital allocation).

2) Shareholders' agreement

The agreement secures economic and governance rights: pre-emption, non-dilution, vesting, good/bad leaver, information, drag/tag, mediation/arbitration. Clause details in our guide shareholders' agreement: essential clauses.

Step 6 — Deposit funds and complete formalities

• Deposit cash contributions in a blocked account with a bank, notary or CDC, supported by a deposit certificate. Usual payment thresholds are 50% on subscription for SAS/SA and 20 % for SARL, with the balance within 5 years (see Service-Public – Capital deposit).
• Decision/record confirming completion of the increase after receipt of funds, then registry filing with documents (minutes, updated articles, funds certificate). Refer to Service-Public Pro for the current list.

Legal basis for the increase and formalities: Commercial Code – Capital increase.

Step 7 — Tax & regulation: what not to forget

• IR-PME (income tax reduction): for an individual investor, check eligibility (company conditions, caps, evidence to retain) and current rates on Service‑Public – IR‑PME.
• AMF regulation: if you use an investment services provider (PSI) or approach the public, check obligations (status, investor information) with AMF – Providing an investment service and guidance on KIDs/prospectuses AMF DOC‑2011‑22. For public offerings, refer to the Prospectus Regulation on EUR‑Lex.
• Investor information: the AMF outlines risks and information documents to provide before investment, in its investor resources (AMF – Understand before investing).

Step 8 — Typical timetable and responsibilities

• Days 0–10: NDA, term sheet, data-room preparation.
• Days 10–30: due diligence and document drafting (shareholders' agreement, resolutions, subscription forms).
• Days 30–45: sign instruments, deposit funds, hold extraordinary general meeting.
• Days 45–60: record completion, registry formalities, update cap table and registers.

Led by the director with support from the lawyer and accountant. Plan electronic signatures to streamline timing.

Special cases and points to watch

• Bonds/convertibles (OCA/ORA): check prior capital payment and issuance capacity for your company form. The regime is governed by the Commercial Code (Legifrance).
• BSPCE & incentives: remember to align your pool before the round. See our guide to BSA, BSPCE, AGA.
• Approval and pre-emption clauses: in SAS companies they arise from the articles; in SARL companies approval for a third-party transfer is statutory (art. L.223‑14, Legifrance).
• Invalidity and penalties: a capital increase with defective meeting notice or without valid waiver of preferential subscription rights may be annulled. Communications amounting to a public offering without compliance with AMF rules may be penalised (see AMF links above).

Operational checklist

• Check articles (approval, pre-emption, preferential subscription rights) and existing shareholders' agreement.
• Negotiate and sign NDA, then term sheet (valuation, rights, timetable).
• Prepare data room (IP/INPI, GDPR/CNIL, contracts, employment).
• Draft shareholders' agreement, extraordinary meeting resolutions, subscription forms.
• Deposit funds (certificate), hold extraordinary meeting, record completion.
• Registry formalities (minutes, articles, certificates), update registers.

For corporate mechanics in more detail, consult our guide capital increases: procedure and pitfalls and, for negotiations, term sheet terms.