#Seed Round and Series A Lawyer in France

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Your situation and your risks

You are preparing a first round with business angels (seed) or a more structured round with venture capital funds (Series A). The arrival of these investors changes the split of the share capital and, often, the governance. They generally ask for specific rights, set out in the articles of association or in a shareholders’ agreement. Our fundraising lawyer page presents the whole process.

At seed stage, the transaction often takes the form of a capital increase in ordinary shares or an issue of BSA AIR (share subscription warrants). In a Series A, investors frequently ask for preference shares. Both rounds require a company limited by shares, most often an SAS (simplified joint-stock company). An SARL (French limited liability company) must first convert.

A poorly prepared round exposes the founders to dilution they have not properly measured, to a loss of control or to exit clauses they do not fully understand. The articles of association and the shareholders’ agreement must remain consistent with each other. The employee share plan, for example in BSPCE (founders’ share warrants), must be planned ahead, as it weighs on the capitalisation table.

The legal framework for a seed or Series A round in France

A capital increase falls within the powers of the extraordinary general meeting, which may delegate its authority (Article L. 225-129 of the French Commercial Code (Code de commerce) (in French)). In an SAS, the decision is taken collectively by the shareholders, under the conditions set by the articles of association (Article L. 227-9 (in French)). To reserve the issue for the investors, the meeting cancels the preferential subscription right in their favour. The named beneficiaries do not take part in the vote (Article L. 225-138 (in French)).

Preference shares may be created on incorporation or during the life of the company (Article L. 228-11 of the Commercial Code (in French)). They carry specific rights of any kind, on a temporary or permanent basis, defined by the articles of association. They may be issued with or without voting rights. Preference shares without voting rights may not exceed half of the share capital. This ceiling is one quarter for companies listed on a regulated market.

In an SAS, the articles of association set the conditions under which the company is managed (Article L. 227-5 (in French)). A strategic committee or a board created by the articles can therefore include investor representatives. The articles may also make the shares non-transferable for up to ten years (Article L. 227-13 (in French)) and make any transfer subject to approval (Article L. 227-14 (in French)). Tag-along, drag-along and anti-dilution clauses are generally found in the shareholders’ agreement.

BSPCE are governed by Article 163 bis G of the French Tax Code (Code général des impôts) (in French). Among other conditions, the issuing company must be subject to corporation tax in France and have been registered with the Trade and Companies Register for less than fifteen years. At least 15% of its share capital must be held directly and continuously by individuals. Companies that are themselves at least 75% owned by individuals also count. Certain holdings of investment funds are not taken into account in this calculation. The arrival of investors must therefore be checked against this condition.

How we can help

  • Analysing the letter of intent or the term sheet: valuation, amount, rights requested, conditions precedent.
  • Preparing the company for the investors’ due diligence: articles of association, registers, key contracts, intellectual property.
  • Drafting or negotiating the amended articles of association, the creation of the preference shares and the shareholders’ agreement.
  • Preparing the président’s report, the resolutions and the shareholders’ collective decision.
  • Checking BSPCE eligibility and structuring the employee share plan.
  • Coordinating completion of the transaction: subscriptions, payments, recording of the capital increase, registration of the shares in the share accounts and formalities.

What is at stake for you

A funding round gives you the means to grow, but it redistributes capital and power. Each right granted to investors has a counterpart for the founders: dilution, prior consent on certain decisions, exit constraints. We help you measure these effects before signing, clause by clause.

Consistency between the term sheet, the articles of association and the shareholders’ agreement also shapes the following rounds. Future investors will review the rights already granted. Every situation is different: the right balance depends on your stage of development and on the parties you are dealing with.

Every situation is different: the information on this page is general and does not replace legal advice tailored to your case. The firm makes no promise of outcome; it commits to the means it deploys.

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Harry allouche

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Harry, partner and co-founder of Hashtag Avocats, heads the Corporate/Tax practice.

His practice covers entrepreneurship, business law and digital law. Before founding Hashtag Avocats in 2015, Harry gained experience in business law in Paris and Montreal, working at various law firms
and mid-sized organisations. His passion for business law and new technologies led him to co-found Hashtag Avocats with Arnaud Touati, with the aim of developing a practice dedicated to these fields. Harry also teaches at several prestigious universities and business schools, covering subjects such as company law, entrepreneurship, and e-commerce and digital economy law. He also takes part in many workshops and events in the start-up ecosystem.

Ambrine durand

# Ambrine Durand

Business and tax lawyer

Ambrine practises as an associate lawyer in the Corporate/Tax practice.

She works in all areas of corporate taxation and has particular experience in the taxation of international transactions and restructurings.

Since her admission to the New York Bar, Ambrine has developed her tax skills at various Paris law firms. Since joining Hashtag Avocats, Ambrine has brought an informed perspective to restructuring transactions, extending her skills to companies operating in the Web3 field.

Eren erdogan

# Eren Erdogan

Corporate tax legal counsel

Eren works as a legal counsel (juriste) in the Corporate/Tax practice.

He works in all areas of corporate taxation and has taken part in many advisory and tax audit engagements involving groups on their French and international issues.

With six years of experience in company law and tax law, Eren has focused on key areas such as corporate restructuring and fundraising. Since joining Hashtag Avocats in 2023, Eren has built up know-how in real estate tokenisation and equity tokenisation to meet the constantly changing needs of Web3 businesses.

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The data above is collected by the law firm HASHTAG AVOCATS in order to process and follow up on your contact request. To find out more about how your personal data is managed and how to exercise your rights, please refer to our privacy policy.