Industry contribution: articles of association and shares

Quick answer. An industry contribution means contributing your work, know-how or services to a company. Under article 1843-2 of the French Civil Code it does not form part of the share capital, so it grants no capital shares but specific shares carrying rights to profits and to vote. It is prohibited in the French public limited company (SA).

A would-be partner wants to come on board, but has neither cash nor an asset to put on the table. What they bring is skill: a network, technical expertise, working time. The temptation is to record those talents as capital, the way you would record a bank transfer. That is legally impossible. The industry contribution answers exactly this need, provided it is translated correctly into the articles of association.

In the incorporation files we handle, this structure often appears between a project leader with no cash and an investor, or between two founders whose contributions differ sharply. If poorly drafted, it weakens the balance of power and of profit sharing for the entire life of the company.

An industry contribution is, for a partner, making their work, know-how, technical knowledge or services available to the company. It is one of the three possible types of contribution, alongside the cash contribution and the contribution in kind (an asset, such as a business or equipment).

The difference is fundamental. Cash and in-kind contributions are measurable assets that join the company's estate. Industry is not an asset: it is a continuous service, tied to the person who provides it. It cannot be seized, sold or transferred like an asset.

In practice, the industry contributor undertakes to carry out an activity for the company over time. A developer who builds the platform, an operational manager who runs the business, a consultant who brings their method and network: all can become partners this way, without paying a euro of capital.

Yes, but not capital shares. This is the point most often misunderstood. Article 1843-2, paragraph 2, of the Civil Code states that industry contributions do not form part of the share capital. The capital therefore consists only of cash and in-kind contributions.

In exchange for their industry, the contributor receives specific industry shares. These shares grant three rights and impose one burden:

• the right to share in the profits and net assets;
• voting rights in meetings;
• the obligation to contribute to losses.

In other words, the industry contributor is a full partner in political and economic terms, even though they carry no weight in the capital. They vote, they receive their share of the result, and they bear their share of the losses like everyone else.

Capital, profits, vote: who holds what?#

Not every corporate form allows it. The rule depends on the structure chosen, and it often drives the choice between an SAS and an SA, or between an SARL and a share-based structure.

The industry contribution is prohibited in the public limited company (SA) and in the partnership limited by shares. It is allowed, provided the articles of association set out its terms, in the SARL (article L223-7, paragraph 2, of the Commercial Code), the EURL, the SAS and the SASU (by reference to article L227-1 of the Commercial Code), the general partnership and civil-law companies.

Our read. For a project where a founder joins purely on the strength of know-how, the SAS and the SASU offer the most flexible framework: strong statutory freedom, the ability to fine-tune the rights attached to the industry shares. The SARL works too, but with more rigid formalities. If you were considering an SA, note that the industry contribution is simply closed to you. On the choice of form, see our SAS incorporation procedure and our complete business creation guide.

There is no valuation in the sense of an entry into the capital, since industry never joins the capital. The real question is not "how much is this know-how worth in euros" but "what share of profits, losses and votes the bylaws allocate to it".

Article 1844-1, paragraph 1, of the Civil Code sets the rule. The industry contributor's share in profits, in losses and in voting rights is set freely by the articles of association. Failing any provision, their share equals that of the partner who contributed the least in cash or in kind.

This default rule is a frequent trap. If the bylaws say nothing, it is the smallest capital contributor who serves as the benchmark to calibrate the industry contributor's rights. The result rarely matches what the founders had in mind during their discussions.

How to write it into the bylaws: the steps#

1. Confirm that the chosen corporate form allows an industry contribution (SARL, EURL, SAS, SASU, SNC, civil-law company; never an SA).
2. Describe the object of the contribution precisely: nature of the activity, of the know-how or of the services provided, and duration of the commitment.
3. Set the contributor's share in profits, in losses and in voting rights, instead of letting the default rule apply.
4. Provide for how the industry shares are subscribed and what happens to them if the contributor stops the activity.
5. Frame the non-compete obligation and the duty to hand over gains, in line with article 1843-3 of the Civil Code.
6. Have the whole document reviewed by your adviser before signing, to align the wording with the partners' real intention.

An industry contribution is not a passive status. Article 1843-3, last paragraph, of the Civil Code imposes two strong obligations on the contributor: they owe the company all the gains made by the activity that is the object of their contribution, and they must refrain from any competing activity.

The underestimated risk. Industry shares are inalienable and non-transferable: they are tied to the contributor's person and lapse when they stop providing their industry. If the contributor leaves the company, falls ill for a long period or dies, their shares pass neither to a buyer nor to their heirs. Many founders discover this extinction at the worst possible moment. You must therefore anticipate, in the bylaws, what happens the day the industry ceases.

A handful of mistakes recur in the files we take over after an incorporation done without advice.

• Recording the industry contribution as share capital. It is impossible: it does not form part of the capital (art. 1843-2 Civil Code).
• Attempting an industry contribution in an SA. The form prohibits it; you must change structure.
• Forgetting to set the share in the bylaws and letting the default rule of article 1844-1 apply.
• Confusing an industry contribution with a mere employment or service contract: the contributor is a partner, not an employee under that contribution.
• Neglecting the non-compete clause and the duty to hand over gains.
• Ignoring the lapse of the shares on departure, which can suddenly unbalance the distribution of power.

Take a situation we often meet. Two people launch an SAS. The first invests cash and forms the capital. The second has no available money but masters the entire technical side of the product and will work on it full time.

Without an industry contribution, the technical partner would remain either a mere employee or dependent on a loan to release capital. With a properly drafted industry contribution, they become a partner: they vote, they share in the profits and net assets, they contribute to losses. The bylaws set their share, for instance a profit split disconnected from the other partner's capital stake.

The point to watch is the exit. The technical partner's industry shares lapse if they stop their activity. The bylaws must therefore anticipate the effect of that departure on governance and distribution; otherwise the cash partner ends up sole master overnight.

Because an industry contribution is not a capital contribution, it does not trigger the proportional registration duties that apply to cash or in-kind contributions. On that front, the structure is neutral at incorporation. The income the contributor later draws from the company (dividends, remuneration) follows its own regime, which should be planned with your chartered accountancy firm in Paris. The subject ties into the broader real cost of setting up a company.

The industry contribution is a valuable, underused tool. It lets you bring in a key person without forcing them to release capital they do not have, and to reward a skill in line with its true contribution to the project. But it is also a structure whose entire value rests on how the bylaws are drafted.

In our practice, disputes almost always stem from a point left blank: the share not set, the exit not anticipated, the blurred line between the contribution and an employment contract. As a statutory auditor and chartered accountant registered with the Ordre, we regularly see companies where the spirit of the original agreement was never written into the bylaws. For active holding companies and more complex structures, this work connects to our thoughts on setting up a holding company.

Hayot Expertise advice. If one of your future partners contributes know-how rather than cash, do not treat the industry contribution as a formality. Have their share of profits, losses and votes set out in black and white, together with the fate of their shares the day they leave. We combine support with business creation and legal advice to draft the bylaws to secure this structure from the outset.