Property Investment Companies: A family investment
A property investment company ( in french: "Société Civile Immobilière" or "SCI" ) for families enables the members of a family to be owners, possibly in different proportions, and to manage jointly one or more immovable properties, for non profit making purposes.
What is an Property Investment Company for families?
A company in which the members of a family choose to contribute a share in a building they own. The company then becomes the owner. In exchange, each contributor receives shares in proportion to their contribution.
SCIs are governed by the provisions common to all companies laid down in articles 1832 et seq. of the French Civil Code and articles 1845 et seq.
It happens that several persons who did not this choose initially find themselves being the owner of the same real estate property (e.g. in case of purchase under the regime of separation of property, divorce or judicial separation, death, etc.).
It is the rules of joint ownership that apply then. All the owners of the building must then learn to manage the said building together and agree to make joint decisions.
However, everyone is free to leave the joint ownership situation at any time, which usually results in selling the said immovable property, failing which disagreements occur and discussions come to a standstill.
You are therefore strongly advised to create a property investment company (SCI) to avoid any such problems.
How does a Property Investment Company work?
Two persons are enough to create an SCI.
The law does not stipulate a maximum number of people or conditions governing nationality as in other types of company. It is even possible for a minor to be part of an SCI because it is not intended for commercial purposes.
The company has a maximum life of 99 years.
The articles of association govern the functioning of the company. They must be drawn up by a legal specialist. Their writing is quite free but it is important to include certain clauses concerning, for example, the length of the manager’s term of office, rules on majority votes at general meetings, occasionally limiting the right to vote to the parents alone, specific regulations for the sale or exchange of shares, approval for entering or leaving the company, etc.
Who manages the Property Investment Company?
A manager is appointed to deal with the everyday business while the more important decisions are taken at meetings by the majority stipulated in the articles of association.
In an SCI for families comprising only parents and children of which the parents are co-managers, the length of their term of office is not generally specified and ends on their death or when the SCI ceases to exist.
How do you create a Property Investment Company?
Firstly, you should contact your usual notaire for drawing up the articles of association for your SCI because, in order to avoid any pitfalls, they have to be carefully drafted.
He will complete all the necessary formalities (registering the articles of association, legal registration , registration at the Companies House (= Centre de Formalité des Entreprises, etc.) on your behalf.
It should be emphasised that the purpose of SCIs is not only to manage family property but they can also be used for property development operations, to manage professional property or to entitle you to tax relief.