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Dissolving a civil company is the first step towards its “termination”. This generally triggers its liquidation; for this purpose, the company retains its legal personality. Then comes the distribution of assets among the partners, and finally the striking off the company, which is the final step. There are numerous reasons for a dissolution; they can occur automatically or be induced. These are provided for in the article 1844-7 du Code civil.
The expiration of the real estate company's term
Companies are formed for a specified duration set out in their bylaws, which cannot exceed 99 years. ( art. 1838 C. civ.).
The arrival of the term automatically leads to the dissolution of the company. However, the partners may decide in a general meeting to extend the duration at least one year before the scheduled expiration date (Article 1844-6 of the Civil Code)
The extinction or fulfilment of the real estate company's corporate purpose.
The corporate purpose corresponds to the activity for which the real estate company (SCI) was established. Therefore, its realization or cessation naturally leads to its dissolution.
- The corporate purpose is achieved
This means that the operation for which the company was established has been completed. Example: An SCI (real-estate investment company) is established to carry out certain works on properties owned by the partners. When the works are completed, the company is dissolved.
- The corporate purpose is extinguished
The activity for which the company was established has become impossible.
Example: An SCI is created to manage the estate acquired by a married couple during their life together. Their divorce results in the extinguishment of the corporate purpose.
When the corporate purpose is achieved or extinguished, the company is dissolved. There is no possibility of extension. The partners must proceed with the liquidation of the SCI.
Since the corporate purpose is generally defined broadly, this cause for dissolution remains marginal.
The cancellation of the partnership agreement
An illicit corporate purpose can lead to the nullification of the contract and therefore its dissolution. For example, a company whose corporate purpose is to hold a property for the purpose of conducting drug trafficking.
The dissolution of the real estate company by decision of the partners.
https://www.notaires.fr/fr/article/societe-civile-immobiliere-dissolution-linitiative-des-associes
The judicial dissolution of the real estate company
Under Article 1844-7, 5° of the Civil Code, a partner can seek legal intervention to prematurely end the real estate company (SCI) for legitimate reasons.
Dissolution for "legitimate reasons"
The judge must assess whether the reason cited is serious enough to justify the dissolution of the SCI, meaning whether it could potentially paralyze the functioning of the company.
This particularly includes cases where a partner fails to fulfil their obligations or where there is discord among the partners, such as a conflict between two partners over major decisions that require a majority vote.
The consolidation of all shares into the hands of a single partner
The law requires at least two partners at the formation of a civil company. In cases such as the death of a partner or the transfer of shares from one partner to another (in an SCI formed between two partners), the consolidation of shares into the hands of a single partner can lead to the dissolution of the company.
However, this dissolution is not automatic (Civil Code, Art. 1844-5, para. 1): without a dissolution action brought before the judicial court, an SCI could operate with only one partner. It is also not immediate: any interested party, such as a creditor, can only request dissolution if the situation has not been regularized within one year.
Moreover, the court may grant the remaining partner a maximum period of six months to comply.
It's good to know: dissolution can also occur at the initiative of the sole partner.
Judicial liquidation due to "insufficient assets"
This occurs when a company faces severe financial difficulties. The judgment concluding the judicial liquidation results in the automatic dissolution of the company.
The inclusion of a statutory dissolution clause
The associates may provide in the bylaws for specific causes of dissolution that may differ from those listed in the Articles of Association article 1844-7 du Code civil
They may be linked to economic, financial or regulatory criteria.
Examples include the withdrawal of one of the company's founding partners from the share capital, the death of a partner, or the abolition of a tax regime.
In practice:
- When this event occurs, the company ceases to exist.
- The partners are responsible for completing all formalities required for the termination of operations.