Purchasing via an Sci

A Comprehensive Guide to Creating a Property Investment Company for Investments in France

What is an SCI ?

An SCI is a type of private, limited company that can be used for the purchase and shared ownership of property in France. In the majority of cases, the SCI is a collection of individuals who buy property with the intention of renting it out or making it available for other members of the group. Shares are distributed amongst members of the SCI, so home ownership can be shared with several people.

Creating an SCI

An SCI requires a minimum of two shareholders, and shares are usually distributed according to initial investment, but they can be distributed on whatever basis the SCI dictates - as long as everyone is in agreement. In order to make an SCI legally binding it must be confirmed by a statute (statuts de la société), and it must be registered with the local Chamber of Commerce, referred to locally as the "Chambre de Commerce et d'Industrie".

The statute is a legally binding contract that will contain details of the company name, its official headquarters, the amount of capital involved, any special conditions attached to the arrangement and the details of the person charged with managing the company. It is not uncommon for an SCI to be set up during the purchase of a house, as it delivers a number of key benefits. It is important to note that any debt associated with the property purchase will be the responsibility of all shareholders on an equal basis. In most cases, the SCI is formed after a preliminary purchase contract has been signed, but before the title deed has been signed. A notary - called a notaire in France - oversees the whole process, ensuring it is legally binding and that all the appropriate taxes are paid.

The process of setting up a new SCI is a relatively simple one. An appropriately qualified lawyer or notary will take charge of the process, and all shareholders will be notified when every stage of the process is ready for completion. Once a statute has been drawn up and signed by all shareholders, a bank account can be set up in the name of the newly formed company. A few weeks after the statute has been registered with the Chamber of Commerce, the notary will then receive the official registration document, which will be forwarded to the company's manager. Other shareholders will usually receive a copy.

Official documentation is required from every shareholder before the company can be registered. These documents include legal forms of identification such as birth certificates, passports and marriage certificates. Shareholders will also need to prove their country of permanent residence.

Managing an SCI

Income or expenses associated with the maintenance and repair of the property must be processed through the SCI's official bank account. Invoices relating directly to the property must be in the official name of the SCI, which will be considered for the future calculation of capital gains tax.

The SCI manager must complete a tax form - known as a Form 2072 - on an annual basis. Of course, if the property is used solely by the shareholders, this form will not include any revenue.

Any major decisions concerning administration, dissolution and the selling of shares must be taken during a 'deliberation' meeting, where every shareholder meets in order to come to a collective decision. A professional notary must take notes and draw up a legally binding contract which every shareholder must sign. For a small fee, a Form M3b can be filled in and lodged with the local Chamber of Commerce in order to permanently dissolve an SCI.

The creation and management of an SCI in France is a complex legal issue that requires an in-depth knowledge of the system. For British investors, it is essential that a notary fluent in English is appointed so nothing during the process is lost in translation. However, with the right support and advice, an SCI can make property ownership in France a much simpler and cheaper proposition altogether.

Mortgages are subject to acceptation by BNP Paribas Personal Finance. For all mortgages the borrower has a 10 day reflection period. If the sale is subject to mortgage acceptance any sums already paid must be reimbursed by the seller if the mortgage is declined. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. Changes in the exchange rate may increase the Sterling equivalent of your debt.