A company director is about to contribute to a holding company the shares of an entity that holds, among other assets, the group's operating premises. To prepare the transaction, the usual question was asked: is the entity predominantly real-estate? It was a matter of cost, namely the registration duties. No one imagined that this same classification could now determine the very validity of the contribution.
Yet that is precisely what has changed. The Law of 25 June 2026 on combating social and tax fraud introduced into the French Civil Code a new Article 1865-1, which subjects transfers of shares in such entities to a strengthened formal requirement, on pain of nullity. The text is short, it entered into force on 27 June 2026 with no transitional period, and its singularity lies in this: it is a rule of civil law whose trigger is a purely tax concept. Anyone who has sold, contributed or gifted shares in a real-estate-holding entity since that date has good reason to make sure the transaction has not been compromised.
To identify the entities concerned, Article 1865-1 creates no definition of its own. It refers to the one set out at 2° of I of Article 726 of the French General Tax Code, that is, to real-estate predominance as understood for the purposes of transfer duties on sales for value (droits de mutation à titre onéreux).
This choice is not neutral, because the tax test is deceptive for anyone applying it without care. It captures legal entities, of whatever nationality, whose shares are not traded on a regulated market, and whose total gross assets were, during the year preceding the transfer, made up for more than half of buildings or real-property rights located in France, or of interests in entities that are themselves predominantly real-estate. The threshold is assessed over the financial year preceding the transfer, not on the signing date, so a snapshot of the balance sheet on the date of the deed tells you nothing about the outcome. It is computed on gross assets, with no deduction for liabilities, which brings within scope entities heavily financed against their property. The use of that property is irrelevant: an operating building weighs in the ratio just like an investment building. And the presence of interests in lower-tier subsidiaries that are themselves real-estate requires the ratio to be reconstructed on a look-through basis, across several tiers of ownership, on accounts that are not always closed as at the date of the transaction.
The result is that an operating company that owns its premises may fall within the text even though neither its shareholders nor their advisers would spontaneously have described it as a real-estate entity, and conversely a company thought to be real-estate may escape the regime. The classification, yesterday confined to calculating a cost, today determines the validity of the deed, and it is not to be read off the articles of association or the corporate purpose: it has to be demonstrated.
The transfer must be recorded by a notarised deed (acte authentique), by a deed countersigned by a lawyer (acte contresigné par avocat) within the meaning of Article 1374 of the Civil Code, or by a private deed drawn up by a chartered accountant in the only cases where that professional is legally authorised to do so. This last route is narrow: it requires, under 2° of Article 22 of the Ordinance of 19 September 1945 and Article 59 of the Law of 31 December 1971, that the deed be the direct accessory of an accounting engagement entrusted to that professional. Outside this framework, the involvement of a lawyer or a notary is not a matter of comfort: it conditions the very existence of the transfer.
The stated objective is combating money laundering and terrorist financing. Until now, shares in a real-estate entity could be transferred by a simple private deed, or even by a book-entry transfer from account to account, without any professional subject to due-diligence obligations being involved. The legislature has closed that route: the professionals called upon to draw up these deeds now act under the due-diligence, reporting and disclosure obligations of the French Monetary and Financial Code. Excluded from the regime, however, are transfers bearing on the units or shares of collective investment vehicles referred to in Article L. 214-1 of that Code, which are already subject to their own supervision.
The text refers to the transfer (la cession), a term the legislature did not define. A sale is plainly covered. But in company law, cession traditionally denotes the whole set of transactions transferring ownership of the shares, and nothing in the text appears to justify confining it to sales alone. A gift, an exchange, a contribution to a company, the settlement of a fiducie all attach to it naturally, all the more so as the case law developed in the context of approval clauses (agrément) has long treated both gifts and isolated contributions as transfers.
The stakes are very concrete for wealth and restructuring transactions. A contribution of shares to a holding company ahead of a transmission, an exchange of interests in the reorganisation of a group, a donation-partage bearing on shares in an SCI: these are all transactions that were not conceived as transfers and which, if the entity is predominantly real-estate, now call for the involvement of an authorised professional. Only universal transfer of assets (transmission universelle de patrimoine), such as results from a merger, escapes the regime, since it does not constitute an isolated transfer to a third party.
This is where the risk stops being theoretical. Nullity does not merely weaken a deed: it erases the transaction, with consequences that spread well beyond the transfer of shares alone.
The price may have been paid, and the capital gain on the transfer declared and taxed, even though the transfer on which it rested is deemed never to have existed. Where the transaction was part of a contribution-and-sale (apport-cession) placed under tax deferral, the annulment of the contribution shakes the very architecture of the deferral and may revive the taxation that the arrangement was designed to postpone. A family transmission built around the transfer may find itself deprived of its foundation, with knock-on effects on gifts and on the balance between heirs. And because the nullity is absolute, it may be raised by any third party with an interest during the five years following the deed: for as long as the transaction has not been secured, a minority shareholder, a creditor or a disinherited heir retains the ability to bring it down. This is not a defect of form to be cured at leisure; it is an uncertainty that weighs on the estate for five years.
This is the point on which uncertainty is currently greatest. Article 1865-1 was inserted into the chapter of the Civil Code devoted to the société civile. On the strength of that placement, it should not reach predominantly real-estate SAS, SARL or SA, and case law has already declined to extend to commercial companies provisions housed in that same chapter.
The opposite argument is nonetheless serious. The text refers to the transfer of shares or of actions. Yet there is no société civile with actions. The reference to actions can only be explained if the legislature intended to cover all predominantly real-estate companies, without distinguishing by their form. Two opposing readings therefore coexist, for one and the same sanction in the event of error, and the question is not settled. It will likely be settled only by a court decision or a position taken by the tax authorities, that is, not for several months. In the meantime, every transaction bearing on the shares of a predominantly real-estate commercial company plays out without a safety net, and the only way to know whether yours requires the new formal step is to analyse it on its own terms, in light of its form, its assets and the nature of the contemplated transaction.
They enjoy no tolerance. Entry into force having been immediate, any transfer of shares in a predominantly real-estate entity carried out since that date without a notarised deed, without a lawyer's countersignature and outside the narrow scope of the chartered accountant's authorisation is exposed both to nullity and to refusal of registration, the latter flowing from the new Article 635-0 A of the General Tax Code, which conditions registration on production of a compliant deed and, failing that, renders the transfer unenforceable against third parties.
Regularisation is conceivable, but it is in no way automatic and it is not without danger. Redoing the deed in a compliant form may, depending on how the transaction is reconstructed, alter its effective date, give rise to a fresh transaction where one thought merely to be correcting an existing one, or trigger tax consequences that the initial deed did not carry, whether in terms of capital gains or of registration duties. Poorly handled, regularisation costs more than the breach it purports to repair, and its choices are difficult to reverse. It first requires establishing with certainty that the entity does fall within the text, over the correct financial year and according to the correct method of calculation, which is precisely the question that most parties have not examined for what it has become.
The new formal requirement does not target SCIs alone, but any structure whose assets are predominantly real-estate in the tax sense, including where real estate is not its purpose. It does not target sales alone, but the whole range of transfers of ownership, contributions and gifts included. And it leaves no margin in the event of breach, over a five-year period. For the director reorganising a group, the investor restructuring a portfolio or the non-resident holding French property through a company, the first question is not how to regularise, nor even which deed to adopt. It is whether the transaction falls within the text, which depends on a tax classification that few taxpayers have verified for what it has become, and on which the soundness of everything else now rests.
Lobe Law, a firm of attorneys specialising in tax and structuring in Paris, assists directors, investors and professional athletes in classifying their companies under Article 726 of the General Tax Code and in securing their share-transfer transactions, in France and internationally. Book a consultation.