Setting up an EURL in Algeria: what the sole partner changes — and the rule that bars you from owning two

Chapter 01

The EURL is not a separate corporate form: it is a SARL with one partner

This is the first misunderstanding to clear up, and everything else follows from it. One reads everywhere that the Algerian entrepreneur chooses "between an EURL and a SARL", as though they were competing regimes between which one had to arbitrate. The Commercial Code does not say that.

An EURL is therefore a SARL with only one partner left. The chapter of the Code is in fact headed "SARL – EURL" and contains a single series of articles, not two. The practical consequence is considerable: everything you know about the SARL applies — the notarial instrument on pain of nullity under article 545, the freedom to fix the capital under article 566, the five years of joint and several liability on contributions in kind under article 568, the three-quarters approval for transfers to third parties under article 571 — except what the Code expressly sets aside for the sole partner.

That characterisation has a second, more surprising consequence. Article 564, in its last paragraph, requires the corporate name to be preceded or followed by "the words société à responsabilité limitée or the initials S.A.R.L. and by a statement of the share capital". The Code names the form "EURL" but gives it no compulsory designation of its own. Administrative practice puts "EURL" on registers and letterheads; the text requires only "SARL" and the amount of capital.

So keep the exact formulation in mind: one does not "set up an EURL" as one would set up a particular corporate form. One sets up a limited liability company and enters it alone. That is what makes moving from EURL to SARL — and back — far simpler than is generally believed, as the last chapter shows.

Chapter 02

The rule almost nobody publishes: you may hold only one

If you were to remember one article from this guide, it should be this one. It is short, it is old, and it is missing from almost everything published on the subject.

Two prohibitions, then, and they do not have the same reach.

The first targets the individual entrepreneur. You may hold shares in ten SARLs, manage five of them, and be a shareholder in three SPAs. But you may be the sole partner of only one company. The second venture will therefore have to take on a partner, however small his stake — or adopt another form.

The second closes a door many believe open: EURLs cannot be stacked. An EURL cannot hold another EURL on its own. The structure "I set up a holding EURL which will own my operating EURLs" is struck down by this text. If you are building a group, the parent and its subsidiaries must each have at least two partners — which is precisely what the guide on holdings assumes without saying so.

The sanction, and what softens it

The article continues, and the detail matters as much as the principle:

• Any interested party may seek dissolution of the irregularly constituted companies. This is not a fine: it is the disappearance of the company.
• Where the irregularity results from the gathering of all the shares in one hand in a company that had several partners — the case where you buy out your partner —, the claim for dissolution may not be brought less than one year after the shares were gathered.
• In every case, the court may grant a period of up to six months to regularise.
• And above all: it may not order dissolution if, on the day it rules on the merits, regularisation has taken place.

In other words, the situation can nearly always be put right — by taking on a partner, by transferring shares, by merging. But it is put right under the threat of proceedings, and that threat can land at the worst moment: during a tender, a due diligence, a loan application. The real cost of article 590 bis 2 is not dissolution; it is a third party discovering the irregularity just when you need him.

Chapter 03

What the sole partner gains: five articles cease to apply

Here is the counterpart, and it is real. Article 584, in its fourth paragraph, sets aside by name part of the collective regime:

This is a considerable lightening of governance, and it is the real argument for the EURL. Increasing the capital, changing the corporate purpose, moving the registered office, removing the manager: in a SARL each of these requires notice, a delay, a de facto quorum and minutes. In an EURL they are taken by a written decision of the sole partner. The trip to the notary for the amending instrument remains due, but the whole deliberative machinery disappears.

One point of vigilance, though, on what the article does not abolish. Article 587 is not in the list: extraordinary decisions must still be "preceded by a report drawn up by an approved expert on the company's situation", except where shares are transferred to a third party. Nor is article 585, though it has no practical bearing when the partner and the reader of the documents are the same person.

Chapter 04

What the sole partner owes in exchange: a register, and no delegation

The following paragraphs of the same article 584 lay down three obligations specific to the EURL. They look formal; they carry a sanction.

The decisions register

It is the document most often missing from the files we open on assignment. It replaces the register of meeting minutes, and there is nothing optional about it: the sanction in the last paragraph covers "decisions taken in breach of this article", which includes the obligation to record them. An unrecorded decision is annullable at the request of any interested party — a creditor, a transferee, an heir, the tax authority.

In practice every decision of the sole partner — approval of the accounts, allocation of the result, appointment or removal of the manager, capital increase, change of registered office — must appear in it, dated and signed. There is no meeting to convene, but there is a trace to leave.

The bar on delegation

"The sole partner may not delegate his powers." The wording is absolute and its reach is poorly gauged: the meeting powers that article 564 confers on the sole partner cannot be exercised by an agent. Approving the accounts, amending the articles, resolving on a capital increase: these acts are personal to him.

The distinction with the manager's powers is sharp: the manager may be a third party (article 576) and runs the company day to day. What cannot be delegated is the function of partner, not the management. For a sole partner living abroad, this is a point of organisation to settle before incorporation, not after.

The six months

The deadline for approving the accounts is the same as in a SARL: six months from the year-end. The absence of a meeting neither shortens nor extends it. For a year ending 31 December, the approval decision must therefore be entered in the register by 30 June at the latest.

Chapter 05

The capital is free, but a contribution in kind goes through the court

On capital, the EURL follows the SARL regime in full, as it results from law no. 15-20 of 30 December 2015. We verified it on Journal officiel no. 71 when preparing the SARL guide, and the point bears repeating because administrative fact sheets still display the old text.

• No minimum capital. Article 566 provides that "the share capital of the limited liability company is fixed freely by the partners in the articles". The 100,000 DA still quoted everywhere belongs to the earlier wording, from legislative decree 93-08.
• At least one fifth to be paid up on cash contributions, the balance in one or more instalments within five years of registration (article 567).
• Contributions in kind are paid up in full at incorporation.
• Contributions in skill are admitted, but do not form part of the capital (article 567 bis) — of no interest to a sole partner unless a second partner joins later.
• If the company is not formed within six months of the funds being deposited, the contributor may claim them back from the notary (article 567 bis 1).

There is no threshold and no waiver. The vehicle, the premises, the equipment, the business you contribute to your EURL must be valued by an expert the court appoints — not by you, not by the notary, not by an expert of your choosing. And the article adds that the partners "are jointly and severally liable for five years towards third parties for the value attributed to contributions in kind". For a sole partner, "jointly and severally" shares nothing: the liability is entirely his, for five years, on a value he himself had adopted.

That is why an overvalued contribution in kind is one of the costliest weaknesses in an EURL's balance sheet — and one of the first things we look at when a credit file is put to us.

Chapter 06

The EURL is exempt from statutory audit — and here is the text that says so

This is the most useful chapter of the guide, and the one that took the most work. The question "does my EURL need a statutory auditor?" gets three contradictory answers on the Algerian web, and most professional fact sheets — including some of our own archives — put forward thresholds that appear in no text at all.

The chain of texts, in order

How to read that sentence

It exempts two categories, not one subject to a condition:

1. single-member limited liability companies — with no turnover condition;
2. companies whose turnover is below 10,000,000 DA.

The relative clause "whose turnover…" attaches grammatically to "companies", not to the whole list. That is also the tax authority's reading: note no. 127 MF/DGI/DLRF of 14 February 2013 states that EURLs are not required to have their accounts certified "whatever the level of their turnover".

Three cases where the exemption does not apply

• Importing. Article 61 of the 2008 Finance Act, amending article 13 of ordinance 05-05, reserves the import of raw materials, products and goods intended for resale as is to companies "subject to audit by a statutory auditor". An importing EURL is therefore caught, whatever its turnover.
• The bank. The exemption is statutory; it is not binding on a lender. Banks routinely require certified accounts in support of a credit file, and a public contract may do the same.
• The group. If your EURL falls within the scope of a holding company, the group's own obligations apply to the parent — up to two statutory auditors at minimum.

Chapter 07

Corporate tax compulsory, flat rate impossible: what legal personality costs

This is the least understood counterpart of choosing an EURL, and it turns on two articles of the Direct Taxes Code.

An EURL is a limited liability company: it therefore falls under corporate income tax, even where its sole partner is a natural person. The profit is not taxed in the entrepreneur's hands; it is taxed at company level, then taxed again when it leaves.

Where activities are mixed, the profit is apportioned in proportion to turnover. And since article 14 of the 2024 Finance Act, the tax on professional activity has gone: title III of the CIDTA, articles 217 to 231, is repealed in full.

The flat-rate regime is closed to you

An EURL is a legal person. It is therefore excluded from the flat-rate regime by its very nature, not by exceeding a threshold. That is the central trade-off for a young venture: an entrepreneur trading in his own name may fall under the flat rate up to eight million dinars; the same entrepreneur housing the activity in an EURL moves at once to the actual-profits regime, with the bookkeeping, filings and obligations that go with it.

Getting the money out: the second layer

Post-tax profit belongs to the company, not to you. To recover it there are two routes, and two distinct costs.

• Distribution. Income from SARL shares is distributed income within the meaning of article 45 CIDTA, subject to a 10 % final withholding (article 104-I-4-a) where the recipient is a resident individual.
• Management remuneration, which follows the salary regime and bears the corresponding contributions. The precise social security position of a sole-partner manager — CASNOS or CNAS affiliation depending on the case — is governed by none of the texts we read for this guide: it is a question to put to your fund before settling your remuneration structure, not after.

The subject goes beyond this guide; we have treated it separately in the article Taking money out of your company in Algeria.

Chapter 08

"Up to the amount of the contributions": what the formula does not protect

Article 564 provides that the partner "bears the losses only up to the amount of his contributions". That is true, and it is the reason the form exists. But three articles in the same chapter open breaches, and they close badly.

In an EURL whose sole partner is also the manager — much the commonest arrangement — the condition of "effective participation in the management" is met by construction. And the burden of proof is reversed: it is not for the receiver to show fault, it is for the director to prove his diligence. Limited liability protects against ordinary liabilities; it does not protect against a shortfall of assets attributed by a court.

Two further texts deserve to be known.

• Article 588 — fictitious dividends. "Repayment of dividends not corresponding to genuinely earned profits may be demanded of the partners who received them." The limitation period is three years from the date of distribution. Distributing on a result that the following year contradicts is not a neutral act.
• Article 589, paragraph 2 — loss of three quarters of the capital. The manager must then obtain a decision on dissolution, have it published in a legal notices journal, filed with the court registry and entered in the commercial register. Failing that, any interested party may seek dissolution in court. With capital freely fixed — hence often symbolic — this threshold is crossed in the first loss-making year, and it is one of the least anticipated side effects of abolishing the legal minimum.

Finally, article 577 recalls that the company is bound by the manager's acts even where they fall outside the corporate purpose, unless it is proved that the third party knew — "publication of the articles alone being excluded as proof". A narrowly drafted corporate purpose therefore does not protect the company as against third parties.

Chapter 09

Taking on a partner, and the day the sole partner dies

Since the EURL is a SARL (chapter 1), moving from one to the other is not a conversion in company-law terms. No resolution changing the form is required, no conversion auditor's report, no special formality: it is a movement in the shares.

The reverse movement — several partners, then one — is governed by article 590 bis 1: "Where all the shares of a limited liability company are gathered in one hand, the provisions of article 441 of the Civil Code on judicial dissolution do not apply." The company survives; it becomes an EURL. But if you were already the sole partner of another EURL, you fall within article 590 bis 2 and the one-year clock starts.

Death of the sole partner

Two articles combine, and the result often surprises families.

• Article 589, paragraph 1: "The limited liability company is not dissolved by the incapacity, bankruptcy or death of one of the partners, save, in the latter case, where the articles provide otherwise."
• Article 570: "Shares are freely transferable by inheritance and freely transferable between spouses and between ascendants and descendants."

The company therefore continues, and the shares pass to the heirs. If there are several, the EURL mechanically becomes a SARL — with no conversion instrument, no resolution, by the mere fact of succession. If there is a single heir who is already a sole partner elsewhere, he finds himself in the position of article 590 bis 2, with a year ahead of him.

Two clauses therefore deserve to be settled when the articles are drafted rather than discovered when the estate is opened: the contrary stipulation of article 589 — which would trigger dissolution on death, rarely a desirable outcome — and any clause requiring approval of the heirs, permitted by article 570, whose time limits may not exceed those of article 571 on pain of nullity of the clause.