When establishing a company in France, company founders are required to choose the form of their future legal entity. French company law offers a variety of different corporate structures. The choice is decisive for the future legal status as well as for tax, administrative and labour law purposes. A chosen company structure can be changed at any time via a resolution of the company’s shareholders.
In France, a notary is not required to establish a company. As lawyers specialising in company law in France, we can take care of the establishment of your company and support and accompany you in all related legal matters.
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Types of legal entities in France
Here below you will find a quick outline of the different types of legal entities in France:
The limited liability partnership Société en nom collectif (SNC)
The Société en nom collectif (SNC) is a company form in which the shareholders (at least 2) have a commercial status and are jointly liable for the debts of the company. There is no minimum capital.
The public limited liability company Société anonyme (SA)
The Société anonyme (SA) is a corporation with at least 2 shareholders. This French entity can be managed by a board of directors with a chairman or by a supervisory board with an administrative director.
The private limited liability company Société à responsabilité limitée (SARL)
The Société à responsabilité limitée (SARL) is a legal entity in which shareholders (between 2 and 100) are only liable for the debts of the company up to their personal capital contribution. There is no minimum capital requirement in France.
Other French legal entities:
– If there is only one shareholder, the company is a Entreprise unipersonnelle à responsabilité limitée (EURL).
– If partners perform a regulated liberal profession (ex. doctors or lawyers), the company is a Société d’exercice libéral à responsabilité limitée (SELARL). If a public limited liability company needs to be established, it takes the legal form of a Société d’exercice libéral à forme anonyme (SELAFA).
– A Société d’exercice libéral par actions simplifiée (SELAS) can also be established as a simplified limited liability company (see below).
The simplified limited liability company Société par actions simplifiée (SAS)
The Société par actions simplifiée (SAS) is a very popular legal entity in France. It is a simplified capital company in which shareholders (at least 2) are only liable for the company’s debts up to their personal capital contribution (like in the private limited liability company (SARL)). No minimum capital is required. Compared to the SARL, the company’s founders have a lot more freedom when it comes to the articles of association. If there is only one shareholder, the legal entity is a Société par actions simplifiée unipersonnelle (SASU).
Establishing a French company
In France companies are established with the local company register (RCS) of the commercial court having jurisdiction. Jurisdiction is determined by the location of the company’s registered office. Registration takes approximately two weeks. Without registration, the company has no legal personality and therefore cannot act in its external business relationships.
In addition, in France it is mandatory to open a company bank account in which at least half of the share capital must be paid in. French banks usually require the bank account to be opened in the presence of the future company’s director. Furthermore, the company also requires a registered office, that can either be a rented office space or a mere post-box.
When a company is incorporated in France, individuals holding more than 25% of the share capital or having more than 25% of the voting rights in the company need to be declared to the register. After registration in the commercial register, the company receives a “Kbis”, which is the commercial register extract. Extract from the commercial register, articles of association and shareholders’ resolutions can be requested and viewed on the official register’s website: www.infogreffe.fr
Tax advisers and company auditors in France
All companies incorporated in France are subject to accounting obligations. For instance, companies must file balance sheets annually with the commercial register. Many companies delegate accounting obligations to external tax advisors if they do not have their own internal accounting. However, there is no legal obligation to appoint a tax advisor.
The appointment of a company auditor, so-called Commissaire aux comptes, needs to be distinguished from the company’s tax advisor. The legal requirement to appoint a French company auditor for a duration of at least 6 years depends on the company’s balance sheet, its turnover and the number of employees. For example, for a SARL, the appointment of a company auditor is mandatory if two of the three following thresholds are met:
– € 4,000,000 balance sheet total
– € 8,000,000 turnover (excluding VAT)
– 50 employees
An auditor may also be appointed at the request of shareholders with at least 1/3 of the share capital. Failure to appoint an auditor despite exceeding the thresholds is punishable by imprisonment of 2 years and a fine of € 30,000.
Liability of managing directors in France
When establishing a company in France and during the entire duration of the managing director’s appointment, she/he is civilly and criminally liable and bears responsibility for tax problems in case of mismanagement. This applies both internally and externally. Mistakes by a managing director occur when he/she is performing his/her duties, in an active as well as passive manner.
The basic requirement is an error of the director causing damage (e.g. non-compliance with the articles of association or disloyal behaviour towards the company). In external relationships, the wrongful conduct of the managing director has the consequence that the company itself is bound by the act towards third parties. Unless the other party can be proven to have acted in bad faith.
In event of insolvency, the insolvency administrator may, under certain circumstances, be held personally liable for misconduct by the managing director. The company’s managing director is then liable with his/her private assets. Even in the case of shareholders whose liability is reduced to the share capital, the liability limit may be extended under certain circumstances.
Insolvency procedures in France
A company is legally insolvent when its available funds (assets) are no longer sufficient to meet its liabilities. In such event, an application for insolvency, the Dépôt de Bilan, must be filed with the commercial or district court. The insolvency petition must be filed with the court having jurisdiction within a maximum of 45 days from the date of insolvency. Failure to do so may amount to an insolvency delay.
French law offers different insolvency procedures, depending on whether the company can be restructured (redressement or liquidation). In certain circumstances, it is also possible to seek the protection of the court in the event of financial difficulties without filing for insolvency (Procédure de Sauvegarde or Conciliation).
Notwithstanding the above, a company may be dissolved by a resolution of the shareholders at any time. If the parent company abroad is the sole shareholder of the French subsidiary, a so-called transmission universelle de patrimoine, also called TUP, i.e. “merger”, automatically takes place with the dissolution of the subsidiary.
Conclusion: Company Law France
There are a many legal aspects that must be consider when establishing a company in France. From choosing the appropriate corporate structure to establishing the company in France as well considering tax and liability-related questions. As lawyers specialising in French corporate law, we support and accompany you during the establishment and existence of your company in France.