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SA - “Société Anonyme” (Public limited companies)
II. Management and administration of public limited companies A Board of Directors is composed of 3-18 members, who determines the broad lines of the company's business activities and ensures their implementation. Without prejudice to the powers expressly invested in meetings of the shareholders, and in so far as the memorandum and articles of association permit, it deals with all matters relating to the conduct of the company's business and decides all pertinent issues through its deliberations. In its dealings with third parties, the company is bound even by acts of its board of directors which do not come within the purview of the company's corporate mission, unless it can prove that the third party knew that a specific action was extraneous to that mission or, given the circumstances, could not have been ignorant of that fact, and mere publication of the memorandum and articles of association does not suffice to constitute such proof. The board of directors shall carry out the inspections and verifications which it considers appropriate. The company's chairman or general manager is required to send all the documents and information necessary to perform this task to each director. Undertakings, avals and guarantees given by companies other than banks or other financial institutions must be authorised by the board of directors. (to see stipulations for directors(2)) The general management of the company shall be assumed under their responsibility by either the chairman of the board of directors or by another natural person appointed by the board of directors and bearing the title of general manager.
On the proposal of the general manager, the board of directors may appoint one or more natural persons charged with assisting the general manager, with the title of assistant general manager. Since the new Law of NRE on May 15 , 2001, it's encouraged to dissociate the role of the chairman of the Board of Directors with the General manager in order to realise one best corporate governance. The board of directors shall choose between the two forms of performance of the general management
The supervisory board has permanent control over the Management, but the gestion of the company is not within its power. Members of the supervisory board shall be appointed by the inaugural general meeting or the routine shareholders' meeting. (to see the conditions (3)) The management shall have the widest powers to act on the company's behalf in any circumstances. It shall exercise its said powers within the limits of the purpose of the company and subject to the powers expressly attributed by the law to the supervisory board and shareholders' meetings. In dealings with third parties, the company shall be bound even by acts of the management that do not relate to its objects, unless it can prove that the third party was aware that the act in question was beyond the scope of the said objects or that in the circumstances it could not have been unaware of that fact. Mere publication of the memorandum and articles of association is considered not to be sufficient proof thereof. The members(4) of the management shall be appointed by the supervisory board, which shall appoint one of the said members as chairman. Where a single person exercises the functions conferred on the management, that person shall take the title of "sole managing director".
An routine shareholders' meeting shall be held at least once a year, within six months of the end of the financial year. This period may be extended by a Court order. Unless otherwise provided by the memorandum and articles of association, shareholders' meetings shall be held at the registered office or anywhere else in the same department.
Shareholders' meetings shall be convened in the manner and subject to time limits to be laid down by an Order approved by the Conseil d'Etat(5) .
Any meeting may be cancelled if incorrectly convened. An application for cancellation shall not, however, be admissible where all the shareholders were present or represented. The board of directors or management shall present its report(6) and annual accounts, and the consolidated financial statements, if appropriate, to the meeting. In addition, the auditors shall confirm in their report that they have duly discharged the duties assigned to them. The meeting shall consider and take decisions on all matters relating to the annual accounts and, if applicable, to the consolidated financial statements, for the preceding financial year.
It shall authorise bond issues and the constitution of specific security for the same. Nevertheless, in companies whose principal object is to issue bonds to finance loans they themselves grant, the board of directors or management, as the case may be, shall be fully empowered to grant such loans unless otherwise provided for by the memorandum and articles of association. Where, within two years of registration, a company acquires an asset belonging to a shareholder which is worth at least one-tenth of its share capital, a valuer shall be appointed by a Court order to value the asset in question on his own liability, on an application by the chairman of the board of directors or the management, as the case may be. The appointment of the said valuer shall be subject to the incompatibility rules. The agenda for general meetings is determined by the convener.
However, one or more shareholders representing at least 5% of the capital, or a shareholders' association are entitled to request the inclusion of draft resolutions on the agenda. Such draft resolutions are included on the agenda for the meeting and brought to the knowledge of the shareholders. The meeting cannot deliberate on an item which is not on the agenda. It may nevertheless remove one or more directors or supervisory board members from office and replace them, in any circumstances.
The agenda for the meeting cannot be amended when a second notice to attend is sent out. A shareholder may be represented by another shareholder or by his or her spouse. Any shareholder may receive powers issued by other shareholders to represent them at a meeting, without limits other than those imposed by the law or the memorandum and articles of association fixing the maximum number of votes a single person may hold either on his own behalf or as a proxy.
SARL - “Société à Responsabilité
Limitée” (Limited liability companies)
I. Incorporation A SARL (limited liability company) can be incorporated by one person and must have no more than 100 shareholders (corporate entities or shareholders). A foreigner without " Carte de commerçant " can be the shareholder of a SARL. Since the new Law of NRE, there is no more minimal capital limits for the constitution of a SARL, the amount of the company's capital is determined by the memorandum and articles of association. It is divided into equal capital shares The total number of shares created must be subscribed by the members. They must be fully paid if they represent contributions in kind. At 1/5 of the face value of shares representing contributions in cash must be paid. The balance may be paid in one or more payments at the managing member's discretion, within a deadline which may not exceed 5 years with effect from registration of the company in the commercial and companies register. Comparing with SA, the SARL is far less complex than and requires a smaller start up capital, thus meaning it is a sensible option for new ventures in France.
In addition, the contributions in the form of services is permitted in SARL, but not in SA ; there are no legal restrictions for cumul of mandates in SARL; a SARL can be converted into an SA after two years.
However, the income tax and social security treatment of SARL managers is sometimes less advantageous if they own a major interest in the company.
And the assignment of shares of a SARL is more costly than a SA.
II. Management and administration The SARL is managed by one or several managers who must be an individual, but not necessarily a shareholder of the company. Concerning the foreigners, they should have either the residence card or the "carte de commerçant ". No restrictions of age exist for the managers of a SARL. The employee of the company can be nominated as manager on condition that his employment is real and he is not the majority shareholder. The tax status of the manager as an individual depends on whether they own a majority of the share capital. At the end of the financial year, financial statements must be established under the supervision and indeed control of the manager. Such statements are submitted for the approval of the shareholders at general meeting of shareholders, where profit allocation is debated and passed on by a 50% majority. Changes to the Articles of Association and share capital require a 75% majority. Change of the nationality of the company, transformation to " société en nom collectif " or " société en commandite ", or any augment of shareholders' obligations need unanimous. All companies are required to keep a journal ("livre-journal"), a Ledger ("grand livre") and a balance sheet book ("Livre d'inventaire"). Companies will also need to attach consolidated accounts, a report on the situation of any subsidiaries and shares owned by the company as well as guarantees granted by the company. The first two are required on a monthly basis and must be kept in accordance with the Chart of Accounts (Plan Comptable Général) which contains accounting definitions and terms specific to France. All financial statements and audits are open to public examination and must be published at the " Registre du Commerce et des Sociétés " ( RCS). Failure to do so may result in a fine. At the close of the financial year, the board of directors or the manager must have prepared: an inventory evaluation, a balance sheet and a general report. The board members and managers are liable for the accuracy of such documents.
III. Shareholders With effect from the communication specified in the preceding subparagraph, any member shall have the option of asking written questions to which the manager shall be obliged to reply during the shareholders' meeting. Every shareholder shall have the right to obtain, at any time, communication of the company's documents relating to the last three financial years as following : The Articles of association fix the method of allocation of the benefits, which should respect the following stipulations : With respect to third parties, the sharesholders shall be liable only in respect of their contributions, except in the following situations : SAS - Société par actions simplifiées (Simplified joint-stock companies) SAS is actually the most flexible form of limited companies in France . As indicated by the name, the nature of such stock companies is " simplified " functioning. The advantage of such an incorporation is the liberty of the internal organisation.
This type of company is very suited to the small or medium enterprises, especially for innovatory enterprises. Its flexibility have attracted a lot of company groups to creat a SAS as their 100% filiale in France. In addition, this kind of company structure is more and more adopted for LBO (Leverage-Buy-Out) deals. Nevertheless, its use for the joint-ventures is very marginal. Caracteristiques SAS is marked by its strong intuitus personae of its shareholders who can determine freely in the Articles of association the nature and function of their gestion as well as the conditions and forms of collective decisions. A SAS must have a president who is capable to engager the company with third parties, though some kinds of decisions must be adopted collectively, such as the modification of capital, merger & scission, dissolution and allocation of benefits, etc.
A SAS cannot make public offering, but it's permitted to issue obligations and transferable securities (valeurs mobilières composées). Constitution A SAS may be established by one or more persons who shall support its losses only up to the amount of their contributions. When this company consists of one person only, the latter shall be referred to as the sole proprietor (For more information on corporations of this type that have a sole shrareholder(SASU), click here.). Shareholders may be individuals (personne physique) or businesses (personne morale) and of any nationality. Although there is no limit on the number of shareholders, such an organisation normally has very few. Minimum capital to start up a SAS is 37 000€ which must figure in the Articles of association ("statuts de la société"). Moreover, the Articles of association may stipulate that the share capital may be increased through successive payments made by the partners or the admission of new partners, and may be reduced by the total or partial withdrawal of the contributions made (" variable capital "). Shares can be subscribed in cash or in kind, but not in the form of services.The capital must be fully subscribed. Shares subscribed in cash must be paid in respect of at least 50% paid of their face value. The balance may be paid in one or more payments, at the discretion of the board of directors or the management according to the case, within a deadline which may not exceed 5 years with effect from registration of the company in the commercial and companies register (RCS). The cost of shares can be outlined in the Articles of association, although this is not obligatory. Shares cannot be issued before the registration in the RCS. Memorandum and Articles of association ("Les statuts de la société") Obligatory Publicities Management and internal organization The memorandum and articles of association shall fix the conditions in accordance with which the company is managed. The company is represented in its dealings with third parties by a chairman appointed as prescribed in the memorandum and articles of association. The chairman is invested with the broadest powers to act on behalf of the company in all circumstances, within the purview of the corporate mission.
In its dealings with third parties, the company is bound even by acts of the chairman which do not come within the purview of the company's corporate mission, unless it can prove that the third party knew that a specific action was extraneous to that mission or, given the circumstances, could not have been ignorant of that fact, and mere publication of the memorandum and articles of association does not suffice to constitute such proof.
The memorandum and articles of association may stipulate the circumstances in which one or more persons other than the chairman, having the title of general manager or assistant general manager, may exercise the powers conferred on the chairman.
The memorandum and articles of association should also fix precisely the compostion and functioning of such body : number of managers, distribution of their posts, modality of their convening, place of meeting, quorum of majority, and the conditions under which such a body takes decisions etc.
The managing body is subject to inspection by shareholders at the annual meeting held at the end of the closing financial period. They can stipulate the presence of an inspection body or exterior audit, provided such a presence is stated in the articles of association.
The remuneration of the chairman and other managers as well as the method of calculate should figure in the articles of associat or its annex. They can also receive stock option as one part of their remuneration. The chairman and the managers are classified as employees and are subject to the same social security regulations. Collective decisions The memorandum and articles of association shall determine the decisions which must be taken collectively by the partners in the forms and in accordance with the conditions which they specify. Decisions taken in breach of the provisions of these stipulations may be declared void at the request of any interested party. For SASU (2) The following clauses of the Articles of association can be adopted or amended only with the unanimous agreement of the partners : In addition, the following decisions should be made by unanimous agreement of the partners, however, the memorandum and articles of association can bring dispensation to it : Like the SA, an SAS must assure a certain percentage of its capital to be frozen as " Réserve ". Dividends must be paid nine months after the end of the financial year at the very latest, which can be paid in the form of new shares.
Rights of shareholders Dissolution As all other types of company, end of term stated in Articles of association, realisation or extinction of corporate mission, judiciary liquidation, the clauses in the Articles of association, shareholders' decision, judiciary dissolution can be the cause of dissolution. A reduction of the registered capital to a lesser amount may be decided upon only subject to the suspensive condition of an increase in capital destined to raise this to an amount at least equal to the amount specified in the preceding subparagraph unless the company is converted into another form of company. In the event of failure to comply with the provisions of this subparagraph, any interested party may apply to the court
for the dissolution of the company. If, as a result of losses duly recorded in the accounting documents, the equity capital falls below half of its share capital, the president or other managers must call an special shareholders' meeting within four months of the approval of the accounts revealing the said loss to decide whether the company should be prematurely
dissolved. However, when one person holds all the shares in a simplified joint-stock company, it is subject to the system of SASU. It is possible for an individual or business to set up such a corporation where such a body is the sole shareholder (even another SAS unipersonnelle). This may be the result of a buy out by an individual or other corporation. Like a SAS, the minimum capital of a SASU should not be less than 37 000€.
However, the company business name must be followed or preceded by SAS, but not SASU.
Therefore a SAS can swing between unipersonnelle and pluripersonnelle provided the formalities of share transactions are met. This also means that entrepreneurs have the choice between an SAS unipersonnelle and an EURL (entreprise unipersonnelle à reponsibilité limité). Although the initial capital required for such a corporation is higher than for a EURL, the freedom of management structures as one example out of many may be worth a great deal of consideration. The sole shareholder can either elect him or herself as president or elect a third party be they individual or a corporation. In this case, the sole shareholder can limit the powers of the president and demand prior consent with regard to certain issues. Where decision making is concerned, the single shareholder of the SASU has the right to participate in the same decisions as those of made collectively in the SAS.
This type of corporation does no need to establish a financial director's report, however the financial statements of the closing financial period must be approved by the sole shareholder. |
