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E-library Corporate Law Incorporation of a French company - choice of the appropriate company form

Incorporation of a French company - choice of the appropriate company form

18 Feb 2013

French corporate law provides for several types of French companies. Commercial companies are ordinarly incorporated in France under the form of a French SAS ("société par actions simplifiée"), a French SARL ("société à responsabilité limitée") or a French SA ("société anonyme").

When incorporating a French company, its legal form (SAS, SARL or SA) should be determined, by taking into account, inter alia:

The amount of share capital of the French company

Certain French company forms, such as SA, require a minimum share capital of 37.000€, whereas other company forms, such as SARL or SAS may be incorporated with as little as 1€ share capital.

The number of shareholders of the French company

While certain French company forms, such as SAS, allow for great flexibility in determining the rights and obligations of the shareholders in the bylaws, other company forms (such as SARL or SA) are regulated by more stringent provisions of French law, which are mandatory and may not be excluded from the bylaws.

Most commercial companies are currently incorporated in the form of a French SAS or SARL. A SAS and a SARL may be incorporated with only one shareholder, whereas a French SA must have at least seven shareholders.

How the French company will be financed?

If you are planning to raise capital from investors or finance the company by means of bonds, a French SAS would probably be the most suitable company form. Indeed, contrary to a French SARL or SA, it allows for a great flexibility in determining the rights and obligations of shareholders, including as regards the management of the company, the inclusion of specific rights reserved to investors in the bylaws, etc. French SARL do not allow for such flexibility and they are generally transformed into a SAS prior to completing a fund-raising transaction.

Similarly, a French SARL may not issue bonds unless it has three years of existence and reaches certain thresholds regarding turnover, number of employees and assets, whereas a French SAS may issue bonds as from the date of its incorporation.

What will be the activity and corporate purpose of the company?

Certain activities may be carried out only within a specified form of company. For example, the sale of tobacco products may be carried out only within a SNC (société en nom collectif), where the shareholders are jointly and indefinitely responsible for the company debts.

Incorporation of a French company - bylaws
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