Search :

Company Formation

Formation of a French Company - a brief overview

The formation of a company is known in French as the 'constitution d'une socit'

It should noted that the general French legal word for a company in this context is 'socit' rather than 'compagnie' which latter word tends to be used in limited circumstances in France, e.g. for airlines and insurance companies.

There are numerous types of company structure which are provided for by French Law, but there are only three forms of company where the liability of the shareholders is limited and these are

  • the Socit Anonyme (S.A.)
  • the Socit Responsabilit Limite (S.A.R.L.)
  • the Socit par Actions simplifie (S.A.S.)

The relatively new S.A.S. company is though becoming more and more popular; particularly with non-French (notably US) corporations which are setting up in France.

In essence, the initial structure of each is as follows.

  • an S.A. has a minimum of 7 shareholders, and a Board of a minimum of three Directors who would elect a Prsident from within their body
  • an SARL has a minimum of 2 shareholders, has no Board of Directors and is instead usually run by a single Grant or CEO (there is though a single shareholder version of the SARL known as an EURL often used by tradesmen and very small businesses)
  • an S.A.S. would generally have a minimum of 2 shareholders but it could have a single shareholder and is not necessarily required to have a Board of Directors. It is run by its Prsident which function could be undertaken by a body corporate, but an individual would need to be registered with the French authorities as its permanent representative

The SAS is generally considered to be the most flexible body, not least in terms of its corporate structure, by US entities used to dealing with 'S Corporations'.

Whilst the following list is not intended to be exhaustive, the points below might be of comparative interest to non-French practitioners who are more used, say, to the Common Law systems.

  • The formation of companies in France is generally considered to be more costly, complicated and time consuming than in many Common Law jurisdictions.
  • The general liability of the shareholders in the S.A., S.A.S. and the SARL is normally limited to the amount of their shareholding (but there are noteworthy exceptions where the veil of limitation of liability may be pierced)
  • There is no such thing (currently) as an off the shelf company at French Law
  • Up until the relatively recent past it was necessary for all three types of companies to ensure that a substantial minimum fixed amount of share capital should be lodged and temporarily frozen prior to completion of the formation formalities; but this is no longer the case for the SARL
  • The 'Statuts sociaux' being the equivalent of the Memorandum and Articles of Association or By(e)-laws are far from standardised in France, but statute law does provide for a number of heads which must obligatorily appear therein.
  • There are no longer any important statutory or regulatory constraints on appointing shareholders or officers of a company, (be they individuals or corporate bodies), whose nationality is that of one of the member states of the European Union.
  • However, both de jure and de facto, there are a number of considerable obstacles which a prospective French company officer from a non E.U. country, such as the USA, India or China, will need to overcome.

For specific information on forming a French Company, please click here