FRANCE

COMPANY FORMATION

SETTING UP IN FRANCE
France has been slower than many of its EU counterparts to embrace a truly liberal business culture. At the same time, it has aggressively sought to attract foreign investment - and with considerable success. One result is that it is now very simple and straightforward to open a company in France, although local advice is essential in order to ensure compliance with legal and financial regulations.

In principle, there are no administrative restrictions on foreign investment in France. International companies may open locations in France under a variety of forms, depending on investors' development strategies. Short-term and long-term options can all be implemented with absolutely no legal risks and investors are free to amend their plans once they have been submitted, subject to some simple and inexpensive procedures.

France has a well-developed legal and regulatory system broadly similar to that in other EU member states. There are few restrictions on setting up companies, except in certain areas such as banking and insurance and there is no restriction on imports or capital from abroad. However state ownership is still a significant feature of the French economy, particularly in infrastructure industries and some restrictions still apply. Furthermore, the French legal system is slow and expensive, which underlines the importance of securing good legal advice from the outset. Our team of French legal specialists can help, so please contact us for more details.

France has a world-class international banking network, and there is a wide range of financial institutions with expertise in arranging financial transactions and transfers. The first step in opening a French company should be to establish a local bank account – we can arrange this for you.

In addition to commercial bank loans, various types of assistance to new businesses may be available. These grants and loans from local authorities help with finding sites, shared cost access to support services, tax incentives and grants for innovative new companies.

TYPES OF CORPORATE ENTITIES
There are two principal types of commercial limited liability companies:
(a) SARL (Société à Responsabilité Limitée)
(b) EURL (Entité Unipersonnelle de Responsabilité Limitée)
(c) SA (Société Anonyme)
(d) SAS (Societé Par Actions Simplifieé)
(e) SCI (Société Civile Immobilière)

SARL – SOCIÉTÉ À RESPONSABILITÉ LIMITÉE
The characteristics of the SÀRL are:
No capital requirement
Minimum of one shareholder
Only 1 director required
No statutory audit needed
No annual general meeting of shareholders, if less than 25 shareholders

Requirements:
Requested information and documents for incorporating a SÀRL in France:

Company name
Place where the company will be domiciled
Business activity (regardless of whether the company trades)
Shareholders: first name(s), surname, address, date and place of birth as well as the first name(s) and the surname of his wife (or her husband), in order to provide a renouncement by her/him of any right to the shares
Manager: first name(s), surname, address, date and place of birth; first name(s) (and surname of his/her father and mother); copy of his/her passport (assuming the Manager is a E.C resident)
Amount of the capital (a one € capital is now possible)
Percentage of the shares belonging to each shareholder (if more than one)
“Récépissé de dépôt des fonds du capital social” : proof of the deposit of the paid-in capital deposited in a blocked bank account opened in the name of the company-in-formation by the investor(s) (even for one €!).
Date on which the financial statements will be closed (June 30 and for the first time June 30, 2006 for example)
Lease for the premises or “contrat de domicialiation”
Any possible specific provision to be included in the articles of incorporation

EURL - ENTERPRISE UNIPERSONNELLE À RESPONSABILITÉ
LIMITÉE
Characteristics of a EURL:
Only a nominal capital requirement - minimum capital of 1 euro
One shareholder - can be a company or an individual
Up to 50 partners are allowed
For small enterprises based on one person
Simple to set up and operate for a closed structure - less formal procedures
Transfer of the shareholdings to family members is usual
Fiscal transparency is usual although company tax can also be levied, depending on the facts and agreements with the French fiscal authorities.
Subject to transfer tax in the event of sale of shares

An Entreprise Unipersonnelle à Responsabilité Limitée - EURL, is a private limited company with one shareholder.

There is a minimum capital of 1 euro which may be paid in cash or by assets brought into the company (the value of these assets must be certified by an independent accountant).

The EURL is run by a manager who may be either the sole partner, or a third party. The manager's appointment and powers are detailed in the Articles of Incorporation.
The sole shareholder/manager is responsible for unpaid company debts only up to the amount of share capital still unpaid.

SA – SOCIÉTÉ ANONYME
The characteristics of the SA are:
- capital of €37000
- minimum of 7 shareholders
- 3 directors minimum
- an independent auditor is required
- an annual general meeting of shareholders is necessary

SAS – SOCIÉTÉ PAR ACTIONS SIMPLIFIÉE
The Societé Par Actions Simplifieé (Simplified Stock Company) is a relatively new type of entity in France. It is a vehicle for creating a joint venture between a French company and a foreign partner. Previously, French companies had found it difficult to enter into joint-venture relationships with foreign companies because of the rigidity of French corporate law. However SAS companies are increasingly finding favor with foreign investors, particularly in the USA, who wish to set up subsidiaries in France.

Requirements:
Requested information for incorporating a SAS in France:

The minimum share capital is €37,000 of which half must be paid up
The company must have at least two shareholders and a chairman
Shareholders are liable up to the limit of their capital contribution
There is no need for a board of directors

SOCIÉTÉ CIVILE IMMOBILIÈRE (SCI)
A common way of buying a property in France

Please read our article inside our link for France;

COMPANY FORMATION IN FRANCE
WHAT IS NEEDED TO GET STARTED

To start the process we need the following information:
- A brief description of the activities of your company
- Proposed company name
- Name Check with the "Institut National de la Propriété Industrielle"
- A sole director for a SARL and a one shareholder
- Three directors for a S.A. (we can assist you appointing nominee directors) and seven - shareholders
- The necessary funds to deposit the capital of the company (€1 as minimum for a SARL or 50% of €37000 for a SA, €18500)
- A copy of the passports of the directors

In order to fully incorporate a company under French law the following have to take place:
- Deposit of funds representing the company's capital with a French Bank - the bank will then issue a certificate
- The By-Laws and articles of incorporation (statutes) must be drafted and approved by shareholders
- The By-Laws and articles of incorporation must then be filed with the commercial registry
- Notice of the incorporation must be advertised in the official journal

TABLE OF TYPES OF STRUCTURE

(1) possibility to pay only half upon setting up the business for contributions in cash and the remainder over 5 years
(2) possibility to have variable capital
(3) 1 to 5 members who can be shareholders or not
(4) 3 to 5 shareholder members
(5) resort to third party capital and issue of more sophisticated securities
(6) 4.80% of the selling price paid by the buyer
(7) relationships between shareholders, management, organization, and capital transfer
(8) public issues forbidden.

TIMINGS FOR INCORPORATION
Step-by-step Incorporation timing for a SARL “Société À Responsibilité Limitée” with nominal share capital (there is no minimum share capital.)

COMPANY FORMATION IN FRANCE
F.A.Q. – FREQUENTLY ASKED QUESTIONS

What names can be used?
You can choose any name which is not already registered as a company or business in France and is not protected under the relevant French intellectual property provisions.

It is nevertheless suggested that:
- typically foreign names be avoided, as well as adding the word “France” after the name of the company (which suggests that a company is not French)
- names which cannot be pronounced in French or a regional language (Alsatian, Basque, Breton, Corsican, Creole, Flemish, Occitan..)

Where should the Registered Office be?
Anywhere in France; P.O. Boxes not permitted.
A formal written agreement by the owner of the property authorising the specific use of the address for the registered office of the company. The agreement needs to be sent to the Registrar.

What is the Gérant?
An SARL does not have Directors but instead usually sole managers who is/are responsible directly to the shareholders and would normally communicate with them through the Annual General Meeting.

The legal representative and Chief Executive Officer of such a French company is called a "Gérant" and it is recommended that he or she should be a national of any EC member state but it is not necessary that he or she reside on French territory.
It is considerably more complicated to appoint a Gérant who is not a national of one of the 25 EU states and to appoint, say, an Argentinean national which will add a number of weeks if not longer to the formation.

For the Gérant we shall need the same information as for an individual shareholder but we will also require a photocopy of passport or national identity card.

The Gérant must get certification that they have no criminal record from the authorities where they reside, or for a British person must sign an affidavit in which he/she confirms that they have no criminal convictions which would prevent them from managing a company.

What are the rules about shareholders?
The minimum number of shareholders in an SARL is two and these may be either individuals or bodies corporate. For a EURL one shareholder is possible. There is no residence requirement and no nationality requirement.

For each shareholder we shall need the following information:
- body corporate: full registered name, trading name, full address of registered office, official company registration number, full name and title of legal representative of the company.
- individual: full last name, full first names, home address, profession, date and place of birth, nationality, marital status, if married to whom, where and when.

How much should the share capital be?
Recently restrictions have been removed so a very small capital base is now possible. Please ask us if you want to incorporate with very little capital as there are laws penalising "thin capitalisation".

The amount of share capital chosen must be frozen on a bank account during the course of the formation of the company.

Pre-Emption Clauses/ Restriction on the Sale of Shares
An SARL usually adopts a “closed” structure, meaning that share transfers can only be carried out between existing shareholders or with the unanimous permission thereof.

Thus, in the event of the transfer of shares to a third party this may only be done with the agreement of the other shareholder(s).

When is the accounting and tax year end?
In France you may chose the date of the end of the financial year of the company, although the majority of companies generally use the calendar year (1 January to 31 December) as this is the year-end for personal tax affairs.

How much time does the incorporation take?
It is possible to form such a company in 4-5 weeks from the date upon which all necessary information and documents have been received. Should it be necessary to proceed with the formation in a much shorter period this is possible, but it is considerably more expensive than the standard formation.

TAXATION IN FRANCE
GENERAL OVERVIEW
France 2007 Corporate tax rate = 331/3%
For fiscal years ending after January 1st 2007, the corporate tax rate is 33.33 percent.

A 3.3 percent social contribution of the corporate income tax is applicable to the portion of corporate income tax exceeding EUR 763,000 resulting in an overall tax rate of 34.43 percent (for this portion).

Companies (i) which have a turnover of up to EUR 7,630,000 and (ii) of which individuals hold at least 75 percent of the share capital (or which are owned by companies meeting the same conditions) are subject to a corporate tax rate of 15 percent. This applies to the part of the taxable profit up to EUR 38,120. These companies are exempted from the 3.3 percent contribution.

The standard rate of value added tax (Taxe sur la valeur ajoutée; TVA) is 19.6%.

There are reduced rates of 5.5 percent, 2.1 percent and zero percent which apply to, for example, food, water, passenger transportation, some pharmaceutical products, books, hotel accommodation (5.5 percent), newspapers and medicines for human health when reimbursed by social security (2.1 percent), exports of goods and intra-Community supplies (zero percent). Certain supplies of goods and services are exempt from VAT, for example certain medical supplies, postal services, education, certain financial transactions and insurance services.

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