France: Company Law

Last Updated: 8 March 1995

The public limited company (SA) and the limited liability company (Sarl) present similarities which justify their being traditionally contrasted with partnerships of individual people. Like the SA, the Sarl is a commercial company with the limited liability, but its spirit is the same as a partnership. However, the partners are generally more numerous, and its company participations are not negotiable. Although the situation of the partner in a Sarl is not really different from that of the shareholder in an SA as regards his right to information and right of control, conversely, reciprocal rights in securities are fundamentally different. The other essential difference between the two types of company concerns the situation of the directors, different in every way: their organisation, their company and fiscal status, their powers, the organs which control them, etc. new statute dated January 3 1994 created a third type of entity, a corporation called the 'SAS' (Societe par Action Simplifiee). This form of corporation mixes limited liability and contractual freedom. This freedom is only limited by a minimum protection given to third parties, as the shareholders can organise the management and 'shareholders control' freely. The structure is close to the one of the SA because of the limited liability and also because some rules governing the SA complete the 1994 law. The SNC (Societe en Nom Collectif) is another type of company classified in France under the category 'Societe de personnes', a kind of commercial Partnership used very often by small structures and by joint ventures, the SNC is a 'transparent company' as the taxable profits are transferred to the partners in proportion of their holdings. The company is now close to the SAS because of contractual freedom but at the same time far from it, since all the partners have a personal, joint and unlimited liability.

Company Formation.
The Sarl is the only type which may be constituted by a single partner, the only one for which a maximum of 50 partners is imposed. The minimum amount of capital is 50,000FF, by contributions either in kind or in cash, funds to be fully and immediately paid up, unlike the SA in which industrial contributions are admitted and only a quarter of the contributions in cash has to be paid up on the day the company is formed. The number of shareholders for an SA is of a least seven, the capital of a least 250,000FF, only a quarter of which need to be paid up each year. An SA calling on public savings whose securities are negotiated on the Stock Exchange either through professional brokers or offered publicly, needs a minimum capital of 1,500,000FF. With the partnership limited by shares, the SA is the only type of company allowed to issue investment securities, thus facilitating the financing of operations and investments. A SAS needs two partners, but can only be legal entities with a minimum capital of 1,500,000FF. Its own capital is, at least, of 250,000FF entirely paid up in kind or in cash. The law prohibits SAS to go public. Any company can be transformed into an SAS with the unanimous consent of the shareholders, provided that the new SAS complies with all the rules of incorporation. At least two partners may constitute a SNC: individuals or legal entities, but need to be commercial. No minimum amount of capital is required but if the partners choose to, contributions can be made in cash, in kind or industrial (unlike the SA, SAS and SARL). But all the partners are personally, jointly and unlimitedly liable for the debts of their SNC.

Securities Transfer.
The hybrid nature of the Sarl, which is at the same time an association of people and a limited liability company, is clear from the approval procedure to which any transfer of participations to a third party, requires in particular the consent of the majority of the partners representing at least three quarters of the share capital. In principal, participations are freely transmissible between partners, spouses and descendants, unless otherwise stipulated in the Articles of Association. Moreover, as the company participations are not negotiable securities, the formalities laid down in Article 1690 of the Civil Code have to be complied with as regards the transfer of debts: drafting a document, notifying the company or acceptance of the transfer by the company in an authenticated deed. Lastly, such transfers are subject to a registration fee of 4.8%. Shares of an SA are negotiable securities for the transmission of which no particular form is required. The principle of the free transmissibility of shares is, however, tempered to a certain extent, notably by the insertion in the Articles of Association of a strictly worded approval clause. Moreover, a whole range of institutions have appeared or have seen their powers strengthened by a setting up of a degree of control over capital variations and the activity of companies: for example, exceeding certain thresholds of participation in the company forces the shareholder concerned to make himself known to the company. Shares of the SAS are negotiable but, like the SA, shareholders may include in the by-laws approval clause, temporary non-negotiable share clauses (limited to 10 years), squeeze out clauses. All these amendments must be voted by all the shareholders. This rule preserves the company from outsiders.

Organisation Plans.
The Sarl has a lighter structure than the SA. There is only one directing organ, the managing directors, conditions of their appointment and prerogatives are fixed by the Article of Association. With third parties, the managing director has extensive powers to act in all circumstances in the company's name. Two types of management are possible for the SA, a board of directors and a directorate. The typical public limited company is administered by a board of directors chosen from among the shareholders, which then appoints a chairman and possibly managing directors. The other possibility consists of a directorate composed of natural persons, shareholders or otherwise, entrusted with administering and directing the company, and a supervisory council, grouping together shareholders entrusted with appointing the members of the directorate and supervising their management. This formula has not been very successful in practice because, although it sets up a better separation of powers, it has several disadvantages.

The structure of the SAS is 'lighter' than the one of the SA or the Sarl. The management is organised by the by-laws such as the number and the power of the Directory, the appointment of the Managing Director. However, a few decisions must be taken by all the shareholders: mergers, spin-off, winding up, appointment of statutory auditors. As for the SA, the company management can be controlled by auditors, on request of a minimum of percentage of the shareholders. The organisation of the SNC, as for the SAS, is governed by contractual freedom. The by-laws can provide for only one director or by several (individuals or legal entities). If the director is a partner designated by the by-laws, his removal requires the unanimous consent of all partners. This rule confers a steady management. The death of one partner requires the winding up of the partnership except if the by-laws provide for some other solution. The personal liability eases the financing of the SNC.

Limits on the Managing Directors.
A Sarl director can be dismissed for good reasons and on the partners' decision representing more than half the share capital. Therefore, to be protected from dismissal he needs to own over 50% of the capital. This advantage is, however, counter-balanced by the fiscal status reserved to a majority-owning director who, unlike a minority-owning director, is not treated as an employee. For a long time this has been the cause of a distortion of the form of companies, since many directors made their companies into public limited companies in order to benefit from the favourable treatment of its directors, even if this was not justified by the small size of their companies. The director's obligations are sanctioned by the 'discharge' granted by the partners' annual meeting. Apart from this occasional and sometimes illusory control, the director of a Sarl is far from being subjected to the same kinds of supervision and outside intervention as the management of an SA. The nature of the general meetings and the average shareholders' ignorance of management have led legislators to set up control authorities within the SA itself; auditors and experts appointed by law. The auditor is an essential and necessary component of any SA. Moreover if the company is obliged to prepare consolidated accounts or calls on public savings, the number of auditors required by law rises to two. The auditor is also obliged to warn the company's directors when he thinks the company's at serious risk of having to cease activity. Exceptionally, a company's management can be controlled from outside by an expert appointed by law at the request of a minority of shareholders (10% of the capital), the public prosecutor, etc. The SA has the advantage of permitting non-trading partners and minority shareholders to participate in the capital. It facilitates the financing of industrial investments and concentration and development operations, notably by allowing simplified and inexpensive transfers of shares. On the downside, however, the formalities constrain its constitution and the phases of the company's existence.

In order to protect the third parties, the Managing Director of an SAS represents the company, binds it even for decisions taken outside the scope of the 'Company Purpose'. If by any chance, the amount of capital is reduced to less than 1,500,000FF, the company may be wound up if nothing is done about it within a period of six months. This winding up may be prevented by a recapitalisation up to 1,500,000FF or by the sale of shares. The statute includes a concerted action provision between shareholders and companies controlled by the SAS. This provision can restrain the use of the new corporation for the purpose of controlling other companies. The personal, joint and unlimited liability of the SNC shareholders is inconvenient since it may lead to the disappearance of the legal entity. Certain activities are therefore forbidden to a SNC: insurance, auditing, etc. The limitation over share transfers prevents the easy leaving from the company; such a leaving requires the unanimous consent of the partners.
The Sarl is perfectly suited to small or medium sized companies whose members do not have to commit a large contribution, can limit their liability in proportion and are subjected to rules of operation and control which are more flexible than for the SA. The choice between an SA or a Sarl depends on prior analysis of the company's financial, economic and personal information.

The content of this article is intended to provide a general guide to the subject matter. Individual advice should be sought about your specific circumstances.

For further information please contact Jean-Jacques Bertagna on +331 47 23 05 09.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions