Doing Business In Comparative Guide

1 Legal framework

1.1 Does your jurisdiction have a civil law system, a common law system or a hybrid system?

France has a civil law system.

1.2 Which legislative and regulatory provisions primarily govern the establishment and operation of enterprises in your jurisdiction?

• The Commercial Code;
• The Civil Code;
• The Monetary and Financial Code;
• The Labour Law; and
• EU regulations and directives on corporate governance.

Regulatory bodies and authorities such as the Financial Market Authorities and the Data Protection Authority also oversee and regulate specific aspects of business activities. Influential sources of soft law include:

• the code of conduct promulgated jointly by the Association Française des Entreprises Privées and the Mouvement des Entreprises de France, most recently in June 2018; and
• the code issued by Middlenext, most recently in 2016, used principally by smaller listed companies.

1.3 Which bodies are responsible for drafting and enforcing these provisions? What powers do they have?

The National Assembly and the Senate are the legislative bodies that draft and pass laws. The commercial courts and other courts in France – in particular, the French Supreme Court – play a role in interpreting and enforcing laws related to commercial disputes, contracts and business disputes.

2 Types of business structures

2.1 What are the main types of business structures in your jurisdiction and what are their key features?

French law provides for several different types of commercial companies, which differ in the way they are organised:

• An entreprise unipersonnelle à responsabilité limitée (EURL), or sole shareholder limited liability company, has a single shareholder; while a société à responsabilité limitée (SARL) has between two and 100 shareholders. The minimum share capital is €1. They are managed by one or several managers, who must be natural persons. Capital contributions include:
• • cash;
  • contributions in kind; and
  • know-how.
• Liability of shareholders is limited to their capital contribution.
• A société par actions simplifiée unipersonnelle (SASU), or sole-shareholder simplified joint stock company, has only one shareholder; while a société par actions simplifiée (SAS), or simplified joint stock company, has at least two shareholders and is legally represented by its president, but may also have general managers or delegate general managers with the same or limited powers. The minimum share capital is €1. This form of company is very flexible, as the shareholders can set out in the bylaws the rules regarding the management and governance of the company. An SAS cannot be listed.
• A société anonyme (SA), or joint stock company, differs from the previous types of company in that the minimum share capital is €37,000. It may be managed either by:
• • a board of directors; or
  • a management board and supervisory board.
• It has at least two shareholders, whose liability is limited to their capital contribution. This form of company is less flexible and more constraining than an SAS, but can be publicly listed.

Please see the table here:

	EURL / SARLU ("Entreprise Unipersonnelle à Responsabilité Limitée ») / (« Société à responsabilité Limitée Unipersonnelle »)	SARL ("Société à Responsabilité Limitée")	SAS / SASU ("Société par Actions simplifiée") / (« Société par Actions Simplifiée Unipersonnelle »)	SA ("Société Anonyme")	SNC ("Société en Nom Collectif")
Capital amount	Min. 1€	Min. 1€	Min. 1€	Min. 37,000€	Min. 1€
Capital contribution	Cash Contributions in kind Know-how / services (do not contribute to the capital but give right to dividends)	Cash Contributions in kind Know-how / services (do not contribute to the capital but give right to dividends)	Cash Contributions in kind Know-how / services (do not contribute to the capital but give right to dividends)	Cash Contributions in kind	Cash Contributions in kind Know-how / services (do not contribute to the capital but give right to dividends)
Shareholders	1	2 to 100 (or 1 if this is a SARLU)	1 in case of a SASU / min. 2 for a SAS	Min. 2 or 7 if the company is listed	2
Shareholders' liability	Limited to the capital contribution (except if the corporate veil is lifted)	Limited to the capital contribution (except if the corporate veil is lifted)	Limited to the capital contribution (except if the corporate veil is lifted)	Limited to the capital contribution (except if the corporate veil is lifted)	Joint and several liability
Management	The SARL is managed by a "Gérant", who must be a natural person. He can be a company's shareholder or a third person, even an employee if he is not a majority shareholder.	The SARL is managed by a "Gérant", who must be a natural person. He can be a company's shareholder or a third person, even an employee if he is not a majority shareholder. The company can have one or several "Gérant(s)".	The by-laws or the Shareholders' General Meeting appoint a "Président", who is a natural or legal person. A "Directeur général" (General Manager) can also be appointed.	2 types of management: Board of Directors (Conseil d'administration) Management board and supervisory board (Directoire et Conseil de surveillance)	All shareholders are "Gérants", unless otherwise mentioned in the by-laws.
Transfer of shares	Shareholder can sell all his shares to a new shareholder. However, if only a part of the shares is sold, the business structure must be changed.	Between shareholder / spouses / heirs: not need for approval, unless mentioned in the company by-laws. To third parties: approval requested (shareholders' majority or more if set out in the by-laws)	No approval needed unless mentioned otherwise in the by-laws.	Between shareholder / spouses / heirs: not need for approval. To third parties: approval may be requested in the by-laws	Approval of all shareholders is mandatory.
Tax	Flow-through structure (Profits are taxed as personal income). Possibility to opt for the corporation income tax (IS) and mandatory if the sole shareholder is a legal person.	Corporation income tax (IS) – possibility to opt for profits taxation as personal income during 5 years under specific conditions.	Corporation income tax (IS) – possibility to opt for profits taxation as personal income when the company is set up.	Corporation income tax (IS).	Flow-through structure (Profits are taxed as personal income).

Less common forms for operating business entities include the following:

• A limited partnership (société en commandite) is subject to somewhat flexible governance rules – some of the partners/shareholders have unlimited liability, while the others have limited liability. There are two types of such companies:
• • A société en commandite par actions issues negotiable shares (actions) and has somewhat flexible governance rules, which allow unlimited liability partners to maintain control. A few publicly traded companies take this form.
  • A société en commandite simple issues shares in non-negotiable form.
• In a société en nom collectif, all partners have unlimited liability.
• A société civile cannot engage in a business deemed to be 'commercial'. Each partner has unlimited liability for its rateable share of the company's debts.
• In de facto companies, members have unlimited liability

2.2 What capital requirements apply to these different types of business structures?

No answer submitted for this question.

2.3 What is the process for establishing these different types of business structures? What procedural and substantive requirements apply in this regard? What is the typical timeline for their establishment?

The steps to incorporate a business structure in France are as follows:

• drafting the bylaws;
• appointing the manager(s) or president and general managers in the bylaws or by decision of the shareholders' general meeting;
• opening a bank account to deposit the funds (share capital amount) and obtain a bank certificate, which can be challenging for foreign companies due to money laundering regulations;
• entering into a lease or domiciliation agreement for the registered office of the company;
• publishing the company's formation in a legal newspaper; and
• filing all documents with the concerned clerk of the commercial court where the company has its registered office to obtain the Kbis (ie, certificate of incorporation).

Since 1 January 2023, the company's incorporation must be processed through the Guichet Unique. All formalities can be completed online on the National Institute of Intellectual Property website.

All companies' legal data is now gathered in a single register: the Companies National Register.

2.4 What requirements and restrictions apply to foreign players that wish to establish a business directly in your jurisdiction?

Foreign citizens or companies can create a corporation in France. There is no citizenship restrictions.

There is no requirement for the legal representative(s) of a foreign company to live in France. However, if the French company has a social and economic committee (CSE), it is recommended to:

• have a representative in France; or
• delegate powers to a French employee to manage French obligations vis-à-vis the CSE.

However, if the person wishes to live in France and is not an EU citizen, he or she will need to obtain a resident permit.

The most challenging step for foreign players is to open a French bank account, which is a requirement to incorporate a company. If the establishment of a business is through the acquisition of an existing French entity, foreign players should check whether the business of the target is likely to be subject to the French foreign direct investment regulations, which have a very broad scope.

2.5 What other opportunities, using people/entities not connected with the main person, are there to do business in your jurisdiction (eg, agency, resale); and what requirements and restrictions apply in this regard?

Business can be operated in France through commercial agents. The status of commercial agent is closely regulated in France (Articles L134-1 and following of the Commercial Code – the Law of 25 June 1991), as a result of EU Directive 86/653/CEE, with various provisions that aim to protect commercial agents. For example, agents are entitled to compensatory indemnity for loss suffered in case of termination of the relationship by the principal.

Selective, exclusive distribution or franchising agreements are also common under French law, with specific rules applicable to each agreement.

3 Directors and management

3.1 How is management typically organised in the different types of business structures in your jurisdiction?

Please see the table in question 2.1.

3.2 Is the establishment of specialist committees recommended or mandated for certain types of enterprises? If so, which areas should they cover?

Since 2008, audit committees have been mandatory for:

• listed companies;
• banks; and
• insurance companies.

For other companies, specialist committees such as audit committees, compensation committees or appointment committees are not mandatory but can be recommended depending on the size of the company.

Some companies also implement new specialised committees such as:

• strategy committees;
• technology committees; and
• environmental, social and governance committees.

In a société par actions simplifiée (SAS), although the only mandatory corporate body is the president, if there are several shareholders, it is common to create other committees – such as an executive or strategic committee – to govern the company.

3.3 Is the appointment of corporate directors permitted in your jurisdiction?

In a société anonyme (SA), a company is legally required to appoint:

• a board of directors with a minimum of three directors; and
• at least one general managing director, who can also assume the functions of president of the board of directors.

There can be one or several deputy managing directors. The SA can also be formed with a management board and a supervisory board. Directors can be legal entities (however, a permanent representative must be appointed in this case), but managing directors must be natural persons.

In a société par actions simplifiée (SAS), shareholders have the power to freely determine the organisation of the management bodies in the articles of association and can thus decide to create different corporate bodies and appoint the members of such corporate bodies. However, shareholders:

• must at least appoint a president who represents the company in its relationships with third parties; and
• may appoint general managing directors and delegate general managers.

3.4 What requirements and restrictions apply to the appointment of directors, in terms of factors such as number, residence, independence, diversity etc?

The following cannot be appointed as corporate officers:

• persons who have been disqualified from acting as a director or manager; and
• persons without legal capacity to act (ie, mentally impaired or non-emancipated minors).

Directors or managers need not hold qualifying shares. However, the articles of association may include such a requirement. In listed companies, however, it is recommended that directors hold a significant number of shares.

The articles of association may also contain other requirements, such as:

• a requirement for specific skills (confirmed by a diploma or professional qualification); or
• an age limitation.

A director or manager need not be a French national; nor need he or she be resident in France.

In an SA with a board of directors, the board must be composed of between three and 18 members. The articles of association must specify a maximum age limit for these members. If not, the number of directors aged over 65 cannot exceed one-third of the directors in office. In an SA with a management board and a supervisory board:

• the supervisory board is also composed of between three and 18 members; and
• the management board is composed of between two and five members (seven for companies which are listed on a regulated market).

In an SAS, unless otherwise provided for in the articles of association, the managers and the president may be legal entities. In this case, the managers of the legal entity are subject to the same conditions as if they were president or manager in their own name.

The board of directors of an SA must reflect a certain degree of balance between women and men. Since 1 January 2017, in listed companies and in large and medium-sized limited companies that employed at least 250 employees during the last three consecutive fiscal years and whose turnover is at least €50 million, the proportion of directors of each gender cannot be lower than 40% on boards of directors or supervisory boards.

The election of board members representing employee shareholders is an obligation for:

• state-controlled companies;
• listed companies in which employees hold more than 3% of the share capital; and
• companies that employ more than 1,000 employees in France or more than 5,000 employees worldwide, including through subsidiaries.

In such cases, elections by employees must be organised to appoint one or two directors to represent them. There should be:

• one employee shareholder representative on any board with fewer than eight members; and
• two on boards with more than eight members.

3.5 How are directors selected, appointed and removed? Do any restrictions or recommendations apply to their tenure?

The president and general managers of an SAS can be designated in the articles of association at the time of the company's incorporation. If not, they can also be appointed by a shareholders' meeting or a meeting of any other corporate body as provided by the articles of association.

The president and general managers of an SAS are removed in accordance with the procedure set out in the articles of association. The articles of association will determine whether the shareholders, a group of shareholders or a supervising body may have the right to dismiss the president or general managers or other appointed members of committees. A dismissal decision need not be justified unless required by the articles of association. In any case, such a decision:

• must be taken only after a 'proper hearing'; and
• must not be taken in insulting or hurtful circumstances.

The articles of association may provide for the payment of damages in the event of a corporate officer's removal and set out the basis of the payment. Corporate officers may resign at any time in accordance with the procedure set out in the articles of association (eg, complying with notice provisions).

Moreover, following the incorporation of an SA with a board of directors, the directors (other than directors elected by employees) are appointed by the ordinary general shareholders' meeting. If there is a vacancy on a board of directors (through death or resignation), the board of directors can temporarily fill such vacancy. This decision will need to be ratified by the next shareholders' meeting.

Directors are eligible for reappointment unless the articles of association provide otherwise. Upon the expiry of a director's term of office, the board of directors of an SA must convene a general meeting to consider the vacancy.

In SAs with a management board and a supervisory board:

• the members of the supervisory board are appointed in the same way as directors; and
• the members of the management board are appointed by the supervisory board.

In an SA with a board of directors, directors, managing directors and deputy managing directors may be dismissed at any time:

• by the shareholders during an ordinary general meeting (for directors); and
• by the board of directors (for managing and deputy managing directors).

There is no need to provide reasons for the dismissal. However, such a decision:

• must not be taken in offensive or hurtful circumstances; and
• must be taken after a 'proper hearing'.

Otherwise, the company could be liable to pay damages. Directors may resign at any time, without giving any reason.

In SAs with a management board and a supervisory board:

• members of the supervisory board are dismissed in the same way as directors; and
• members of the management board are dismissed by the supervisory board.

The removal does not put an end to the director's or manager's liability for the past. He or she can still be liable if he or she breached directors' or managers' duties prior to his or her removal.

3.6 What are the directors' primary roles and responsibilities, and how are these exercised?

An SA's board of directors sets the company's strategy and oversees its execution, keeping in mind the social and environmental impact of the business while also acting in the company's best interests. Apart from matters specifically reserved by law or the articles of association for the general shareholders' meeting, it has all the authority necessary to carry out the company's corporate objective. In practice, the managing director exercises most of these powers.

The board of directors must receive all documents and information necessary from the chairman or managing director to carry out its duties. Nonetheless, the board has the exclusive authority to decide on:

• calling general meetings;
• preparing the company's financial statements and yearly management reports;
• co-appointing directors; and
• designating and removing the managing director and chairman.

In SAs with a management board and a supervisory board, the latter plays a more limited role than a board of directors (eg, it only controls the accounts and does not draw them up). The management board manages the company in the same capacity as a managing director.

The following appointees represent the company in its relationships with third parties:

• the president of an SAS (and any manager empowered to do so by the articles of association);
• the managing director (and any deputy managing director) in an SA with a board of directors; and
• the president of the management board (and any of its members empowered to do so by the supervisory board) in an SA with a management board and a supervisory board.

These legal representatives have all the powers to fulfil the corporate purpose of the company in all circumstances and in the name of the company.

Nevertheless, the legal representatives' authority to interact with the board of directors, the supervisory board and shareholders may be restricted by the articles of association. These limitations are not enforceable against third parties.

3.7 Are the roles of individual directors restricted? Is this common in practice?

Please see question 3.6 – some matters and decisions are expressly reserved to the directors sitting on the board of directors. The duties, responsibilities and liabilities of directors may vary according to the different company forms. They are regulated:

• by the law as far as an SA is concerned; and
• by the articles of association as far as an SAS is concerned.

3.8 What are the legal duties of individual directors? To whom are these duties owed?

Directors have legal duties towards:

• the company;
• shareholders;
• employees; and
• third parties.

They have tax, social, personal data protection, health and security obligations. Each director owes duties to the company to promote its success for the benefit of its shareholders.

3.9 To what civil and criminal liabilities are individual directors primarily potentially subject?

Directors or officers may be held liable for the following violations against the company, shareholders and third parties:

• violations of laws and regulations applicable to the company;
• violations of the articles of association; and
• mismanagement.

A director is personally liable to a third party which is not a shareholder if the director's breach of duty:

• is intentional, wilful and material; and
• does not necessarily concern the exercise of his or her duties.

The director or manager is liable only if the offence that he or she committed causes personal injury to the victim. The liability of a managing director may be incurred individually or jointly and severally, depending on whether the managing director individually or several managing directors together have breached their duties as managing directors.

In addition, directors may be prosecuted for criminal offences committed in the performance of their duties. They may be held liable for certain offences, such as:

• misuse of corporate assets;
• abuse of power; and
• payment of fictitious dividends.

In the event of bankruptcy:

• special measures may be taken against directors or managers in case of mismanagement; or
• the proceedings may be extended to directors or managers in the event of confusion of their assets with those of the debtor or the fictitious nature of the legal entity; and
• the directors may be ordered to pay all or part of the company's debts.

	Towards the company	Towards the shareholders	Towards third parties
Can the directors be personally liable?	No need to prove an intentional fault. The company can hold the directors personally liable in case of breach of the law, regulations or articles of association.	Only if they prove that they suffered different damage from that suffered by the company itself.	Only if they prove that a director committed a personal fault, not intrinsically connected with the performance of his or her duties (eg, a criminal offence).

4 Shareholders/members

4.1 What requirements and restrictions apply to shareholders/members in your jurisdiction, in terms of factors such as age, bankruptcy status etc?

Shareholders must have the capacity to contract. The following restrictions apply:

• Insane/mentally incompetent persons: A distinction must be drawn between:
• • persons who have been adjudicated incompetent by a court and have had a guardian appointed, as only the guardian can purchase company's shares on behalf of such persons; and
  • mentally incompetent persons who have not been so adjudicated, who can purchase company's shares in their own name, although the contract is voidable by them.
• Minors: A distinction must also be drawn between:
• • emancipated minors, who can become shareholders if the company's structure does not require that shareholders qualify as a merchant (eg, a société en nom collectif (SNC)); and
  • non-emancipated minors, as only their legal representative can purchase company's shares on their behalf.

Some offences (eg, theft, money laundering), as well as bankruptcy, can lead to a management ban or a prohibition against carrying on a commercial activity. However, this does not prevent a person from becoming a company's shareholder as long as he or she does not perform any management function.

The articles of association of a société par actions simplifiée (SAS) may also contain an age limitation.

4.2 What rights do shareholders/members enjoy with regard to the company in which they have invested?

Shareholders enjoy different rights about the company in which they have invested:

• They have a right to information, as follows:
• • They can ask to receive certain documents before the shareholders' annual general meeting (balance sheet, profit and loss, management report, text of the draft resolutions and statutory auditor's reports); and
  • They can consult certain documents at the company's head office.
• They usually have a right to be convened and vote during all shareholders' meetings, unless they hold securities that do not give them a right to vote.
• They have a right to dividends when the company makes profit and if a decision to distribute dividends has been voted.
• They have the right to defend the company's interest by:
• • taking legal action to overturn an abusive decision decided during a shareholders' meeting;
  • seeking a director's dismissal if he or she committed a serious fault; or
  • requesting the appointment of a temporary administrator when the company faces difficulties. Three conditions must be met for a temporary administrator to be appointed:
  • • the company must be in imminent peril (even serious difficulties are not sufficient);
    • there must have been a failure to act or the directors must have committed acts intended to harm the company's interests; and
    • the company's recovery must still be possible, failing which the court will prefer to dissolve the company.

4.3 How do shareholders/members exercise these rights? Do they have a right to call shareholders' meetings and, if so, in what circumstances?

Shareholders exercise their rights through:

• general shareholders' meetings (ie, the annual general meeting); or
• extraordinary shareholders' meetings (ie, where it is necessary to modify the company's articles of association).

In a société à responsabilité limitée (SARL), pursuant to Article L223-27 of the Commercial Code, a shareholders' meeting may be called by one or several shareholders that:

• own half of the company's shares; or
• represent at least one-tenth of the shareholders or the company's shares.

One or more shareholders holding one-twentieth of the share capital may place draft resolutions on the general meeting's agenda, which will be brought to the attention of the other shareholders of the SARL.

Any shareholder can take legal action to ask for the appointment of a proxy in charge of convening the annual general meeting and set the agenda. Pursuant to Article L227-9 of the Commercial Code, it is not mandatory in an SAS to organise a shareholders' meeting to take collective decisions; this depends on the provisions of the company's articles of association. However, some decisions such as a capital increase or a merger must be taken collectively.

In an SA, pursuant to Article L225-100 of the Commercial Code, the shareholders' annual general meeting must take place at least once a year, within six months of the end of the financial year. If the shareholders' annual general meeting has not been organised within this timeframe, the public prosecutor or any shareholder can take legal action to order the directors – subject to a fine – to convene the shareholders' meeting or to appoint a proxy to do so.

Moreover, pursuant to Article L225-105 of the Commercial Code, in any SA whose share capital does not exceed €750,000, any shareholder representing at least 5% of the company's shares can ask to place a draft resolution on the general meeting's agenda.

In an SAS, the articles of association specify:

• the decisions which should be taken collectively by the shareholders; and
• the rules for taking these decisions (Article L227-9 of the Commercial Code).

However, the Commercial Code stipulates that certain decisions must be taken by the shareholders collectively – for example:

• approval of annual financial statements and appropriation of profits;
• capital increases, capital reductions and capital amortisation;
• dissolution of the SAS; and
• conversion of the SAS into a company of a different legal form.

4.4 What influence can shareholders/members exert on the appointment and operations of the directors?

In an SA:

• the first members of the board of directors are appointed by the shareholders; and
• those appointed members will then appoint the president of the board of directors.

In an SA with a management board and a supervisory board:

• the members of the supervisory board are designated by the shareholders; and
• they then appoint the management board's members, one of whom is appointed president.

Therefore, the shareholders and the appointed members of board of directors or supervisory board influence the appointment of the other members.

In an SARL, the managers are appointed by the shareholders.

In an SAS, the company's management bodies are freely determined in the articles of association. However, the president and the general managers, if any, are appointed by the shareholders.

4.5 What are the legal duties/responsibilities and potential liabilities, if any, of shareholders/members?

As a general rule, shareholders do not have specific responsibilities towards the other shareholders or the company. In case of a limited liability company, the shareholders' liability towards the company is limited to their contribution in the capital. However, shareholders of unlimited liability companies such as civil companies (eg, sociétés civiles immobilières, SNCs) are severally and jointly responsible for the company's debts.

Moreover, even in limited liability companies, shareholders may also be held liable in some exceptional circumstances. For example, if a shareholder is considered to be de facto managing the company and has committed a mismanagement fault contributing to the company's insolvency, the corporate veil may be pierced, which means that the shareholders may no longer benefit from the company's shield and may be held liable for the company's debts. Such a mechanism is provided for in Article L 651-2(1) of the Commercial Code, which provides as follows:

The action must be brought by the liquidator intervening in the proceedings, who must provide proof of:

• the existence of a management error; and
• its causal link with the increase in the shortfall in assets.

Although there is no exhaustive list, the commercial courts regularly find the following grounds for such fault:

• late declaration of cessation of payments;
• careless management of the company's assets;
• abusive remuneration; or
• an executive's lack of interest in the company's affairs by abstaining from its management.

Also, shareholders may be held liable in exercising their voting rights, in case of majority or minority abuse, if they:

• impose a decision that is contrary to the company's interest; or
• prevent a vote on a decision that is in the company's best interests.

In terms of duties, shareholders must:

• comply with the company's rules and articles of association; and
• act in the best interests of the company.

If a shareholders' agreement has been concluded, they must also comply with it and honour their commitments.

4.6 To what civil and criminal liabilities might individual shareholders/members be subject?

In principle, the liability of the shareholders is limited to the amount of their contributions.

However, a shareholder may be civilly liable if it causes damages to a third party (eg, a party contracting with the company) by wrongfully exercising its rights, but only if it commits a particularly serious wilful fault which is incompatible with the normal exercise of the prerogatives attached to the shareholder's status.

Shareholders may also be subject to civil liability in the following circumstances, even though they did not commit a serious wilful fault:

• abuse in the exercise of their voting rights;
• fraudulent dissolution of the company; or
• disparagement of a company's director at or outside a general meeting.

The liability of the shareholders may be extended if one or more shareholders sign a deed of guarantee or a shareholders' agreement. In addition, if a shareholder is deemed to be a de facto manager, he or she will bear the same civil and criminal liability as the manager of the SAS.

In terms of criminal liability, shareholders may be held liable for certain violations for example, an overvaluation of contributions in kind under:

• Article L241-3, 1° for a SARL;
• Article L242-2, 4° for an SA; and
• Article L243-1 for a société en commandite par actions (SCA); and
• Article L244-1 for an SAS.

4.7 Are there rules governing the issuance of further securities in a company? Do rights of pre-emption exist and, if so, how do they operate? Can they be circumvented? If so, how and to what extent?

Under French law, where a capital increase results in new shareholders joining the company, the articles of association may provide for a prior approval procedure which must be followed.

In addition, in joint stock companies, if this right is provided for in the articles of association, existing shareholders have a preferential right to subscribe for shares when the capital is increased. The preferential subscription right consists of offering shareholders the opportunity to subscribe to the capital increase in proportion to their existing rights.

By exercising their preferential rights, shareholders avoid having their shareholding diluted.

As this right is not a matter of public policy, shareholders may waive or transfer it. The general meeting that decides on the capital increase may also decide to cancel this preferential subscription right to reserve the capital increase to one or more expressly designated beneficiaries.

The cancellation of the preferential subscription right:

• must be the subject of a special report by the statutory auditor; or
• requires the appointment of an ad hoc statutory auditor if the company does not have one.

Pre-emption clauses may exist either in the articles of association of an SAS or a shareholders' agreement which provides for the detailed procedure to be followed. It requires a shareholder that wishes to sell its shares to notify the other shareholders of its intention to sell, thereby giving them priority in the purchase of the shares.

The pre-emption right enables the shareholders to:

• control the entry of new shareholders; and
• avoid majority reversal if all shareholders benefit from the right.

However, there are circumstances under which pre-emption rights can be circumvented or waived.

4.8 Are there any rules on the public disclosure of levels of shareholding and/or stake building?

In France, there are rules and regulations that govern the public disclosure of levels of shareholding and stake building. These regulations aim to:

• ensure the transparency in the financial markets; and
• provide relevant information to investors.

The law imposes a disclosure obligation when an investor crosses – whether upwards or downwards – the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 33.33%, 50%, 66.66%, 90%, and 95% in the target's share capital or voting rights. The target's articles of association may provide additional disclosure obligations if certain thresholds between 0.5% and 5% are exceeded. In addition, the crossing of any of the 10%, 15%, 20% and 25% thresholds oblige the buyer to publicly declare in sufficient detail the objectives and strategy it intends to pursue over the next six months, including whether it plans to continue to purchase shares and take control of the target.

5 Operations

5.1 What are the main routes for obtaining working capital in your jurisdiction? What are the advantages and disadvantages of each?

In France, there are several routes for obtaining working capital. The availability and feasibility of these options may vary depending on the size and nature of the business. Common routes for obtaining working capital in France are as follows:

• Bank loans: These are a common source of working capital. Businesses can approach banks and financial institutions to secure loans based on their creditworthiness and business plans.
• Government assistance programmes: In France, various government-backed programmes and initiatives provide financial support to businesses, including:
• • grants;
  • subsidies;
  • low-interest loans; and
  • issuance of bonds.
• Examples include the following:
• • The Aide à la création ou à la reprise d'une entreprise (ACRE) is a scheme designed to encourage entrepreneurs to set up or take over a business. ACRE beneficiaries enjoy a 12-month exemption from social security contributions. The exemption may be total or partial.
  • The business project support contract (Contrat d'appui au projet d'entreprise (Cape)) allows the economic viability of a project to be tested with the help of a support structure. It provides assistance as well as material and financial resources. In exchange, the entrepreneur undertakes to follow a business startup or takeover preparation programme. The Cape is not an employment contract, but it does afford social protection.
• Factoring: Factoring involves the sale of accounts receivable to a third party at a discount. This provides immediate cash flow for the business. Factoring companies take over the responsibility of collecting payments from customers.
• Trade credit: Negotiating extended payment terms with suppliers can be a way to free up working capital. However, this should be approached carefully to maintain good relationships with suppliers.
• Venture capital and private equity: For high-growth startups and businesses with significant potential, venture capital or private equity investment could be an option. This involves raising funds at a defined valuation in exchange for securities with preferential rights.

Several French and EU subsidies and other forms of aid aim to support investments and growth of business, particularly in innovative sectors.

5.2 What are the main routes for the return of proceeds in your jurisdiction? What are the advantages and disadvantages of each?

• Dividends:
• • Advantages: Shareholders can receive a portion of the company's profits.
  • Disadvantages: Dividends may be subject to withholding tax; the company must have distributable profits.
• Interest payments:
• • Advantages: Fixed income for debt investors.
  • Disadvantages: Interest income may be subject to withholding tax; debt investments carry their own risks.
• Liquidation or sale of assets:
• • Advantages: Realises value from the sale of company assets.
  • Disadvantages: Complex process; potential for market uncertainties.
• Royalties:
• • Advantages: Potential for ongoing income from IP rights.
  • Disadvantages: Dependence on the success of the underlying asset; potential legal and contractual issues.
• Share buybacks:
• • Advantages: Companies can repurchase their own shares, providing a return to shareholders.
  • Disadvantages: Regulatory restrictions; financial considerations for the company.

5.3 What requirements and restrictions apply to foreign direct investment in your jurisdiction?

In France, the principle is that foreign investments are free. However, as an exception, some foreign investments are subject to prior authorisation from the Ministry of the Economy if they meet the following cumulative criteria:

• the presence of a foreign investor;
• an 'investment transaction' as defined in Article R151-2 of the Monetary and Financial Code; and
• intervention in a sensitive sector.

The definition of a 'foreign investor' is established in Article R151-1 of the Monetary and Financial Code (CMF). It encompasses:

• individuals of foreign nationality or tax residence;
• entities incorporated under foreign law; and
• entities incorporated under French law but that are controlled by one or more of the abovementioned persons or entities.

All persons and entities belonging to the investor's chain of control (from the direct investor to the ultimate controller) are considered as 'investors' within the meaning of these regulations. A foreign investor controlling a target legal entity governed by French law will be subject to a filing requirement if it is active in a strategic sector, even if it is ultimately controlled by a French entity.

Pursuant to Article R151-2 of the CMF, the following are considered investment transactions:

• the acquisition of control, within the meaning of Article L233-3 of the Commercial Code, of an entity incorporated under French law or an establishment registered with the French Commercial Registry, whether or not the investor is part of the European Union/European Economic Area (EEA);
• the acquisition of all or part of a branch of activity of an entity governed by French law, whether or not the investor is part of the European Union/EEA;
• the crossing of the 25% voting rights ownership threshold, directly or indirectly, alone or in concert, if the investor is from outside the EU/EEA; and
• the crossing, directly or indirectly, alone or in concert, of the threshold of 10% of voting rights in a French company whose shares are admitted to trading on a regulated market (which has been definitively adopted).

The Decree of 28 December 2023 supplemented the above list on two levels:

• Foreign investments in branches in France of companies governed by foreign law will be taken into account; and
• The perpetuation of the threshold crossing for listed companies was perpetuated.

Article R151-7, Section I has been rewritten and now provides more concisely that:

According to the notice of the decree, this is a "simplification measure in terms of exemptions for intra-group reorganisations".

However, this new wording should no longer allow the last exemption previously provided for – that is, the acquisition of control of an entity when the foreign investor had already exceeded the threshold of 25% of voting rights and was already authorised under the foreign investment (IEF) regulations – to come into play.

Finally, the investment must involve an entity incorporated under French law or an establishment registered with the French Commercial Registry that carries out a sensitive business in areas:

• listed in Article L151-3 of the CMF; and
• detailed by Article R151-3 of the code.

Article R151-3, II has been amended to include, among sensitive activities:

• the performance of prison security missions; and
• "the integrity, security or continuity of the extraction, processing and recycling of critical raw materials".

The list of critical technologies also now includes photonics and technologies involved in the production of low-carbon energy, as provided for in:

• the Decree on Foreign Investment of 31 December 2019; and
• the Order of 10 September 2021.

As a result, research and development activities in these critical technologies will be considered sensitive whenever they are intended to be implemented in one of the sectors covered by the IEF regulations. Previously, the focus was on renewable energies; the term 'low-carbon energy' could have a broader meaning.

In October 2023, the French Treasury announced the creation of the IEF Platform as a "dematerialised channel for filing applications for authorisation and requests for prior review".

Activities that are considered sensitive by nature that mainly fall within the defence and security sectors (Article R151-3, II of the CMF)	Activities involving infrastructure, goods or services that are essential to safeguard public security and public order (Article R151-3 of the CMF)	R&D activities involving critical technologies and dual-use goods and technologies (EU Regulation 428/2009)
Weapons, ammunition, powders, explosive substances	Goods or services that are essential to: the continuity of water and energy supplies; the protection of public health or food safety; or the dissemination of information	Technologies relating to cybersecurity, artificial intelligence, robotics, additive manufacturing, quantum technologies, energy storage, biotechnologies or the production of renewable energy

The Decree of 31 December 2019 on foreign investments was amended accordingly by the Decree of 28 December 2023. Article 5 of the Decree of 31 December 2019 now stipulates that applications for authorisation and requests for prior review must be submitted to the French Treasury via plateforme-ief.dgtresor.gouv.fr.

In addition, the following should be sent electronically through the IEF Platform:

• the notification required when the 10% threshold is exceeded for listed companies governed by French law;
• the mandatory declaration required as soon as the authorised investment has been made; and
• any correspondence relating to IEFs.

Non-compliance with the authorisation procedure leads to severe sanctions:

• Any undertaking, agreement or contractual clause which directly or indirectly gives rise to a foreign direct investment without the prior authorisation required under the IEF regulations is deemed null and void.
• Injunctions may also be pronounced by the Ministry of the Economy against the investor (ie, filing an application for a regularisation permit, restoring the previous situation at its own expense and/or modifying the investment). Additionally, these injunctions may be accompanied by a penalty payment and/or protective measures.
• Criminal sanctions are also incurred by the investor (ie, five years' imprisonment, confiscation of the property and assets resulting from the offence).

5.4 What exchange control requirements apply in your jurisdiction?

As part of the international effort to combat money laundering and the financing of terrorism, the French banking regulations have undergone several changes – as recommended by the Financial Action Task Force – that affect the handling of checks. New policy steps aim to:

• reduce anonymity in financial transactions; and
• reinforce the oversight mechanisms required of the financial community.

In addition to implementing EU common positions on terrorists or arms proliferators, France can use its powers under national law to execute asset freeze orders against terrorists. In general, all inward and outward payments must be made through approved banking intermediaries by bank transfers.

There is no restriction on the repatriation of capital, provided that the investment is authorised and is carried out through an approved bank. Similarly, there is no restriction on transfers of profits, interest, royalties or service fees, provided that the investment is authorised and made through approved banks.

Foreign-controlled French businesses:

• must have a resident French bank account; and
• are subject to the same regulations as other French legal entities.

The use of foreign bank accounts by residents is permitted.

Moreover, France has few controls on the use of foreign exchange. For exchange control purposes, foreigners are residents from the time they arrive in France. French and foreign citizens are subject to the same rules. Residents are entitled to an account in a foreign currency with a bank established in France. They can also establish accounts abroad.

5.5 What role do stakeholders such as employees, pensioners, creditors, customers and suppliers play in shaping business operations in your jurisdiction? What other influence can they exert on an enterprise?

Stakeholders play crucial roles in shaping business operations in France. Their interests and interactions influence various aspects of how a business operates. Stakeholder engagement in France has thus become an integral part to business success, transcending the conventional focus solely on profits. By recognising the importance of stakeholders, businesses can:

• harness their collective power, drive innovation and create sustainable value; and
• foster collaboration, enhance their competitive edge and thrive in an ever-evolving business landscape.

An overview of the roles that different stakeholders play is set out below.

Employees: Employees are a fundamental stakeholder group. Their skill, dedication and productivity contribute directly to a company's success. Employee satisfaction, engagement and effective communication between management and staff are essential for a positive working environment and overall business success. Thus, the social and economic committee (CSE) is the employee representation body within the company. It must be set up in companies with 11 or more employees. In companies with at least 50 employees, the CSE must be informed and consulted and informed on changes to the economic and legal organisation of the company (Article L2312 II-2 of the Labour Code). The CSE has additional responsibilities relating to:

• economic matters (consultations and information on the organisation, management and general running of the company);
• health and safety conditions at work; and
• the management of social and cultural activities (former responsibilities of the works council).

CSE members have a right to an economic alert (Article L2312-63 of the Labour Code) and a right to a social alert (Article L2312-70 of the Labour Code).

Pensioners: As former employees, they may have interests tied to:

• pension plans;
• benefits; and
• the overall financial health of the company.

Creditors: Creditors have a significant interest in the financial stability of the business. Timely repayment of loans, adherence to financial agreements and transparent financial reporting are crucial for maintaining positive relationships with creditors.

Customers: Customers are vital stakeholders as they drive revenue and business growth. Meeting customer expectations through quality products, excellent service and competitive pricing is essential. Engaging customers through surveys, focus groups and online communities can uncover valuable insights, leading to the creation of products and services that truly resonate with their desires.

Suppliers: Suppliers are integral to the supply chain. Dependable suppliers are critical for the continuity of business operations.

5.6 What key concerns and considerations should be borne in mind with regard to general business operations in your jurisdiction?

'Business operations' refers to the activities, processes and systems that a company uses to:

• deliver its products or services to customers; and
• achieve its business objectives.

It includes everything from procurement and production to sales and customer support.

In France, conducting business operations requires careful consideration of various factors to ensure compliance with local regulations and cultural nuances:

• Legal structure: The appropriate corporate legal structure must be chosen depending on the business. It is important to ensure compliance with French company law and understand the implications of each business structure from a legal, tax and labour law standpoint.
• Registration and licensing: The business must be registered with the relevant authorities, such as the French Commercial Registry.
• Employment and tax regulations: Regarding general business operations, stakeholders must understand:
• • the French tax system, including corporate income tax and value-added tax; and
  • employment and social security regulations.
• Language: French is the official language of business and administration. While many business professionals speak English, a basic understanding of French can be beneficial; the Toubon Law of 4 August 1994 provides that a number of information and documents should be in French.
• IP protection: The availability of a corporate name and trademarks to be used should be checked with the National Institute for Industrial Protection. IP rights should also be safeguarded by understanding French IP laws and the ways in which these rights can be registered and protected.
• Banking and finance: A business bank account with a local bank should be opened, and the financial regulations and reporting requirements applicable to the business should be understood.
• Data protection and privacy: Compliance with the General Data Protection Regulation, which is applicable in France, is essential. Also, stakeholders should implement robust data protection measures to ensure the security and privacy of customer and employee data.

6 Accounting reporting

6.1 What primary accounting reporting obligations apply in your jurisdiction?

The primary accounting reporting obligations in France are governed by:

• French generally accepted accounting principles (GAAP);
• the regulatory framework established by the Autorité des Normes Comptables (ANC); and
• the Commercial Code.

Key accounting reporting obligations in France include the following:

• Financial statements: French companies must generally prepare annual financial statements, including:
• • a balance sheet;
  • an income statement; and
  • notes to the financial statements.
• Annual report: Companies in France typically prepare an annual report that includes:
• • the financial statements;
  • a management commentary; and
  • other relevant information about the company's performance and financial position.
• Audit requirements: Larger companies and certain entities must have their financial statements audited by a statutory auditor. The auditor's report is then included in the company's annual report.
• Publication requirements: Certain companies – especially those listed on stock exchanges – may have obligations to:
• • publish their financial statements and annual reports in the Official Gazette; and
  • make them available to the public.

6.2 What role do the directors play in this regard?

Directors in a société anonyme (SA) play a crucial role in ensuring compliance with accounting reporting obligations in France. Their responsibilities extend to:

• overseeing the financial reporting process;
• ensuring accuracy and transparency; and
• making decisions that impact the company's financial statements.

Key aspects of the role directors play in fulfilling accounting reporting obligations include the following:

• Oversight of financial reporting: Directors are responsible for overseeing the preparation of the company's financial statements. They must ensure that the financial information accurately reflects the company's financial position and performance in accordance with applicable accounting standards.
• Approval of financial statements: Directors typically review and approve the annual financial statements before they are presented to shareholders. These include:
• • the balance sheet;
  • the income statement; and
  • accompanying notes.
• Internal controls: Establishing and maintaining effective internal controls is a key responsibility of directors. Internal controls help to ensure the reliability of financial reporting and prevent errors or fraudulent activities.
• Disclosure and transparency: Directors play a role in ensuring that the company provides adequate disclosure in the financial statements and annual report. This includes information on:
• • significant accounting policies;
  • related-party transactions; and
  • other relevant details.
• Risk management: Directors are involved in assessing and managing financial risks that could impact the accuracy of financial reporting. This includes identifying and mitigating risks related to:
• • financial processes;
  • transactions; and
  • external factors.

6.3 What role do accountants and auditors play in this regard?

The accountants' tasks include the following:

• Financial statement preparation: Accountants are responsible for preparing the financial statements in accordance with the relevant accounting standards (French GAAP or International Financial Reporting Standards). They:
• • compile financial data;
  • create reports; and
  • ensure the accuracy of financial information.
• Maintaining books of accounts: Accountants keep detailed records of financial transactions, ensuring that all relevant information is properly recorded and organised. This includes recording income, expenses, assets and liabilities.
• Internal controls: Accountants contribute to the establishment and maintenance of effective internal controls. These controls help to prevent errors and fraud, ensuring the reliability of financial information.
• Financial analysis: Accountants analyse financial data to identify trends, variances and areas of concern. This analysis helps management and stakeholders to make informed decisions about the company's financial health.

The auditors' tasks include the following:

• Independent verification: Auditors provide an independent and objective assessment of the company's financial statements. They verify the accuracy and fairness of the financial information presented by the company.
• Compliance audit: Auditors ensure that the financial statements comply with applicable:
• • accounting standards;
  • legal requirements; and
  • regulatory frameworks.
• They also assess the company's adherence to internal policies and procedures.
• Risk assessment: Auditors identify and assess financial risks that could impact the accuracy of financial reporting. This includes:
• • evaluating internal controls; and
  • making recommendations for improvements.
• Audit report: After completing the audit, the auditors issue an audit report that expresses their opinion on the fairness of the financial statements. This report is typically included in the company's annual report.

6.4 What key concerns and considerations should be borne in mind with regard to accounting reporting in your jurisdiction?

When it comes to accounting reporting in France, there are several key concerns and considerations that businesses and professionals should keep in mind. These considerations encompass various aspects, including:

• legal requirements;
• financial standards;
• tax regulations; and
• broader economic factors.

Key concerns and considerations include the following:

• Compliance with French GAAP or IFRS: Ensure that financial statements are prepared in accordance with either French GAAP or IFRS, depending on the company's requirements and obligations.
• Auditing requirements: Determine whether the company is subject to mandatory audit requirements. Larger companies and certain entities are often required to undergo an annual audit by a statutory auditor.
• Consolidation requirements: If the company is part of a group, assess whether consolidated financial statements are required. Groups may need to prepare consolidated accounts to provide a comprehensive view of the financial position and performance of the entire group.
• Related-party transactions: Disclose and appropriately account for any related-party transactions. Transactions with entities or individuals related to the company may require special attention and disclosure.
• Environmental, social and governance (ESG) reporting: Be aware of the increasing emphasis on ESG reporting. Companies may need to disclose information related to their ESG practices.
• Communication with stakeholders: Effectively communicate financial information to stakeholders, including shareholders, regulators and creditors. This involves providing clear and transparent information in financial statements and annual reports.
• Training and professional development: Keep accounting and finance professionals updated through ongoing training and professional development programmes to ensure awareness of the latest accounting standards and regulatory changes.

7 Executive performance and compensation

7.1 How is executive compensation regulated in your jurisdiction?

Company corporate executives may:

• receive remuneration in return of their duties; or
• perform them free of charge (société par actions simplifiée (SAS), société à responsabilité limitée (SARL)).

Remuneration may be set:

• in the articles of association;
• by the supervisory board or board of directors;
• through a collective decision of the shareholders; or
• at the general meeting.

7.2 How is executive compensation determined? Do any disclosure requirements apply?

In France, depending on the form of the company, corporate executives' compensation is determined by:

• the articles of association;
• the board of directors;
• the shareholders; or
• a specific corporate body.

However, the articles of association can provide that these functions are performed free of charge.

SARL and entreprise unipersonnelle à responsabilité limitée (EURL): Remuneration of the manager(s) may be either set out in the articles of association or decided by the shareholders. In the case of a EURL, the sole shareholder must vote on the remuneration. The terms of remuneration will be set out in the articles of association or by decision of the shareholders and the same applies to the allocation of remuneration.

SAS/société par actions simplifiée unipersonnelle (SASU): The remuneration of the president and general manager(s) is either set out in the articles of association or decided by the shareholders.

SA: The rules differ as follows:

• The directors receive a fixed annual amount in directors' fees. The annual amount is decided by the shareholders' meeting and the board of directors distributes it among its members. In addition to attendance fees, directors may receive exceptional remuneration for any assignments that they undertake. The chairman of the board is the only person entitled to receive, in addition to directors' fees, exceptional remuneration for his or her duties as chairman, which may be:
• • fixed;
  • proportional; or
  • a combination of both.
• This remuneration is decided by the board of directors.
• The system for remuneration of supervisory board members is the same as that for société anonyme (SA) directors.
• Each member of the management board receives remuneration for his or her duties, which is set by the supervisory board
• The remuneration of the managing directors is set by the board.

French companies in the form of an SA are subject to disclosure requirements regarding corporate executive compensation which must appear in the report to the annual general meeting. This report must provide an account of:

• the total remuneration and benefits of all kinds paid during the past financial year to each director; and
• the amount of remuneration and benefits in kind received by these directors from companies controlled by the company concerned (Article L225-102-1 of the Commercial Code, as amended by the New Economic Regulation Act.

In addition, all SAs and sociétés en commandite par actions, whether listed or not, must produce an annual corporate governance report drawn up by the board of directors or supervisory board, which must be presented to the general meeting.

This obligation was defined by Order 2017-1162 of 12 July 2017, issued in application of the Sapin 2 Law. The corporate governance report is drawn up by the board of directors and presented along with the management report to the general shareholders' meeting. This report includes information on corporate governance, as well as numerous items relating to remuneration. The enactment of Ordinance 2019-1234 introduced new provisions on executive compensation policy in listed companies as follows:

• the inclusion in the remuneration policy of all corporate officers, including directors (who previously were not covered, unlike supervisory board members);
• publication of the remuneration policy on the company's website on the business day following the vote for (at least) the entire period during which it applies; and
• an express penalty of nullity in the event of the allocation or payment of remuneration items that do not comply with the approved remuneration policy.

7.3 How is executive performance monitored and managed?

In France, for listed companies, the financial market authorities:

• monitors:
• • the financial information provided and information on the financial products provided to investors; and
  • the ways in which such companies are marketed;
• ensures that financial intermediaries comply with their professional obligations; and
• monitors financial markets and the conduct of market participants.

All limited companies, including listed corporations, have the choice between:

• a unitary formula with a board of directors; or
• a two-tier structure with a management board and a supervisory board based on a distinction between management functions and the supervision of this management.

Moreover, companies with a board of directors have a choice between separating and combining the offices of president and general manager. In France, most companies now have a one-tier board or a unitary board. Furthermore, the Commercial Code prohibits the number of directors bound to the company through a contract of employment from exceeding one-third of the board's members. Moreover, boards are almost exclusively made up of non-executive directors. As a result of the significant powers conferred on it by law, the board of directors in its entirety must guarantee the balance that is essential for good governance.

Under French law, the chairman of the board of directors has an essentially administrative and leadership role.

In a two-tier structure, the supervisory board controls and monitors the management board.

The articles of association of an SAS offer significant flexibility and may provide for a supervisory committee or an executive committee. They may also provide for external audits to be carried out on a regular basis on legal, accounting and social issues. The terms and conditions of these controls are freely determined by the articles of association, apart from regulated agreements, which are governed by law.

7.4 What key concerns and considerations should be borne in mind with regard to executive performance and compensation in your jurisdiction?

Key concerns and considerations about executive performance and compensation in France include the following:

• Variable compensation and bonuses: Variable compensation components such as bonuses, stock options and warrants are common in executive packages and subject to strict legal regulation. Stakeholders must ensure that these align with both company performance and legal requirements
• Transparency: Transparency in executive compensation is crucial. Disclosures in annual reports and shareholder communications should provide a clear and comprehensive view of how executive pay is determined and aligned with company performance.
• Consultation with employee representatives: Remuneration may be freely set by the company, but prior consultation with employee representative bodies is required in the event of the introduction of a collective remuneration plan or modification of this plan (including its termination).

8 Employment

8.1 What is the applicable employment regime in your jurisdiction and what are its key features?

In France, employment law affords employees a good level of protection. Nevertheless, this legal environment is constantly changing because of government reforms and case law evolution.

First, all non-EU citizens need a work permit to work. Employers and employees are free to negotiate the terms and conditions of their employment relationship. However, employees have various minimum rights under the law, regardless of any provision to the contrary in their employment contract. Usually, employees work 35 hours per week. Only hours worked at the request of the employee's superior will be regarded as overtime. Severance payments are awarded only:

• if the employee has the required minimum length of service; and
• pursuant to:
• • the law;
  • the relevant applicable collective bargaining agreement provisions; or
  • the employment agreement.

Statutory rest periods are:

• 24 hours a week; and
• 11 hours a day.

Annual leave in France is 25 paid days a year. In addition, collective agreements may provide for additional leave for a certain length of service or for special family circumstances (eg, the death of a relative).

In accordance with the Labour Code, the initial trial period is limited to a maximum of:

• four months for managers;
• three months for technicians; and
• two months for blue-collar workers.

However, collective bargaining agreements may provide for a different or longer trial period. Working time provisions in French employment contracts must always be drafted with the utmost care.

8.2 Are trade unions or other types of employee representation recognised in your jurisdiction?

Trade unions are recognised in France. Their main objective is to defend the common professional interests of a group of people who share the same or similar professions. In 2019, 9% of employees were unionised, according to Ministry of Labour figures. In other European countries, the figures are totally different. Since the post-war years, the rate of unionisation has been falling steadily:

• 30% of French employees were unionised in 1949;
• 20% were unionised in 1969; and
• just over 10% are unionised today.

Behind this low rate of unionisation lie major disparities according to trade, job function and age. France is one of the least unionised countries in the European Union, falling far below the EU average (23%), according to figures from the Organisation for Economic Co-operation and Development. For example, in 2021:

• 69% of employees in Sweden were unionised;
• 16.7% of employees in Germany were unionised; and
• 58.8% employees in Finland were unionised.

When a company employs more than 50 employees, trade unions may be involved in a mass redundancy procedure to negotiate an 'employment saving plan' or social plan. Strong unions negotiate on behalf of workers to influence decisions on benefits, wages and working conditions. This ensures that when it comes to decisions that directly affect workers' incomes, their voices are heard and considered. Close attention must be paid to safety and a deep comprehension of the legal requirements that French employers should meet to successfully navigate this marketplace.

8.3 How are dismissals, both individual and collective, governed in your jurisdiction? What is the process for effecting dismissals?

Under the Labour Code, the employer must establish a real and serious reason to dismiss an employee. It may be:

• a personal reason – notably:
• • fault;
  • poor performance; or
  • the disability of the employee, where the employer is unable to relocate/deploy him or her to another position or make reasonable adjustments to the post; or
• an economic reason, such as economic difficulties.

The stages in the individual dismissal procedure are as follows:

• The employee is formally invited to a preliminary meeting.
• At least five business days after the formal invitation, a preliminary meeting is held during which the employer explains the reasons for the contemplated dismissal and listens to the employee's explanation.
• The dismissal letter mentioning the ground for dismissal must be sent by registered letter with acknowledgement of receipt to the employee at least two business days after the meeting.

A special procedure (ie, involvement of the works council, meeting and notification of the dismissal) applies in the case of a dismissal for economic reasons involving at least two employees or when the dismissal concerns a 'protected employee' (eg, members of the social and economic council or trade union delegates). The procedure set out in Article 1233-8 of the Labour Code applies only to situations where the dismissal of more than 10 employees is being considered.

In case of mass redundancies (more than 10 employees in a company employing at least 50 employees), the following requirements apply:

• The employer has a duty to inform and consult the works council, involving at least two meetings (the works council may be assisted by an accountant in some cases). The duration of the consultation is regulated.
• An 'employment saving plan' (a social plan providing real alternatives and social measures accompanying the redundancy, such as redeployment, redeployment leave and/or training) should be drafted. There are two options for implementing this plan:
• • through a collective agreement negotiated with trade unions; or
  • unilaterally by the employer (only in the absence of trade unions in the company or if no agreement is found, and then only after consultation with the works council).
• The employment saving plan should then be sent to state authorities for validation (if agreed with trade unions) or homologation (if unilaterally drafted by the employer). If the state authorities do not agree with the plan, the employer may present another draft after consulting with the works council.

In groups with fewer than 1,000 employees in Europe or companies under judicial reorganisation or liquidation (irrespective of their size), the employer must propose a contrat de sécurisation professionnel (CSP) – a statutory outplacement programme – to employees considered for economic dismissal. If an employee accepts the CSP, he or she will have better rights in terms of unemployment benefits but will not be entitled to a notice period. (An equivalent amount will be paid by the company to the unemployment administration.)

There is a procedure to follow, as the employer is obliged to:

• inform the work administration;
• consult with employee representatives;
• look for alternative work for the employees who are to be dismissed within the company or the group; and
• offer the employees a reclassification scheme to help them find alternative employment.

8.4 How can specialist talent be attracted from overseas where necessary?

Key strategies to attract international talent in France include:

• the new work long stay visas and residence permit or talent passport;
• the French tech visa, which is specifically tailored to the French tech ecosystem;
• shifting immigration policies;
• targeted incentives for specific occupation shortages;
• the offer of financial incentives and better benefits;
• facilitation of intra-company transfers;
• bilateral social security agreements; and
• expatriate tax systems.

8.5 What key concerns and considerations should be borne in mind with regard to employment in your jurisdiction?

The 35-hour workweek is one of the main principles of French labour law. Any hours worked beyond this threshold are considered overtime and typically require additional compensation.

The law places strong emphasis on paid leave, granting employees a minimum of five weeks of paid vacation per year. If ill, employees in France are entitled to paid sick leave. The duration and conditions vary, but generally employees receive a percentage of their salary during this period. Additionally, employers must provide a safe and healthy working environment, adhering to strict health and safety regulations. The minimum wage is set by law, with:

• equal pay for work of equal value;
• regular payment of wages; and
• protection in the event of the employer's insolvency.

Since 1 January 2024, the gross minimum wage is €1,766.92 per month (€1,398.70 net).

Another essential component of French labour law is job security. Employers are subject to strict regulations in France when it comes to ending employment agreements. The procedure for dismissing employees without cause is intended to protect their rights, and can thus be challenging and complex. For dismissal for personal reasons, it is important to have a valid reason for termination, which may include personal circumstances or misbehaviour. Dismissal for economic reasons must be evidenced by financial difficulties, which must be justified and clearly documented.

Employees participate in the collective determination of working conditions, notably through representative trade unions. The law determines the conditions under which collective agreements may set standards that differ from those set out in the law and regulations. If the law so permits, in the event of a conflict of standards, the most favourable may apply to the employee. Similarly, a collective agreement that is less favourable than the contractual stipulations may take precedence over the latter if the law so provides.

9 Tax

9.1 What is the applicable tax regime in your jurisdiction and what are its key features?

On of the primary taxes that individuals in France must pay is income tax. In 2024, income tax can be as high as 45% for higher incomes, with an additional 3% to 4% surcharge for those earning above a certain threshold.

Apart from income tax and capital gains tax, another significant aspect of taxation in France is social charges. These charges are levied on various forms of income and cover social security contributions. The rate effective since 1 January 2019 stands at 17.2%, which includes healthcare coverage along with other benefits according to the French legal administrative website.

France also has an annual wealth tax known as 'impôt sur la fortune immobilière', which focuses solely on real estate assets rather than overall wealth accumulation. Individuals with real estate assets valued above a certain threshold are subject to a progressive scale ranging from 0.5% to 1.5% according to the French legal administration.

Inheritance tax is levied on the estate of a deceased person.

9.2 What taxes apply to capital inflows and outflows?

Investment income, including dividends received from French companies or foreign entities, is subject to taxation in France at a flat rate of 30%, consisting of:

• 12.8% income tax; and
• the remaining 17.2% as social charges.

In France, the taxation of investment income is an important consideration for individuals looking to invest or earn passive income.

9.3 What key exemptions and incentives are available to encourage enterprises to do business in your jurisdiction?

France boasts competitive taxation of research and temporary exemption arrangements for innovative startups and new businesses. Businesses that spend money on research may be granted a tax credit which can be offset against their corporation tax. All industrial, commercial or agricultural businesses taxed based on their actual profits are eligible for the tax credit, regardless of business structure. The research tax credit (CIR) is designed to encourage companies to carry out research and development by covering part of the expenses incurred. The rate of this tax credit varies according to the company's location. The CIR is available to any industrial, commercial or agricultural company, whatever its size or legal form, provided that:

• it is subject to a real (normal or simplified) corporate income tax or income tax regime; or
• it is tax exempt but falls within one of the following categories:
• • a young innovative company; or
  • a company created to take over a company in difficulty.

The research tax credit applies to:

• fundamental research (experimental or theoretical research to acquire new knowledge, with no particular application or use in view);
• applied research (to determine possible applications for the results of fundamental research); and
• experimental development activities (systematic work based on knowledge gained from basic and applied research).

Moreover, the Aide à la création ou à la reprise d'une entreprise (ACRE) is a scheme designed to encourage entrepreneurs to set up or take over a business (eg, where a micro entrepreneur launches an e-commerce business). ACRE beneficiaries benefit from a 50% exemption on their social security contributions until the end of the third calendar quarter following the date of company registration.

In certain areas, setting up a business provides an entitlement to exemption or relief on taxes on profits for the initial years of operation. To benefit, the business operations must be:

• commercial;
• industrial;
• craft-based; or
• non-commercial.

In theory, a full or partial exemption from tax on profits is granted for five years as from the date on which the business is set up.

9.4 What key concerns and considerations should be borne in mind with regard to tax in your jurisdiction?

Businesses and individuals should be aware of various key concerns to ensure compliance and optimise their tax positions. Key concerns and considerations related to tax in France include the following:

• Corporate income tax: Corporate income tax is levied on company profits. This tax, which exists in most countries, was created in France by the Decree of 9 December 1948. The standard rate was 50% until 1985, before falling to 33.3% in 1993. As of 1 January 2022, it stood at 22%. In 2023, this reduced rate applied to the portion of profits up to €42,500 and a rate of 25% above this threshold. In 2024, the corporate income tax rate is 25% for all companies, regardless of turnover.
• Tax residency: Residency plays a significant role in determining tax obligations. If you reside in France as your main home or spend more than 183 days in France within a calendar year, you will be considered a resident for tax purposes.
• Worldwide income: Once you become a resident of France for tax purposes, you are required to declare your worldwide income on your French tax return. This includes income from:
• • employment;
  • self-employment activities;
  • rental properties abroad (if any);
  • investments held outside of France; and
  • any sources of income.
• Wealth tax: Individuals with substantial net assets may be subject to French wealth tax (impôt sur la fortune immobilière). The threshold for this tax varies each year and it primarily targets real estate holdings in France. Seek professional advice to determine whether you are liable for this tax and how to manage your assets accordingly.

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