Company Formations: A jurisdictional guide to setting up a business

QUESTION ONE – What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?

The most common structure is the simplified stock cor­poration (SAS).

QUESTION TWO – Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?

One of the most favourable pieces of legislation is the Research & Development Tax Credit (CIR).

International French group branch offices or subsidiary companies can obtain from the French state the reim­bursement of up to 30 per cent of their spending on research, experimentation and development operated in France, under the same conditions as French compa­nies.

Costs eligible for ‘CIR’ include;

  • Salaries and related social expenses,
  • Depreciation allowances for assets used in research projects,
  • Operational expenses,
  • Intellectual protection expenses (patents costs),
  • Technology watch expenses assured by the research­ers,
  • The costs of subcontracted research entrusted to public research entities, to scientific experts and pri­vate structures approved by the Ministry of Research.

The simplified stock corporation (SAS) offers also a favourable corporation environment. Its benefits include;

  • A minimum share capital requirement fixed for the incorporation at EUR1.
  • A transfer of shares principle freely effected in some cases
  • It can issue preferred shares, preferential dividend rights, and permits to fix the rights and obligations of the shareholders (e.g. pre-emption rights, tag-along and drag-along rights, exit and exclusion rights, etc.)
  • It can issue bonds, warrants, convertible bonds and other types of financial instruments,
  • An auditor is required if it exceeds, at the close of a financial year, two of the three following thresholds: EUR1m of total assets, EUR2m of turnover, or 20 employees.

The most unfavourable legislation remains the social law. French corporate rela­tionships are governed by a complex set of laws and regulations which leaves not much space for individual negotiation. The French Labour Code (‘Code du Travail’) provides a comprehensive framework for both individual and collective relationships between employers and employees.

Collective bargaining agreements be negotiated between employers and labour unions, covering a company or group of companies, or between employers’ asso­ciations and labour unions covering an industry as a whole. In the event of conflict between the Labour Code and the relevant collective bargaining agreement, the provisions more favourable to the employee apply.

Individual employment contracts cover only those points that are not already dealt with in the Labour Code or in the relevant collective bargaining agreement.

Most of France is covered by collective bargaining agreements, and the Labour Code is supplemented by more generous rules like paid / maternity leave, medical cover and working time.

The El Khomri Law allows the French labour market to be more flexible, offer­ing a collective bargaining agreement to be adopted by referendum of a majority of employees actually participating in the vote, reducing overtime pay, codifying grounds upon which dismissal for economic reasons can occur, and fixing sug­gested objective limits on amounts of damages for unjustified dismissal.

Employee representatives play an important role. In companies with works councils, employee representatives are entitled to attend meetings of the Board of Directors (if there is one), although they do not vote at such meetings. Although the employee representatives are subject to confidentiality rules, this often results in real decisions being made outside of the board meeting itself.

Dismissing employees is expensive, and numerous formalities must be complied with prior to implementing any monitoring of employee emails.

QUESTION THREE – What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?

Unlisted companies must disclose the name and identification card of its current beneficiaries.

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Contributing Advisors