What is the main source of law authorising this entity form?

French Commercial Code.

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

The Limited Liability Company has its own legal personality;

(Maximum) period of existence

The maximum period of existence is 99 years. Prior to the expiry of this term, the shareholders may decide to extend the duration of the company;

Governing document(s)

The Limited Liability Company is governed by its Articles of Association (statuts) and by the French Commercial Code;

Liability of incorporators / shareholders

Shareholders’ liability for the debts of the company is limited to the amount of their respective capital contributions;

However, the corporate veil may be pierced in court if a shortfall in the company’s assets can be linked to prior mismanagement by legal representatives (who could be shareholders as well)

(Governing) bodies

The governing body of a Limited Liability Company is the manager (gérant).

Other particularities

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

Under French Law, Limited Liability Companies can, like any other commercial companies, undertake or be part of international restructurings. More specifically, cross border mergers are governed by the French Commercial Code provisions related to the national mergers and some specific rules deriving (i) from the transposition of the European Directive 2005/56 dated October 25, 2005 on cross border mergers of Limited Liability Companies and (ii) from the application of the European Directive 2019/2021 dated November 27, 2019 on cross border mergers.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

No.

Can this type of entity be used for a non-profit or charitable organization?

Under French law, a commercial company’s traditional purpose is to make profits. Therefore, it is not the appropriate form of entity for a non-profit or charitable organisation, although it is not forbidden in itself.

Give a brief summary of the process of incorporation, formation, or organization, including:

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

The Articles of Association (Statuts);

Declaration of non-conviction of the legal representative with a copy of his/her passport or ID;

Declaration of ultimate beneficial owner(s);

Proof of address;

Declaration of company creation: electronic form to be filed in online; and

Bank/notary certificate for the share capital pay-out.

Involvement of notary, company register, governmental authorities

No involvement of a notary is required. However, for regulated activities, specific authorisations may be required.

Limited Liability Companies must be registered with the French Trade and Companies Register (Registre du Commerce et des Sociétés).

Timing (estimate)

The waiting period required for incorporating a company does not exceed one (1) week.

Main costs, including registration and similar fees (excluding legal fees)

The main costs relate to (i) any payments made to agents in charge of the legal formalities with the Trade and Companies Register and (ii) lawyers.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The corporate purpose must be stated in the Articles of Association of the company (Statuts) and summarised in the certificate of incorporation (K-bis).

Minimum number of incorporators / shareholders and residency requirements

There must be at least one (1) shareholder upon incorporation. There are no residency requirements for shareholders, but any legal representative who is not a European Economic Area citizen must hold a residence document (“titre de séjour”: visa, temporary residence permit, multi-annual residence permit or residence permit) if he/she wishes to engage in a professional activity in France while establishing his/her residence there. If he/she remains resident abroad, he/she is exempt from all formalities.

Minimum number of directors (or other applicable officers) and residency requirements

In a Limited Liability Company, there must be at least one manager (gérant) who may be a shareholder at the same time. The manager must always be an individual (not a legal entity).

There are no residency requirements for shareholders.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The minimum share capital is €0.01.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

No, the physical presence of the shareholders/managers is not required in the jurisdiction for incorporation or organisation of the company. All documents can be executed electronically and all legal formalities can be carried out online by an agent.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Under French law, the tax identification number is the intracommunity VAT number. Each French company which owes VAT must have a tax identification number provided by the French Tax Administration, more specifically by the Corporate Tax Office (service des impôts des entreprises) at the date of incorporation.

What is the title of the applicable company registry?

French Trade and Companies Register (Registre du Commerce et des Sociétés).

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles or other formation document, Articles or other formation document, Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

The information listed below must be filed with the French Trade and Companies Register and is publicly available:

• Articles of Association (Statuts);
• Certificate of incorporation (K-bis);
• Corporate name, head office, date of incorporation, duration of the company, registration number, corporate form;
• The activities of the company;
• Share capital (issued and paid-up);
• Identity of the shareholders and number of shares held;
• Identity of the managers, including birth and personal address details;
• Identity of the company’s statutory auditors, if the company has to appoint one;
• Liens and encumbrances on the shares (parts sociales)
• Liens and encumbrances on certain assets of the entity (including for going concerns, assets derived through financial leasing);
• Information regarding insolvency and liquidation; and
• The annual accounts (however small-sized companies can request confidentiality for the information).

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

In a Limited Liability Company, the executive body is the manager (gérant). Unless provided otherwise, the manager may accomplish any act of management which is in the interest of the company.

Regarding its relations with third parties, he/she is vested with the broadest powers to act on behalf of the company, subject to the powers granted to the shareholders by the Articles of Association and by Law.

How are the members of the executive body appointed, dismissed and replaced?

Managers are appointed, dismissed, and replaced by an ordinary shareholders’ resolution.

Is it possible to appoint corporate directors or must all directors be natural persons?

No, managers must be natural persons.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

No, the SARL is not an appropriate form to establish a corporate body with non-executive directors or any other additional corporate body.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The body of shareholders is the Shareholders’ General Meeting (Assemblée Générale des Associés).

The Shareholders’ General Meeting has a general right of control of the management of the company. It is competent to take any decisions which go beyond the powers of the Manager. Moreover, it is legally competent to approve annual accounts.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

It depends on whether it is an Ordinary Shareholders’ General Meeting or an Extraordinary Shareholders’ General Meeting:

• Ordinary Shareholders’ General Meeting: decisions are taken by shareholders with an absolute majority and with no quorum required.
• Extraordinary Shareholders’ General Meeting: decisions may be taken by shareholders with an enhanced majority of at least two-thirds and with a quorum of a quarter of shares (one-fifth in case of a second meeting) provided that the Articles of Association so stipulate.

Some decisions must be unanimously taken –

• transfer of the head office to another country; and
• increasing shareholders’ liabilities.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

No.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

The Limited Liability Company must file financial accounts on an annual basis. The Shareholders’ General Meeting must approve annual accounts within the first six (6) months from the end of the fiscal year. Following the approval, the annual accounts must be filed (electronic filing) with the Trade and Companies Register within two months from the date of the Shareholders’ General Meeting approving the annual accounts.

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

From 1st January 2024, a statutory auditor is required where at least 2 of the 3 following thresholds are met at the end of a given financial year:

• EUR 5,000,000 total balance sheet;
• EUR 10,000,000 turnover (taxes excluded);
• An average of 50 employees or more during the financial year.

Controlling entities (i.e. a legal entities controlling other entities within the meaning of Article L.233-3 of the French Commercial Code) are also obliged to appoint an auditor where together with the controlled entities, it exceeds 2 or the 3 above-mentioned thresholds at the end of a given financial year.

Controlled entities are obliged to appoint an auditor where it exceeds 2 or the 3 following thresholds at the end of a given financial year:

• EUR 2,500,000 total balance sheet;
• EUR 5,000,000 turnover (taxes excluded);
• An average of 25 employees or more during the financial year.

The appointment of the statutory auditors is decided by the Ordinary Shareholders’ General Meeting.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

No.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Shares (parts sociales).

Are different classes of ownership interests possible? If so, what are some examples of different classes?

No.

What documentation is required for the transfer of ownership interests?

The transfer of shares requires:

• The prior approval by the shareholders of the said transfers;
• Signing a transfer deed (acte de cession);
• Submitting updated Articles of Association and the minutes of the Shareholders’ General Meeting modifying the allocation of shares to the French Trade and Companies Register; and
• Submitting the transfer deed to the French Tax Administration. 

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

No.

Are there any applicable stamp duties imposed when transferring ownership interests?

Transfers of shares are subject to the payment of registration fees with the French Tax Administration, owed by the parties and usually paid by the transferee.

How are shares issued? (including information on payment obligations, registration requirements)

Shares may be issued via share capital increase operations.

These operations are subject to the share capital being fully paid up confirmed by a certificate of deposit of the funds issued by the bank corresponding to the amount of the capital increase paid-up by the shareholders.

Moreover, any share issued must be approved by the Extraordinary Shareholders’ General Meeting (Assemblée Générale Extraordinaire des Associés).    

In addition, the capital increase must be registered with the French Trade and Companies Register. In order to do so, the following documents must be submitted:

• A copy of the minutes of the Shareholders’ General Meeting deciding the capital increase;
• A certificate of deposit of the funds issued by the bank corresponding to the amount of the capital increase paid-up by the shareholders; and
• A copy of the updated Articles of Association. 

Moreover, publication of this information must be made in a legal newspaper (journal d’annonces légales).

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

Non-cash contributions are allowed for Limited Liability Companies under French law, provided that they are assessed by one (1) or two (2) external contribution auditors (depending on the value of the contribution).

However during incorporation, shareholders may unanimously decide not to appoint any auditor if –

• the value of the contribution is less than €30,000; and
• the total value of non-cash contributions does not exceed half of the registered share capital.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Share cancellations justified by losses: Capital reductions are required when equity is less than half of the registered share capital. In such case, the company may:

• Reduce the nominal value of shares; or
• Reduce the numbers of shares.

Share repurchases not justified by losses: Shares repurchases are permitted when the equity is greater than the price of the shares to be repurchased. It is also subject to the absence of objection from third parties during the one-month period provided for that purpose by Law.

Any requirements with respect to distributions to shareholders?

The distributable profit consists of the profit for the financial year, less previous losses and amounts to be transferred to reserves in accordance with the applicable law and the Articles of Association, plus any profit carried forward from prior financial years.
The shareholders can decide to distribute the profit as a dividend, as well as other sums, either to provide or supplement a dividend, or as an exceptional distribution, during the Ordinary Shareholders’ General Meeting approving the annual accounts.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, although it is less appropriate than in a Share Limited Liability Company (Société Anonyme) and Simplified Joint-Stock Company (Société par actions simplifiée).

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The company must maintain its business address and have a legal representative. The shareholders must each year hold their annual general meeting to approve the annual accounts and to file the annual accounts with the Trade and Companies Register.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The company will be subject to corporate income tax (CIT) on its taxable income (i.e. rents and capital gains) and will have to file a French CIT return annually. The standard CIT rate is equal to 25%. CIT may be increased by a 3.3% CIT surcharge resulting in an effective overall taxation rate of 25.83%. The surcharge will be due if the annual CIT computed by the company exceeds €763k.

Summary of any specific matters, e.g. recent or prospective major legal developments

No specific matters to be mentioned.