Doing business in France

By Thierry CLERC, Avocat, Eurojuris Rouen (Normandy)

There are several ways to sell products and services in France for a foreign company:

- either through distributors and agents,

- or by setting up a company,

- or by taking over an existing company.

Distribution agreements

A distribution agreement means that the principal sells goods to the distributor who then sells them to the customers. Such an agreement must comply with statutory provisions, with special regard to termination. The duration of the notice period will depend on:

· the importance of the investments made by the distributor;

· and / or the necessary time to find another market;

· and / or the time to sell the remaining stock.

Commercial agents’ agreement

This agreement must comply with rules implementing the EC Directive on commercial agents. When it is terminated, the agent is entitled to a compensation which is calculated on the basis of two years commissions.

Setting up a company

It takes approximately one month. There are 3 main types of companies.

· SARL (Société à Responsabilité Limitée)

It is a limited liability company with one or several shareholders. No more minimum share capital, one chairman who may also be a shareholder or not. One General Meeting per year minimum.

No company auditor. Transfer duties amount to 4.80% when the shares are sold.

It is a close company. We advise beginners to start with this company form.

It can later be converted into a SA or a SAS type company.

· SAS (Société par Actions Simplifiée)

It is a company with a lighter managing structure than SA (see overleaf). One or several shareholders who are not named in the articles of association. A minimum share capital of € 37,000. The following clauses contained in the articles of association may be freely agreed: prohibition of transfer of shares, exclusion of shareholders, pre-emptive right, or concentration of the power in the hands of the chairman (except concerning extraordinary decisions and approval of company’s accounts), etc.

Freedom to organize decision-making powers and the methods of appointment of the chairman.

It is not compulsory to disclose the remuneration of the top management, contrary to SA.

This type of company is increasingly used by big companies so as to facilitate their management, avoid any disclosure of the chairman and board members’ remuneration, when the shareholders are private individuals or body corporates.

· SA (Société Anonyme)

A minimum of 7 shareholders and a minimum share capital of € 37,000.

The shares may be transferred to third parties with the prior agreement of the current shareholders.

Possible to go public. There is no freedom to determine the framework of the collective decisions, there are special requirements to inform the shareholders, compulsory requirements concerning votes, etc.

The company is run by both a chairman and a board of 3 members minimum, or a director and a supervisory board.

Disclosure of the remunerations as well as the appointment of company auditors are compulsory.

* * *

Transfer duties in SAS and SA amount to 1% of the price, but are limited to a maximum of € 3,049.

Chairman in the SAS and SA are considered as employees but are not entitled to unemployment benefits.

* * *

Corporate tax amounts to 33.33%, but may be reduced to 15%.

Social taxes for employees amount to about 50% of the gross salary (35% paid by the company and 15 % paid by the employee).

The chairman must hold a “commercial card” if he is not a EU citizen.

A shareholder agreement may always be entered into by the shareholders.

Acquisitions

The process usually starts with a M.O.U. (Memorandum Of Understanding) including suspensive terms (such as satisfactory due diligence), a reference accounting situation, a description of the company, its off balance sheet undertakings, non-competition clauses and an assets and liabilities guarantee.

You must bear in mind that in France breach of talks may entitle the other party to compensation.

If the suspensive terms are fulfilled and the investigations carried out do not reveal any discrepancies with the M.O.U., the assets and liabilities guarantee together with a bank guarantee will usually be granted by the seller and the shares will be transferred when paid.

Access Business Normandy (ABN)

You would you like to invest in France but do not know where to start; your project is at an early stage. You need technical and legal information on the market.

Our law office is a member of ACCESS BUSINESS NORMANDY (ABN), a network gathering the Rouen Development Agency (City of Rouen, Chamber of Commerce and Industry, Port of Rouen, University), Advantage Export, members of ITG (a European network of technical experts) and Philip Garbut (structure engineer).