Can shares be issued in consideration for the contribution of assets or services (present or future)? Are any formalities required if shares are issued for non-cash consideration?

Structures: France: International Joint Ventures

Resource type: Country Q&A

Status: Law stated as at 11-Jun-2009

Jurisdiction: France

International joint venture structures. Country specific information for France. See related content links for other aspects of international joint venure agreements involving French companies.

Frédéric Grillier, Herbert Smith LLP

Contents

What are the most common legal structures for joint ventures?

Joint ventures are usually structured either as corporate entities (whether limited or unlimited liability companies) or as contractual arrangements.

Are there different forms of corporate entity? If so, which form is most likely to be used for a joint venture?

The three most common forms of corporate entity are (all limited liability companies):

Société à responsabilité limitée (SARL) - SARLs are used for small and medium sized businesses. Although the rules applicable to an SARL are set out in the Commercial Code, they are more flexible than those applicable to an SA (a single partner is possible), and statutory restrictions on shares' transfers may be useful in joint ventures.

Société anonyme (SA) - The SA is not a flexible structure, as it is highly regulated by the Commercial Code. For instance, an SA must have at least seven shareholders.

Société par actions simplifiée (SAS) - The most frequent (and the most flexible) corporate form used joint ventures in France. The shareholders of an SAS have great flexibility to reflect in the articles of association their agreement in relation to corporate governance and restrictions on transfers of shares. An SAS can have a single shareholder.

Are there any minimum/maximum capital requirements?

Société par actions simplifiée (SAS). There is no minimum share capital for an SAS. It is freely determined by the company's articles of association, but at least one-half must be paid upon incorporation. Certain minimum capital requirements may exist for companies undertaking financial, investment or banking operations.

Société anonyme (SA). An SA must have a minimum share capital of EUR37,000, with at least one half paid up on incorporation.

Société à responsabilité limitée (SARL). There is no minimum share capital for an SARL. It is freely determined by the company's articles of association, but at least one-fifth must be paid up on incorporation. Certain minimum capital requirements may exist for companies undertaking financial, investment or banking operations.

Can shares be issued in consideration for the contribution of assets or services (present or future)? Are any formalities required if shares are issued for non-cash consideration?

As a general rule, shares in French companies may be issued in consideration for the following contributions: contributions in cash (apport en numéraire), contributions of assets (apport en nature) and contribution of services (apport en industrie).

SAS

SA

SARL

Cash contribution

possible

possible

possible

Assets contribution

possible

possible

possible

Services contribution

possible

not possible

possible

When shares are issued for non-cash consideration, French corporate law requires a valuation report to be prepared (and submitted to the shareholders) by an independent court-appointed appraiser.

Société par actions simplifiée (SAS). Cash, assets and services contributions are possible in SASs. Shares issued for non-cash consideration, including services, are subject to valuation by an independent court-appointed appraiser who reports to the general meeting of shareholders, which will approve such contributions. The nature and term of the contributed services must be set out in the company's articles of association, together with the number of shares issued in consideration, it being specified that shares issued in consideration for the contribution of services are not taken account in the determination of the share capital of the company and cannot be assigned. These shares nevertheless grant their holder the quality of shareholder and, accordingly, certain associated rights (for example, voting rights in general meetings, entitlement to dividends and so on).

Société anonyme (SA). Contributions to the share capital must be either in cash or in assets. Contribution of services are not permitted.

Société à responsabilité limitée (SARL). Cash, assets and services contributions are possible in an SARL. Non-cash contributions are subject to valuation under the same terms as in an SAS.

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