French Business Law

Embezzlement is the fraudulent conversion of a company’s funds or other property by a director of the company. The following acts, inter alia, have been judged by French courts to constitute embezzlement: Use, by a corporate officer, of company funds to pay the fees of its own lawyers; Payment, by a company, of traffic fines imposed on its CEO, although the CEO committed the traffic offences while driving a company…

What provisions should contain an agreement for the provision of services ? A description of the services which should be provided The services which should be provided by the service provider to the client may be described by reference to an exhibit. Their scope, volume and nature should be clearly defined. The agreement may also authorize the client to request at any time the provision of additional services. In such…

Most companies are incorporated in France under the form of a SAS (“société par actions simplifiée”, or a limited liability company by shares) or a SARL (“société à responsabilité limitée” or a limited liability company). The minimum share capital required for the incorporation of both types of companies is 1€. The main differences, advantages and disadvantages of these company forms are as follows: Payment of the share capital The share…

Distribution agreements contain standard terms and conditions, which relate, inter alia, to: the appointment of the distributor as such and the territory covered by the distribution agreement, the obligations of the parties regarding the distribution of the products, such as the provision, by the distributor, of sales forecasts and periodic sales reports, the implementation of marketing plans and actions, etc. the placement, acceptance and cancellation of orders, the terms of…

A SARL is a form of limited liability company. Shareholders Any person can become a shareholder of a French SARL, including non-French residents. Subject to certain exceptions, a SARL may validly exist with only one shareholder (in which case it is called a EURL (“entreprise unipersonnelle à responsabilité limitée“). A SARL may not comprise more than 100 shareholders. Corporate purpose Certain activities, such as (but not limited to) insurance, may…

Purpose of a franchise agreement The purpose of a franchise agreement is to organize the relationship between a franchisor – a manufacturer or supplier of products or provider of services, who owns the relating trademark and know-how, and a franchisee – a company or individual willing to distribute such products or services under the franchisor’s trademark and benefit from the franchisor’s know-how. A franchise agreement is therefore characterised by: a…

Corporate officers of French companies (CEOs, members of a board of directors, etc.) may incur civil or criminal liability for various acts or omissions. Civil liability Civil liability may be incurred, inter alia, for actions or omissions which: violate applicable law or the company’s bylaws, or constitute acts of mismanagement (“faute de gestion”). Criminal liability Criminal liability may be incurred, inter alia, for: embezzlement, abuse of corporate position or votes,…

The by-laws of a company make part of its constitutive documents. Their purpose is to set forth the rules which will govern the company and the relationship between its shareholders. The company by-laws are often supplemented by a shareholders’ agreement. The by-laws of a company typically include provisions relating to: The company’s purpose, legal form, address, name and duration; Capital contributions or contributions in kind, amount of the company’s share…

The share capital of a SARL may be contributed in cash or in kind (by the contribution of assets). The amount of share capital must be indicated in the company’s bylaws, as well as on all documents issued by the company, such as contracts, letters, invoices, advertisements, etc. Cash contributions Only an amount corresponding to 1/5th of the amount of registered share capital (that is, the amount indicated in the…

Banking monopoly The right to lend money to individuals and corporations on a regular basis is reserved in France to financial insitutions. Money lending by any person other than a bank is therefore strictly prohibited, and constitutes a criminal offence. Similarly, companies are prohibited from borrowing money from any person other than a financial institution. Shareholder loans to a company in which the lending shareholder hold 5% or more of…