FRANCE Law and Practice Contributed by: Sophie Vermeille, Vermeille & Co
1. Types of Company, Share Classes and Shareholdings 1.1 Types of Company In France, the main corporate forms include the fol- lowing. Publicly Listed Companies For publicly listed companies, French law requires the use of either a société anonyme (SA) or a société en commandite par actions (SCA). • The SA is the standard corporate form for listed companies. It may be organised under either a single-tier system with a chair/CEO and board of directors, or a two-tier system with a management board ( directoire ) and supervisory board ( conseil de surveillance ). In practice, shareholders in an SA play a relatively limited role in day-to-day manage- ment, with decision-making concentrated in the board, reflecting a strict statutory separation of powers. • The SCA combines two categories of members: general partners, who are personally liable for the SCA’s debts (though in practice this liability is usu- ally neutralised, as the general partner is often a shell limited liability company with minimal capital); and limited partners, who are ordinary sharehold- ers. Historically, the SCA was sometimes used by listed companies as a defensive structure against hostile takeovers, but it has been in clear decline of late, illustrated by the recent conversion of Lagardère from an SCA into an SA. Privately Held Companies The most common form of privately held company is the société par actions simplifiée (SAS), which is valued for the high degree of contractual freedom it affords in structuring governance and sharehold- er arrangements. Unlike the SA, where governance is tightly regulated, the SAS allows parties to tailor almost every aspect of decision-making – who man- ages, what requires shareholder approval, and what thresholds apply. The SAS is often compared to a US LLC because of its high degree of contractual freedom in structuring governance. However, it remains legally a corporation
( société par actions ), subject to certain statutory rules and corporate law concepts that do not exist for LLCs. 1.2 Types of Company Used by Foreign Investors For listed companies, foreign investors invariably invest through an SA. The SA is the only real vehicle available on the French market for public companies and is broadly comparable to a US corporation in this respect. Unlike Delaware corporations, however, the SA leaves very little room for contractual freedom: governance rules, shareholder rights and disclosure obligations are largely fixed by statute, with relative- ly limited ability to customise them in the articles of association. For private companies, the SAS is by far the preferred vehicle for foreign investors, including private equity funds and joint ventures. The SAS offers wide con- tractual freedom to tailor governance and sharehold- er rights, somewhat similar in spirit to the flexibility found in US LLC operating agreements. However, it remains a corporation under French law, subject to certain mandatory corporate law rules and corporate taxation. This combination of flexibility and corporate status explains its widespread use in cross-border transactions. 1.3 Types or Classes of Shares and General Shareholders’ Rights For listed companies (SA), the common class of shares is ordinary shares, which generally carry voting rights, information rights and proportional financial rights. These rights are mainly set out in the French Com- mercial Code and the French Monetary and Financial Code. In practice, non-voting preference shares are rarely used in listed French companies, even though they are permitted within certain limits by law. For private companies (SAS), the regime is far more flexible. While ordinary shares are common, compa- nies frequently issue preference shares with custom- ised voting, information and financial rights tailored to shareholders’ needs. As a general rule, French law follows the principle of “one share, one vote”, with the following exceptions.
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