FRANCE Law and Practice Contributed by: Jean-Christophe Devouge and Kaïs Boussadia, Aurès
1. Introductory 1.1 Forms of Corporate/Business Organisations
bility companies are rare and used for extremely specific transactions, so they will be also exclud - ed from this study. Among limited liability companies, the most common corporate forms are: • public limited companies ( sociétés anonymes or SA), used for large companies, most listed companies being incorporated in the form of SA; • simplified joint stock companies ( sociétés par actions simplifiées or SAS), a rather new corporate form but largely used thanks to its high flexibility; and • limited liability partnership ( sociétés à respon- sabilité limitée or SARL), primarily used for small businesses, as shares of SARL are not freely tradable. 1.2 Sources of Corporate Governance Requirements Corporate governance requirements are derived from laws and regulations, recommendations and internal rules set forth by companies them - selves. Laws and Regulations The French Commercial Code ( Code de com- merce ) and, to a lesser extent, the French Mon - etary and Financial Code ( Code monétaire et financier ) contain the majority of corporate gov - ernance rules and requirements. European Union directives and regulations, such as the Shareholder Rights Directive II of 17 May 2017, or the Directive on improving the gender balance among directors of listed companies dated 23 November 2022, also comprise a set of corporate governance requirements applicable to French companies. Requirements issued from EU directives shall be incorporated into French
In France, most business organisations are incorporated in the form of companies with dis - tinct legal personality. French law distinguishes between civil com - panies, governed by civil laws exclusively, and commercial companies, governed by civil and commercial laws. Civil companies may operate only a limited list of activities, which are deemed civil by nature (eg, agriculture, liberal activities, real estate), while commercial companies may operate any type of activities, including civil activities. There are three main differences between civil companies and commercial companies: • civil companies may not conduct commer - cial or industrial activities – their purpose is therefore limited; • shareholders’ liability is never limited in civil companies, whereas it is limited in most com - mercial companies; and • most civil companies are tax-transparent – ie, profits of the company are taxed at the shareholders’ level and subject to income tax, whereas most commercial companies are subject to corporate tax. These differences explain that civil companies are far less common than commercial compa - nies, and limited to specific uses. For this rea - son, they will be excluded from this study. The corporate forms applicable to commercial companies are numerous and can be classified into two categories: limited liability companies and unlimited liability companies. Unlimited lia -
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