FRANCE Law and Practice Contributed by: David-James Sebag, Donald Davy and Marie-Sophie Chevreteau, Gide Loyrette Nouel
4. Government Inducements 4.1 Subsidy Programmes
(number of board members, distribution of dividends etc); • the right to dismiss, with or without cause, the officers of the company (above a certain
The French government provides a variety of programmes to encourage equity financing in growth companies. These programmes are designed to reduce risk and increase the appeal of investing in startups. They include direct finan - cial support, tax incentives and special statuses that confer tax advantages. The landscape of incentives is subject to change, reflecting the government’s ongoing commitment to fostering a dynamic and innovative business environment. The complexity of these programmes and their application to specific situations can be signifi - cant, and the details of each are subject to spe - cific rules and conditions. Such programmes include the following. • Bpifrance, the French public investment bank, which is a key player in this ecosystem. It offers a range of financial instruments and support services for start-ups and SMEs (small and medium-sized enterprises), includ - ing direct equity investments, co-investments, investment as LP in VC funds and various loans and guarantee schemes. • The Young Innovative Company Status (JEI – Jeune Entreprise Innovante ). Companies that qualify for JEI status can benefit from tax incentives (notably exemptions from corpo - rate income tax and local taxes for a certain period) and social charge exemptions (partial or total exemptions from employer social security contributions on salaries paid to researchers and developers). • Investment Tax Credits – France offers vari - ous tax credits to incentivise investment in growth companies. One example is the “réduction d’impôt pour investissement dans les PME” (Tax Reduction for Investment in
shareholder threshold); and • audit and information rights. 3.7 Contractual Protection
Within the context of a financing, representa - tions and warranties on the company and its subsidiaries covering a large scope (corporate, capitalisation table, IP, employment, tax, insur - ance, accounts, financing, contracts etc.) are granted by the founders (generally at an early stage) and/or the company. The following limitations are usually provided: • information fairly disclosed in the agreement (no reference to data room); • time limitations: between 12 and 24 months, except for tax and certain fundamental repre - sentations; and • financial limitations: (a) de minimis (ie, the minimum amount of damages suffered either by the investor or by the company), generally equal to 0.1% of the invested amount; (b) the threshold (ie, the minimum amount of cumulated damages entitling the investor to claim) is equal to 1% of the invested amount; and (c) the cap (ie, the maximum amount that may be claimed by the investor) is equal to the invested amount (if founders are warrantors, then the cap for them is equal to one or two times their annual salary). Indemnification can be paid in cash or in shares of the company, usually at the sole decision of the warrantor.
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