France Company Registration- An Overview
Setting up a company in France is relatively straightforward when compared to other jurisdictions in the EU. In comparison to EU, France is the only country that prefers private sector investment rather than starting a businessitself. Which make it the preferred destination for investors and entrepreneurs to start a business.
The French government offers different benefits and incentives for the company to thrive. When it comes to intellectual property protection, the country is a signatory to conventions such as the TRIPS Agreement, which provides significant protection for foreign intellectual property rights.
The qualified workforce in France directly reduces the cost of production of the products. Apart from this, the country offers proper infrastructure and facilities for energy, highways, railway projects, ports and other projects.
All these attractive incentives make France one of the friendliest places for starting a business. Due to this, investors should go through the company registration process in France.
Benefits of Company Registration in France
The following benefits can accrue to the investors who are considering registering a company in France:
- One of the Largest Economies in the EU -
France has the second largest consumer market in the EU, with 65 million domestic buyers consuming to the tune of €2 trillion annually. The tourism industry is booming, with more than 83 million visitors annually. France is considered the second largest exporter of Food and Beverage products and 4th largest exporter of pharmaceutical products.
- Intellectual Property Protection -
France is a signatory to conventions such as the TRIPS Agreement, which significantly protects foreign intellectual property rights. All companies in France have a unified patent registration method which provides more protection to patents in France. This provides international patent protection. France has been ranked as the 12th best country for registering patents in the world by the World Economic Forum. The French government actively checks the cases of IP infringements, and the fines can range up to €7,500per violation.
- Low-Interest Loans for Public Sector -
Public sector banks in France offer low-interest loans. This low-interest loan would amount to €1.5 million for financing innovation and research & development projects in companies that have (i) less than 250 employees, (ii) have less than €50 million in annual revenue and (iii) have been operational for a minimum of 3 years. For unlisted resident companies, equity investment opportunities are allowed. Credit insurance is offered to all the domestic companies in France at a low cost.
- Tax Incentives Offered by the Government-
There are many tax incentives and allied schemes offered by the French Government. Interest rates offered for loans to global entrepreneurs can go as low as 2%. If the investment is made in some of the priority areas provided by the French Government, then such companies would receive an exemption from payment of corporate tax for 7 years. While the corporate tax rate can be as high as 34 per cent in France, the net effective tax rate can be brought down to 9% if the investments are made in specific sectors. Apart from this, the government provides other social security exemptions.
- Good destination for FDI-
France has become the most attractive destination for Foreign Direct Investment, moving ahead of the United Kingdom. France received almost a thousand FDI projects in the year 2020, with the maximum investments made in the sphere of software and IT projects.
- Good Infrastructure-
The country offers proper infrastructural facilities in terms of energy, highways, railway projects, ports and other projects.
Regulatory Authority/ Body for Company Registration in France
France's primary regulatory authority for company registration is the Registry of Commerce and Companies (RCS).
Eligible Business Structures under Company Registration in France
An applicant going through the process of company registration in France would have to choose a relevant business structure. Following are the business structures present in France that entrepreneurs can adopt:
- French LLC (Société à responsabilité limitée (SARL))-
This form of entity is also known as SARL, which is an equivalent of a private limited company in France. This type of business vehicle is prevalent among entrepreneurs running small and medium-sized businesses because of its advantages to small entrepreneurs, such as low capital requirements and simple incorporation procedures.
For this type of company, there must be one director (who must not be a corporate body), one shareholder, and the minimumshare capital required is €1. The minimum amount can be decided among the shareholders. The incorporation of an LLC is a very quick process. No restrictions on the residency requirements for the shareholders and directors of an LLC. They do not have access to the capital markets, and their shares can be listed on the stock exchange.
A maximum of 100 shareholders are allowed, and only one class of stock can be issued. There is no personal liability of the shareholders. The manager has broad powers to act and represent the company against third parties. The company's bylaws and shareholders' meeting resolutions form the meeting resolutions. The annual shareholders meeting has to take place every year to get the accounts approved.
A partnership is an agreement between the partners to share the business's profits. In a partnership type of business, the liabilities and assets of the company are shared among the partners. There are numerous types of partnership structures that can be set up in France which are equivalents of general partnerships (SNCs), Limited Liability Partnerships (SCSs), Civil Companies, Civil Real Estate Companies (SCIs), Economic Interest Groups (GEI), SCA etc.
- Simplified Joint Stock Company (société par actions simplifiée or SAS)-
This type of companyis suitable for establishing holding companies and start-up companies because of the immense flexibility it offers to the shareholders in designing the company according to their requirements. The manager for these companies can be either a natural or a legal person.
The shareholders have the right to determine the rights attached to their shares freely. It is required to appoint an auditor on fulfilment of a few criteria. It cannot make public offerings, so its shares cannot be listed on the stock exchange. There is no specified management structure for SAS except for appointing a company president with the broadest powers in the company and exercising the maximum powers while representing the company to third parties. It is not mandatory to establish BOD; however, it can be formed via bylaws.
This Company is similar to the French LLC. For this type of company, there must be one director and one shareholder, and the minimum capital required is €1. There is no upper limit on the maximum number of shareholders for SAS. Companies can be appointed directors to manage this form of company. They have to hold an annual shareholder meeting for the approval of their accounts within 6 months from the closing of the last financial year. The management decisions have to be taken in France.
- French Public Limited Company (Société anonyme or SA)-
This type of business entity is usually meant for large corporations as it allows the company to offer shares publicly to the market as they require a large amount of capital. It is a complex mechanism and is not suggested for first-time incorporation in France.
A French public limited company would require minimum share capital for a formation like a public limited company. The amount required for forming a French Public Limited Company is €37,000. There has to be a minimum of two (and seven if publicly traded) shareholders, and no limit has been imposed on the maximum number of shareholders.
The management structure of a SARL comprises either:
- A Board of Directors with 3-18 members; or
- An Executive Board with a maximum of 5 members with a supervisory board having 3-18 members.
Where the share capital of the SA is less than €150,000, a single person has been allowed to act with the authority of the directorate. However, this company has to comply with the requirements of capital. An auditor must be appointed to manage the audits.
There is no personal liability on the member against the debts and obligations of the company. The typical charter documents include bylaws, shareholders’ meeting resolutions, share transfer register, shareholders’ accounts etc.
- European Stock Corporation-
A combination of two or more EU companies can form the European Stock Corporation. However, the minimum capital required for developing this form of company is € 120,000.
- Branch Office-
A branch office (succursale) is a permanent establishment that is not a separate legal entity from its parent company. Such offices are set up during the starting phase of a business. The majority of control of the branch office is by foreign shareholders. The parent company must bear all the branch office debts. There is no requirement for minimum paid-up capital to set up a branch office.
- Representative Office-
A representative office (bureau de représentation) is an extension office of a foreign parent company in France that intends to establish a presence in France. It is not a separate entity from its parent company. The purpose of the representative office is to observe the local French market for business opportunities and conduct market research, marketing and promotion activities without having a trading purpose.
The representative office is not allowed to contract or trade on behalf of the parent company. It is only a contact point enabling potential clients and associates to find out information about the foreign parent company through this office. The establishment of a representative office is the first step in the establishment of a subsidiary or a branch office in France.
Since it is an extension of the parent company, the parent company has full liability over the activities of the representative office. A representative office in France is not required to register with the RCS but with the Companies Formalities Centre of the place where the office will be located. It is issued a tax identification number allowing the opening of a bank account.
The representative office has to appoint a representative who shall be a resident in France to represent the activities of the Representative Office in France. The documents required include a Certificate of Incorporation, Articles of Association of the parent company, board resolution to open a representative office in France, passport and other identification papers of the person registering the office in France.
No minimum capital is required to register a Representative Office in France is not allowed to carry out any sales-related operations. The office is registered only to establish the company's presence in France. However, this office can be controlled by foreign shareholders. Similar to the case of the Branch Office, there is no requirement for minimum paid-up share capital.
Eligibility Criteria for French Company Formation
The following eligibility criterion has to be sufficed for company registration in France:
- Objects Clause-
The objects clause in the memorandum of association must state the objects for which the company is formed.
- Information on Key Executives-
All key information about the executives must be provided when applying for Company registration in France. Such information would include information on the name of the shareholders, registered address, and other information. Apart from this, other information must be provided related to the shareholders. This would include information on the visa.
- Information on Directors-
Information on the directors of the company must be provided.
- Minimum Capital-
An applicant for company registration in France also has to suffice the minimum capital requirement for company formation in France. If the applicant forms a French LLC or a Simplified Joint Stock Company, then the minimum capital shall be decided by the shareholders in the AOA, which can be as low as €1. However, if the company is a French Public Limited Company, the minimum capital required is €37,000. One-fifth of the authorised capital must be paid at registration time
Procedure for Company Registration in France
An applicant going through the process of company registration in France has to follow the below-prescribed method:
- Select an Appropriate Structure
- Check the Name on the Website of (the French Patent and Trademark Office) (INPI) and the Commercial Court Registry
- Open Corporate Bank Account for depositing the company’s share capital
- Consider who the shareholders and guarantors are (PSC)
- Prepare Documents for Running the Company
- Register the Company
- Select an Appropriate Structure-
First and foremost, the applicant for company registration in France has to choose an appropriate business structure or vehicle. This would depend on the business requirements of the applicant. If the applicant wants to start an entrepreneurship business, it would be suitable to go for the French LLC.
- Check the Name on the Website of (the French Patent and Trademark Office) (INPI) and Commercial Court Registry-
In the next step, the applicant must check for a unique name. The company's name must notconflict with any other names the existing French Companies already take, and it should not be offensive.
- Open Corporate Bank Account for depositing the company’s share capital-
In the next step, the applicant must open a corporate bank account. There are different types of banks, such as BNP Paribas, HSBC and Societe Generale, which provides banking services to business. For selecting a suitable bank, it is recommended to have a comparison of the services offered by all banks.
- Register at Centre de Formalites des Enterprises-
After opening a corporate bank account, the applicant would have to register at the Centre de Formalites des Enterprises for company registration in France. All other compliances related to business and tax would also be carried out through this institution.
For other kinds of businesses, such as the ones related to trades/ artisans and for independent or freelance professionals, the institution to get the registration is e Chambre des Métiers et de l’Artisanat (CMA). Similarly, if the business is agriculture-related, the appropriate authority to register the company is at Chambre d’Agriculture (CA).
- Publish Legal Notice of Incorporation on JAL Announces legales-
In the next step, the applicant must publish a legal notice of the incorporation in the local gazette JAL Announces legales. This process is needed to publicly and formally introduce the company to the business world.
- Receiving the Identification Number-
Once the Centre de Formalites des Enterprises receives the documentation, such information will be provided to the Register Nationale des Enterprise. After this, the company would receive the SIRENE (Systeme Informatique pour le Repertoire des Enterprises), SIRET and NAF (Nomenclature des Activities Francaises) numbers.
Corporate Tax in France
All companies that are registered in France have to pay corporate tax. The following taxes would be applicable:
- Corporate Tax payable in France is 33.33%. This would apply to all businesses which are established in France. Hence an applicant wanting to go for company registration in France would have to pay this percentage of corporate tax.
- There is 20% VAT levied in France. VAT is an indirect tax which is charged to all businesses in France.
- Withholding Tax is charged on all dividends in France. 25% withholding tax is charged on all businesses that distribute dividends. The new withholding tax rate has been made applicable from 1st January 2022.
- Companies have to file corporate tax returns by 30th April.
- Companies that invest in priority sectors are exempted from corporate tax payments. This exemption would be applicable for seven years.
Documents for Company Registration in France
The following documents are required for company formation in France:
- Information about the Founders of the Company- This will include their address, visa, passports and other relevant information.
- Identification documents of the Company's shareholders need to be translated and notarised.
- Information regarding the managers of the company and their identification papers and appointment letters
- Charter of the SARL
- Appointment of Manager Document
- Application Form for Registration and Fees
- A statement that the manager does not have any criminal convictions
- Memorandum of Association and Articles of Association which must be notarised
- Board Resolution( If required)
- Application forms issued by the Trade Registrar
- Publication of the decision to open the company in the National Gazette