All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

The incorporation of a joint stock company is subject to the fulfillment of the substantive conditions generally required for any corporate form, with some specificities related to its capitalistic nature.
1) Corporate purpose
Article L. 210-1 of the Commercial Code provides that the joint stock company is commercial by virtue of its form, regardless of its purpose. This purpose must be possible a …

Formation of the company

The incorporation of a joint stock company is subject to the fulfillment of the substantive conditions generally required for any corporate form, with some specificities related to its capitalistic nature.

Article L. 210-1 of the Commercial Code provides that the joint stock company is commercial by virtue of its form, regardless of its purpose. This purpose must be possible and lawful, and, within these limits, in accordance with the statutes. Therefore, the joint stock company formed by shareholders who do not all engage in the professional activity specifically required by the statutes is subject to invalidity, provided that the action is brought within the three-year limitation period .

The ordinance of 10 September 2015 modified the requirements regarding the number of shareholders in an SA. From a previously required minimum of seven for all SAs, it is now accepted that those whose shares are not tradable on a regulated market or a multilateral trading system can be formed by only two shareholders , with only listed companies remaining subject to a minimum of seven shareholders . A number of partners below the legal minimum due to the falsification of some of their signatures may lead to the annulment of the company . In the absence of fraud, the parties may opt for transformation, particularly in the case of the concentration of share capital in the hands of a single partner . Finally, since the shareholders of an SA do not necessarily need to have the status of merchants, minors can be part of the partners and increase the numbers.

Article L. 224-2 of the Commercial Code provides that the share capital of joint stock companies must be at least 37,000 euro. The reduction of the share capital to a lower amount can only be decided under the suspensive condition of a subsequent capital increase intended to raise it to at least the legal minimum, unless the company transforms into a company of another form. In case of non-compliance with these provisions, any interested party may request the dissolution of the company in court. This dissolution cannot be pronounced if, on the day the court rules on the merits, the regularization has taken place. Finally, no clause of variability can be stipulated within joint stock companies .

Pursuant to Article L. 225-3, the capital must be fully subscribed, either through contributions in cash or contributions in kind. Contributions in the form of services, however, are prohibited in joint stock companies .

Cash contributions must be paid up, at the time of subscription, to at least half of the nominal value of the shares. The invalidity of a joint stock company is thus incurred when cash contributions have only been paid up to a quarter, after the formation of the company . The release of the surplus may occur in one or more installments by decision of the board of directors or the management board, as the case may be, within a period not exceeding five years from the registration of the company in the trade and companies register. Such a requirement aims to combat fictitious subscriptions. However, subscriptions made by nominees cannot receive such a classification, in the absence of fraud and fictitiousness of the release of the shares, when the funds actually and definitively enter the company's accounts .

The release of contributions cannot, in principle, be carried out by offsetting with the credit balance of the associate's current account. Indeed, the claim constituted by this balance, which derives from a loan granted to the company, and the company's claim against its shareholder for the unpaid portion of their cash contribution, which arises from the company contract, are not related . However, an associate from whom the liquidator demands payment of the unpaid portion of the share capital after the opening of the company's judicial liquidation can invoke legal offset with the balance of their current account that occurred before the opening judgment, even if the claims in question are not related .

In accordance with Articles L. 225-5 and R. 225-6, the funds from cash subscriptions and the list containing the usual name, first name, and domicile of the subscribers, along with the amounts paid by each of them, are deposited, on behalf of the company being formed and by the persons who received the funds, either at the Caisse des dépôts et consignations, with a notary, or with a credit institution or intermediary. Jurisprudence considers that the chairman of the board of directors, acting as the agent of the subscribers of a joint stock company being formed, who deposits only part of the funds contributed and uses another part for corporate expenses, while these funds must be blocked and remain unavailable until registration, commits the offense of breach of trust .

Article L. 225-131 adds that the capital must be fully paid up before any issuance of new shares to be paid in cash, even if the case law considers that this text is not applicable when the capital increase of a SA is carried out by increasing the nominal value of existing shares and not by creating new shares .

Regarding contributions in kind, the major difficulty that arises is their evaluation. To avoid potential risks of overvaluation, Articles L. 225-8 and L. 225-12 have established a control procedure, which requires the appointment of one or more contribution auditors by unanimous decision of the founders or, failing that, by court decision at the request of the founders or one of them. These financial professionals are responsible for assessing, under their responsibility, the value of the contributions in kind. The report filed with the registry, along with the draft articles of association, is made available to subscribers. The constitutive general meeting then decides on the evaluation of the contributions. The constitutive meeting deliberates under the quorum and majority conditions provided for extraordinary meetings. It can only reduce the contributions by unanimous consent of all subscribers. When the meeting deliberates on the approval of a contribution in kind, the shares of the contributor or beneficiary are not counted in the majority calculation. In accordance with Article L. 225-8-1 of the Commercial Code, the verification procedure is waived only in two cases, namely when it involves listed securities or when these contributions have already been evaluated by a contribution auditor within the six months preceding the operation. Article L. 225-101 further provides that when the company, within two years following its registration, acquires an asset belonging to a shareholder and whose value is at least equal to one-tenth of the share capital, an auditor, responsible for assessing the value of this asset under their responsibility, must be appointed by court decision at the request of the chairman of the board of directors or the executive board, as the case may be.

Verification procedures are not limited to contributions in kind. Indeed, Articles L. 225-8 and L. 225-12 also subject to this requirement the special benefits stipulated for certain partners, which may jeopardize equality among shareholders. These benefits can be granted at the company's formation or during its existence. The verification procedure is the same as for contributions in kind.

Cass. com., 17 July 1974, LawLex202200003585JBJ, concerning statutes requiring the exercise of the activity of industrialist or intermediary in standardized carpentry.

Commercial Code, Art. L. 225-1, para. 2. - Adde : MERLE, SVP, especially not a public limited company with two shareholders!, BJS 2014, 480.

Cass. com., 8 January 2002, LawLex202100002692JBJ.

Cass. crim., 10 May 1993, LawLex202300007500JBJ.

CA Paris, 13 October 2009, LawLex202300011979JBJ.

CA Versailles, 13 November 2007, LawLex202300011989JBJ.

Metz, 19 September 2013, LawLex202300002267JBJ.

Cass. com., 30 January 1961, LawLex202300011984JBJ.

Cass. com., 20 May 1997, LawLex202100002701JBJ.

Company Law (en cours)

462. Formation of the company

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462. Formation of the company

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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