Corporate law

Company formation and drafting of articles of association

SAS or SARL — the two most common French company forms: the question is not which is “the better one”, but what each of them allows you to write. The SARL is largely governed by statute — the approval of a transfer of shares to a third party is required as of right (article L. 223-14 of the French Commercial Code). The SAS is almost entirely free: the freedom to write its own constitution is what makes it attractive, and what makes it dangerous, since what is not written there does not exist.

A second choice, often overlooked: the articles of association are filed with the greffe, the commercial court registry, and are public— your competitors and your future buyers can read them. What has to stay confidential, the exit price and the real distribution of power, belongs in the shareholders' agreement. We draft the two together, then align them with your operating commitments: this is the moment to make your operating contracts safe.

Shareholders' agreements and governance

A useful agreement does not describe the harmony. It organises the break-up. These are the clauses that genuinely earn their keep on the day things go wrong.

• The valuation method, fixed in advance. The most profitable clause in the agreement. Since Ordinance no. 2014-863 of 31 July 2014, an expert appointed under article 1843-4 of the Civil Codemust apply the valuation rules laid down in the articles of association or in the parties' agreement. Writing the formula down in calm times means keeping control of the exit price; not writing it means handing that control to a third party appointed in the middle of a crisis.
• Cross put and call options. Their nature changed with Ordinance no. 2016-131 of 10 February 2016: the promisor withdrawing during the option period no longer prevents the contract from being formed (article 1124 of the Civil Code). An option granted to the departing shareholder is therefore enforced in specific performance (article 1221 of the Civil Code), and no longer in damages.
• Tag-along and drag-along rights. The first protects the minority shareholder when the majority sells; the second makes it possible to transfer 100% of the share capital to a buyer who will accept nothing less. An investment fund will insist on the second.
• Exclusion. In an SAS it is provided for in the articles of association (article L. 227-16 of the Commercial Code), and Act no. 2019-744 of 19 July 2019 removed the requirement of unanimity to adopt or amend such a clause. Its limit remains firm: the shareholder concerned cannot be deprived of the right to take part in the decision (article 1844 of the Civil Code).
• What cannot be written. A clause relieving a shareholder of any contribution to the losses, or awarding that shareholder all of the profit, is deemed unwritten (article 1844-1 of the Civil Code). Buy-back undertakings at a guaranteed price are drafted in the knowledge of that.

A shareholders' agreement remains a contract: it binds only those who sign it. Some clauses must therefore also appear in the articles of association to be enforceable against the company — a restriction on transferring shares, capped at ten years in an SAS (article L. 227-13 of the Commercial Code). Others have no business being in a public document.

Fundraising and the arrival of investors

On the side of the company and its founders: term sheet, being on the receiving end of due diligence, issue documentation, investors' agreement, capital increase. The point to watch does not change — what is conceded on governance and on decision thresholds is paid for in the next round, not in this one.

General meetings, restructurings and corporate finance transactions

Approval of the accounts, related-party agreements, conversion, merger, partial asset contribution, reduction or increase of share capital. Formality is not a formality: it is the first thing a buyer, an investor or a court-appointed officer examines, and it becomes decisive when the company can no longer pay.

There are two ways of selling your business, and the choice is made before the price is negotiated.

Fonds de commerce or shares: what the choice changes

Selling the fonds de commerce — the going concern, in French law a defined set of assets — means selling those elements: the customer base, the trading name, the lease, the equipment. The selling company survives, with its past and its debts. Selling the shares means selling the company itself: the buyer takes everything, including what it does not know about.

The sale of a fonds de commerce follows a protective and rigid regime, to be understood before any timetable is set:

• the sale is published in a legal announcements journal and then in the BODACC, the official bulletin of civil and commercial announcements (article L. 141-12 of the Commercial Code);
• the seller's creditors may lodge an objection against the price within ten days of that publication (article L. 141-14);
• the buyer remains jointly liable for the tax owed by the seller for the period set by article 1684 of the French General Tax Code;
• in companies with fewer than fifty employees, those employees must be informed beforehand (articles L. 141-23 et seq. of the Commercial Code).

Worth noting, because the consequence is counter-intuitive: the particulars formerly required in the sale agreement were removed by Act no. 2019-744 of 19 July 2019. Drafting is freer — and therefore more exposed, since the nullity that punished an omission also, by implication, protected whoever drafted badly.

Finally, the choice between the fondsand the shares has a tax cost, which varies with the transaction and with the seller's situation. For a transfer within the family, that cost is prepared long in advance: it is the subject of the tax cost of a family handover.

Warranty of assets and liabilities

It only applies to a sale of shares, and it is where most of the negotiation is decided. Five parameters make it useful or merely decorative: the scopeof the seller's representations, the threshold at which it is triggered, the cap, the duration — aligned with the tax and social security reassessment periods — and, above all, the security for the warranty: an escrow of part of the price or a bank guarantee.

Without it, a warranty is only a promise to pay made by someone who will have banked the price and may no longer be solvent. It is the point we lock down first, on both sides of the table.

Here we follow the method we apply on every file, adapted to capital transactions.

1. Scoping. A first conversation, at the office or by video call, to identify the transaction actually in play and the deadlines that constrain it.
2. Scope and budget in writing. What we draft, what we do not draft, the timetable, the amount — before we start.
3. Drafting and negotiation.Articles of association, shareholders' agreement, sale documents, fundraising documentation — and the discussion with the other side's advisers.
4. Follow-through. Formalities, registry filings, publications, and then the life of the company: your contact stays the same.

The items that recur from one file to the next — company formation, shareholders' agreement, minutes of general meetings, filing of the accounts — are priced as a fixed fee. Companies that consult us regularly are better served by the monthly retainer, day-to-day questions and routine reviewing included. Heavier transactions are handled under a detailed fee agreement.

In all three cases, the scope and the amount are stated and accepted before the work begins.

Me Jérôme Pujol was admitted to the Bar in 2000 and has practised business law ever since, at the Bars of Paris and of the Pyrénées-Orientales, as well as on Liste E with the Barcelona Bar. He holds a master's degree from ESSEC and began his career with Gide Loyrette Nouel in Bucharest, before founding the firm.

Two things matter particularly here.

• We also argue in court what these clauses avoid. The firm handles disputes between business partners and insolvency proceedings as well: you do not draft an exit clause the same way once you have seen what becomes of it in front of a judge. It is our chosen approach — anticipate rather than repair.
• The budget is stated before you commit, including on transactions where the custom of the profession is to stay vague.

We give no undertaking as to the outcome of a negotiation or of court proceedings: our professional rules forbid it, and nobody can seriously hold to it.

From our office in the 7th arrondissement, we handle the most structural transactions: fundraising rounds, the arrival of institutional investors, share sales, group restructurings. That is where the funds, the buyers' advisers and the market practice that transaction documents have to answer to are to be found — and it is from there that we support young Paris companies before their first round.

From Perpignan, the issue is different: a fabric of small and medium-sized and family-owned businesses, where the dominant question is not the fundraising round but the handover and the balance between partners who have known each other for twenty years. It is also the territory of the UPVD iN CUBEincubator, of which the firm was a patron — new companies are numerous there, shareholders' agreements far less so.

Our Catalan office takes over as soon as a transaction crosses the border: the Spanish subsidiary of a French group, the arrival of a shareholder established in Catalonia, the organisation of shareholdings between the two countries. Company form, the tax treatment of the shareholding and the law governing the agreement are then decided together, not one after the other. Incorporating the Spanish company itself is a matter of local law: it is carried out by our partner firm in Barcelona, without the file slipping away from you.

We also work remotely throughout France, by video call and electronic signature.