France Companies Act
France
COMMERCIAL CODE
TITLE I
The commercial act
L110-4
Article L110-1
The law provides that commercial instruments are:
1° All purchases of chattels in order to resell this, either in kind or after having worked and developed this;
2° All purchases of real property in order to resell this, unless the purchaser has acted in order to construct one or more buildings and to sell these en bloc or site-by-site;
3° All intermediate operations for the purchase, subscription or sale of buildings, business or shares of property companies;
4° All chattels rental undertakings;
5° All manufacturing, commission and land or water transport undertakings;
6° All supply, agency, business office, auction house and public entertainment undertakings;
7° All exchange, banking or brokerage operations;
8° All public banking operations;
9° All obligations between dealers, merchants and bankers; 10° Bills of exchange between all persons.
Article L110-2
The law also deems commercial instruments to be:
1° All construction undertakings and all purchases, sales and resales of ships for inland and foreign-going navigation;
2° All sea shipments;
3° All purchases and sales of ship’s tackle, apparatus and foodstuffs;
4° All chartering or chartering and bottomry loans;
5° All insurances and other contracts relating to maritime trade;
6° All agreements and conventions on crew wages and rents;
7° All engagements of seamen for the service of commercial ships.
Article L110-3
With regard to traders, commercial instruments may be proven by any means unless the law specifies otherwise.
Article L110-4
I.- Obligations deriving from trade between traders or between traders and non-traders shall be prescribed after ten years unless they are subject to special shorter periods of prescription.
II.- All claims for payment shall be prescribed:
1° For food supplied to seamen on the captain’s orders, one year after delivery;
2° For the supply of materials and other items needed for the construction, equipment or supply of the ship, one year after these foodstuffs are provided;
3° For built structures, one year after the acceptance of the structures.
III.- Claims for payment of the wages of officers, seamen and other crewmembers shall be prescribed after five years in accordance with Article 2277 of the Civil Code.
TITLE II
Traders
Article L121-1
Traders are those who carry out commercial instruments and who make this their usual profession.
Article L121-2
Minors, even when declared of full age and capacity, may not be traders.
Article L121-3
Spouses of traders shall be deemed to be traders only if they carry out a separate commercial activity from that of their spouse.
SECTION II
Spouses of craftspeople and traders working in the family-owned undertaking
CHAPTER II
Foreign traders Articles L122-1 to L122-4
Article L122-1
(Order No. 2004-279 of 25 March 2004 Art. 1 1 Official Journal of 27 March 2004)
A foreign national shall not be engaged in a commercial, industrial or handicraft occupation in France in a manner which requires his registration or inclusion in the register of companies or the trade register without the prior consent of the Prefect of the Department in which he envisages conducting his business initially.
Article L122-2
Any breach of the requirements of Article L.122-1 and of those in the implementing decree specified in Article L.122-4 shall be punished by a prison sentence of six months and a fine of 25 000 F. In cases of recidivism, the penalties shall be doubled. The court may also order the closure of the establishment.
Article L122-3
(Order No. 2004-279 of 25 March 2004 Art. 1 2 Official Journal of 27 March 2004)
I. - The provisions of Articles L. 122-1 and L. 122-2 do not apply to the citizens of a European Community member state, a European Economic Area member state or a member state of the Organisation for Economic Cooperation and Development acting on their own behalf or on behalf of either another citizen of such a State or a company incorporated pursuant to the legislation of such a State and having its registered office, its principal administrative establishment or its principal place of business in such a State.
II. - However, when a foreign national or a company referred to in I creates an agency, a branch or a subsidiary on French soil or provides services there, the benefit of I shall be granted only if:
1. The foreign national is established in a European Community member state, a European Economic Area member state or a member state of the Organisation for Economic Cooperation and Development;
2. The company, if it has only its registered office in the European Community, a European Economic Area member state or a member state of the Organisation for Economic Cooperation and Development, conducts a business which has an effective and continuous link with the economy of such a State.
Article L122-4
A Conseil d'Etat decree shall fix the conditions for implementing this chapter.
CHAPTER III
General obligations of traders
Articles L123-1 to
L123-28
SECTION I
Commercial and companies register
Articles L123-1 to L123-11
Subsection 1
**Persons required to register **
Articles L123-1 to L123-5-1
Article L123-1
I.- A commercial and companies register shall be kept in which the following shall be registered as a result of their declaration:
1° Natural persons with the capacity of trader, even if they are required to register in the trades register;
2° Companies and economic interest groups which have their registered office in a French department and which have a legal personality in accordance with Article 1842 of the Civil Code or with Article L.251-4;
3° Commercial companies whose registered office is situated outside a French department and which have an establishment in one of these departments;
4° French public establishments of an industrial or commercial nature;
5° Other legal persons whose registration is specified by the acts and regulations;
6° Commercial delegations or commercial agents of foreign States, authorities or public establishments established in a French department.
II.- The registrations and instruments or documents filed as specified by a Conseil d'Etat decree shall appear in the register in order to be brought to the attention of the public.
Article L123-2
No-one may be registered in the register if they do not meet the conditions required in order to carry out their activity. Legal persons must also have complied with the formalities specified by the legislation and regulations in force relating thereto.
Article L123-3
If a trader who is a natural person fails to request registration by the specified deadline, the judge hearing the case shall, either automatically or at the request of the procureur de la République or any person proving that they have an interest in this, make an order requiring the trader to request registration.
In accordance with the same conditions, the judge may order any person registered in the commercial and companies register, who has not requested these by the specified deadlines, to make the additional entries or corrections which must be made in the register, to make the entries or corrections needed in the event of incorrect or incomplete declarations or to deregister.
The clerk of a court delivering a decision requiring a person to register must notify this decision to the clerk of the Tribunal de commerce whose jurisdiction covers the registered office or main establishment of the interested party. The clerk of the Tribunal de commerce receiving the decision shall refer this to the judge responsible for overseeing the register.
Article L123-4
(Law No 2000-916 of 19 September 2000 Article 3 Official Gazette of 22 September 2000 effective 1 January 2002) (Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
If any person ordered to request a registration, a supplementary or amending entry, or a striking-off in the trade register should fail to comply with that requirement without an excuse deemed to be valid within two weeks of the date on which the order made by the judge entrusted with supervision of the list directing him to complete one of those formalities becoming final, a fine of €3,750 euros shall be imposed on that person.
The court may, moreover, deprive the person concerned of the right to vote in, and to stand in, elections to the commercial courts, the chambers of commerce and industry and the industrial tribunals for a period of up to five years.
The court orders that the registration, the notations or the striking-off that must be recorded in the companies register be entered therein within a specified timeframe, at the request of the person concerned.
Article L123-5
The act of giving, in bad faith, incorrect or incomplete information with a view to registration, removal of the registration or additional entries or corrections in the commercial and companies register shall be punished by a fine of 30 000 F and a prison sentence of six months.
The provisions of the second and third paragraphs of Article L.123-4 shall apply in the cases specified in this article.
Article L123-5-1
(inserted by Act No 420 of 15 May 2001, Article 123 II, Official Gazette of 16 May 2001)
At the request of any interested party or the procureur de la République, the president of the court, ruling in interlocutory proceedings, may enjoin, subject to a penalty, the manager of any legal person to file the documents and instruments with the commercial and companies register which this legal person is required to do by the acts or regulations.
The president may, in accordance with the same conditions and to this same end, appoint a representative responsible for fulfilling these formalities.
Subsection 2
Keeping of the register and effects attached to registration Articles L123-6 to L123-9-1
Article L123-6
The commercial and companies register shall be kept by the clerk of each Tribunal de commerce. It shall be overseen by the president of the court or a judge entrusted with this responsibility who shall be competent for all disputes between the person under obligation and the clerk.
Article L123-7
The registration of a natural person shall involve the presumption of the capacity of trader. However, this presumption shall not be binding on third parties and administrations which provide proof to the contrary. Third parties and administrations shall not be permitted to rely on this presumption if they know that the liable person is not a trader.
Article L123-8
The person obliged to register who has not requested this by the expiration of a period of fifteen days from the start of their activity may not rely on, until registration, the capacity of trader with regard to both third parties and public administrations. However, this person may not invoke their failure to register in order to avoid the responsibilities and obligations inherent in this capacity.
Without prejudice to the application of Article L.144-7, registered traders who assign their business or hand over the operation of this, particularly in the form of real estate management, may not plead the cessation of their commercial activity in order to avoid claims for damages to which they shall be subject due to the obligations contracted by their successors in the operation of the business until the day when the corresponding additional entry or removal of the registration has been carried out.
Article L123-9
Persons obliged to register may not, in carrying out their activity, raise in respect of third parties or public administrations, which may, however, rely on these, the acts and instruments subject to entry unless the latter have been published in the register.
In addition, persons obliged to file instruments or documents in the annex to the register may not raise these against third parties or administrations unless the corresponding formality has been carried out. However, third parties or administrations may rely on these instruments or documents.
The provisions of the above paragraphs shall apply to the acts or instruments subject to entry or filing even if they are covered by another legal publication. Third parties and administrations which personally knew about these acts or instruments may not, however, rely on these.
Article L123-9-1
(inserted by Law No. 2003-721 of 1 August 2003 Article 2 (I) Official Gazette of 5 August 2003)
The court registrar or the body referred to in the last paragraph of Article 2 of Law No. 94-126 of 11 February 1994 relating to individual initiative and enterprise shall deliver a receipt, free of charge, for the submission of an application to create a business to any person subject to registration, as soon as that person has submitted a duly completed application for registration. The said receipt allows the necessary formalities to be completed with the public bodies and the private bodies entrusted with rendering a public service, under the personal responsibility of the natural person having tradesman status or who is acting on behalf of the company being formed. It bears the legend:"Registration pending".
The implementing provisions for the present Article are defined in a Conseil d'Etat decree.
Subsection 3
Place of domicile of registered persons Articles L123-10 to L123-11
Article L123-10
(inserted by Law No. 2003-721 of 1 August 2003 Article 6 (I) (1) Official Gazette of 5 August 2003)
Natural persons applying for registration in the companies register or the trade register must declare their business address and substantiate possession thereof.
Natural persons may declare the address of their place of residence and conduct their business there, barring any legislative provision or contractual stipulation to the contrary.
Natural persons who do not have business premises may declare their place of residence, solely for the purpose of providing a business address. Such a declaration does not give rise to any change of use or to application of the commercial lease regulations.
NB: Law No. 2003-721 of 1 August 2003 Article 6 II: These provisions apply to businesses listed in the companies register or the trade register on the date of promulgation of Law No. 2003-721 of 1 August 2003.
Article L123-11
(Law No 2003-721 of 1 August 2003 Article 6 (I) (2) Official Gazette of 5 August 2003)
Any legal entity applying for registration in the companies register must substantiate possession of the premises which will house its registered office, alone or with others, or, if the registered office is to be located abroad, the agency, branch or representation established on French soil.
A company is allowed to have its registered address in premises occupied by several businesses under the conditions determined in a Conseil d'Etat decree. That decree also stipulates the equipment or services that are required to justify the reality of the registered office of the company domiciled there.
NB: Law No. 2003-721 of 1 August 2003 Article 6 II: These provisions apply to businesses registered in the companies register or the trade register on the date of promulgation of Law No. 2003-721 of 1 August 2003.
SECTION II
**Accounts of traders **
Articles L123-12 to
L123-28
Subsection 1
Financial liabilities applicable to all traders Articles L123-12 to
L123-24
Article L123-12
All natural or legal persons with the capacity of trader shall enter in their accounts the movements affecting the assets of their undertaking. These movements shall be recorded chronologically.
These persons must check, by means of a stocktake at least once every twelve months, the existence and value of the assets and liabilities of the undertaking.
They must prepare annual accounts at the end of the financial year in view of the entries made in the accounts and the stocktake. These annual accounts shall consist of the balance sheet, profit and loss account and an annex which shall form an ineparable whole.
Article L123-13
The balance sheet shall describe individually the assets and liabilities of the undertaking and shall clearly show the equity capital.
The profit and loss account shall summarise the income and expenditure for the financial year without taking into account their date of receipt or payment. It shall show, according to the difference after deducting the depreciation and provisions, the profit or loss for the financial year. The income and expenditure, classed by category, shall be presented in the form of either tables or lists.
The amount of the undertaking’s commitments in terms of pensions, supplemental pensions, compensation and allowances due to retirement or similar advantages of its staff members or partners and its managing agents shall be indicated in the annex. In addition, undertakings may decide to enter in the balance sheet, in the form of a provision, the amount corresponding to all or part of these commitments.
The annex shall supplement and comment on the information given in the balance sheet and the profit and loss account.
Article L123-14
The annual accounts shall be honest and truthful and shall ensure a fair representation of the assets, financial situation and results of the undertaking.
When the application of an accounting requirement is not sufficient to ensure the fair representation indicated in this article, additional information must be provided in the annex.
If, in an exceptional case, the application of an accounting requirement proves to be unsuitable in order to ensure a fair representation of the assets, financial situation or results, an exception must be made to this. This exception shall be indicated in the annex and duly reasoned, with an indication of its effect on the assets, financial situation and results of the undertaking.
Article L123-15
The balance sheet, profit and loss account and annex shall include as many headings and items as are needed to ensure a fair representation of the assets, financial situation and results of the undertaking. Each item in the balance sheet and profit and loss account shall contain the figure relating to the corresponding item for the previous financial year.
The classification of the elements of the balance sheet and profit and loss account, the elements forming the equity capital and the texts to be included in the annex shall be fixed by decree.
Article L123-16
Traders, whether natural or legal persons, may, in accordance with the conditions fixed by a decree, adopt a simplified presentation of their annual accounts when these do not exceed, at the end of the financial year, the figures fixed by decree for two of the following criteria: the total of their balance sheet, the net amount of their turnover or the average number of permanent employees during the financial year. They shall lose this option when this condition is not met for two successive financial years.
Article L123-17
Unless an exceptional change occurs in the trader’s situation, whether a natural or legal person, the presentation of the annual accounts and the valuation methods used may not be altered from one financial year to the next. If alterations occur, these shall be described and justified in the annex.
Article L123-18
On its date of entry into the capital assets, property acquired for money consideration shall be recorded at its cost of acquisition, property acquired free of charge shall be recorded at its market value and property produced shall be recorded at its cost of production.
For fixed assets, the values used in the stocktake shall, if applicable, take account of the depreciation plans. If the value of a fixed asset falls below its net book value, the latter shall be reduced to the stocktake value at the end of the financial year, whether or not the depreciation is final.
Wasting assets shall be valued either at its weighted average cost of acquisition or production or by considering that the first item out is the first item in.
The asset appreciation noted between the stocktake value of an item and its entry value shall not be entered in the accounts. If this results from a revaluation of all the tangible and capital assets, the revaluation difference between the current value and the net book value may not be used to offset losses. It shall be clearly entered on the liabilities side of the balance sheet.
Article L123-19
The assets and liabilities shall be valued separately.
No offsetting may be applied between the assets and liabilities items of the balance sheet or between the income and expenditure items of the profit and loss account.
The opening balance sheet for a financial year shall correspond to the closing balance sheet for the previous financial year.
Article L123-20
The annual accounts must respect the precautionary principle. In order for these accounts to be prepared, traders, whether natural or legal persons, shall be presumed to be continuing their activities.
Even in the absence or insufficiency of any profit, the necessary depreciation and provisions must be established. The risks and losses occurring during the financial year or during a previous financial year shall be taken into account, even if they are identified between the end date of the financial year and that of the preparation of the accounts.
Article L123-21
Only the profits made by the end date of a financial year may be entered in the annual accounts. The profit made on a partially executed transaction, accepted by the other contracting party, may be entered, after the stocktake, when its completion is certain and when it is possible, using the projected accounting documents, to value the overall profit of the transaction with sufficient safety.
Article L123-22
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
The accounting documents are expressed in euros and drafted in the French language. The accounting documents and supporting documentation are kept for ten years.
The accounting documents relating to the recording of transactions and the inventory are prepared and maintained without blanks or alterations of any kind in conditions determined in a Conseil d'Etat decree.
Article L123-23
Duly kept accounts may be accepted in the courts in order to act as proof between traders in respect of commercial instruments.
If the accounts have not been duly kept, they may not be invoked by their author for the latter’s benefit. The communication of accounting documents may be ordered in the courts only in cases of succession, joint ownership and partition of a company and in the event of administrative order or court-ordered winding-up.
Article L123-24
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
All traders are required to open a current account with a bank or the post office.
Subsection 2
Financial liabilities applicable to certain traders who are natural persons Articles L123-25 to L123-28
Article L123-25
As an exception to the provisions of the first and third paragraphs of Article L.123-12, natural persons placed voluntarily or ipso jure under the effective simplified taxation system may record claims and debts only at the end of the financial year and shall not have to prepare an annex.
Article L123-26
As an exception to the provisions of the second paragraph of Article L.123-13, natural persons placed voluntarily or ipso jure under the effective simplified taxation system may record in their profit and loss account, according to its payment date, expenditure whose frequency does not exceed one year, excluding purchases.
Article L123-27
As an exception to the provisions of the third paragraph of Article L.123-18, natural persons placed voluntarily or ipso jure under the effective simplified taxation system may carry out a simplified valuation of the stocks and work in process according to a method fixed by decree.
Article L123-28
As an exception to the provisions of Articles L.123-12 to L.123-23, natural persons subject to the taxation system for micro-undertakings may not be required to prepare annual accounts. They must, in accordance with the conditions fixed by decree, record on a day-by-day basis the accounts received and the expenses paid and they must produce an end-of-year statement of the accounts received and expenses paid, the financial debts, the fixed assets and the stocks valued in a simplified manner.
However, when their annual turnover does not exceed an amount of 120 000 F, natural persons registered in the commercial and companies register may keep only one book chronologically recording the amount and origin of the income which they receive due to their professional activity. A decree shall fix the conditions in accordance with which this book shall be kept.
CHAPTER IV
Cooperative associations of retailers Articles L124-1 to L124-16
Through the collective efforts of their members, retail cooperative societies seek to improve the conditions in which they conduct their business. To that end, they may, inter alia, directly or indirectly engage in the following activities on behalf of their members:
1. Supplying them with some or all of the goods, commodities, services, equipment and materials they need in order to conduct their business by, inter alia, establishing and maintaining stocks of all kinds of goods, by building, purchasing, or leasing and managing private shops and warehouses, and by carrying out in their own premises or those of their members any appropriate works, conversions or modernisation;
2. Bringing together on one site the businesses belonging to their members, creating and managing all services collectively needed to operate those businesses, building, purchasing or renting the buildings required for their activities or those of their members, and managing them, all as provided for in Chapter V of the present Part;
3. Within the framework of the legislative provisions relating to financial activities, to facilitate access by the members and their clients to the various financing and credit facilities available;
4. Carrying out activities which are complementary to those referred to above, and, inter alia, providing their members with assistance in relation to technical, financial and accounting management;
5. Purchasing businesses in respect of which, contrary to the provisions of Article L. 144-3, leasing-management rights are granted to a member within two months and which, under pain of the penalties laid down in the second and third paragraphs of Article L. 124-15, must be re-conveyed within a maximum period of seven years;
6. Drawing up and implementing a common commercial policy designed to ensure the development and permanence of its members by any means, including:
-
the establishment of an appropriate legal framework;
-
the provision of trademarks or brand names which they own or have the use of;
-
the carrying out of commercial operations, of an advertising or other nature, which may include common pricing;
-
the development of common methods and models for purchasing, stocking and presenting products, and for the architecture and organisation of the outlets;
7. Acquiring shareholdings, including majority interests, in directly or indirectly associated retail businesses.
Article L124-2
Cooperative associations of retailers may not allow non-member third parties to benefit from their services. However, cooperative associations of retail pharmacists may not refuse their services, in the event of an emergency, to non-member retail pharmacists and to all the public or private establishments where patients are treated, when these establishments duly own a pharmacy.
Article L124-3
Cooperative associations of retailers shall be public limited companies with variable capital formed and operating in accordance with the provisions of Book II, Title III, Chapter I. They shall be governed by the provisions of the present chapter and by those which are not contrary hereto in Book II, Titles I to IV and in Act No 1775 of 10 September 1947 defining the rules governing cooperation. The provisions of Book II, Titles I to IV on the formation of statutory reserves shall apply thereto.
Only associations and unions formed in order to carry out the operations referred to in Article L.124-1 and which comply, in respect of their formation and operation, with the requirements of this chapter may be regarded as cooperative associations of retailers or unions of these associations. Only these shall be authorised to take this title and to add it to their name.
Article L124-4
(Order No. 2004-274 of 25 March 2004 Art. 2 Official Journal of 27 March 2004)
Without prejudice to application of the provisions of Article 3 bis of Act No. 47-1775 of 10 September 1947 instituting cooperative status, any retail trading entity which is properly established in a Foreign State may become a member of cooperative retail societies. The same applies to the cooperative companies governed by the present Chapter, as well as companies which are registered in both the trade register and the register of companies. The cooperatives governed by the present Chapter may admit to membership natural persons or legal entities having relevant commercial activities and possessing the requisite competence.
Cooperative retail companies engaged in the activities referred to in 2 of Article L. 124-1 may, moreover, admit to membership any person referred to in Article L. 125-1.
Retailers whose cooperative is affiliated to another cooperative retail society may benefit directly from that society's services.
Article L124-5
The associations governed by this chapter may establish between them unions having the same aims as those defined in Article L.124-1.
These unions must comply, in respect of their formation and operation, with the same rules as said associations. The second paragraph of Article 9 of the Act of 10 September 1947 defining the rules governing cooperation shall apply thereto.
Unions of cooperative associations of retailers may contain only cooperative associations of retailers or their members. Retailers whose cooperative is affiliated to a union may benefit directly from the services of this union.
Cooperative associations of retailers and their unions may form mixed unions with other cooperative associations and their unions.
As an exception to Article L.225-1, the number of members in a union governed by this article may be less than seven.
Article L124-7
The articles of association may specify that cooperative associations of retailers shall be combined in accordance with the conditions specified in Article 3a of the Act of 10 September 1947 defining the rules governing cooperation. In this case, these associations may not use the services of the cooperative association with which they are combined.
Article L124-8
The decisions of the general meeting shall only be valid when one-third of the members existing on the date of the meeting are present or represented.
However, the decisions of meetings convened in order to amend the articles of association shall only be valid if at least half of the members existing on the date when the meeting is convened are present or represented.
Members who have voted by post, where the articles of association authorise this, shall be taken into account for determining the quorum.
When the quorum is not reached, a new meeting shall be convened. Its decisions shall be valid whatever the number of members present or represented.
Article L124-9
(Order No. 2004-274 of 25 March 2004 Art. 4 Official Journal of 27 March 2004)
The deliberations of the general meeting are taken on a majority of the votes held by the members present or represented. However, a majority of two thirds of the votes of the members present or represented is required for any change to the articles of association.
If the cooperative is engaged in the activities referred to in 2 of Article L. 124-1, this provision does not apply in the circumstances referred to in Article L. 125-10.
Article L124-10
The exclusion of a member may be ordered, as applicable, by the board of directors or the supervisory board, with the interested party being duly heard.
All members subject to an exclusion order shall be able to appeal against this decision before the general meeting which shall rule on the appeal at the first routine meeting following the notification of exclusion. This exclusion shall enter into force on the date of notification of its acceptance by the general meeting.
However, the board of directors or the supervisory board, as applicable, may, in the interests of the association, suspend the exercise of the rights which the excluded member enjoys due to being a member of the cooperative until notification is sent to the latter of the general meeting’s decision. The duration of this suspension may not exceed one year.
If the decision to exclude a member is not justified by a serious and legitimate reason, the court, referred to within one month of the notification of refusal of the member’s appeal by the general meeting, may either reinstate the unduly excluded member or allocate damages thereto or order both of these measures.
When the cooperative carries out the activities specified in 2° of Article L.124-1, the provisions of this article shall not apply. Articles L.125-15 and L.125-16 shall apply.
Article L124-11
(Order No. 2004-274 of 25 March 2004 Art. 5 Official Journal of 27 March 2004)
If a cooperative is engaged in the activities referred to in 2 of Article L. 124-1, the redemption of the cooperative's shares held by a withdrawing or excluded member takes place, contrary to Article 18 of the act of 10 September 1947 instituting cooperative status, as provided for in Articles L. 125-17 and L. 125-18.
The said member nevertheless remains liable, towards both the cooperative and third parties, for a period of five years commencing on the day on which it definitively ceases to be a member, in respect of obligations which existed at the close of the financial year during which it left the cooperative. Pursuant to the previous paragraph, the board of directors or the supervisory board, as applicable, may retain some or all of the sums owed to the former member, for a maximum period of five years, limited to the amount required to guarantee the obligations for which it is liable pursuant to the present paragraph, unless the party concerned provides sufficient sureties.
Article L124-12
The routine shareholders’ meeting may, by ruling in accordance with the quorum and majority conditions of the special shareholders’ meeting, convert into shares all or part of the refunds frozen in individual accounts and all or part of the refunds distributable to the cooperative members in the last financial year.
In the latter case, the rights of each cooperative member to the allotment of shares resulting from this increase in capital shall be identical to those which they would have to the distribution of the refunds.
Article 124-13
The central cooperative credit agency shall be authorised to carry out all financial transactions in favour of associations formed in accordance with the provisions of this chapter. In particular it shall make available thereto the funds which are specifically allotted to the agency or which it may obtain in the form of loans or by rediscounting subscribed bills, it shall give its backing or act as guarantor in order to guarantee their loans and it shall receive and manage their fund deposits.
Article L124-14
If a cooperative association or union governed by the provisions of this chapter is dissolved, and subject to the provisions of the following paragraphs of this article, the net surplus of assets over the capital shall be passed either to other cooperative associations or unions of cooperatives or to works of general or professional interest.
However, a cooperative association or union may be authorised by an Order of the Minister for Economic and Financial Affairs, adopted following an opinion from the Cooperation Authority, to divide the net surplus of assets among its members. This division may not include the part of the net surplus of assets resulting from aid granted directly or indirectly to the association or union by the State or by a public authority. This part must be repaid in accordance with the conditions specified by the authorisation Order.
The division between the members of the net surplus of assets shall occur ipso jure when the cooperative association carries out the activities referred to in 2° of Article L.124-1.
Article L124-15
All groups of retailers established in order to carry out one or more of the activities referred to in 1°, 3° and 4° of Article L.124-1 must, if they have not adopted the form of a cooperative association of retailers governed by the provisions of this chapter, be formed as a public limited company, limited liability company, economic interest group or European economic interest group.
If a group of retailers is formed in breach of the provisions of the previous paragraph, this shall be punished by a fine of 60 000 F.
The court may also order the cessation of the operations of the body in question and, if applicable, the confiscation of the commodities purchased and the closure of the premises used.
Article L124-16
Cooperative associations of retailers for joint purchasing and their unions formed in accordance with Act No 1070 of 2 August 1949 shall be regarded as meeting the provisions of this chapter without needing to amend their articles of association.
However, the associations benefiting from the provisions of the previous paragraph shall bring their articles of association into line when they amend these subsequently.
CHAPTER V
Collective shops of independent traders
Articles L125-1 to
L125-19
SECTION I
Formation of the collective shop
Articles L125-1 to
L125-9
Article L125-1
The provisions of this chapter shall apply to natural or legal persons gathered in the same place and under the same name in order to operate, according to common rules, their business or their undertaking registered in the trades register without giving up ownership of this, thus creating a collective shop of independent traders.
Article L125-2
The persons referred to in Article L.125-1 shall form, in the form of an economic interest group, public limited company with variable capital or a cooperative association of retailers, a legal person which shall own and use or solely use the buildings and annexed areas of the collective shop, define and implement the common policy and organise and manage the common services.
The economic interest group, company or association which owns all or part of the land, buildings and annexed areas of the collective shop may not return all or part of this property to its members during the existence of said shop.
Only economic interest groups, public limited companies with variable capital and cooperative associations of retailers which comply, in respect of their formation and operation, with the requirements of this chapter may be regarded as collective shops of independent traders. These alone shall be authorised to take this title and to add it to their name.
Article L125-3
The economic interest group, company or association which has recourse to leasing shall be regarded as a user within the meaning of Article 5b of Order No 837 of 28 September 1967.
Article L125-4
Each member of the economic interest group, company or association shall hold inseparable shares in the use of a space determined by the formation agreement or articles of association and shall benefit from common services. The formation agreement or articles of association may allot any holder another space for seasonal activities. The meeting of members or the general meeting, as applicable, shall alone be competent to amend, with the agreement of the interested parties, the spaces thus allotted.
The provisions of this chapter on partner’s shares shall apply to the shares referred to in the first paragraph above.
Article L125-5
When a business or an undertaking registered in the trades register is transferred to or created in the collective shop, no contribution shall be made to the group, company or association for the shares allotted to its owner. The shares in the group, company or association shall not represent the value of the business or undertaking. Any contributions other than in cash are also prohibited.
Article L125-6
In the event of leasing-management of the business or the undertaking registered in the trades register, only the lessor shall be a member of the group, company or association.
The transfer within the collective shop of a pre-existing business or undertaking may occur only with the agreement of the lessee-manager.
Article L125-7
The owner of a business subject to a preferential right or charge specified by Chapters I to III of Title IV of this book must, prior to joining a collective shop and to transferring this business to said shop, comply with the publication formalities specified in Articles L.141-21 and L.141-22.
If the preferred creditor or charge has not notified any objection by filing this with the registry within ten days of the last in date of the publications specified in Articles L.141-12 and L.141-13, this creditor shall be deemed to have agreed to the membership of the owner of the business.
In the event of an objection, the lifting of this shall be ordered by the courts if the owner of the business proves that the securities which the creditor has are not reduced by membership of the collective shop or that guarantees which are at least equivalent are offered thereto. If the objection is not lifted, the trader may not become a member of the collective shop while remaining the owner of the business.
Article L125-8
The formation agreement or articles of association shall, in order to be valid, and under the joint liability of the signatories, contain the express specification that no business shall be subject to the preferential right or a charge specified in Chapters I to III of Title IV of this book or, in the opposite case, that no objection has been formed prior to the membership of one of the members or that the lifting of the objection has been ordered by the courts.
Article L125-9
Collective shops of independent traders already created in the form of a legal person may, by their adaptation or conversion, be placed under the system specified by this chapter.
All members may, through interlocutory proceedings, request the appointment of a representative specially entrusted with convening the meeting in order to rule on these adaptations or conversions.
Notwithstanding any provision to the contrary, these decisions shall be taken by a majority in number of the members forming the legal person. Those who did not take part in this may, however, withdraw by demanding the redemption of their shares in accordance with the conditions specified in Articles L.125-17 and L.125-18.
SECTION II
Administration of the collective shop Articles L125-10 to L125-11
Article L125-10
Internal regulations shall be annexed to the formation agreement or articles of association, as applicable.
The formation agreement or articles of association, and the internal regulations, may be amended only by the meeting, or the general meeting, as applicable, ruling by an absolute majority in number of the members of the group, company or association or, if the formation agreement or articles of association specify this, by a larger majority. The same shall apply to decisions on approval or exclusion.
Other decisions shall be taken in accordance with the conditions specific to each of the forms specified in Article L.152-2. However, notwithstanding the provisions of Book II, the articles of association of a public limited company with variable capital formed pursuant to this chapter may stipulate that each of the shareholders has one vote at the general meeting, whatever the number of shares held thereby.
Article L125-11
The internal regulations shall determine the rules for ensuring a common business policy. It shall fix the general operating conditions and in particular:
1° The days and times of opening and, if applicable, the seasonal periods of closure or the annual holidays;
2° The organisation and management of the common services and the distribution of the charges corresponding to these services;
3° Subject to the legislation in force in this respect, the development of competing activities and the determination of the annexed activities which may be carried out by each member in competition with those of other members of the shop;
4° The choice of advertising and decor specific to each space and possibly their harmonisation; 5° The collective or individual actions to promote the shop, particularly those of a seasonal nature.
SECTION III
Approval and exclusion Articles L125-12 to L125-18
Article L125-12
The formation agreement or articles of association, as applicable, may subordinate any assignment of shares to the approval of the transferee by the meeting of the group or by the general meeting of the company or association, as applicable. The meeting or general meeting shall decide within one month of the date of the approval request.
The formation agreement or articles of association, as applicable, may also subject to this approval the legal successors of a deceased shareholder who did not participate in his activity in the collective shop.
Refusal of approval shall confer the right to compensation in accordance with the conditions specified in Articles L.125-17 and L.125-18.
Article L125-13
The approval clause shall not be binding in the event of a forced sale of shares, whether or not these have been subject to a charge.
Article L125-14
The formation agreement or articles of association, as applicable, may subordinate the leasing-management of a business or craft manufacturing company in the collective shop to the approval of the lessee-manager by the meeting.
In the event of administrative order or winding-up proceedings of the owner, this clause may not be invoked if the conclusion of a real estate management contract is authorised by the court in accordance with the provisions of Title II of Book VI.
Article L125-15
The administrative body of the collective shop may send a warning to any member who, personally or through the persons to whom the latter has entrusted the operation of his business or undertaking, breaches the internal regulations. In the event of real estate management, this warning shall also be notified to the lessee-manager.
If, in the following three months, this warning does not produce any effect and if the legitimate interests of the collective shop or of certain of its members are compromised, the meeting of members, or the general meeting, as applicable, shall have the option of deciding, by the majority specified in Article L.125-10, on the exclusion of the interested party.
Until the exclusion decision becomes final, the person excluded shall be able to put forward one or more transferees in accordance with the conditions determined by the formation agreement or articles of association.
Article L125-16
Subject to the shares valuation procedure specified in the second paragraph of Article L.125-17, any member of a collective shop may refer to the Tribunal de grande instance, within one month of its notification by registered letter with a request for acknowledgement of receipt, any decision taken pursuant to Articles L.125-12, L.125-14 and the third paragraph of Article L.125-15.
The court may declare void or alter the decision referred thereto or replace this with its own decision. Notwithstanding any clause to the contrary, recourse to the courts shall suspend the implementation of the referred decision, except in the event of an exclusion decision motivated by the non-use of spaces or by the non-payment of charges.
Article L125-17
In the event of exclusion, departure or death accompanied by the refusal of approval of the transferee or successors, the shareholder or, in the event of death, the latter’s legal successors, shall be able to transfer or dispose of the business or the undertaking registered in the trades register. The new allottee of the space or, failing this, the group, company or association, as applicable, shall reimburse thereto the value of their shares plus, where applicable, the asset appreciation which may have resulted from their developments to the space which they held.
This value shall be fixed by the meeting or general meeting, as applicable, at the same time as the exclusion decision or that refusing to approve the transferee or successors is taken. In the event of disagreement, this shall be determined on the date of these decisions by an expert appointed by an order of the president of the Tribunal de grande instance ruling in interlocutory proceedings. This order shall not be open to any appeal, notwithstanding any clause to the contrary. The expert report shall be subject to the approval of the president of the Tribunal de grande instance ruling in interlocutory proceedings.
Article L125-18
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
In the cases referred to in the first paragraph of Article L. 125-17, the group or the company can only proceed with the installation of a new beneficiary if it has paid the former holder of the shares or, if he is deceased, his assigns, the sums referred to in the said Article L. 125-17, or, failing that, a consideration determined by the presiding judge of the district court ruling on a summary basis.
However, such prior payment is not required when a guarantee has been provided for the value of those sums or of that provision by a lending institution or a financial institution duly authorised for that purpose, or when that amount has been placed in the hands of a representative, designated if necessary by an order made on a summary basis.
Moreover, if it is a cooperative, the board of directors or the executive board, as applicable, can invoke the provisions of the second line of Article L. 124-11.
SECTION IV
**Dissolution **
Article L125-19
Unless a clause in the formation agreement or articles of association specifies otherwise, the administrative order or winding-up proceedings of one of the members shall not lead ipso jure to the dissolution of the economic interest group.
CHAPTER VI
Mutual guarantee schemes
Article L126-1
Article L126-1
The rules creating mutual guarantee schemes between traders, industrialists, manufacturers, craftspeople, commercial companies, members of the professions and owners of property or property rights and also between the operators mentioned in Article L.524-1 shall be fixed by the Act of 13 March 1917.
CHAPTER VII
The business-plan support contract for the creation or takeover of a business activity Articles L127-1 to L127-7
Article L127-1
(inserted by Law No. 2003-721 of 1 August 2003 Article 20 Official Gazette of 5 August 2003)
The support provided for a business plan to create or take over a business activity is defined in a contract through which, using the means available to it, a legal entity undertakes to provide specific and continuous help to a natural person who is not in full-time employment and who undertakes to follow a preparatory programme covering the creation, takeover and management of a business activity. Such a contract can also be entered into by a legal entity and a manager who is the sole partner of another legal entity.
Article L127-2
(inserted by Law No. 2003-721 of 1 August 2003 Article 20 Official Gazette of 5 August 2003)
The business-plan support contract is entered into for a term which cannot exceed twelve months, renewable twice. The terms and conditions of the support and preparation programme and the respective commitments of the contracting parties are stipulated in the contract. It also determines the conditions under which the person benefiting therefrom can make commitments to third parties in relation to the planned business activity.
The contract is entered into in writing, otherwise it is null and void.
Article L127-3
(inserted by Law No. 2003-721 of 1 August 2003 Article 20 Official Gazette of 5 August 2003)
The fact that the legal entity providing support makes facilities available to the beneficiary to prepare him for the creation, or takeover and management, of the planned business activity does not, of itself, constitute any presumption of a relationship of subordination.
The provision of those means and any costs thereby incurred by the legal entity providing the support pursuant to the contract shall be posted to its balance sheet.
Article L127-4
(inserted by Law No. 2003-721 of 1 August 2003 Article 20 Official Gazette of 5 August 2003)
If a business activity begins while the contract is still in force, the beneficiary must register the business if the nature thereof makes this necessary.
Before any registration is effected, the commitments made to third parties by the beneficiary while the support and preparation programme was ongoing are, in regard to those third parties, assumed by the mentor. After registration, the supporting legal entity and the beneficiary are jointly and severally bound by the commitments made by the latter pursuant to the stipulations of the support contract, until it expires.
Article L127-5
(inserted by Law No. 2003-721 of 1 August 2003 Article 20 Official Gazette of 5 August 2003)
The business-plan support contract for the creation or takeover of a business activity cannot have as its object or its effect infringement of the provisions of Articles L. 125-1, L. 125-2, L. 324-9 or L. 324-10 of the Labour Code. The act of creating or taking over a business must be clearly distinguished from the supervisory function.
Article L127-6
(inserted by Law No. 2003-721 of 1 August 2003 Article 20 Official Gazette of 5 August 2003)
The professional and social situation of the beneficiary of the business-plan support contract is determined by Articles L. 783-1 and L. 783-2 of the Labour Code.
The supporting legal entity is liable in regard to third parties for any damage caused by the beneficiary as a consequence of the support and preparation programme referred to in Articles L. 127-1 and L. 127-2 prior to the registration referred to in Article L. 127-4. After the registration, the supporting legal entity guarantees the liability assumed under the support contract, provided that the beneficiary complied with the terms and conditions of the contract through to its expiry.
Article L127-7
(inserted by Law No. 2003-721 of 1 August 2003 Article 20 Official Gazette of 5 August 2003)
The publication formalities for business-plan support contracts for the creation or takeover of a business activity and the present chapter's other implementing measures are determined in a Conseil d'Etat decree.
CHAPTER VIII
Concerning Incapacity to Practice a Commercial or Industrial Profession Articles L128-1 to L128-6
Article L128-1
(inserted by Order No. 2005-428 of 6 May 2005 Art. 1 Official Journal of 7 May 2005)
No person shall, either directly or indirectly, for his own account or on behalf of another, engage in a commercial or industrial occupation, direct, administer, manage or control a commercial or industrial venture or a commercial company, in whatever capacity, if he has been the subject of a final judgement within the previous ten years:
1 For a crime; or
2 Has been sentenced to at least three months' imprisonment without suspension for:
a) An offence covered by Part I of Book III of the Penal Code or an offence covered by special laws punished with the penalties imposed for fraud and breach of trust;
b) Handling stolen goods or an offence treated as handling stolen goods or similar thereto referred to in section 2 of Chapter I of Part II of Book III of the Penal Code;
c) Money laundering;
d) Bribery or accepting or soliciting bribes, influence peddling, misappropriation and fraudulent conversion of property;
e) Forgery, falsification of securities or other fiduciary instruments issued by the public authorities, falsification of marks of authority;
f) Participation in an association of criminals;
g) Drug trafficking;
h) Procuring or an offence covered by sections 2 and 2 bis of Chapter V of Part II of Book II of the Penal Code;
i) An offence covered by Section 3 of Chapter V of Part II of Book II of the Penal Code;
j) A violation of the commercial companies legislation covered by Part IV of Book II of the present code;
k) Bankruptcy;
l) Making loans at usurious rates of interest;
m) An offence envisaged by the Act of 21 May 1836 prohibiting lotteries, or the Act of 15 June 1907 regulating gaming in clubs and the casinos of seaside resorts, thermal spas and health resorts, or Act No. 83-628 of 12 July 1983 relating to games of chance;
n) An offence against the laws and regulations relating to foreign financial dealings;
o) Tax fraud;
p) An offence referred to in Articles L. 115-16 and L. 115-18, L. 115-24, L. 115-30, L. 121-6, L. 121-28, L. 122-8 to L. 122-10, L. 213-1 to L. 213-5, L. 217-1 to L. 217-3, and L. 217-6 to L. 217-10 of the Consumer Code;
q) An offence referred to in Articles L. 324-9, L. 324-10 and L. 362-3 of the Labour Code;
3 Dismissal from functions as a public official or law official.
Article L128-2
(inserted by Order No. 2005-428 of 6 May 2005 Art. 1 Official Journal of 7 May 2005)
Persons engaged in an activity referred to in Article L. 128-1 who are convicted of an offence covered by that same article must cease their activity within three months of the date on which the court's decision giving rise to incapacity to conduct that business became final.
Article L128-3
(inserted by Order No. 2005-428 of 6 May 2005 Art. 1 Official Journal of 7 May 2005)
In the event of a final judgement being pronounced by a foreign court for an offence which, under French law, constitutes a crime or an offence referred to in Article L. 128-1, the criminal court of the convicted person's domicile shall declare, at the request of the public prosecutor and after verifying the correctness and legality of the conviction and having duly heard the person concerned in closed session, that there are grounds for applying the incapacity referred to in Article L. 128-1.
The said incapacity also applies to any non-reinstated person who is the subject of a disqualification order issued by a foreign court which is enforceable in France. The application for an enforcement order may, in this specific case only, be entered by the public prosecutor before the Tribunal de grande instance of the convicted person's domicile.
Article L128-4
(inserted by Order No. 2005-428 of 6 May 2005 Art. 1 Official Journal of 7 May 2005)
The court which ordered the dismissal referred to in 3 of Article L. 128-1 may, at the request of the public official or law official dismissed, either lift the incapacity referred to in the aforementioned Article, or reduce its term.
Article L128-5
(inserted by Order No. 2005-428 of 6 May 2005 Art. 1 Official Journal of 7 May 2005)
Whoever contravenes the incapacities provided for in Articles L. 128-1, L. 128-2 and L. 128-3 shall incur the penalties laid down in Article 313-1 of the Penal Code.
Persons guilty of the offence referred to in the previous paragraph may also incur the additional penalty of confiscation of goods or assets as provided for in Article 131-21 of the Penal Code.
Article L128-6
The provisions of the present chapter shall not impede application of the rules specific to the practising of certain professions.
They apply to persons who act as commercial representatives.
TITLE III
Brokers, agents on commission, carriers and commercial agents Articles L131-1 to
L134-17
CHAPTER I
Brokers Articles L131-1 to
L131-11
Article L131-1
There are commodities brokers, shipbrokers, and land and water transport brokers.
Article L131-3
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
Only land and water transport brokers constituted pursuant to the law are entitled, in the places in which they are established, to engage in land and water transport broking. They cannot combine their functions with those of the commodity brokers or shipping brokers designated in Article L. 131-1.
Article L131-5
Providers of investment services may, in conjunction with commodities brokers, negotiate and broker sales or purchases of metals. They alone shall be entitled to fix the prices of these.
Article L131-11
If a broker is entrusted with a brokerage operation for a deal in which he has a personal interest and does not notify this to the parties for whom he shall act as intermediary, this shall be punished by a fine of 25 000 F, without prejudice to the claim by the parties for damages. If he is registered in the list of brokers, drawn up in accordance with the regulations, he shall be removed from this and may not be registered in this again.
CHAPTER II
**Agents on commission **
Articles L132-1 to
L132-9
SECTION I
Agents on commission in general Articles L132-1 to
L132-2
Article L132-1
Agents on commission are persons who act in their own name or under a company name on behalf of a principal. The duties and rights of agents on commission acting on behalf of a principal shall be determined by Title XIII of Book III of the Civil Code.
Article L132-2
Agents on commission shall have a preferential right over the value of the commodities covered by their obligation and over the documents relating thereto with regard to all commission claims against their principals, even those created during prior operations.
The preferential claim of the commission agent shall include, together with the principal amount, the interest, commission and additional expenses.
SECTION II
Agents on commission for transport Articles L132-3 to L132-9
Article L132-3
Agents on commission responsible for land or water transport shall be required to enter in their diary the declaration of the nature and quantity of the commodities and, if this is required, their value.
Article L132-4
They shall act as guarantor for the arrival of the commodities and bills within the period specified by the bill of lading, except in cases of legally recorded force majeure.
Article L132-5
They shall act as guarantor for the average or loss of commodities and bills unless there is a stipulation to the contrary in the bill of lading or in a case of force majeure.
Article L132-6
They shall act as guarantor for the acts of the intermediate commission agent to whom they send the commodities.
Article L132-7
The commodities taken from the seller’s or consignor’s warehouse shall travel, unless otherwise agreed, at the risk of the person to whom they belong, except for the latter’s recourse against the commission agent and the carrier responsible for the transport.
Article L132-8
The bill of lading shall form a contract between the consignor, the carrier and the recipient or between the consignor, the recipient, the commission agent and the carrier. Carriers shall therefore have a direct claim for payment of their services against the consignor and the recipient who shall act as guarantors for the payment of the transport cost. Any clause to the contrary shall be deemed to be unwritten.
Article L132-9
I.- The bill of lading must be dated.
II.- It must specify:
1° The nature and weight or the capacity of the items to be transported; 2° The period within which the transport must be carried out.
III.- It shall indicate:
1° The name and address of the commission agent through whom the transport is carried out, if there is one; 2° The name of the person to whom the commodities are being sent;
3° The name and domicile of the carrier.
IV.- It shall set out:
1° The price of the carriage;
2° The compensation payable for late delivery.
V.- It shall be signed by the consignor or the commission agent.
VI.- It shall contain in the margin the makes and numbers of the items to be transported.
VII.- The bill of lading shall immediately be copied by the commission agent into a numbered and initialled register without any gaps.
CHAPTER III
Carriers
Articles L133-1 to L133-7
Article L133-1
The carrier shall act as guarantor for the loss of the items to be transported, except in cases of force majeure.
The carrier shall act as guarantor for the average other than that resulting from the inherent defect of the item or from force majeure.
Any clause to the contrary inserted in any bill of lading, price list or other document shall be invalid.
Article L133-2
If, due to the effect of the force majeure, the transport is not carried out within the agreed period, no compensation may be claimed from the carrier for late delivery.
Article L133-3
The receipt of the transported items shall extinguish any claim against the carrier for average or partial loss if, within three days of this receipt, not including public holidays, the recipient has not notified the carrier, by extra-judicial means or registered letter, of the reasoned protest.
If, within the period specified above, an expert report request is made pursuant to Article L.133-4, this request shall be valid as a protest without the notification specified in the first paragraph having to be carried out. All stipulations to the contrary shall be null and void. This latter provision shall not apply to international transport.
Article L133-4
In the event of refusal of the items transported or presented in order to be transported, or of any dispute whatsoever regarding the establishment or implementation of the shipping agreement or due to an incident occurring during and on the occasion of the transport, the state of the items transported or presented in order to be transported and, where necessary, their packaging, weight, nature, etc. shall be verified and recorded by one or more experts appointed by the president of the Tribunal de commerce or, failing this, by the president of the Tribunal de grande instance, through an Order made following a petition.
The petitioner shall be obliged, under their responsibility, to invite to this expert assessment, by an ordinary registered letter or by telegram, all parties liable to be involved in the case, in particular the consignor, recipient, carrier and commission agent. The experts must take an oath, without a hearing being required, before the judge who has appointed them or before the judge of the Tribunal de grande instance from which they originate. However, in urgent cases, the judge receiving the petition may dispense with fulfilling all or part of the formalities specified in this paragraph. This dispensation shall be specified in the Order.
The deposit or attachment of the items in dispute, and their subsequent transport to a public warehouse, may be ordered.
The sale of these items may be ordered up to the amount of the transport expenses or other expenses already incurred. The judge shall allot the product of the sale to those of the parties which advanced these expenses.
Article L133-5
The provisions contained in this chapter shall be common to both road and river carriers.
Article L133-6
Claims for average, loss or delay, to which the shipping agreement may give rise against the carrier, shall be prescribed after one year, without prejudice to cases of fraud or inaccuracy.
All other claims to which this agreement may give rise, against both the carrier or commission agent and the consignor or recipient, and those which result from the provisions of Article 1269 of the New Code of Civil Procedure, shall be prescribed after one year.
The period of these prescriptions shall be calculated, in the event of total loss, from the day when the commodities should have been handed over and, in all other cases, from the day when the goods were handed over or offered to the recipient.
The period for bringing any action for a remedy shall be one month. This prescription shall run only from the day when the claim against the guarantor is made.
In the event of transport carried out on behalf of the State, the prescription shall start to run only from the day of notification of the ministerial decision specifying payment or final authorisation of payment.
Article L133-7
Carriers shall have a preferential right over the value of the commodities covered by their obligation and over the documents relating thereto with regard to all transport claims, even those resulting from prior operations for which their principals, the consignors or the recipients remain in debt to them, insofar as the owner of the commodities over which the preferential right is exercised is involved in these operations.
The transport claims covered by the preferential right shall involve the transport expenses properly speaking, the supplementary remuneration payable for the additional services and tying-up of the vehicle during loading or unloading, the expenses incurred in the interest of the commodities, the customs duties, taxes, expenses and fines linked to a transport operation and the interest.
CHAPTER IV
Commercial agents Articles L134-1 to L134-17
Article L134-1
Commercial agents are agents who, as independent professionals not linked by contracts for services, shall be permanently entrusted with negotiating and possibly concluding sale, purchase, rental or service provision contracts for and on behalf of producers, industrialists, traders or other commercial agents. Commercial agents may be natural or legal persons.
Agents whose representation tasks are carried out in the context of economic activities which are covered, with regard to these tasks, by special acts shall not come under the provisions of this chapter.
Article L134-2
Each party shall be entitled, at its request, to obtain from the other party a signed document indicating the contents of the agency contract, including the contents of its riders.
Article L134-3
Commercial agents may agree, without needing authorisation, to represent new principals. However, they may not agree to represent an undertaking competing with that of one of their principals without the latter’s agreement.
Article L134-4
The contracts concluded between commercial agents and their principals shall be in the common interest of the parties.
The relationships between commercial agents and principals shall be governed by an obligation of loyalty and a reciprocal duty of information.
Commercial agents must perform their mandate in a professional manner. Principals shall make sure that the commercial agents are able to perform their mandate.
Article L134-5
Any element of the remuneration which varies according to the number or value of the deals concluded shall constitute a commission within the meaning of this chapter.
Articles L.134-6 to L.134-9 shall apply when the agents are remunerated in full or in part by the commission thus defined.
If the contract is silent on this, commercial agents shall be entitled to a remuneration in accordance with the usual practice in the sector of activity covered by their mandate and in which they carry out their activity. In the absence of any usual practice, the commercial agent shall be entitled to a reasonable remuneration which takes account of all the elements involved in the operation.
Article L134-6
For any commercial transactions concluded during the term of the agency contract, commercial agents shall be entitled to the commission defined in Article L.134-5 when these transactions have been concluded thanks to their intervention or when the transactions have been concluded with a third party whose custom they obtained previously for transactions of the same kind.
When they are entrusted with a geographical sector or a specific group of persons, commercial agents shall also be entitled to the commission for any transaction concluded during the term of the agency contract with a person belonging to this sector or group.
Article L134-7
For any commercial transactions concluded after the agency contract ceases, commercial agents shall be entitled to the commission when the transaction is mainly due to their activity during the agency contract and has been concluded within a reasonable period after the contract ceases or when, in accordance with the conditions specified in Article L.134-6, the order from the third party was received by the principal or by the commercial agent before the agency contract ceased.
Article L134-8
Commercial agents shall not be entitled to the commission specified in Article L.134-6 if this is due, pursuant to Article L.134-7, to the previous commercial agent, unless the circumstances make it fair to share the commission between the commercial agents.
Article L134-9
The commission shall be acquired as soon as the principal has carried out the transaction or should have carried this out under the agreement concluded with the third party or as soon as the third party has carried out the transaction.
The commission shall be acquired at the latest when the third party has carried out its part of the transaction or should have carried this out if the principal has carried out its own part. It shall be paid at the latest on the last day of the month following the quarter in which it was acquired.
Article L134-10
The right to the commission may be extinguished only if it is established that the contract between the third party and the principal will not be performed and if this is not due to circumstances attributable to the principal.
The commission which the commercial agent has already received shall be refunded if the right relating thereto is extinguished.
Article L134-11
A term contract which continues to be performed by both parties after its term shall be deemed to have been converted into an open contract.
When the agency contract is an open contract, each party may end this by giving prior notice. The provisions of this article shall apply to the term contract converted into an open contract. In this case, the calculation of the duration of the prior notice shall take account of the previous fixed term.
The period of prior notice shall be one month for the first year of the contract, two months for the second year started and three months for the third year started and for subsequent years. In the absence of agreement to the contrary, the end of the prior notice period shall coincide with the end of a calendar month.
The parties may not agree shorter periods of prior notice. If they agree longer periods, the prior notice period specified for the principal must not be shorter than that specified for the agent.
These provisions shall not apply when the contract ends due to serious negligence by one of the parties or the occurrence of a case of force majeure.
Article L134-12
If their relationship with their principal ceases, commercial agents shall be entitled to an indemnity for the loss suffered.
Commercial agents shall lose the right to this compensation if they have not notified the principal, within one year of the cessation of the contract, that they intend to use their rights.
The legal successors of commercial agents shall also benefit from the right to compensation when the cessation of the contract is due to the death of the agent.
Article L134-13
The compensation specified in Article L.134-12 shall not be due in the following cases:
1° The cessation of the contract is caused by the serious negligence of the commercial agent.
2° The cessation of the contract is initiated by the agent unless this cessation is justified by circumstances attributable to the principal or due to the age, infirmity or illness of the commercial agent, as a result of which the continuation of the latter’s activity can no longer be reasonably required;
3° In accordance with an agreement with the principal, the commercial agent cedes to a third party the rights and obligations held under the agency contract.
Article L134-14
The contract may contain a non-competition clause applying after its cessation.
This clause must be established in writing and shall cover the geographical sector and, if applicable, the group of persons entrusted to the commercial agent and the type of goods or services which the latter represents under the contract.
The non-competition clause shall be valid only for a maximum period of two years after a contract ceases.
Article L134-15
When the activity of commercial agent is carried out under a written contract, signed by the parties, which is principally for another purpose, the parties may decide in writing that the provisions of this chapter do not apply to the part corresponding to the commercial agency activity.
This renunciation shall be invalid if the performance of the contract reveals that the commercial agency activity is actually being carried out as the principal or decisive element.
Article L134-16
Any clause or agreement contrary to the provisions of Articles L.134-2 and L.134-4, the third and fourth paragraphs of Article L.134-11 and Article L.134-15 or establishing an exception, to the detriment of the commercial agent, to the provisions of the second paragraph of Article L.134-9, the first paragraph of Article L.134-10, Articles L.134-12 and L.134-13 and the third paragraph of Article L.134-14 shall be deemed to be unwritten.
Article L134-17
A Conseil d'Etat decree shall fix the conditions for applying this chapter.
TITLE IV
The business
Articles L141-1 to
L146-4
CHAPTER I
Sale of the business
Articles L141-1 to
L141-22
SECTION I
Sale contract Articles L141-1 to
L141-4
Article L141-1
I.- In any instrument recording an assignment by private treaty of a business, agreed even in accordance with the condition and in the form of another contract or a capital investment in a business, the seller shall be obliged to indicate:
1° The name of the previous seller, the date and nature of the instrument of acquisition from the latter and the price of this acquisition for the fixed assets, goods and equipment;
2° The state of the preferential rights and charges affecting the business;
3° The turnover made by the seller during each of the last three years of operation or since the acquisition of the business if the seller has operated this for less than three years;
4° The trading profits made during the same time;
5° The lease, its date and term and the name and address of the lessor and assignor, if applicable.
II.- The omission of the information specified above may, at the request of the purchaser made within one year, lead to the sale contract being declared void.
Article L141-3
The seller shall, notwithstanding any stipulation to the contrary, be bound by the guarantee relating to the inaccuracy of the information provided thereby, in accordance with the conditions laid down by Articles 1644 and 1645 of the Civil Code.
Intermediaries, drafters of the contracts and their agents shall be jointly liable with the seller if they are aware of the inaccuracy of the information provided.
Article L141-4
The claim resulting from Article L.141-3 shall be brought by the purchaser within one year of the date when the latter took possession of the business.
SECTION II
Preferential right of the seller Articles L141-5 to L141-22
Article L141-5
The preferential right of the seller of a business shall apply only if the sale has been recorded in a notarised document or unattested document, which has been duly registered, and only if this has been entered in a public register held by the registry of the Tribunal de commerce in whose jurisdiction the business is operated.
This right shall cover only the elements of the business listed in the sale and in the entry in the register and, in the absence of precise specification, only the trade name and commercial name, the right to the lease, the customer base and the goodwill.
Separate prices shall be established for the fixed assets of the business, the equipment and the goods.
The preferential right of the seller guaranteeing each of these prices, or those remaining due, shall be exercised separately with regard to the respective prices of the resale for the goods, equipment and fixed assets of the business.
Notwithstanding any agreement to the contrary, part payments other than down payments shall be allocated firstly to the price of the goods and then to the price of the equipment. The resale price assigned shall be broken down if it applies to one or more elements not included in the initial sale.
Article L141-6
The entry in the register must be made, in order to be valid, within a fortnight of the date of the sale contract. It shall take preference over any entry in the register made in the same period by the purchaser. It shall be binding on the creditors of the purchaser subject to an administrative order or winding-up proceedings and on the latter’s estate accepted without liability to debts beyond the assets descended.
The action for rescission, established by Article 1654 of the Civil Code, shall, in order to be effective, be mentioned and expressly reserved in the entry in the register. This action may not be brought to the prejudice of third parties after the preferential right has lapsed. It shall be limited, like the preferential right, to solely the elements forming part of the sale.
Article L141-7
In the event of the court-ordered or amicable rescission of the sale, the seller shall be obliged to take back all the elements of the business which formed part of the sale, even those for which the latter’s preferential right and the action for rescission have lapsed. The seller shall be responsible for the price of the goods and equipment existing at the time when the latter takes back possession, according to the estimate which shall be made of these by an expert in the presence of both parties, whether this is amicable or ordered by the court, subject to the deduction of what may still be due thereto, under the preferential right, with regard to the respective prices of the goods and equipment. The remainder, if any, shall be kept as the security for the registered creditors and, failing this, the unsecured creditors.
Article L141-8
The seller bringing the action for rescission shall notify this to the registered creditors of the business at the domicile elected by them in their registrations. The judgment may be made only when a month has passed since this notification.
Article L141-9
The seller who has stipulated during the sale that, in the absence of payment within the agreed term, the sale shall be rescinded ipso jure, or who has obtained an amicable rescission from the purchaser, must notify to the registered creditors, at the elected domiciles, the rescission incurred or granted which shall not become final until one month after this notification is made.
Article L141-10
When the sale of a business at public auction is applied for, either at the request of an court-appointed receiver or a legal agent for the winding-up of undertakings or by court order at the request of any other legal successor, the applicant shall notify this to the previous sellers, at the domicile elected in their registrations, with a declaration that, if they fail to bring the action for rescission within one month of notification, they shall lose the right to bring this in favour of the successful bidder.
Article L141-11
(Act No. 2005-845 of 26 July 2005 Art. 1 I Official Journal of 27 July 2005 effective 1 January 2006)
Articles L. 624-11 to L. 624-18 do not apply to either the privilege or the action for rescission of the seller of a business.
Article L141-12
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
Without prejudice to the provisions relating to contributions of business assets provided for in Articles L. 141-21 and L. 141-22, details of any sale or transfer of business assets, even if subject to conditions or in the form of another contract, and likewise any transmission of business assets via partition or auction, must be published within two weeks of being effected, at the acquirer's behest, in a periodical authorised to carry official notices available in the district or department in which the business operates and, within two weeks of such publication, must appear in the Official Gazette of Civil and Commercial Announcements.
Article L141-13
The publication of the extract or notice carried out pursuant to the previous article shall, in order to be valid, be preceded either by the registration of the contract containing the transfer or, in the absence of a contract, by the declaration specified by Articles 638 and 653 of the General Tax Code. This extract shall, subject to the same penalty, indicate the date, volume and number of the registration or, in the event of a simple declaration, the date and number of the receipt for this declaration and, in both cases, the indication of the office where these operations took place. It shall also set out the date of the contract, the surnames, forenames and domiciles of the former and new owners, the nature and headquarters of the business, the stipulated price, including the charges or the valuation used as the basis for paying the registration fees, the indication of the period below fixed for objections and an election of domicile in the jurisdiction of the court.
Article L141-14
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
Within ten days of the date of the second publication referred to in Article L. 141-12, any creditor of the previous owner, whether his debt is due or not, may lodge an appeal against the payment of the price at the elected domicile via a simple extrajudicial document. The appeal, if it is not to be declared null and void, must state the amount and cause of the debt and contain an election of domicile in the jurisdiction where the business is located. The lessor cannot lodge an appeal in respect of current rent or rent not yet due, notwithstanding any stipulations to the contrary. No amicable or judicial transfer in respect of the price or a portion of the price can be raised against creditors who have duly declared their debts within the allotted timeframe.
Article L141-15
In the event of an objection to the payment of the price, the seller may, at any stage after the expiration of the ten-day period, submit an urgent application to the president of the Tribunal de grande instance in order to obtain authorisation to receive the proceeds despite the objection, provided that the seller pays to the Consignments office, or to a third party appointed for this purpose, a sufficient sum, fixed by the judge ruling on the urgent application, in order to possibly meet the causes of the objection where the seller is recognised or judged to be in debt. The deposit thus ordered shall be specifically assigned, by the third-party holder, to guarantee the claims to secure which the objection has been made and to guarantee the exclusive preferential right which anyone else may have over this deposit without, however, a court-ordered transfer being able to result from this to the benefit of the objector or objectors in question with regard to other objecting creditors of the seller, if any. When the urgent order is enforced, the purchaser shall be discharged and the effects of the objection shall be assigned to the third-party holder.
The judge ruling on the urgent application shall grant the authorisation requested only if this is justified by a formal declaration from the purchaser involved in the case, made under the latter’s personal responsibility and formally noted thereby, that there are no objecting creditors other than those who have taken action against the purchaser. The purchaser, when the order is enforced, shall not be released from paying the price to other objecting creditors prior to said order, if any.
Article L141-16
If the objection has been made without title and cause or is invalid in its form and if there are no pending proceedings at the outset, the seller may submit an urgent application to the president of the Tribunal de grande instance in order to obtain authorisation to receive the proceeds, despite the objection.
Article L141-17
The purchaser who pays the seller without having carried out the publications in the specified forms, or before the expiration of the ten-day period, shall not be released with regard to third parties.
Article L141-18
If the sale or assignment of a business includes branches or establishments situated on French territory, the registration and publication specified in Articles L.141-6 to L.141-17 shall also be carried out in a newspaper authorised to receive legal notices in the place of the registered office of these branches or establishments.
Article L141-19
(Act No. 2005-845 of 26 July 2005 Art. 161 II Official Journal of 27 July 2005 effective 1 January 2006 without prejudice to Art. 190)
During the twenty days following publication in the Official Bulletin of Civil and Commercial Notices referred to in Article L. 141-12, an authenticated copy or an original of the contract of sale shall be held at the elected domicile to facilitate easy consultation thereof by any objecting or registered creditor.
During that same period, any registered creditor or creditor who has lodged an objection within the ten-day period stipulated by Article L. 141-14 may inspect the contract of sale and the objections at the elected domicile and, if the price is not sufficient to pay off the registered creditors and those who have made themselves known through an objection, may, within ten days of the publication in the Official Bulletin of Civil and Commercial Notices referred to in Article L. 141-12, and pursuant to Articles L. 141-14 to L. 141-16, make a bid one sixth higher than the principal price asked for the business, excluding equipment and goods.
The one-sixth increase is not admissible after the court-ordered sale of a business or a sale effected at the request of a court-appointed receiver or court-appointed liquidator, or of joint co-owners of the fund, by way of public auction pursuant to Articles L. 143-6 and L. 143-7, or in accordance with Article L. 642-5.
The public officer instructed to proceed with the sale shall allow only those persons whose solvency is known to him, or who have deposited either with him or with the Caisse des dépôts et consignations, for specific allocation to payment of the price, a sum not lower than either half the total price of the first sale or the portion of the price of the said sale stipulated as being payable in cash, plus the amount of the higher bid.
The auction with the price increased by one sixth shall take place under the same conditions and within the same time limit as the sale in respect of which the higher bid was made.
If the buyer against whom the higher bid is made is dispossessed as a result thereof, he shall, under his own responsibility, deliver all the objections lodged to the successful bidder, against a receipt, within eight days of the sale, if he did not make them known earlier via a notation inserted in the articles and conditions. The effect of the said objections shall be applied to the sale price.
Article L141-20
When the sale price is finally fixed, whether or not there has been a higher bid, the purchaser, in the absence of an agreement between the creditors for the amicable distribution of this price, shall be obliged, following formal notice from any creditor, and within the next fortnight, to deposit the due portion of the price, and the remainder where this may be due, to cover all the objections made thereto together with the registrations affecting the business and the assignments notified thereto.
Article L141-21
Except where this results from a merger or division operation subject to the provisions of the fourth paragraph of Article L.236-2 and Articles L.236-7 to L.236-22, any contribution in the form of a business made to a company being formed or already in existence must be brought to the attention of the third parties in accordance with the conditions specified by Articles L.141-12 to L.141-18 by an advertisement in the legal notices newspapers and in the official gazette of civil and commercial notices.
However, if following the application of the acts and regulations in force on the publication of company documents, the information specified by these articles is already contained in the issue of the legal notices newspaper where the advertisements must be made, this may be carried out by simple reference to this publication.
In these advertisements, the election of domicile shall be replaced by the indication of the registry of the Tribunal de commerce where creditors of the contributor must declare their claims.
Article L141-22
Within ten days of the last in date of the publications specified in Articles L.141-12 and L.141-13, any unregistered creditor of the contributing partner shall inform the registry of the Tribunal de commerce covering the business location of their capacity of creditor and the sum due thereto. The clerk shall issue thereto a receipt for this declaration.
If the partners or one of them fails to make, within the next fortnight, a request to cancel the company formation or contribution, or if the cancellation is not ordered, the company shall be obliged, jointly with the main debtor, to pay the liability declared and justified within the above period.
In the event of a contribution of a business by one company to another company, in particular following a merger or division, the provisions of the above paragraph shall not apply when Articles L.236-14, L.236-20 and L.236-21 should apply or when the option specified in Article L.236-22 is exercised.
CHAPTER II
Charge on the business Articles L142-1 to L142-5
Article L142-1
Charges may be taken on a business without conditions and formalities other than those specified by this chapter and Chapter II below.
Taking a charge on a business does not give a secured creditor the right to have the business arrogated in payment up to the full amount due.
Article L142-2
The charge subject to the provisions of this chapter may cover the following items only as forming part of a business: style and real estate management, leasing rights, clientele and custom, commercial furniture, equipment and tools used for the operation of the business, patents, licences, trademarks, industrial drawings and designs, and in general the intellectual property rights attached thereto.
A certificate of addition subsequent to the taking of a charge, which includes the patent to which it applies shall follow the fate of this patent and, as shall it, of the charge constituted.
Unless otherwise stated explicitly and precisely in the instrument creating it, the charge shall cover only the style and trademark, leasing rights, clientele and custom.
If the charge relates to a business and its branches, these must be designated by the precise indication of their registered address.
Article L142-3
The contract of charge shall be ascertained by a notarised document or by a duly registered unattested document. The preferential charge resulting from the contract of charge shall be constituted by the simple fact of entry in a
public register held at the registry of the Tribunal de commerce within the judicial area in which the business is operated. The same formality must be completed at the registry of the Tribunal de commerce within the judicial area in which each of the branches of the business included in the charge is situated.
Article L142-4
(Act No. 2005-845 of 26 July 2005 Art. 1 I Official Journal of 27 July 2005 effective 1 January 2006)
Registration must take place, under pain of becoming null and void, within fifteen days of the date of the memorandum and articles of association.
In the event of court-ordered receivership or liquidation proceedings, Articles L632-1 to L632-4 shall apply to pledges of business assets.
Article L142-5
The ranking of secured creditors among themselves shall be determined by the date of their registrations. Creditors registered on the same date shall rank equally.
CHAPTER III
**Provisions common to the sale and charge of the business **
Articles L143-1 to
L143-23
SECTION I
Use of the security and redemption of registered claims
Articles L143-1 to
L143-15
Article L143-1
In the event of assignment of the business, all registered charges shall become due ipso jure if the owner has failed to inform the secured creditors at least two weeks in advance of their intention to assign the business and the new registered office which they intend to give it.
Within two weeks of the notice given to them or within two weeks of the day on which they have learned of the assignment, all vendors and secured creditors must have the new headquarters of the business annotated in the margin of the existing entry in the register and, if the business has been transferred to another judicial area, have the original registration and its date carried over into the register of the court of this judicial area, indicating the new registered office.
If it causes a depreciation of the business, assignment of the business without the consent of the vendor or the secured creditors may render the debts owed to them due.
The registration of a charge may also cause earlier debts incurred for the purpose of operation of the business to become due.
Applications to the Tribunal de commerce for termination of the term made pursuant to the previous two subparagraphs shall be subject to the rules of procedure decreed in subparagraph four of Article L. 143-4.
Article L143-2
An owner seeking to cancel the lease on the building in which a business with charges registered against it operates must notify previously registered creditors of its application at the domicile elected by them in their registry entries. The judgment may be given only after one month has passed since the notification.
An amicable termination of the lease may not become definitive until one month after the notification of it which has been given to secured creditors at the elected domiciles.
Article L143-3
Any creditor pursuing distraint proceedings and any debtor against whom or which they are brought may apply to the Tribunal de commerce within the judicial area in which the business operates for the sale of the distrained business with its associated equipment and goods.
At the request of a plaintiff creditor, the Tribunal de commerce shall order that, in the absence of payment within the deadline allowed to the debtor, the sale of the business shall take place at the request of the said creditor after completion of the formalities specified in Article L. 143-6.
The same shall apply if, upon proceedings instigated by the debtor, the creditor applies to proceed with the sale of the business.
Should the creditor not request it, the Tribunal de commerce shall fix the deadline within which the sale of the business must take place at the request of the said creditor in accordance with the formalities specified in Article L. 143-6, and it shall order that, in the absence of the debtor having carried out the sale within the said deadline, the distraint proceedings shall be resumed and continued on the last steps.
Article L143-4
If required, the court shall appoint an interim manager of the business, fix the reserve prices, determine the primary terms and conditions of the sale and appoint the public official who shall draw up the terms and conditions.
When useful, special advertising shall be regulated by the judgment or, by default, by order of the presiding judge of the Tribunal de commerce given on application.
The latter may, by judgment given, authorise the plaintiff, if there is no other registered creditor or opposing party and with the exception of preferential expenses for the benefit of the party or parties concerned, to receive the price directly and against a simple receipt either from the purchaser or from the public official mandated to conduct the sale as the case may be, in deduction from or up to the amount of their claim in principal, interest and expenses.
The Tribunal de commerce shall decree within two weeks of the first hearing by judgment not liable to stay of execution, enforceable at a moment’s notice. An appeal against the judgment shall be a stay. It shall be formed within two weeks of its service on the opposing party and judged by the court within one month. The order shall be enforceable at a moment’s notice.
Article L143-5
Vendors and secured creditors of the business may also, even by virtue of shares under an unattested document, have an order given for the sale of the business constituting their charge one week after an official demand for payment made to the creditor and to a third-party holder, if applicable, has remained unprofitable.
The demand must be brought before the Tribunal de commerce within the judicial area of which the business is operated, which shall rule as stated in Article L. 143-4.
Article L143-6
The plaintiff shall serve notice on the owner and the creditors registered prior to the decision ordering the sale at the domicile elected by them in their registrations at least two weeks before the sale to accept communication of the terms and conditions, to supply their statements and observations and to attend the sale by auction if they so desire.
The sale shall take place at least ten days after the affixing of notices indicating: the names, occupations and domiciles of the plaintiff and the owner of the business, the decision by virtue of which the proceedings are instigated, an election of domicile within the area in which the Tribunal de commerce within the judicial area of which the business is operated, the various element constituting the said business, the nature of its activities, its location, the reserve prices, the place, date and time of the sale by auction, the name and domicile of the public official mandated to conduct the sale and custodian of the terms and conditions.
These notices must mandatorily be affixed, at the instigation of the public official, to the main door of the building and of the town hall of the municipality in which the business is located, the Tribunal de commerce within the judicial area of which the business is located and on the door of the office of the public official mandated to conduct the sale.
The notice shall be inserted ten days prior to the sale in a newspaper authorised to receive legal advertisements and in the administrative district or Department in which the business is located.
Publication shall be ascertained by a statement included in the record of forced sale.
Article L143-7
If required, the presiding judge of the Tribunal de grande instance within the judicial area of which the business is operated shall rule on the grounds for nullity of the sale procedure prior to adjudication and on the expenses within the judicial area of which the business is operated. Objections to these grounds must be made at least one week prior to the sale in order to be valid. Subparagraph four of Article L. 143-4 shall apply to the order made by the presiding judge.
Article L143-8
If the Tribunal de commerce before which a petition is brought for payment of a debt attached to the operation of a business gives judgment against the defendant and if the creditor so requests, it may order the sale of the business by the same judgement. It shall order within the terms of subparagraphs one and two of Article L. 143-4 and shall fix the deadline after which the sale may be proceeded with if payment is not made.
The provisions of subparagraph four of Article L. 143-4 and Articles L. 143-6 and L. L43-7 shall apply to the sale as ordered by the Tribunal de commerce.
Article L143-9
Should the purchaser fail to execute the clauses of the sale, the business shall be sold by auction without reserve in accordance with the forms specified by Articles L. 143-6 and L. 143-7.
The irresponsible bidder shall be liable to the creditors of the vendor and the vendor himself, herself or itself, for the difference between their price and that of the resale by auction without reserve, although not being entitled to lay claim to any surplus that may arise.
Article L143-10
The separate sale of one or more components of a business with charges registered against it, whether by distress or by virtue of the provisions of this chapter, may not be carried out until ten days at the earliest after notification of the proceedings to those creditors who or which have registered at least two weeks prior to the notification, at the domicile they elected in their registrations. During this period of ten days, any registered creditor, irrespective of whether their claim has fallen due, may serve a writ on the interested parties before the Tribunal de commerce within the judicial area of which the business is operated, applying for all the components of the business to be sold at the request of the plaintiff or their own request, within the terms and conditions and in accordance with the provisions of Articles L. 143-3 to L. 143-7.
The equipment and goods shall be sold at the same time as the business at separate reserve prices or subject to separate prices if the terms and conditions obliges the adjudicator to take them according to experts’ statements.
A price breakdown must be given for those components of the business against which no preferential charges are registered.
Article L143-11
No higher bid will be allowed when the sale has taken place in accordance with the terms and conditions specified in Articles L. 141-19, L. 143-3 to L. 143-8, L. 143-10 and L. 143-13 to L. 143-15.
Article L143-12
The preferential rights of the vendor and a registered creditor shall follow the business in whichever hands it may pass.
If the sale of the business has not been carried out by public auctions in accordance with the Articles specified in Article L. 143-11, a purchaser wishing to protect him, her or itself against proceedings by secured creditors must serve notifications to all the secured creditors, before the proceedings or within two weeks in order to be valid, in accordance with the terms and conditions specified by decree.
Article L143-13
Where Article L. 143-11 does not apply, any creditor with a registered charge on the business may demand its sale by public auction by offering to bid up the principal price, exclusive of the equipment and goods, by one tenth, and to give a guarantee for the payment of the prices and expenses or to give proof of sufficient creditworthiness.
In order to be valid, this demand, signed by the creditor, must be served upon the purchaser and the prior owner debtor within two weeks of the notifications, with service before the Tribunal de commerce of the business location of a plea for an order, in the event of dispute, on the validity of the higher bid, on the admissibility of the guarantee or creditworthiness of the higher bidder, and for an order that the business, with its associated equipment and goods, should be sold by public auction, and that the outbid purchaser should be obliged to communicate their title and the lease document or lease assignment document to the public official mandated to conduct the sale. The aforementioned deadline of two weeks may not be extended because of the distance between the elected domicile and the real domicile of secured creditors.
Article L143-14
With effect from notification of the higher bid, a purchaser having taken possession of the business shall be no longer be entitled to administer and may no longer undertake any acts of administration. However, at any time during the proceedings they may apply to the Tribunal de commerce or to a judge sitting in chambers, according to the case, for the appointment of another administrator. This application may also be made by any creditor.
The higher bidder may not prevent the sale by public auction by waiver, even by paying the amount of the tender, other than by consent of all the secured creditors.
The formalities of the procedure and of the sale shall be carried out at the instigation of the higher bidder and, in the absence thereof, any registered creditor or the purchaser, at the cost and risk of the higher bidder and their guarantee remaining committed, in accordance with the rules specified in Articles L. 143-4, L. 143-5 to L. 143-7 and in subparagraph three of Article L. 143-10.
In the absence of auction, the higher bidder creditor shall be declared the purchaser.
Article L143-15
The purchaser shall be obliged to take the equipment and goods existing at the time of taking possession at the prices fixed by an amicable or court-ordered counter-appraisal between the outbid purchaser, their vendor and the purchaser.
In addition to their purchase price, they shall be obliged to reimburse to the dispossessed purchaser the expenses and genuine expenses of their contract, of notifications, of registration and of publication specified in Articles L. 141-6 to L. 141-18 and, to whom it may concern, of accomplishing the resale.
Article L. 143-9 shall apply to the sale and to the sale by higher bid.
An outbid purchaser who becomes the purchaser by means of the resale by higher bid shall have recourse as provided by law against the vendor for the reimbursement of the amount in excess of the price specified by their title and for interest on this excess amount with effect from the date of each payment.
SECTION II
Registration and removal of the registration formalities Articles L143-16 to L143-20
Article L143-16
The registration and removal of the registration of a vendor’s or creditor’s preferential rights are subject to formalities whose terms and conditions are fixed by Conseil d'Etat decree.
Article L143-17
In addition to the registration formalities specified in Article L. 143-16, sales and assignments of businesses including trademarks and trademarks, industrial drawings or designs, charges on businesses which include patents or licences, brands or drawings or designs, must be registered with the National Industrial Rights Institute, on production of the certificate of registration issued by the clerk of the Tribunal de commerce, within two weeks following this registration in order to be valid with respect to third parties, sales, assignments and charges as they apply to patents and licences, trademarks and trademarks, and industrial drawings and designs.
The assignment of patents included in the assignment of a business shall remain subject to the rules decreed in Articles L. 613-8 onwards of the intellectual property code.
Article L143-18
If the title resulting from the registered preferential right is negotiable, negotiation by endorsement shall imply the assignment of the preferential right.
Article L143-19
Registration shall preserve the preferential right for ten years with effect from its date. It shall cease to have effect if it has not been renewed before expiration of this period.
It guarantees two years of interest at the same ranking as the principal amount.
Article L143-20
(Law No 2003-721 of 1 August 2003 Article 3 Official Gazette of 5 August 2003)
Registrations are deleted either with the consent of the duly entitled interested parties or by virtue of a res judicata judgment.
Without a judgment, total or partial deletion cannot be effected by the registrar unless a duly registered notarially recorded or private instrument is lodged with the court through which the debtor or his properly subrogated transferee consents to the deletion and substantiates his rights.
Total or partial deletion of the registration made at the National Industrial Property Institute is effected upon production of the certificate of deletion issued by the registrar of the commercial court.
SECTION III
Intermediaries and distribution of the price Articles L143-21 to L143-23
Article L143-21
Any third party holder of the purchase price for the business with whom domicile has been elected must transfer it within three months of the date of the deed of sale.
On expiration of this deadline, the first to act may appeal to a judge sitting in chambers at the competent court of the place of election of domicile, which shall order either deposit with the Deposit and Consignment Office or the appointment of a trustee charged with the distribution of the proceeds of the sale of the business.
Article L143-22
If the confiscation of a business is ordered by a criminal jurisdiction in application of Articles 225-16, 225-19 and 225-22 of the penal code and 706-39 of the penal proceedings code, the State must offer the confiscated business for sale in accordance with the terms and conditions specified by this title within a deadline of one year in the absence of an exceptional extension of this deadline by order of the presiding judge of the Tribunal de grande instance. Liability with respect to the creditors shall be limited to the sale price of this business.
This offer for sale must be carried out in the form of a legal advertisement made at least forty-five days prior to the sale, whether this is to take place by auction or in the form of a private sale.
Guarantees registered after the date of the statement of instigation of proceedings for any of the offences referred to in subparagraph one shall ipso jure be null and void in the absence of a court order to the contrary.
The administrative authority may, at any time, demand the determination of the rent at a rate corresponding to the rental value of the premises.
If the owner of the confiscated business is simultaneously the owner of the premises in which the business is operated, a lease must be drawn up, the terms and conditions of which shall be determined, in the absence of amicable agreement, by the presiding judge of the Tribunal de grande instance, who will rule within the terms and conditions specified for leases of immovable properties or for premises used for commercial, industrial or craft purposes.
Article L143-23
A Conseil d'Etat decree shall determine the executory measures for Chapters I and II above and this chapter, in particular the fees to be allocated to the clerks of tribunaux de commerce, the terms and conditions under which registrations, cancellations and the issuing of statements and negative certificates concerning sales, assignments and charges relating to the business which include patents and licences, trademarks and trademarks, industrial drawings and industrial designs are carried out at the National Industrial Rights Institute.
It shall also determine the duties to be collected by the Conservatoire des Arts et Métiers (Museum and college of higher technology for training students in the application of science to industry) for the service of the National Industrial Rights Institute on registrations and statements of priority, subrogation and cancellation, statements of registration and certificates that none exist.
CHAPTER IV
Real estate management Articles L144-1 to L144-13
Article L144-1
Notwithstanding any clause to the contrary, any contract or agreement under the terms of which the owner or operator of a business or a craft establishment grants the lease thereof totally or partially to a manager who operates it at their own risk shall be regulated by the provisions of this chapter.
Article L144-2
The tenant manager shall be classified as a merchant. They shall be subject to all the obligations which arise therefrom.
If the business is a craft establishment, the tenant manager shall be registered in the craft directory and shall be subject to all the obligations which arise therefrom..
Article L144-3
(Order No. 2004-274 of 25 March 2004 Art. 10 I Official Journal of 27 March 2004)
Natural persons or legal entities who/which grant leasing-management rights must have operated the business or handicraft establishment placed under leasing-management for at least two years.
Article L144-4
The period stated in Article L. 144-3 may be done away with or reduced by order of the presiding judge of the Tribunal de grande instance given on ordinary application by the interested party, after having consulted the public ministry, in particular when the interested party can prove that they are unable to operate their business personally or through the intermediary of agents.
Article L144-5
(Order No. 2004-274 of 25 March 2004 Art. 10 II Official Journal of 27 March 2004)
Article L. 144-3 shall not apply to:
1. The State;
2. The territorial authorities;
3. Credit institutions;
4. Persons of full age subject to a legal protection measure or persons hospitalised on account of mental illness as provided for in Articles L. 3211-2 and L. 3212-1 to L. 3212-12 of the Public Health Code, in relation to the business which they owned prior to the entry into force of the legal protection measure or the commencement of hospitalisation;
5. The heirs or legatees of a deceased trader or craftsperson, and likewise the beneficiaries of a division between relatives in direct ascending line, in connection with the business thus transmitted;
6. The public institution created by Article L. 325-1 of the Planning Code;
7. A spouse who is the recipient of a business or a handicraft establishment following the dissolution of a marriage, when the said spouse has participated in its exploitation for at least two years prior to the dissolution of the marriage contract or the division;
8. The lessor of a business, when the main object of the leasing-management is to achieve retail sales of the products made or distributed by the business under an exclusive contract;
9. The lessors of cinema, theatre and music hall businesses.
Article L144-6
At the date of the real estate management, the debts owed by the lessor of the business relating to the operation of the business may be declared due immediately by the Tribunal de commerce where the business is located, if it considers that the real estate management endangers their recovery.
In order not to be out of time, the proceedings must be started within a deadline of three months from the date of publication of the management contract in a newspaper authorised to receive legal advertisements.
Article L144-7
Until publication of the real estate management contract and for a period of six months with effect from this publication, the lessor of the business shall be jointly liable with the tenant manager for debts entered into by the latter during the operation of the business.
Article L144-8
The provisions of Articles L. 144-3, L. 144-4 and L. 144-7 shall not apply to real estate management contracts entered into by court-appointed agents charged in any capacity whatsoever with the administration of a business, on condition that they have been authorised for the purposes of the said contracts by the authority having given them their mandate and that they have complied with the specified publication measures.
Article L144-9
Termination of the real estate management shall render immediately due all debts relating to the operation of the business or the craft establishment entered into by the tenant manager during the period of management.
Article L144-10
Any real estate management contract and any other agreement containing similar clauses granted by the owner or the operator of a business which does not comply with the conditions specified in the articles above shall be null and void. However, the contracting parties may not invoke this nullity against third parties.
The nullity specified in the preceding subparagraph shall lead to forfeiture of the contracting parties rights which they could potentially have held from the provisions of Chapter V of this title regulating relations between lessors and lessees with respect to the renewal of building leases or of premises used for commercial, industrial or craft purposes.
Article L444-11
If the real estate management contract includes an escalator clause, a rent revision may be requested, notwithstanding any agreement to the contrary, whenever the rent calculated in accordance with this clause is increased or reduced by more than one quarter in comparison with the price previously determined contractually or by court order.
Should one of the factors used for the calculation of the escalator clause disappear, the revision may be requested and carried out only if the economic conditions are changed to the point of causing a variation of more than one quarter of the rental value of the business.
Article L 144-12
The party wishing to request the revision must notify the other party of this by registered letter with confirmation of delivery or by extra-judicial means.
In the absence of amicable agreement, proceedings shall be instigated and judged in accordance with the provisions laid down for matters of the revision of prices of leases of immovable properties or for premises used for commercial or industrial purposes.
The judge must, while taking into consideration all the relevant factors, adjust the scope of the escalator clause to the fair rental value on the date of notification. The new price shall apply with effect from this same unless the parties have agreed upon an earlier or more recent date before or during the proceedings.
Article L144-13
The provisions of Articles L. 144-11 and L. 144-12 shall not apply to leasing transactions with regard to businesses or craft establishments mentioned in 3. of Article one of Act No 66455 of 2 July 1966 relating to undertakings carrying out leasing.
The provisions of Article L. 144-9 shall not apply if the tenant manager having leased a business or a craft establishment by means of a leasing contract exercises the purchase option.
CHAPTER V
Commercial lease Articles L145-1 to L145-60
SECTION I
Article L145-1
I.- The provisions of this chapter shall apply to leases of immovable properties or for premises in which the business is operated irrespective of whether this business is owned by a merchant or a manufacturer registered in the commercial and companies register or to a head of an undertaking registered in the craft directory, whether trading or not, and also:
1. To leases for premises or immovable properties accessory to the operation of a business when their loss would be likely to compromise the operation of the business and they belong to the owner of the premises or the real property where the principal place of business is located. Should there be more than one owner, the associated premises must have been leased to the certain knowledge of the lessor with a view to shared use
2. To leases of undeveloped land on which buildings for commercial, industrial or craft use are erected, either before or after the lease, on condition that these buildings have been erected or operated with the explicit consent of the owner.
II. – If the business is operated under the form of a real estate management in application of Chapter IV of this title, the owners of the business shall nevertheless benefit from these provisions without having to prove registration in the commercial and companies register or in the craft directory.
Article L145-3
The provisions of this chapter shall not apply to long leases with the exception of matters relating to rent revision. However, they shall apply in the cases specified in Articles L. 145-1 and L. 145-2 to leases entered into by long leaseholders, subject to the period of renewal granted to their subtenants not having the effect of extending occupation of the premises beyond the expiration date of the long lease.
SECTION II
**Term **
Articles L145-4 to L145-7
Article L145-4
The term of the lease contract may not be less than nine years.
However, in the absence of agreement to the contrary, the lessee shall have the option of giving notice on expiration of a term of three years in the forms and deadline of Article L. 145-9.
The lessor shall have the same option if they intend to invoke the provisions of Articles L. 145-18, L. 145-21 and L. 145-24 in order to build, rebuild, raise the height of the existing real property or to carry out the works prescribed or authorised within the framework of an real property restoration operation.
A lessee having made a request to take advantage of their rights to retirement from the social security system to which they subscribe or having been accepted as a beneficiary of an invalidity pension allocated within the framework of the social security system shall have the option of giving notice in the forms and deadline of Article L. 145-9.
The provisions of the preceding subparagraph shall apply to the sole member of a one-man limited liability company or a majority shareholder manager of at least two years’ tenure of a limited liability company when they are the leaseholder.
Article L145-5
When the lessee enters the premises, the parties may depart from the provisions of this chapter on condition that the lease is agreed for a term of no more than two years.
If the lessee remains and is allowed to remain in possession on expiration of this term, a new lease shall be formed, the effect of which shall be regulated by the provisions of this chapter.
The same shall apply in the event of explicit renewal of the lease or of agreement between the same parties of a new lease for the same premises. The provisions of the two preceding subparagraphs shall not apply if the lease is of a seasonal nature.
Article L145-6
During the course of the original lease or a renewed lease, the lessor of premises used for commercial, industrial or craft purposes may retake possession of the premises in whole or in part to carry out works requiring the evacuation of the premises included within a sector or perimeter specified in Articles L. 313-3 and L. 313-4 of the town planning code and authorised or prescribed within the conditions specified in the said articles, on condition of offering to transfer the lease to equivalent premises within the same real property or within another real property. This offer must specify the characteristics of the premises offered, which must enable continuation of the exercise of the tenant’s previous activity. The offer must be notified one year in advance.
Within a deadline of two months, the tenant must either communicate their acceptance or refer the reasons for their refusal to the competent court, in the absence of which they shall be deemed to have accepted the offer.
Article L145-7
A tenant whose lease is assigned shall be entitled to a dipossession compensation which includes compensation for the prejudicial consequences of temporary loss of enjoyment taking into account, if applicable, of the provisional installation carried out at the lessor’s expense and reimbursement of their normal expenses of removal and reinstallation.
Once the offer has been accepted or acknowledged as being valid by the competent court and after expiration of the deadline of one year with effect from confirmation of the offer, the tenant must leave the premises with effect from the premises offered being made effectively available and payment of provisional compensation of an amount determined within the forms specified in Article L. 145-19.
The price and accessory terms and conditions of the lease may be amended at the request of the first to act.
SECTION III
Renewal Articles L145-8 to L145-13
Article L145-8
The right to renewal of a lease may be invoked only by the owner of the business operated in the premises.
In the absence of legitimate reasons, the converted business must, if appropriate, in the conditions specified in section 8 of this chapter, have been operated effectively during the three years prior to the date of expiration of the lease or of its renewal as specified in Article L. 145-9, this latter date being either the date for which the notice has been given or, if a request for renewal has been made, the customary term following this request.
Article L145-9
Notwithstanding Articles 1736 and 1737 of the civil code, leases for premises subject to the provisions of this chapter shall end only by virtue of a notice given in accordance with custom and practice in respect of premises and at least six months in advance.
In the absence of notice, a written lease shall continue by tacit renewal beyond the term stated in the contract, in conformity with Article 1738 of the civil code and subject to the reserves specified by the preceding subparagraph. Beyond the term of nine years, a lease with a period conditional upon an event, the occurrence of which will authorise the lessor to demand its cancellation shall terminate only by virtue of notice given six months in advance and for a customary term. This notice must state the occurrence of the event specified in the contract.
If the lease is for several terms and the lessor terminates the lease at the end of the first nine years or on expiration of one of the subsequent terms, the notice must be given within the deadline stated in subparagraph one above.
The notice must be given by extra-judicial means. In order to be valid, it must state the reasons for which it is given and state that a lessee wishing either to dispute the notice or demand payment of compensation for eviction must refer the matter to the court within a deadline of two years with effect from the date for which the notice has been given in order not to be out of time.
Article L145-10
In the absence of notice, a tenant wishing to renew their lease must request this either within the six months prior to expiration of the lease or, if appropriate, at any time during its renewal.
The request for renewal must be served on the lessor by extra-judicial means. In the absence of conditions or notifications to the contrary on the part of this latter, it may be addressed equally validly ether to the lessor or to the manager, who shall be deemed to be authorised to receive it. Should there be more than one owner, a request addressed to one of them shall be valid in respect of them all in the absence of conditions or notifications to the contrary. In order to be valid, it must reproduce the terms of the subparagraph below.
Within three months of service of the request for renewal, the lessor must inform the lessee, within the same forms, if they refuse the renewal, stating the reasons for this refusal. Should the lessor fail to communicate their intentions within this deadline, the lessor shall be deemed to have accepted the principle of renewal of the previous lease.
In order to be valid, the extra-judicial means giving notice of refusal to renew the lease must state that a lessee wishing either to dispute the refusal to renew the lease or demand payment of compensation for eviction must refer the matter to the court before expiration of a deadline of two years with effect from the date on which notice of the refusal to renew was served.
Article L145-11
A lessor wishing, while not being opposed to the principle of renewal, to obtain an amendment of the price of the lease must give notice of the rent they propose within the period of notice specified in Article L. 145-9 or in the reply to the request for renewal specified in Article L. 145-10, in the absence of which the new price shall be due only with effect from a demand made subsequently in accordance with the terms and conditions defined by Conseil d'Etat decree.
Article L145-12
The term of the renewed lease shall be nine years in the absence of agreement between the parties on a longer term. The provisions of subparagraphs two and three of Article L. 145-4 shall apply during the term of the renewed lease.
The new lease shall take effect from expiration of the preceding lease or, if appropriate, from its renewal, this latter date being either that for which the notice had been given or, if a request for renewal has been made, the customary term which follows this request.
However, if the lessor has communicated, either by giving a period of notice or by refusal of renewal, their intention not to renew the lease and if, subsequently, they decide to renew it, the new lease shall take effect from the date on which this acceptance has been communicated to the lessee by extra-judicial means.
Article L145-13
Subject to the provisions of the Act of 28 May 1943 relating to the application to foreigners of the laws on rental leases and farm leases, the provisions of this section may be invoked by merchants, manufacturers and persons registered in the crafts directory of foreign nationality, acting directly or via an intermediary only if they have fought in the French or Allied armies during the 1914 and 1939 wars or if they have children holding French nationality.
The preceding subparagraph shall not apply to citizens of Member States of the European Community or of Member States of the European Economic Area.
SECTION IV
Refusal of renewal Articles L145-14 to L145-30
Article L145-14
A lessor may refuse the renewal of a lease. However, except in cases of the exceptions specified in Articles L. 145-17 onwards, the lessor must pay the evicted tenant compensation for eviction equal to the prejudice caused by the absence of renewal.
This compensation shall include in particular the market value of the business, determined in accordance with custom and practice of the profession, potentially increased by the normal expenses of removal and reinstallation, plus the expenses and duties of assignment of a business of the same value, except in the event of the owner providing proof that the prejudice is lower.
Article L145-15
Irrespective of their form, clauses, conditions and arrangements which have the effect of frustrating the right of renewal laid down by this chapter or the provisions of Articles L. 145-4, L. 145-37 and L. 145-41, subparagraph one of Article L. 145-42 and Articles L. 14547 to L. 145-54 shall be null and void.
Article L145-16
Irrespective of their form, agreements whose object is to prohibit the tenant from assigning their lease or the rights held by virtue of this chapter to a purchaser of their business or undertaking shall also be null and void,
In the event of the merger of companies or the contribution of part of the assets of a company carried out within the conditions specified in Article L. 236-22, the company resulting from the merger or the company receiving the contribution shall, notwithstanding any condition to the contrary, replace the party in whose favour the lease was granted in respect of all rights and obligations resulting from this lease.
If the guaranty obligation can no longer be maintained within the terms and conditions of the agreement in the event of assignment, merger or contribution, the court may substitute any guaranties it may deem sufficient.
Article L145-17
I. – A lessor may refuse the renewal of a lease without being obliged to pay any compensation if:
1. They can provide proof of a serious and legitimate reason against the tenant whose lease is ending. However, should this involve either failure to perform an obligation or cessation of operation of a business ion the absence of genuine and legitimate reason, taking into account the provisions of Article L. 145-8, the breach committed by the lessee may be invoked only if has been continued or renewed more than one month after the lessor has given formal notice to cause it to cease. In order to be valid, this formal notice must be served by extra-judicial means, stating the reason invoked and reproducing the terms of this subparagraph;
2. If proof is provided that the building must be totally or partially demolished due to being acknowledged by the administrative authority as in an unfit condition for occupation or if proof is provided that the it may no longer be occupied without danger due to its condition.
II. - In the event of rebuilding of a new building containing commercial premises by the owner or their beneficiary, the tenant shall have a preferential right to enter into a lease in the rebuilt building, subject to the terms and conditions specified in Articles L. 145-19 and L. 145-20.
Article L145-18
A lessor shall be entitled to refuse the renewal of a lease in order to build or rebuild the existing building, subject to payment to the ejected tenant of the compensation specified in Article L. 145-14.
The same shall apply for the carrying out of works requiring the evacuation of the premises included within a sector or perimeter specified in Articles L. 313-3 and L. 313-4 of the town planning code and authorised or prescribed within the conditions specified in the said articles.
However, the lessor may avoid payment of this compensation by offering the ejected tenant premises corresponding to their needs and means located in an equivalent site.
If applicable, the tenant shall receive compensation for their temporary loss of enjoyment and for the depreciation of their business. The tenant’s normal removal and installation expenses shall also be reimbursed.
Should a lessor invoke the benefit of this article, they must refer to the provisions of subparagraph 3 and specify the new terms and conditions of rental in the document refusing to renew the lease or the notice. Within a deadline of three months, The tenant must either communicate their acceptance by extra-judicial means or refer the matter to the competent court within the conditions specified in Article L. 145-58.
Should the parties disagree only in respect of the terms and conditions of the new lease, these shall be determined in accordance with the procedure specified in Article L. 145-56.
Article L145-19
In order to exercise the preferential right specified in Article L. 145-17, on leaving the premises or no later than three months of so doing, a tenant must give notice to the owner of their desire so to do by extra-judicial means, informing the owner of their new domicile; in order to be valid, the tenant must also give notice of any subsequent change of domicile.
Prior to letting or occupying the new premises themselves, an owner having received such notice must advise the tenant in the same way that they are prepared to grant them a new lease. In the absence of agreement between the parties on the terms and conditions of this lease, these shall be determined in accordance with the procedure specified in Article L. 145-56.
The tenant shall have a deadline of three months in which to confirm their decision or to refer the matter to the competent court. In order to be valid, this deadline must be stated in the notice referred to in the preceding subparagraph. On expiration of this deadline, the owner may dispose of the premises.
An owner failing to comply with the provisions of the preceding subparagraphs shall be liable, on demand by their tenant, to pay damages to this latter.
Article L145-20
Should the building rebuilt within the conditions specified in Article L. 145-17 have a surface area greater than that of the original building, the preferential right shall be limited to those premises with a surface area equivalent to that of the premises previously occupied or likely to satisfy the same commercial needs as these latters.
Should the rebuilt building not permit the reinstallation of all the occupants, preference shall be given to those tenants holding the oldest leases and having communicated their intention to occupy the premises.
Article L145-2l
An owner may also defer renewal of the lease for a period of up to three years if they intend to raise the height of the building and if this raising necessitates the temporary eviction of the tenant. In such an event, the tenant shall be entitled to compensation equal to the prejudice suffered up to a maximum of three years’ rent.
Article L145-22
An owner shall be entitled to refuse the renewal of a lease exclusively in respect of the part involving the living accommodation associated with commercial premises in order to occupy them themselves or to enable their spouse, members of their family of ascending or descending order, or those of their spouse to occupy them, subject to the beneficiary of the takeover not having access to accommodation corresponding to their normal needs and those of the members of their family normally living or domiciled with them.
However, a takeover in the conditions stated above may not be exercised on premises used for hotel purposes or for furnished rentals, nor on premises used for hospital or teaching purposes.
Similarly, a takeover may not be exercised if the tenant provides proof that the loss of enjoyment of the living accommodation causes a serious difficulty to the operation of the business or if the commercial premises and the living accommodation form an indivisible whole.
Should the building have been bought for money consideration, the lessor may benefit from the provisions of this article only if their deed of purchase has a legal date more than six years prior to the refusal of renewal.
The beneficiary of the takeover right shall be liable to place the accommodation which may be left vacant by the exercise of this right, if any, at the disposal of the tenant whose premises they take over.
In the event of partial takeover as specified in this article, the rent for the renewed lease shall take into account the prejudice caused to the tenant or to their beneficiary in the exercise of their activity.
Unless prevented by a legitimate reason, the beneficiary of the takeover must occupy the premises personally within a deadline of six months with effect from the date of departure of the evicted tenant and for a term of no less than six years, in the absence of which the evicted tenant shall be entitled to compensation for eviction in proportion to the size of the premises taken over.
Article L145-23
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
The provisions of Article L. 145-22 do not apply to lessors of foreign nationality, whether they act directly or through an intermediary, unless they fought in the French or allied forces during the wars of 1914 and 1939 or have children with French nationality.
The previous paragraph does not apply to citizens of a Member State of the European Community or of a State which is a party to the Agreement on the European Economic Area.
Article L145-24
The right to renewal shall not be demurrable against an owner having obtained a building permit for living accommodation on all or part of one of the plots of land referred to in Article L. 145-1 (2).
Irrespective of the circumstances, this right of takeover may be exercised only in respect of the part of the land essential for the building. Should its effect be to cause the mandatory cessation of the commercial, industrial or craft operation, the provisions of Article L. 145-18 shall apply.
Article L145-25
An owner or principal tenant being simultaneously the lessor of the premises and the vendor of the business operated there and having received total price may refuse the renewal only on condition of payment of the compensation for eviction specified in Article L. 145-14, unless able to provide proof of an acknowledged serious and legitimate reason against the lessee.
Article L145-26
The renewal of leases concerning immovable properties owned by the State, departments, municipalities and public establishments may not be refused without the joint ownership being obliged to pay the compensation for eviction specified Article L. 145-14, even if its refusal is justified for public purposes.
Article L145-27
Should it be proved that a lessor has exercised the rights conferred upon them by Articles L. 145-17 onwards purely with a view to fraudulently frustrating the rights of a tenant, in particular through letting and resale transactions, irrespective of whether these transactions are of a civil or commercial nature, the tenant shall be entitled to compensation equal to the amount of the prejudice suffered.
Article L145-28
No tenant entitled to claim compensation for eviction may be forced to vacate the premises before having received it. They shall be entitled to remain in the premises under the terms of the expired lease contract until payment of this compensation. However, the occupation compensation shall be determined in accordance with the provisions of sections 6 and 7, taking into consideration all the relevant factors.
By derogation from the preceding subparagraph, in the single case specified in subparagraph two of Article L. 145-18, the tenant shall be obliged to vacate the premises upon payment of provisional compensation determined by the presiding judge of the Tribunal de grande instance ruling in the light of an expert assessment previously ordered within the forms determined by Conseil d'Etat decree in application of Article L. 145-56.
Article L145-29
In the event of eviction, the premises must be handed back to the lessor in time for the first day of the term of occupation following the expiration of the deadline of two weeks with effect from payment of the compensation into the hands of the tenant themselves or, potentially, of a receiver. In the absence of agreement between the parties, the receiver shall be appointed by the judgment ordering payment of the compensation or, by default, by ordinary order on application.
The receiver shall pay the compensation to the tenant against their sole receipt if there are no objections on the part of creditors and in exchange for the keys to the vacant premises upon proof of payment of taxes, rents and subject to tenant’s repairs.
Article L145-30
In the event of failure to hand over the keys on the date specified and after formal notice, the receiver shall withhold 1% per day of lateness of the amount of the compensation and shall return this amount withheld to the lessor against their sole receipt.
Should the deadline of two weeks specified in Article L. 145-58 have ended without the lessor having exercised their right of repentance, the compensation for eviction must be paid to the tenant or, potentially, to a receiver within a deadline of three months with effect from the date of a summons to pay by extra-judicial means which, in order to be valid, must reproduce this subparagraph.
SECTION V
Sub-leasing Articles L145-31 to L145-32
Article L145-31
Unless otherwise stated in the lease or with the lessor’s agreement, no sub-leasing, whether total or in part, shall be allowed.
In the event of authorised sub-leasing, the owner shall be called upon to be a party to the document.
Should the sub-leasing rent be in excess of the primary lease price, the owner shall have the option of requiring a corresponding increase in the rent for the primary lease, which increase, in the absence of agreement between the parties, shall be determined in accordance with a procedure laid down by Conseil d'Etat decree in application of the provisions of Article L. 145-56.
The tenant must notify the owner of their intention to sub-lease by extra-judicial means or by registered letter with confirmation of delivery. Within two weeks of receipt of this notice, the owner must give notice of whether they intend to be a party to the document. Should the lessor refuse or fail to reply despite the authorisation specified in subparagraph one, they shall be disregarded.
Article L145-32
A subtenant may request the renewal of their lease from the primary tenant within the measure of the rights held by this latter with respect to the owner. The lessor shall be called upon to be a party to the document, as specified in Article L. 145-31.
On expiration of the primary lease, the owner shall be obliged to renew only if they have explicitly or tacitly authorised or agreed to the sub-leasing and if, in the event of partial sub-leasing, the premises comprising the object of the primary lease do not form an indivisible whole materially or in the joint intention of the parties.
SECTION VI
**Rent **
Articles L145-33 to L145-40
Article L145-33
(Act No. 2001-1168 of 11 December 2001 Art. 33 V Official Journal of 12 December 2001)
The amount of the rent payable under the renewed or revised leases corresponds to their rental value. Failing agreement thereon, the said value shall be determined on the basis of:
1 The features of the premises concerned;
2 The use of the premises;
3 The respective obligations of the parties;
4 The local commerciality factors;
5 The prices commonly applied in the vicinity.
A Conseil d'Etat Decree determines the relative weightings of these elements.
Article L145-34
(Act No. 2001-1168 of 11 December 2001 Art. 33 VI Official Journal of 12 December 2001)
Barring any substantial change in the elements indicated in 1 to 4 of Article L145-33, the rate of change applied to the rent payable upon entry into force of a renewed lease, if the term thereof does not exceed nine years, cannot exceed the variation in the quarterly national Construction Cost Index published by the Institut national de la statistique and des études économiques since the date on which the initial rent for the expired lease was determined. Failing any contractual clause specifying the reference quarter for the said index, the variation in the quarterly national Construction Cost Index calculated over the nine-year period preceding the most recently published index shall be used.
If renewal takes place subsequent to the date initially stipulated for expiry of the lease, the variation shall be calculated on the basis of the most recently published index for a term equal to the time elapsed between the initial date of the lease and the date of its effective renewal.
The provisions of the above paragraph do not apply when, through the effects of tacit renewal, the term of the lease exceeds twelve years.
Article L145-35
Disputes arising from the application of Article L. 145-34 shall be submitted to a departmental conciliation committee composed of an equal number of lessors and tenants and of qualified persons. The committee shall endeavour to conciliate the parties and give an opinion.
Should the matter be referred to a court in parallel with the competent committee by one or other of the parties, it may not give a verdict until the committee has given its opinion.
The committee shall be disseized if it fails to give an opinion within a deadline of three months.
The composition of the committee, the method of appointment of its members and its operating rules shall be determined by decree.
Article L145-36
The factors to be used in determining the prices of leases of land, premises built with a view to single occupation and premises exclusive for office use shall be laid down by Conseil d'Etat decree.
Article L145-37
The rents for leases of immovable properties and premises regulated by the provisions of this chapter, whether renewed or not, may be revised at the request of one or other of the parties, subject to the reserves specified in Articles L. 145-38 and L. 145-39 and under the conditions laid down by Conseil d'Etat decree.
Article L145-38
(Act No. 2001-1168 of 11 December 2001 Art. 26 Official Journal of 12 December 2001)
Application for a review cannot be made until at least three years have elapsed since the date on which the lessee entered into possession or since the commencement of the renewed lease.
Further applications may be made every three years with effect from the date on which the new amount becomes applicable.
Notwithstanding the provisions of Article L145-33, and failing production of proof of a material change in the local commerciality factors which has of itself given rise to a variation of more than 10% of the rental value, the rent increase or decrease following a triennial review shall not exceed the variation in the quarterly Construction Cost Index since the previous amicable or judicial determination of the rent.
Under no circumstances shall any investment made by the lessee or any capital gains or losses resulting from its management during the term of the lease be taken into account for calculation of the rental value.
Article L145-39
Furthermore and by derogation from Article L. 145-38, should the lease include an escalator clause, a revision may be requested whenever the rent calculated in accordance with this clause is increased or reduced by more than one quarter in comparison with the price previously determined contractually or by court order.
Article L145-40
Rents paid in advance, in whatever form and even as a guarantee, shall bear interest for the account of the tenant at the rate charged by the Bank of France for advances against securities for amounts in excess of that corresponding to the price of the rent for more than two terms.
SECTION VII
Article L145-41
Any clause inserted in a lease providing for cancellation ipso jure shall not take effect until after a summons to pay has remained unprofitable for one month. In order to be valid, the summons to pay must state this deadline.
A court to which an application is made within the forms and conditions specified in Articles 1244-1 to 1244-3 of the civil code may, by granting deadlines, suspend the execution and the effects of cancellation clauses if the cancellation is not determined or pronounced by a court order having acquired the status of judgment res judicata. The cancellation clause shall not take effect if the tenant discharges themselves in accordance with the conditions determined by the court.
Article L145-42
Ipso jure cancellation clauses for cessation of activity shall cease to take effect during the time necessary for the execution of conversions carried out in application of the provisions of section 8.
This period may not exceed six months from the date of agreement on non-specialisation or the court order authorising it.
Article L145-43
Merchants and persons registered in the craft directory who are tenants of the premises in which their business is located, who are allowed to follow a conversion training course or a promotional training course within the meaning of Article L. 900-2 (3. and 5.) of the labour code, the minimum duration of which is fixed by order and the maximum duration of which may not exceed one year unless it involves a so-called promotional training course benefiting from the authorisation specified in Article L. 961-3 of the said code shall be exempted from the obligation to operate during the term of their training course.
Article L145-44
Should the merchant or craftsperson, on conclusion of one of the training courses specified in Article L. 145-43, vacate the premises of which they are the tenant to convert their activity by transferring it into other premises or to take up paid employment, the lease shall be cancelled ipso jure and without compensation on expiration of a deadline of three months with effect from the date that this is notified to the lessor.
Article L145-45
An administrative order and winding-up proceedings shall not cause the ipso jure termination of the lease on immovable properties used for the debtor’s industry, trade or craft, including premises annexed to these properties and used as their living accommodation or that of their family. Any provision to the contrary shall be deemed to be null and void.
Article L145-46
If the lessor is simultaneously the owner of the leased real property and of the business operated therein and if the lease relates to both simultaneously, the lessor must pay the tenant, on their departure, compensation corresponding to the profit that they may draw from the asset appreciation contributed either to the business or to the rental value of the real property by material improvements carried out by the tenant with the owner’s explicit agreement.
SECTION VIII
**Non-specialisation **
Articles L145-47 to L145-55
Article L145-47
A tenant may add related and/or complementary activities to the activity specified in the lease.
To this end, they must notify the owner of their intention by extra-judicial means, stating the activities they envisage exercising. This formality shall be deemed to be equivalent to formal notice to the owner to give notice, within a deadline of two months in order to avoid forfeiture, of whether they dispute the related and/or complementary nature of these activities. In the event of objection, the Tribunal de grande instance to which the matter is referred by the first to act shall make an order in accordance in particular with the trend in commercial custom and practice.
At the time of the first three-year revision following the notification referred to in the preceding subparagraph, by derogation from the provisions of Article L. 145-38, the additional commercial activities may be taken into account in determining the rent if these have, in themselves, caused a change in the rental value of the rented premises.
Article L145-48
A tenant may, at their request, be authorised to exercise in the rented premises one or more different activities from those specified in the lease, taking into account the economic climate and the necessities of rational organisation of delivery when these activities are compatible with the intended purpose, characteristics and location of the real property or group of properties.
However, the principal tenant of premises included in a whole constituting a commercial unit defined by a building programme may not exercise this option during a period of nine years with effect from the date on which they took possession.
Article L145-49
In order to be valid, the request made to the lessor must include a statement of the activities whose exercise is envisaged. It shall be constituted by extra-judicial means and notice shall be given in the same form to secured creditors of the business. These latters may request that the change of activity should be subject to conditions of a nature that safeguards their interests.
Within one month of this request, the lessor must give notice, in the same form, to those of their tenants with respect to which they may be obliged not to let with a view to the exercise of similar activities to those referred to in the request. In order to avoid being out of time, these must give notice of their attitude within one month of this notification.
In the absence of the lessor having given notice of their refusal, acceptance or the conditions to which their agreement is subject within three months of the request, they shall be deemed to have acquiesced to the request. This acquiescence shall not constitute an obstacle to the exercise of the rights specified in Article L. 145-50.
Article L145-50
A change of activity may justify the payment by the tenant of compensation equal to the amount of the prejudice that the lessor shall be able to prove.
In exchange for the benefit procured, at the time of the conversion this latter may also request the amendment of the price of the lease without the provisions of Articles L. 145-37 to L. 145-39 being applicable.
The rights of secured creditors shall be exercised on the converted business in accordance with their previous ranking.
Article L145-51
If a tenant who has applied to exercise their rights to retirement or who has been granted the benefit of an invalidity pension allowed by the invalidity/life insurance scheme for the craft professions or the industrial and trade professions has given notice to their landlord and to secured creditors of the business of their intention to assign their lease, stating the nature of the activities whose exercise is envisaged and the proposed price, the lessor shall have a preferential right of repurchase within a deadline of two months subject to the terms and conditions stated in the notification. Should the lessor fail to exercise this right, their agreement shall be deemed to have been obtained if hey have not referred the matter to the Tribunal de grande instance within this same deadline of two months.
The nature of the activities whose exercise is envisaged must be compatible with the intended purpose, characteristics and location of the real property.
The provisions of this article shall apply to the sole member sole member of a one-man limited liability company or a majority shareholder manager since at least two years of a limited liability company when they are the leaseholder.
Article L145-52
The Tribunal de grande instance may authorise the total or partial conversion despite the refusal of the lessor if this refusal is not justified by a serious and legitimate reason.
Should the parties disagree only in respect of the price of the new lease, this shall be determined in accordance with the procedure specified pour the fixing of the prices of revised leases. In other cases, the matter shall be referred to the court.
Article L145-53
Refusal of the conversion shall be sufficiently justified if the lessor proves that they intend to reoccupy the premises on expiration of the current three-year term, either in application of Articles L. 145-18 to L. 145-24, or with a view to carrying out works prescribed or authorised within the framework of an urban renovation or real property restoration transaction.
A lessor who has fraudulently invoked one of the reasons specified in the preceding subparagraph or who has not satisfied the conditions given to justify the refusal of a tenant’s request may not object to a new request for a conversion of activity other than for serious and legitimate reasons unless they may be held responsible for failure of execution. They may also be ordered by a court to pay the tenant compensation equal to the prejudice suffered by this latter.
Article L145-54
The asset appreciation conferred upon the business by the conversion specified in Article L. 145-48 shall not be taken into account if the real property in which the business is operated must be demolished or restored, or if the business must be expropriated within the framework of a property renovation or restoration transaction decided upon less than three years after the request specified in subparagraph 1 of the said article.
Article L145-55
A tenant who has made a request in accordance with Articles L. 145-47, L. 145-48 or L. 145-49 may withdraw it at any time up to the expiration of a deadline of two weeks with effect from the date on which the decision has become a judgment res judicata by notifying the lessor by extra-judicial means and, in this event, shall bear all the expenses of the proceedings.
SECTION IX
Procedure
Articles L145-56 to L145-60
Article L145-56
The rules of competence and procedure for dispute relating to a lease shall be laid down by Conseil d'Etat decree.
Article L145-57
The tenant shall be obliged to continue paying the rents due at the previous price or, if applicable, at the price which may in all events be determined provisionally by the court to which the matter has been referred during the term of the proceedings relating to determination of the price of the revised or renewed lease, unless there is to be a reckoning between the lessor and the lessee after definitive determination of the price of the rent.
The parties shall draw up a new lease on the terms and conditions laid down by the court within a deadline of one month following service of notice of the definitive decision unless the tenant declines the renewal or the lessor refuses this, subject to the party demonstrating their disagreement being liable to bear all the expenses. Should the lessor fail to have sent the draft lease drawn up in accordance with the aforementioned decision to the lessee for signature within this deadline or, in the absence of agreement within one month of this sending, the order or judgment fixing the price or the terms and conditions of the new lease shall be deemed to constitute the lease.
Article L145-58
Until the expiration of a deadline of two weeks with effect from the date on which the decision has become a judgment res judicata, the owner may decline to pay the compensation subject to being liable to bear the expenses of the proceedings and to agree to the renewal of the lease, the terms and conditions of which shall be determined, in the event of disagreement, in accordance with the regulatory provisions laid down to this effect. This right may be exercised only if the tenant is still occupying the premises and has not already rented or purchased another real property intended for their reinstallation.
Article L145-59
The owner’s decision to refuse renewal of the lease in application of the last subparagraph of Article L. 145-57 or to decline to pay the compensation in accordance with the conditions specified in the last subparagraph of Article L. 145-58 shall be irrevocable.
Article L145-60
All proceedings exercised by virtue of this chapter shall be time-barred after two years have elapsed.
CHAPTER VI
**Nominee Managers **
Articles L146-1 to L146-4
Article L146-1
(inserted by Act No. 2005-882 of 2 August 2005 Art. 19 Official Journal of 3 August 2005)
Natural persons or legal entities who manage a business in return for payment of a commission proportionate to the turnover are known as "nominee managers" when the contract entered into with the principal on behalf of whom they manage that business, sometimes within the framework of a network, who remains the owner thereof and bears the risks associated with its operation, confers a mission on them which gives them a free hand within the framework thus established to determine their working conditions, to take on staff and to arrange substitutes for themselves within the business at their own expense and under their own responsibility.
The nominee manager is registered in the trade and companies register and, if applicable, the trade register. The contract is referred to in the said registers and details thereof are published in a journal authorised to publish legal notices.
The provisions of the present chapter do not apply to professions governed by Chapter II of Part VIII of Book VII of the Labour Code.
Article L146-2
(inserted by Act No. 2005-882 of 2 August 2005 Art. 19 Official Journal of 3 August 2005)
The principal provides the nominee manager with all the information he needs for his work, as specified by decree, before the contract is signed, to enable him to commit himself in full knowledge of the facts.
Article L146-3
(inserted by Act No. 2005-882 of 2 August 2005 Art. 19 Official Journal of 3 August 2005)
A framework agreement entered into by the principal and the nominee managers to whom he is contractually bound, or their representatives, determines, inter alia, the amount of the guaranteed minimum commission payable under all nominee-management contracts entered into by the said principaL.The said minimum commission takes account of the size of the establishment and its operational facilities.
Failing agreement thereon, the Minister for Small and Medium-Sized Businesses determines the amount of the minimum commission.
Article L146-4
(inserted by Act No. 2005-882 of 2 August 2005 Art. 19 Official Journal of 3 August 2005)
The contract binding the principal and the nominee manager may be terminated at any time under terms determined by the parties. If the contract is terminated by the principal, however, with no serious fault being attributable the nominee manager, the principal shall, unless the parties have agreed more favourable terms, pay him compensation equal to the amount of the commissions, or the guaranteed minimum commission referred to in Article L146-3, earned during the six months preceding termination of the contract, or during the term of the contract if it is shorter than six months.
BOOK II
Commercial companies and economic interest groups
Articles L210-1 to
L252-13
TITLE I
Preliminary provisions
Articles L210-1 to
L210-9
Article L210-1
The commercial nature of a company shall be determined by its form or by its objects.
General partnerships, limited partnerships, limited liability companies and joint-stock companies are trading companies by virtue of their form, irrespective of their objects.
Article L210-2
The form, duration, which may not exceed ninety-nine years, the business name, the registered office, the purpose of the company and the amount of the registered capital shall be determined by the company’s memorandum and articles of association.
Article L210-3
Companies whose registered office is located on French territory shall be subject to French law.
Third parties may avail themselves of the registered office, but this shall not be demurrable with respect to them by the company if its real office is located in another place.
Article L210-4
The mandatory publication formalities at the time of formation of the company and in the event of subsequent deeds and deliberations shall be laid down by Conseil d'Etat decree.
Article L210-5
The transactions of limited liability companies and joint-stock companies occurring prior to the sixteenth day of publication in the Official Gazette of civil and commercial advertisements of deeds and indications subject to this publication shall not be demurrable in respect of third parties able to prove that it had been impossible for them to have become acquainted therewith
Should there be any discrepancy in the publication of deeds and indications relating to limited liability companies and joint-stock companies between the text filed with the commercial and companies register and the text published in the Official Gazette of civil and commercial advertisements, this latter shall not be demurrable with respect to third parties; however, they may avail themselves of it unless the company is able to prove that they have been acquainted with the text filed with the commercial and companies register.
Article L210-6
Trading companies shall have legal personality with effect from their registration in the commercial and companies register. The conversion in due form of a company shall not give rise to the creation of a new legal personality. The same shall apply with respect to extension.
Persons who have acted in the name of a company in formation before it has acquired enjoyment of legal personality shall be held jointly and indefinitely liable for the acts thus accomplished unless the company, after having been formed and registered in due form, takes over its obligations thus entered into. These obligations shall then be deemed to have been entered into from the start by the company.
Article L210-7
A company shall be registered after the clerk of the competent court has verified the due form of its formation in accordance with the conditions laid down by the legislative and regulatory provisions relating to the commercial and companies register.
If the memorandum and articles of association do not contain all the statements required by law and the regulations or if a formality laid down by these for the formation of the company has been omitted or not accomplished in due form, any interested party shall be entitled to apply to a court for an order to be made that the formation must be regularised or a fine imposed. The ministère public is competent to act in respect of the same ends.
The provisions of the preceding subparagraphs shall apply in the event of amendment of the memorandum and articles of association. The proceedings specified in subparagraph two shall be time-barred after three years have elapsed with effect from either registration of the company in the commercial and companies register or the amending entry in the said register and the filing in the annex of the said register of the documents amending the memorandum and articles of association.
Article L210-8
The founders of the company and the initial members of its management, administration, executive and monitoring bodies shall be jointly liable for any prejudice caused by an error in any obligatory statement in the memorandum and articles of association as well as by any omission or failure to accomplish in due form any formality specified by law and the regulations for the formation of the company.
The provisions of the preceding subparagraph shall apply in the event of amendment of the memorandum and articles of association, and of the members of management, administration, executive, monitoring and audit bodies holding office at the time of the said amendment.
Proceedings shall be time-barred after ten years have elapsed with effect from the accomplishment of one or the other, according to the case, of the formalities referred to in subparagraph four of Article L. 210-7.
Article L210-9
Neither the company nor third parties may, in order to avoid their obligations, avail themselves of an irregularity in the appointment of persons charged with managing, administrating or directing the company if this appointment has been published in due form.
The company may not avail itself, with respect to third parties, of appointments and withdrawals from office of the persons referred to above while these have not been published in due form.
TITLE II
**Provisions specific to various commercial companies **
Articles L221-1 to
L229-15
CHAPTER I
**General partnerships **
Articles L221-1 to
L221-17
Article L221-1
The partners in a partnership shall all be deemed to be merchants and shall have unlimited joint liability for the debts of the partnership.
A partnership’s creditors may not pursue payment of the debts of the partnership against a partner until after having fruitlessly given the partnership formal notice to pay by extra-judicial means.
Article L221-2
A general partnership shall be designated by its business name, in which may be incorporated the names of one or more partners and which must be immediately preceded or followed by the words “société en nom collectif” (general partnership).
Article L221-3
All the partners shall be managers unless otherwise specified in the memorandum and articles of association, which may appoint one or more managers, who may or may not be partners, or provide for such appointment by means of a subsequent deed.
Should a legal personality be a manager, its executives shall be subject to the same conditions and obligations and incur the same civil and penal liabilities as though they were managers in their own right, without prejudice to the joint liability of the legal personality which they manage.
Article L221-4
In dealings between partners and in the absence of limitation of their powers by the memorandum and articles of association, the manager may perform all acts of management in the interests of the partnership.
In the event of there being more than one manager, each shall hold separately the powers specified in the preceding subparagraph, except that each shall have the right to object to any transaction prior to its conclusion.
Article L221-5
In dealings with third parties, the manager shall bind the partnership by acts within the purpose of the company.
In the event of there being more than one manager, each shall hold separately the powers specified in the preceding subparagraph. An objection formulated by one manager to the acts of another manager shall not be effective with respect to third parties unless it is proved that they were aware thereof.
Clauses of the memorandum and articles of association limiting the powers of the managers resulting from this article shall not be demurrable with respect to third parties.
Article L221-6
Decisions which exceed the powers accorded to the managers shall be taken by unanimous agreement of the partners. However, the memorandum and articles of association may specify that certain decisions shall be taken by a specified majority.
The memorandum and articles of association may also specify that decisions shall be taken by means of consultation by exchange of letters if a general meeting is not requested by one of the partners.
Article L221-7
(Order No. 2004-1382 of 20 December 2004 Art. 6 Official Journal of 22 December 2004)
The management report, inventory and annual accounts drawn up by the chief executive are subject to approval by the meeting of members within six months of the close of the said financial year.
To that end, the documents referred to in the previous paragraph, the text of the proposed resolutions and, where applicable, the auditor's report, the consolidated accounts and the group's management report, are sent to the members in the manner and within the time limits determined in a Conseil d'Etat decree. Any deliberation which violates the provisions of the present paragraph and its implementing decree may be declared void. Any clause contrary to the provisions of the present article and its implementing decree is deemed not to exist. The third to sixth paragraphs of Article L. 225-100 and Article L. 225-100-1 apply to the management report when all the shares are held by persons having one of the following forms: public limited company, partnership limited by shares,
limited liability company.
NB: Order 2004-1382 2004-12-20 Art. 12: The provisions of the present order shall apply with effect from the first financial year commenced on or after 1 January 2005.
Article L221-8
Partners who are not managers shall have the right to obtain, twice per year, communication of the partnership’s books and documents and to ask written questions on the company’s management, which written replies must be given.
Article L221-9
The partners may appoint one or more auditors within the terms specified in Article L. 221-6.
At least those partnerships which exceed, at the end of the financial year, the figures laid down by Conseil d'Etat decree for two of the following criteria shall be obliged to designate an auditor: their balance sheet total, the amount of their turnover excluding VAT or the average number of employees during the financial year. Even if these thresholds are not reached, one partner may apply to the court for an auditor to be appointed.
Article L221-10
(Law No 2003-706 of 1 August 2003 Article 112 Official Gazette of 2 August 2003)
I. - The auditors, who must be chosen from the list referred to in Article L. 225-219, are appointed for a term of six financial years.
II. and
III. - Paragraphs repealed.
IV. - Resolutions passed when the auditors have not been ?properly appointed, or based on a report from auditors who were appointed or retained contrary to the provisions of the present Article are null and void. The nullity is extinguished if the said resolutions are expressly confirmed by a general meeting on the basis of a report from properly appointed auditors.
Article L221-11
The provisions relating to the powers, the incompatibilities referred to in Article L. 225-222, the functions, the obligations, the liability, the substitution, the challenging, the dismissal and the remuneration of auditors of public companies shall apply to general partnerships, subject to the specific rules applicable to these latters.
The auditor shall be advised of shareholders’ meetings and consultations no later than at the same time as its partners. They shall have access to shareholders’ meetings.
The documents referred to in subparagraph one of Article L. 221-7 shall be made available to the auditor subject to the conditions and deadlines laid down by Conseil d'Etat decree.
Article L221-12
If all the partners are managers or if one or more managers chosen among the partners are designated in the memorandum and articles of association, the dismissal of one of them from their office may be decided only by unanimous agreement of the other partners. It shall cause the dissolution of the partnership unless its continuation is specified in the memorandum and articles of association or if the other partners decide upon it by unanimous agreement. The dismissed manager may then decide to withdraw from the partnership and demand the repayment of their shares, the value of which shall be determined in accordance with Article 1843-4 of the civil code. Any clause contrary to Article 1843-4 of the said code shall be deemed null and void.
If one or more of the partners are managers and are not designated in the memorandum and articles of association, each of them may be dismissed from their office subject to the conditions specified in the memorandum and articles of association or, in the absence thereof, by a decision taken by unanimous agreement of the other partners, whether managers or not.
A manager who is not a partner may be dismissed conditions subject to the conditions specified in the memorandum and articles of association or, in the absence thereof, by a decision taken by unanimous agreement of the partners. Should the dismissal be decided without due cause, it may give rise to damages.
Article L221-13
The shares may not be represented by negotiable securities. They may be sold only with the consent of all the partners. Any clause to the contrary shall be deemed null and void.
Article L221-14
The assignment of shares must be determined in writing. It shall be rendered demurrable with respect to third parties under the terms specified in Article 1690 of the civil code. However, service of notice may be replaced by the deposit of an original of the deed of assignment at the registered office in exchange for a certificate of this deposit issued by the manager.
It shall not be demurrable with respect to third parties until after these formalities have been accomplished and, moreover, after publication in the commercial and companies register.
Article L221-15
The partnership shall terminate on the death of one of the partners, subject to the provisions of this article.
Should it have been specified that, in the event of the death of one of the partners, the partnership should continue with their heir or only with the surviving partners, these provisions shall be followed with the exception of specifying that the heir must be approved by the partnership in order to become a partner.
The same shall apply if it has been specified that the partnership should continue with the surviving spouse, or with one or more of the heirs, or with any other person designated by the memorandum and articles of association or, if these so authorise, by the provisions of a will.
If the partnership continues with the surviving partners, the heir shall be simply a creditor of the partnership and shall be entitled only to the value of the deceased partner’s shares. The heir shall similarly be entitled to this value if it has been specified that they must be approved by the partnership in order to become a partner and if this approval has been refused.
If the partnership continues subject to the conditions specified in subparagraph three above, the beneficiaries of the specification shall be obliged to pay the estate the value of the shares allocated to them.
In all the situations specified in this article, the value of the shares shall be determined as of the date of death in accordance with Article 1843-4 of the civil code.
In the event of continuation and if one of or more of the partner’s heirs are unemancipated minors, these latters shall be liable for the debts of the partnership only up to the power of the deceased partner’s estate. Moreover, the partnership must be converted, within a deadline of one year from the death, into a limited partnership in which the minor becomes a partner. In the absence thereof, it shall be dissolved.
Article L221-16
(Act No. 2005-845 of 26 July 2005 Art. 162 I Official Journal of 27 July 2005 effective 1 January 2006 without prejudice to Art. 190)
When a winding-up order is made or a total assignment plan is imposed, or when a prohibition on involvement in a commercial business or an incapacity order becomes final in regard to a partner, the company is dissolved unless its continuation is stipulated in the memorandum and articles of association or unless the other partners unanimously so decide.
If the company continues, the value of the shares and voting rights to be repaid to the departing partner is determined pursuant to Article 1843-4 of the Civil Code. Any clause contrary to Article 1843-4 of the said code is deemed unwritten.
Article L221-17
By derogation from the provisions of Articles L. 221-2 and L. 222-3, general partnerships which were using the name of one or more deceased founding partners in their business name on 1 April 1967 may be authorised to retain this name in their business name.
A Conseil d'Etat decree shall determine the conditions to which this authorisation shall be subject.
This decree shall also define the conditions under which an objection may be referred by third parties to judicial courts.
CHAPTER II
Limited partnerships Articles L222-1 to L222-12
Article L222-1
Managing partners shall have the statute of general partners.
Limited partners shall be liable for the debts of the partnership only in respect of the amount of their contribution. This may not be a contribution in the form of services.
Article L222-2
The provisions relating to general partnerships shall apply to limited partnerships, subject to the rules specified in this chapter.
Article L222-3
A limited partnership shall be designated by its business name, in which may be incorporated the names of one or more partners and which must be immediately preceded or followed by the words “société en commandite simple” (limited partnership).
Article L222-4
The memorandum and articles of association of the partnership must contain the following indications:
1. The amount or the value of the contributions of all the partners
2. The share in this amount or this value of each active partner and limited partner
3. The total share of the active partners and the share of each limited partner in the dividends and in the residual.
Article L222-5
Decisions shall be taken in accordance with the conditions specified in the memorandum and articles of association. However, a general meeting of all the partners shall be legally convened if requested by either one active partner or one quarter by number and by capital of the limited partners.
Article L222-6
A limited partner may not carry out any external act of management, even by virtue of a power of attorney.
In the event of infringement of the prohibition specified in the preceding subparagraph, the limited partner shall be held jointly liable with the active partners for any debts and obligations of the partnership which may result from the prohibited acts. According to the number and size of these, they may be declared jointly liable for all obligations of the partnership or for some only.
Article L222-7
Limited partners shall have the right to obtain, twice per year, communication of the partnership’s books and documents and to ask written questions on the company’s management, which written replies must be given.
Article L222-8
I. - Shares may be assigned only with the consent of all the partners.
II. - However, the memorandum and articles of association may specify:
1. That the shares of limited partners may be freely assigned between partners
2. That the shares of limited partners may be freely assigned to third parties outside the partnership with the consent of all the active partners and the majority by number and by capital of the limited partners.
3. That an active partner may assign some of their shares to a limited partner or to a third party outside the partnership subject to the conditions specified in 2. above.
Article L222-9
The partners may not change the nationality of the partnership other than by unanimous agreement. All other amendments of the memorandum and articles of association may be decided upon with the consent of all the active partners and the majority by number and by capital of the limited partners.
Clauses decreeing more onerous majority conditions shall be deemed null and void.
Article L222-10
The partnership shall continue despite the death of a limited partner.
Should it be specified that, despite the death of an active partner, the partnership shall continue with their heirs, these shall become limited partners if they are unemancipated minors. Should the deceased partner have been the sole active partner and if their heirs are all unemancipated minors, the deceased partner must be replaced by a new active partner or the partnership must be converted within a deadline of one year with effect from the death. In the absence thereof, the partnership shall be dissolved ipso jure on expiration of this deadline.
Article L222-11
If an order is made for the administrative order or winding-up proceedings in respect of one of the active partners, or if an order prohibiting the exercise of a commercial profession or if an incapacity order is made in respect of one of the active partners, the partnership shall be dissolved unless it has one or more other active partners, its continuation is specified in its memorandum and articles of association or if the partners so decide by unanimous agreement. In this event, the provisions of subparagraph two of Article L-221-16 shall apply.
Article L222-12
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
The provisions of Article L. 221-17 are applicable to limited partnerships.
CHAPTER III
Limited liability companies Articles L223-2 to L223-43
Article L223-2
(Order No 2000-916 of 19 September 2000 Article 4 and Annex II Official Gazette of 22 September 2000 in force on l January 2002)
(Law No 2003-721 of 1 August 2003 Article 1 (I) Official Gazette of 5 August 2003)
The amount of the company's capital is determined by the memorandum and articles of association. It is divided into equal capital shares.
Article L223-3
(Order No. 2004-274 of 25 March 2004 Art. 11 Official Journal of 27 March 2004)
The number of members of a limited liability company shall not exceed one hundred. If such a company comes to have more than one hundred members, it shall be dissolved after a period of one year has elapsed unless the number of members has become equal to or lower than one hundred, or the company has been converted, during that period.
Article L223-4
Should all the shares in a limited liability company be gathered together in the ownership of one shareholder, the provisions of Article 1844-5 of the civil code relating to court-ordered dissolution shall not apply.
Article L223-5
A limited liability company may not have another limited liability company comprising only one person as its sole member.
In the event of infringement of the provisions of the preceding subparagraph, any interested party may apply for the dissolution of irregularly constituted companies. If the irregularity results from the gathering together in the ownership of one shareholder of all the shares in a limited liability having more than one member, the application for dissolution may not be made less than one year after the gathering together of the shares. Irrespective of the circumstances, a court may grant a maximum deadline of six months to regularise the situation and may not order the dissolution if compliance has taken place on the date on which the court gives judgment on the merits of the case.
Article L223-6
All the members must be parties to the deed of formation of the company, either in person or via a proxy on production of a special authorisation.
Article L223-7
(Act No 2001-420 of 15 May 2001 Article 1241 Official Gazette of 16 May 2001)
The total number of shares created must be subscribed by the members. They must be fully paid if they represent contributions in kind. At least one fifth of the face value of shares representing contributions in cash must be paid. The balance may be paid in one or more payments at the managing member’s discretion, within a deadline which may not exceed five years with effect from registration of the company in the commercial and companies register. However, the registered capital must be paid in full before any new shares may be subscribed in cash for the transaction to be valid.
If applicable, the memorandum and articles of association shall specify the terms and conditions under which shares may be subscribed in the form of services.
The ownership of the shares shall be stated in the memorandum and articles of association.
Funds arising from the payment of shares must be deposited within the conditions and deadlines specified by Conseil d'Etat decree.
Article L223-8
(Order No. 2004-274 of 25 March 2004 Art. 15 Official Journal of 27 March 2004)
The company's authorised representative shall not withdraw the funds resulting from the paying-up of the shares until the company is entered in the register of companies.
If the company is not incorporated within six months of the first deposit of funds, or if it is not entered in the register of companies within that same period, the contributors may individually institute legal proceedings seeking permission to withdraw the amount of their contributions. In the same circumstances, a representative of all the contributors may directly request withdrawal of the funds from the custodian.
If the contributors subsequently decide to form the company, new funds must be deposited.
Article L223-9
(Order No 2000-916 of 19 September 2000 Article 4 and Annex II Official Gazette of 22 September 2000 in force on l January 2002)
The memorandum and articles of association must contain a valuation of each contribution in kind. This shall be made in the light of a report annexed to the memorandum and articles of association and drawn up by and under the responsibility of an auditor of the formation proceedings appointed by unanimous decision of the future members or, in the absence thereof, by a court order applied for by the proceeding future partner.
However, the future members may decide by unanimous decision that the use of an auditor of the formation proceedings shall not be mandatory if no contribution in kind exceeds a value of 7 500 euros and if the total value of all the contributions in kind not subject to valuation by an auditor of the formation proceedings does not exceed half the capital.
If the company is formed by only one person, the auditor of the formation proceedings shall be appointed by the sole member. However, the use of an auditor of the formation proceedings shall not be mandatory if the conditions specified in the preceding subparagraph are complied with.
If there is no auditor of the formation proceedings or if the stated value is different from that suggested by the auditor of the formation proceedings, the members shall be jointly liable for five years with respect to third parties for the value attributed to contributions in kind at the time of formation of the company.
Article L223-10
Initial managers and members to whom nullity of the company is attributable shall be jointly liable with respect to the other members and third parties for the prejudice resulting from cancellation. Proceedings shall be time-barred by the deadline specified in subparagraph one of Article L. 235-13.
Article L223-11
(Order No. 2004-274 of 25 March 2004 Art. 12 Official Journal of 27 March 2004)
(Act No. 2004-1343 of 9 December 2004 Art. 78 XV Official Journal of 10 December 2004)
A limited liability company which is required by virtue of Article L. 223-35 to appoint an auditor and whose accounts for the last three twelve-month accounting periods have been duly approved by its members, may issue registered bonds without making a public offering.
The bond issue is decided by the meeting of the members pursuant to the provisions applicable to general meetings of shareholders. Such securities are subject to the provisions applicable to bonds issued by joint-stock companies, with the exception of those envisaged in Articles L. 228-39 to L. 228-43 and L. 228-51.
Upon each issue of bonds by a company which fulfils the conditions of the first paragraph, the company shall make a notice available to the subscribers concerning the conditions of issue and an information document as determined in a Conseil d'Etat decree.
Under pain of the guarantee being declared null and void, a limited liability company is prohibited from guaranteeing an issue of transferable securities unless the issue is made by a regional development company or is a bond issue which benefits from a subsidiary guarantee from the State.
Article L223-12
The shares may not be represented by negotiable securities.
Article L223-13
(Order No. 2004-274 of 25 March 2004 Art. 13 Official Journal of 27 March 2004)
(Act No. 2004-1343 of 9 December 2004 Art. 78 XV Official Journal of 10 December 2004)
The shares are freely transferable through succession or in the event of liquidation of community of property between spouses and are freely assignable between spouses and between ascendants and descendants.
The articles of association may nevertheless stipulate that the spouse, an heir, an ascendant or a descendant may only become a member after having been approved as provided for in Article L. 223-14. The time limit set for the company to decide on an application for approval shall not exceed that determined in Article L. 223-14, and the majority required shall not be greater than that determined in the said article, failing which the stipulation shall be null and void. If approval is refused, the provisions of the third and fourth paragraphs of Article L. 223-14 apply. If none of the solutions envisaged in those paragraphs is arrived at within the time allowed, approval is deemed to have been granted.
The articles of association may stipulate that in the event of the death of a member, the company shall continue with his heir or with the surviving members only. If the company continues with the surviving members only, or if the heir is refused approval, the latter is entitled to the value of the shares and voting rights of his predecessor in title.
It may also be stipulated that the company shall continue with the surviving spouse, with one or more of the heirs, or with any other person designated in the articles of association or, if the said articles so permit, in the last will and testament.
In the cases envisaged in the present article, the value of the shares and voting rights is determined on the day of death pursuant to Article 1843-4 of the Civil Code.
Article L223-14
(Act No. 2003-721 of 1 August 2003 Art. 1 III Official Journal of 5 August 2003)
(Order No. 2004-274 of 25 March 2004 Art. 14 Official Journal of 27 March 2004)
The shares may only be transferred to third parties outside the company with the consent of the majority of the members representing at least one half of the shares, unless the articles of association stipulate a greater majority.
If the company has more than one member, the transfer proposal is notified to the company and to each of the members. If the company has not made its decision known within three months of the date of the last notification given pursuant to the present paragraph, consent for the transfer is deemed to have been given.
If the company has refused to consent to the transfer, the members are required, within three months of such refusal, to purchase or arrange the purchase of the shares at a fixed price as provided for in Article 1843-4 of the Civil Code, unless the transferor waives his right to transfer his shares. The valuation fees are borne by the company. If the chief executive so requests, this time limit may be extended by a court decision, which extension shall not exceed six months.
With the transferring member's consent, the company may also decide, within the same time limit, to reduce its capital by the amount of the nominal value of that member's shares and buy up those shares at a price determined as provided for above. The company may be granted a time limit for payment of not more than two years by a court decision, if duly justified. The sums owed bear interest at the legal rate applicable to commercial transactions.
If, upon expiry of the time allowed, none of the solutions envisaged in the third and fourth paragraphs above has been arrived at, the member proceed with the transfer initially planned.
With the exception of succession, liquidation of community of property between spouses, or a donation in favour of a spouse, an ascendant or a descendant, the transferring member may only avail himself of the provisions of the third and fifth paragraphs above if he has held his shares for at least two years. Any clause contrary to the provisions of the present article is deemed not to exist.
Article L223-15
Should the company have given its consent to a proposal to take a charge on shares subject to the conditions specified in subparagraphs one and two of Article L. 223-14, this consent shall imply consent to the transferee in the event of the forced sale of the charged shares in accordance with the provisions of subparagraph one of Article 2078 of the civil code unless the company prefers to repurchase the shares after the assignment with a view to reducing its capital.
Article L223-16
Shares may be freely assigned between members.
Should the memorandum and articles of association contain a clause limiting transferability, the provisions of Article L. 223-14 shall apply. However, in this event the memorandum and articles of association may reduce the majority or shorten the deadline specified in the said article.
Article L223-17
The assignment of shares shall be subject to the provisions of Article L. 221-14.
Article L223- 19
The manager or the auditor if one is appointed shall submit to the shareholders' meeting or append to the documents communicated to the members in the event of a consultation by exchange of letters a report on agreements entered into directly or via intermediaries by the company and any of its managers or members. The shareholders' meeting shall rule on this report. The managers or members concerned may not participate in the vote and their shares shall not be taken into account for the calculation of the quorum and the majority.
However, should no auditor have been appointed, the agreements entered into by a manager who is not a member shall be subject to the prior approval of the shareholders' meeting.
By derogation from the provisions of subparagraph one, if a company enters into an agreement with its sole member, this shall simply be entered in the register of decisions.
Agreements not approved shall, nevertheless, remain effective subject to the contracting manager and, if applicable, member being jointly or severally liable, according to the case, for any consequences of the agreement prejudicial to the company.
The provisions of this article shall extend to agreements entered into with a company of which a member with unlimited liability, manager, director, general manager, member of the management or member of the supervisory board is simultaneously a manager or member of the limited liability company.
Article L223-20
The provisions of Article L. 223-19 shall not apply to agreements relating to ordinary transactions conducted under normal conditions.
Article L223-21
Managers and members other than legal personality shall be prohibited from contracting loans from the company irrespective of their form, from arranging for it to grant them a loan account or other borrowing whatsoever, or to arrange for the company to stand surety for them or act as their guarantor in respect of their obligations to third parties. Any such arrangement shall be null and void. This prohibition shall apply to the legal agents of members that are legal personalities.
The prohibition shall apply to the spouse and relatives in the ascending and descending line of the persons referred to in the preceding subparagraph, as well as to any intermediary.
However, if the company operates a financial establishment, this prohibition shall not apply to current commercial transactions entered into subject to normal terms and conditions.
Article L223-22
Managers shall be jointly or severally liable, according to the circumstances, to the company or to third parties for breaches of the legislative or regulatory provisions applicable to limited liability companies, for breaches of the memorandum and articles of association, and for their errors of management.
Should more than one manager have cooperated in the same circumstances, the court shall determine the contributory share of each in the reparations.
In addition to proceedings for reparation of prejudice suffered personally, the members may instigate civil liability proceedings against the managers, either individually or as a group subject to the conditions laid down by Conseil d'Etat decree. The plaintiffs shall be authorised to pursue reparation for the entirety of the prejudice suffered by the company to which, if applicable, damages may be granted.
Any clause in the memorandum and articles of association having the effect of subordinating the exercise of civil proceedings to prior notice to or authorisation of the shareholders’ meeting, or which contains a waiver of the exercise of these proceedings shall be deemed null and void.
No decision by the shareholders’ meeting may have the effect of extinguishing civil liability proceedings against the managers for errors committed in the performance of their office.
Article L223-23
The liability proceedings specified in Articles L. 223-19 and L. 223-22 shall be time-barred after three years with effect from the prejudicial act or, if it has been dissembled, from its disclosure. However, proceedings shall be time-barred after ten years if the act is classified as criminal.
Article L223-24
In the event of an administrative order or winding-up proceedings being instigated in application of the provisions of book VI, title II, the persons referred to in these provisions may be rendered liable for the debts of the company and shall be subject to the prohibitions and forfeitures in accordance with the conditions specified by the said provisions.
Article L223-25
(Order No. 2004-274 of 25 March 2004 Art. 17 Official Journal of 27 March 2004)
The chief executive may be dismissed by a decision of the members as provided for in Article L. 223-29, unless the articles of association stipulate a larger majority. If dismissal is decided upon without good cause, it may give rise to damages.
The chief executive may also be dismissed by the courts on good grounds, at the request of any member.
Contrary to the first paragraph, the chief executive of a limited liability company operating a press business within the meaning of Article 2 of Act No. 86-897 of 1 August 1986, which reforms the law and jurisdiction applicable to the press, may be dismissed only by a decision of the members representing at least three quarters of the share capital.
Article L223-26
(Order No. 2004-1382 of 20 December 2004 Art. 5 Official Journal of 22 December 2004)
The management report, the inventory and the annual accounts established by the chief executive are subject to approval by the meeting of members within six months of the close of the financial year.
To that end, the documents referred to in the previous paragraph, the text of the proposed resolutions and, where applicable, the auditor's report, the consolidated accounts and the group's management report, are sent to the members in the manner and within the time limits determined in a Conseil d'Etat decree. Any deliberation which violates the provisions of the present paragraph and its implementing decree may be declared void.
After dispatch of the communication referred to in the previous paragraph, any member is entitled to submit written questions which the chief executive must reply to at the meeting.
As provided for in a Conseil d'Etat decree, the members may at any time have sight of the company documents determined by the said decree pertaining to the previous three financial years. Any clause contrary to the provisions of the present article and its implementing decree is deemed not to exist.
The third to sixth paragraphs of Article L. 225-100 and Article L. 225-100-1 apply to the management report. Where applicable, Article L. 225-100-2 applies to the consolidated management report.
NB: Order 2004-1382 2004-12-20 Art. 12: The provisions of the present order shall apply with effect from the first financial year commenced on or after 1 January 2005.
Article L223-27
(Act No. 2003-7 of 3 January 2003 Art. 50 II Official Journal of 4 January 2003)
(Order No. 2004-274 of 25 March 2004 Art. 18 Official Journal of 27 March 2004)
The decisions are taken at a meeting. The articles of association may nevertheless stipulate that, with the exception of those referred to in the first paragraph of Article L. 223-26, all decisions or certain decisions may be taken via written consultation of the members or may result from the consent of all the members expressed in an act.
The members are invited to attend meetings in the manner and within the time limits determined in a Conseil d'Etat decree. The meeting is convened by the chief executive or, failing this, by the auditor, if there is one. The meeting shall not be held until the time limit for production of the documents referred to in Article L. 223-26 has expired.
One or more members holding one half of the shares or, if they represent at least one quarter of the members, holding one quarter of the shares, may request that a meeting be convened. Any clause to the contrary is deemed not to exist. Any member may ask the court to appoint a representative to convene the meeting and determine its agenda.
In the event of the death of the sole chief executive, the auditor or any member may convene a meeting of the members for the sole purpose of replacing the chief executive. Such meetings are convened in the manner and within the time limits determined in a Conseil d'Etat decree.
Any irregularly convened meeting may be cancelled. An action for voidance is nevertheless inadmissible if all the members were present or represented.
Article L223-28
Each member shall be entitled to participate in the decisions and shall have a number of votes equal to that of the company’s shares they hold.
A member may mandate their spouse to represent them on condition that the company is not composed only of the two spouses. If there are more than two members, a member may mandate another member to represent them.
They may not mandate any person other than those permitted by the memorandum and articles of association.
A member may not mandate another person to vote a proportion of their shares and vote the other proportion in person. Any clause contrary to the provisions of subparagraphs one, two or four above shall be deemed null and void.
Article L223-29
In the shareholders’ meetings or on the occasion of consultation by exchange of letters, decisions shall be passed by one or more members representing more than half the company’s shares.
Should this majority not be obtained in the absence of specification to the contrary in the memorandum and articles of association, the members shall be summoned to a second meeting or consulted a second time, according to the circumstances, and decisions shall be passed by a majority of the votes cast, irrespective of the number of parties voting.
Article L223-32
In the event of an increase in capital by the subscription of shares in cash, the provisions of the final subparagraph of Article L. 223-7 shall apply.
Funds arising from the subscription of shares may be withdrawn by the company’s proxy holder after the deposit receipt has been issued.
Should the increase in capital not be carried out within the deadline of six months with effect from the first deposit of the funds, the provisions of subparagraph two of Article L. 223-8 may be applied.
Article L223-33
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
If the increase in capital is effected, either wholly or partly, by means of contributions in kind, the provisions of the first line of Article L. 223-9 are applicable. However, the valuer of contributions in kind is appointed by a decision of the court at the behest of a partner.
When a valuer of contributions in kind has not been consulted, or when the valuation used differs from that proposed by the valuer of contributions in kind, the company's managers and the persons who subscribed to the increase in capital are jointly and severally liable for five years, in regard to third parties, for the value assigned to the said contributions.
Article L223-34
A reduction of capital may be authorised by the shareholders’ meeting ruling in accordance with the conditions laid down for amendments to the memorandum and articles of association. Under no circumstances may it interfere with the equality of the members.
If auditors have been appointed, notice of the proposed reduction of capital shall be communicated to them within the deadline laid down by Conseil d'Etat decree. They shall make their opinion on the causes and conditions of the reduction known to the shareholders’ meeting.
Should the shareholders’ meeting approve a proposed reduction of capital not motivated by losses, creditors whose debt antedates the date on which the minutes of the deliberation are filed with the clerk may lodge an objection to the reduction within the deadline laid down by Conseil d'Etat decree. A court order shall reject the objection or order either the repayment of the debts or the formation of guarantees if the company offers them and if they are judged adequate. Reduction of capital transactions may not begin during the deadline for objections.
A company may not purchase its own shares. However, a shareholders’ meeting which has decided in favour of a reduction of capital not motivated by losses may authorise the manager to buy a specified number of shares in order to cancel them.
Article L223-35
The members may appoint one or more auditors in accordance with the conditions specified in Article L. 223-29.
At least those limited liability companies which exceed, at the end of the financial year, the figures laid down by Conseil d'Etat decree two of the following criteria shall be obliged to designate an auditor: their balance sheet total, the amount of their turnover excluding VAT or the average number of employees during the financial year.
Even if these thresholds are not reached, one or more members representing at least one tenth of the capital may apply to the court for an auditor to be appointed.
Article L223-36
Members who are not managers shall have the right, twice per financial year, to ask written communication of the company’s books and documents and to ask the manager written questions concerning any matter which might compromise continuity of the operation. The manager’s reply shall be communicated to the auditor.
Article L223-37
One or more partners representing at least one tenth of the registered capital may, either individually or as a group under any form whatsoever, apply to the court for one or more experts to be appointed and charged with presenting a report on one or more management transactions.
The ministère public and the works council are competent to act in respect of the same ends.
Should the court accede to the application, the court order shall determine the scope of the mission and the powers of the experts. It may rule that the fees shall be for the account of the company.
The report shall be addressed to the applicant, to the ministère public, to the works council, to the auditor and to the manager. This report must also be annexed to that drawn up by the auditor for the next general meeting and receive the same publicity.
Article L223-38
(Law No 2003-706 of 1 August 2003 Article 112 Official Gazette of 2 August 2003)
I. - The auditors, who must be chosen from the list referred to in Article L. 225-219, are appointed for a term of six financial years.
II. and
III. - Paragraphs repealed.
IV. - Resolutions passed when the auditors have not been ?properly appointed, or based on a report from auditors who were appointed or retained contrary to the provisions of the present Article are null and void. The nullity is extinguished if the said resolutions are expressly confirmed by a general meeting on the basis of a report from properly appointed auditors.
Article L223-39
The provisions relating to the powers, the incompatibilities referred to in Article L. 225-222, the functions, the obligations, the liability, the substitution, the challenging, the dismissal and the remuneration of auditors of public companies shall apply to limited liability companies, subject to the specific rules applicable to these latters.
The auditors shall be advised of shareholders’ meetings and consultations no later than at the same time as the members. They shall have access to shareholders’ meetings.
The documents referred to in subparagraph one of Article L. 223-26 shall be made available to the auditor subject to the conditions and deadlines laid down by Conseil d'Etat decree.
Article L223-40
The repayment of dividends not corresponding to profits made in reality may be imposed upon the members who have received them.
Proceedings for repayment shall be time-barred after three years with effect from the date on which the dividends became payable.
Article L223-41
A limited liability company shall not be dissolved if a court order for the court-ordered winding-up, personal bankruptcy, prohibition from management as specified by Article L. 625-8 or legal disability measure is made with respect to one of the members.
It shall also not be dissolved by the death of a member unless otherwise specified in the memorandum and articles of association.
Article L223-42
(Law No 2003-721 of 1 August 2003 Article 1 (IV) Official Gazette of 5 August 2003)
If, on account of losses recorded in the accounting documents, the company's capital were to fall below half of the value of the share capital, the partners shall, within four months of approving the accounts that show that loss, decide whether there are grounds for early dissolution of the company.
If dissolution is not decided with the majority required by the memorandum and articles of association, the company is required, not later than the end of the second financial year following that in which the losses were recorded, to reduce its capital by an amount at least equal to that of the losses which could not be charged to reserves, if, during that period, the shareholders' equity has not been reconstituted to a level at least equal to one half of the share capital.
In either case, the resolution adopted by the partners is published in accordance with the terms prescribed in a Conseil d'Etat decree.
If the chief executive or the auditor should fail to secure a decision, or if the partners are unable to validly deliberate, any interested party may ask the court to dissolve the company. The same applies if the provisions of the second paragraph above have not been applied. In all such cases, the court may grant the company a maximum period of six months in which to put the situation in order, and cannot order its dissolution if the situation has already been put in order by the day on which it rules on the merits.
The provisions of the present Article do not apply to companies in receivership or subject to a recovery plan.
Article L223-43
(Order No 2000-916 of 19 September 2000 Article 4 and Annex II Official Gazette of 22 September 2000 in force on 1 January 2002)
The conversion of a limited liability company into a general partnership, a limited partnership or a limited partnership that issues shares shall require the unanimous agreement of all its members.
Conversion into a limited company must be decided by the majority required for amendments to the memorandum and articles of association. However, it may be decided upon by members representing the majority of the shares if the shareholders’ funds stated on the last balance sheet exceed 750 000 euros.
The decision must be preceded by a report by a registered auditor on the company’s situation. Any conversion carried out in breach of the rules in this article shall be null and void.
CHAPTER IV
General provisions applicable to joint-stock companies Articles L224-1 to L224-3
Article L224-1
A joint-stock company shall be designated by a business name, which must be immediately preceded or followed by a statement of the duration of the company and the amount of the registered capital.
The name of one or more members may be included in the business name. However, the names of limited partners may not be included in the business name of a limited partnership that issues shares.
Article L224-2
(Order No 2000-916 of 19 September 2000 Article 4 and Annex II Official Gazette of 22 September 2000 in force on 1 January 2002)
The registered capital must be at least 225 000 euros if the company’s shares are offered to the public and at least 37000 euros in the contrary case.
A reduction of the registered capital to a lesser amount may be decided upon only subject to the suspensive condition of an increase in capital destined to raise this to an amount at least equal to the amount specified in the preceding subparagraph unless the company is converted into another form of company. In the event of failure to comply with the provisions of this subparagraph, any interested party may apply to the court for the dissolution of the company. This dissolution may not be ordered if the situation has been regularised on the date on which the court gives judgment on the merits of the case.
By derogation from subparagraph one, the capital of press journalist’s companies must be at least 300 euros if they are constituted in the form of a limited company
Article L224-3
(Law No 2001-420 of 15 May 2001 Article 100 Official Gazette of 16 May 2001)
(Law No 2003-706 of 1 August 2003 Article 98 Official Gazette of 2 August 2003)
When a company, regardless of its form, which does not have an auditor is converted into a joint-stock company, one or more conversion auditors, responsible for estimating the value of the items that comprise the corporate assets and the special advantages, are appointed either by a unanimous decision of the partners or by a decision of the court at the request of the company's executives or one of their number. The conversion auditors may be tasked with drafting the report on the company's situation referred to in the third paragraph of Article L. 223-43. In which case, only one report is written. The conversion auditors are subject to the incompatibilities referred to in Article L. 225-224. The company's auditor can be appointed as a conversion auditor. The report is made available to the partners.
The partners adjudicate on the valuation of the assets and the awarding of the special advantages. They can only reduce them unanimously.
Failing the express approval of the partners duly recorded in the minutes, the conversion is null and void.
CHAPTER V
Public limited companies Articles L225-2 to L225-1
Article L225-1
A limited company is a company whose capital is divided into shares and which is formed among members who shall bear any losses only up to the amount of their contributions. The number of members may not be less than seven.
SECTION I
**Formation of public limited companies **
Articles L225-2 to
L225-16
Subsection 1
**Formation with a public offering **
Articles L225-2 to
L225-11
Article L225-2
The draft memorandum and articles of association shall be drawn up and signed by one or more founders, who shall file one copy with the clerk of the Tribunal de commerce of the district in which the registered office is located.
The founders shall publish a notice in accordance with the conditions laid down by Conseil d'Etat decree. No subscription may be received if the formalities specified in subparagraphs one and two above have not been complied with.
Persons who have forfeited the right of directorship or management of a company or who are disqualified from holding these offices may not be founders.
Article L225-3
The capital must be fully subscribed.
Shares subscribed in cash must be paid in respect of at least fifty percent paid of their face value. The balance may be paid in one or more payments, at the discretion of the board of directors or the management according to the case, within a deadline which may not exceed five years with effect from registration of the company in the commercial and companies register.
Shares subscribed in kind must be paid in full at the time of their issue. Shares may not represent contributions in the form of services.
Article L225-4
The subscription of shares in cash shall be evidenced by a subscription form drawn up in accordance with the conditions laid down by Conseil d'Etat decree.
Article L225-5
Funds arising from subscriptions in cash and the subscribers’ list, specifying the amounts paid by each subscriber, shall be deposited in accordance with the conditions laid down by Conseil d'Etat decree, which shall also determine the conditions under which the right to communication of this list shall be opened.
With the exception of the deposits referred to by the decree specified in the preceding subparagraph, no party may hold the sums gathered on behalf of a company in formation for more than one week.
Article L225-6
Subscriptions and payments shall be evidenced by a receipt issued by the depository at the time of deposit of the funds, on presentation of the subscription forms.
Article L225-7
Once the receipt of deposit has been issued, the founders shall summon the subscribers to a constitutive shareholders’ meeting in accordance with the conditions and deadlines laid down by Conseil d'Etat decree. This meeting shall confirm that the capital has been fully subscribed and that the shares have been paid in respect of the amount due. It shall decide on the adoption of the memorandum and articles of association, which may be amended only by unanimous decision of all the subscribers, appoint the first directors or members of the supervisory board and designate one or more auditors. The minutes of the session of the meeting shall observe, if applicable, the acceptance of their office by the directors or members of the supervisory board and by the auditors.
Article L225-8
In the event of contributions in kind as in the event of the specification of special benefits for persons who may or may not be members of the company, one or more auditors of the formation proceedings shall be designated by court order at the request of one or more of the founders. They shall be subject to the incompatibilities specified by Article L. 225-224.
The auditors of the formation proceedings shall appraise, subject to their own responsibility, the value of the contributions in kind and the special benefits. The report, filed with the clerk with the proposed memorandum and
articles of association, shall be held at the disposal of the subscribers in accordance with the conditions laid down by Conseil d'Etat decree.
The constitutive shareholders’ meeting shall rule on the valuation of the contributions in kind and the granting of special benefits. It may reduce them only by unanimous decision of all the subscribers.
In the absence of explicit approval by the contributors and the beneficiaries of special benefits stated in the minutes, the company shall not be formed.
Article L225-9
Subscribers of shares shall participate in the vote or mandate another person to represent them in accordance with the conditions specified in Articles L. 225-106, L. 225-110 and L. 225-113.
The constitutive shareholders’ meeting shall deliberate in accordance with the quorum and majority conditions specified for special shareholders’ meetings.
Article L225-10
Should the general meeting deliberate on the approval of a contribution in kind or the granting of a special benefit, the shares of the contributor or the beneficiary shall not be taken into account in the calculation of the majority.
The contributor or the beneficiary shall not be entitled to participate in the deliberation either in person or as a proxy.
Article L225-11
Funds arising from subscriptions in cash may not be withdrawn by the company’s proxy holder before it is registered in the commercial and companies register.
Should the company not be formed within the deadline of six months with effect from the deposit of the proposed memorandum and articles of association with the registry, any subscriber may apply to a court for the appointment of a proxy authorised to withdraw the funds and return them to the subscribers, subject to deduction of the expenses of distribution.
A new deposit of funds and the declaration specified in Articles L. 225-5 and L. 225-6 must be made if the contributors decide subsequently to form the company.
Subsection 2
Formation without a public offering Articles L225-12 to L225-16
Article L225-12
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
When there is no public issue, the provisions of Subsection 1 apply, with the exception of Articles L. 225-2, L. 225-4, L. 225-7, the second, third and fourth paragraphs of Article L. 225-8, and Articles L. 225-9 and L. 225-10.
Article L225-13
Payments shall be evidenced by a certificate issued by the depository at the time of deposit of the funds, on presentation of the list of shareholders, stating the amounts paid by each of them.
Article L225-14
The memorandum and articles of association must contain an evaluation of any contributions in kind. This shall be carried out by an auditor of the formation proceedings, who shall draw up a report under their own responsibility to be annexed to the memorandum and articles of association.
The same procedure must be followed if special benefits are specified.
Article L225-15
The memorandum and articles of association must be signed by the shareholders either in person or via a proxy on production of a special authorisation, after the issue of the deposit receipt and after the report specified in Article L. 225-14 has been placed at the disposal of the shareholders in accordance with the conditions and deadlines laid down by Conseil d'Etat decree.
Article L225-16
The first directors and the first members of the supervisory board and the first auditors shall be designated in the memorandum and articles of association.
SECTION II
**Management and administration of public limited companies **
Articles L225- 17 to
L225-95-1
Subsection 1
**Board of directors of the general management **
Articles L225- 17 to
L225-42-1
Article L225- 17
(Law No 2001-420 of 15 May 2001 Article 104 (I) and Article 105 Official Gazette of 16 May 2001)
(Law No 2003-706 of 1 August 2003 Article 128 Official Gazette of 2 August 2003)
A limited company is administered by a board of directors composed of at least three members. The memorandum and articles of association stipulate the maximum permissible number of board members, which shall not exceed eighteen.
In the event of the death, resignation or removal from office of the chairman of the board of directors, the board may, if it has been unable to replace him from among its members, and without prejudice to the provisions of Article L. 225-24, appoint an additional director to perform the chairman's functions.
Article L225-18
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The directors shall be appointed by the constitutive shareholders’ meeting or by the routine shareholders’ meeting. In the circumstances specified by Article L. 225-16, they shall be designated in the memorandum and articles of association. The term of their office shall be determined by the memorandum and articles of association but may not exceed six years in the event of appointment by general meetings or three years in the event of appointment in the memorandum and articles of association. However, in the event of merger or division, the appointment may be made by the special shareholders’ meeting.
The directors shall be eligible for re-election unless otherwise specified in the memorandum and articles of association. They may be dismissed at any time by the routine shareholders’ meeting.
Any appointment made in breach of the preceding provisions shall be null and void, with the exception of those which may be made in accordance with the conditions specified in Article L. 225-24.
Article L225-l9
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The memorandum and articles of association must specify an age limit for the exercise of the office of director either for all the directors or for a specific percentage of them.
In the absence of an explicit provision in the memorandum and articles of association, the number of directors over the age of seventy years may not be more than one third of the directors in office.
Any appointment made in breach of the provisions in the preceding subparagraph shall be null and void.
In the absence of an explicit provision in the memorandum and articles of association specifying another procedure, the oldest director shall be deemed to be retiring from office when the age limit for the directors specified in the memorandum and articles of association or by law is exceeded.
Article L225-20
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
A legal personality may be appointed as a director.
On their appointment, they must designate a permanent representative, who shall be subject to the same conditions and obligations and who shall incur the same civil and penal liabilities as if they were a director in their own name, without prejudice to the joint liability of the legal personality they represent.
Should the legal personality dismiss its representative, it must appoint their replacement at the same time.
Article L225-21
(Law No 2001-420 of 15 May 2001 Article 105 and Article 1001 (1) Official Gazette of 16 May 2001)
(Law No 2002-1303 of 29 October 2002 Article 1 (I) Official Gazette of 30 0ct 2002)
No natural person shall concurrently hold more than five directorships of limited companies having their registered office on French soil.
Contrary to the provisions of the first paragraph, this shall not apply to directorships or supervisory board membership of companies which are controlled, within the meaning of Article L. 233-16, by the company of which that natural person is a director.
For the purposes of the present Article, directorships of companies whose shares are not quoted on a regulated stock market within the meaning of Article L. 233-16 and are held by a single company count as one directorship, subject to the number of such directorships held not exceeding five.
Any natural person who is in breach of the provisions of the present Article shall resign from one of his directorships within three months of being appointed, or from the directorship in question within three months of the occurrence of the event which resulted in a condition of the previous paragraph no longer being met. Upon expiry of that period, he shall be deemed to have resigned either from his new directorship or from the directorship which no longer meets the conditions laid down in the previous paragraph, whichever applies, and shall return the remuneration received. This shall not affect the validity of the deliberations in which he participated.
Article L225-22
(Act No. 2001-420 of 15 May 2001 Art. 105 Official Journal of 16 May 2001)
(Act No. 2001-1168 of 11 December 2001 Art. 33 II Official Journal of 12 December 2001)
An employee of the company can only become a director if his contract of employment relates to actual employment. He shall not lose the benefit of that contract of employment. Any directorship conferred in breach of this paragraph is null and void. Such voidance shall not entail voidance of the deliberations that the illegally appointed director participated in.
The number of directors bound to a company by a contract of employment shall not exceed one third of the serving directors.
However, directors elected by the employees, directors representing the employee shareholders or the company's open-end investment company pursuant to Article L225-23, and, in public companies with worker participation, the representatives of the workers' cooperative society, are not included in the number of directors bound to the company by a contract of employment referred to in the previous paragraph.
In the case of a merger or demerger, the contract of employment may have been entered into with one of the merged companies or with the demerged company.
Article L225-23
(Law No 2001-152 of 19 February 2001 Article 24 (1) and Article 25 (I) Official Gazette of 20 February 2001)
(Law No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
(Law No 2002-73 of 17 January 2002 Article 217 (1) and (2) Official Gazette of 18 January 2002)
If the report presented to the general meeting by the board of directors pursuant to Article L. 225-102 establishes that the shares held by the companies' staff and by the staff of affiliated companies within the meaning of Article L.225-180 represent more than 3% of the company's share capital, one or more directors shall be elected by the general meeting of shareholders on a proposal from the shareholders as provided for in Article L. 225-102 and as prescribed in the relevant decree. Those directors shall be elected from among the employee-shareholders or, if appropriate, from among the employee-shareholders who are members of the supervisory board of a company investment trust which holds shares in the company. Such directors are not counted when the minimum and maximum numbers of directors are determined pursuant to Article L. 225-17.
If an extraordinary general meeting is not held within eighteen months of the report being presented, any employee-shareholder may request the presiding judge, ruling on a summary basis, to direct the board of directors, under pain of a coercive fine, to convene an extraordinary general meeting and submit draft resolutions to it aimed at amending the memorandum and memorandum and articles of association as provided for in the preceding paragraph and in the final paragraph of the present Article.
If the request is upheld, the coercive fine and the legal costs shall be paid by the directors.
Companies whose board of directors includes one or more directors designated by the members of the supervisory boards of company investment trusts representing the members, or one or more employees elected pursuant to the provisions of Article L. 225-27, are exempted from the obligations referred to in the first paragraph.
If an extraordinary general meeting is convened pursuant to the first paragraph, it also rules on a draft resolution to provide for the election of one or more directors by the staff of the company and of the direct or indirect subsidiaries having their registered office in France. If appropriate, these representatives are designated as provided for in Article L. 225-27.
Article L225-24
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
In the event of vacancy due to the death or resignation of one or more directors, the board of directors may make appointments on a provisional basis between general meetings. Should the number of directors have fallen below the legal minimum, the remaining directors must immediately convene the routine shareholders’ meeting with a view to completing the board’s numbers.
Should the number of directors have fallen below the minimum number specified in the memorandum and articles of association without, however, being below the legal minimum, the board of directors must make appointments on a provisional basis with a view to completing its numbers within a deadline of three months with effect from the date on which the vacancy arises.
The appointments made by the board by virtue of subparagraphs one and two above shall be subject to confirmation by the very next routine shareholders’ meeting. In the absence of confirmation, the deliberations made and the acts carried out beforehand by the board shall remain no less valid.
Should the board fail to make the required appointments or to convene the meeting, any interested party may apply to the court for the designation of a proxy charged with convening the general meeting in order to make the appointments or to confirm the appointments specified in subparagraph three.
Article L225-25
(Act No 2001-420 of 15 May 2001 Article 105(3) Official Gazette of 16 May 2001)
Each director must own a number of the company’s shares determined by the memorandum and articles of association.
Should a director not own the required number of shares on the date of their appointment or should they cease to own them during the term of their office, they shall be deemed to have resigned from office if they have not regularised the situation within a deadline of three months.
The provisions of subparagraph one shall not apply to shareholder employees appointed as directors in application of Article L. 225-23.
Article L225-26
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The auditors shall ensure, under their own responsibility, compliance with the provisions specified in Article L. 225-25 and shall give notice of any breach in their report to the annual general meeting.
Article L225-27
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The memorandum and articles of association may specify that, in addition to the directors whose number and method of appointment are specified in Articles L. 225-17 and L. 225-18, the board of directors shall contain directors elected either by the company’s employees or by the employees of the company and those of its direct or indirect subsidiaries which have their registered office located on French territory. The number of these directors may not exceed four, or five in companies whose shares are not listed on a regulated stock exchange, nor may they exceed one third of the number of the other directors. Should the number of directors elected by the employees be equal to or in excess of two, engineers, executives and similar shall have one less directorship.
The directors elected by the employees shall not be taken into account for the determination of the minimum number and the maximum number of directors specified in Article L. 225-17.
Article L225-28
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The directors elected by the employees must have an employment contract with the company or with one of its direct or indirect subsidiaries which have their registered office located on French territory antedating their appointment by at least two years and corresponding to a real employment. However, the condition of length of service shall not be required if the company has been formed for less than two years on the date of their appointment.
All the company’s employees and, if applicable, all the employees of its direct or indirect subsidiaries which have their registered office located on French territory, whose employment contract antedates the date of the date of the election shall be electors. The ballot shall be by secret vote.
Should at least one directorship be reserved for engineers, executives and similar, the employees shall be divided into two electing bodies voting separately. The first electing body shall comprise engineers, executives and similar, the second the other employees. The memorandum and articles of association shall determine the distribution of the directorships by electing body in accordance with the employee structure.
The candidates or lists of candidates may be proposed either by one or more representative trades union organisations within the meaning of Article L. 423-2 of the employment code or by one twentieth of the electors or, if their number is in excess of two thousand, by one hundred of them.
Should there be one directorship to fill for the whole of the electoral body, a majority vote with two ballots must be held. Should there be one directorship to fill in an electing body, the election must be held by majority vote with two ballots within this electing body. In addition to the name of the candidate, each candidature must include the name of their potential replacement. The candidate having obtained the absolute majority of the votes cast in the first ballot or the relative majority in the second ballot shall be declared elected.
In the other cases, the election shall be by proportional representation based on the list according to the highest vote and without vote splitting. The list must include a number of candidates double that of the directorships to be filled.
In the event of a tied vote, the candidates with the earliest-dated employment contracts shall be declared elected. The other terms and conditions of the vote shall be determined by the memorandum and articles of association. Disputes relating to the electorate, eligibility and the due form of the electoral operations shall be brought before the
trial judge, who shall give a final decision in accordance with the conditions specified by subparagraph one of Article L. 433-11 of the employment code.
Article L225-29
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The directors shall be eligible for re-election unless otherwise specified in the memorandum and articles of association.
Any appointment made in breach of Articles L. 225-27, L 225-28 and this article shall be null and void. This nullity shall not cause that of the deliberations in which the irregularly appointed director has participated.
Article L225-30
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The office of director elected by the employees shall be incompatible with any office of trades union representative, member of the works council, employee representative or member of the company’s health, safety and working conditions committee. A director who holds one or more of these offices at the time of their election must resign from it or them within one week. Should they fail to do so, they shall be deemed to have resigned their office of director.
Article L225-31
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
Directors elected by the employees shall not lose the benefit of their employment contract. Their remuneration as an employee may not be reduced by virtue of the exercise of their office.
Article L225-32
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
Breach of the employment contract shall terminate the office of director elected by the employees. Directors elected by the employees may not be dismissed other than for fault in the performance of their office by order of the presiding judge of the Tribunal de grande instance, given in session in chambers at the request of the majority of the members of the board of directors. The order shall be immediately enforceable.
Article L225-33
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
Except in the event of termination at the employee’s initiative, the breach of the employment contract of a director elected by the employees may be pronounced only by the board of judgment of the conseil de prud'hommes ruling in the form of summary proceedings. The order shall be immediately enforceable.
Article L225-34
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
I. - In the event of the vacancy of an office of director elected by the employees due to death, resignation, dismissal, breach of employment contract or for any other reason whatsoever, the vacant office shall be filled in the following manner:
1. If the election has taken place by majority vote with two ballots, by the replacement
2. If the election has taken place by list, by the candidate appearing on the same list immediately after the last candidate elected.
II. The term of office of the director thus designated shall end on the arrival of the normal term of office of the other directors elected by the employees.
Article L225-35
(Law No 2001-420 of 15 May 2001 Article 105 and Article 106 (1) Official Gazette of 16 May 2001) (Law No 2003-706 of 1 August 2003 Article 129 Official Gazette of 2 August 2003)
The board of directors determines the broad lines of the company's business activities and ensures their implementation. Without prejudice to the powers expressly invested in meetings of the shareholders, and in so far as the memorandum and articles of association permit, it deals with all matters relating to the conduct of the company's business and decides all pertinent issues through its deliberations.
In its dealings with third parties, the company is bound even by acts of its board of directors which do not come within the purview of the company's corporate mission, unless it can prove that the third party knew that a specific action was extraneous to that mission or, given the circumstances, could not have been ignorant of that fact, and mere publication of the memorandum and articles of association does not suffice to constitute such proof.
The board of directors shall carry out the inspections and verifications which it considers appropriate. The company's chairman or general manager is required to send all the documents and information necessary to perform this task to each director.
Undertakings, avals and guarantees given by companies other than banks or other financial institutions must be authorised by the board of directors as prescribed in a Conseil d'Etat decree. That decree also determines the conditions under which any transaction which exceeds that authorisation can be raised against third parties.
Article L225-36
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The transfer of the registered office within the same department or within an adjacent department may be decided upon by the board of directors, subject to confirmation of this decision by the next routine shareholders’ meeting.
Article L225-36-l
(inserted by Act No 2001-420 of 15 May 2001 Article 105 and 106(2) Official Gazette of 16 May 2001)
The company’s memorandum and articles of association shall determine the rules relating to the convening and deliberations of the board of directors.
Should it not have met for more than two months, at least one third of the members of the board of directors may call upon the chairman to convene it with a specified agenda.
The general manager may also call upon the chairman to convene the board of directors with a specified agenda. The chairman shall be bound by the requests addressed to them by virtue of the two preceding subparagraphs.
Article L225-37
(Act No. 2001-420 of 15 May 2001 Art. 105 and Art. 109 1 Official Journal of 16 May 2001)
(Act No. 2003-706 of 1 August 2003 Art. 117 I 1, II Official Journal of 2 August 2003)
(Act No. 2005-842 of 26 July 2005 Art. 5 I, Art. 7 I Official Journal of 27 July 2005)
The board of directors may validly deliberate only if at least half of its members are present. Any clause to the contrary is deemed unwritten.
Unless the memorandum and articles of association require a larger majority, the decisions are taken on a majority vote of the members present or represented.
Unless the board is convened to deal with matters referred to in Articles L232-1 and L233-16, and barring any contrary provision in the memorandum and articles of association, the internal regulations may provide for directors who participate in the meeting via videoconferencing or via a telecommunications medium which permits their identification and guarantees their effective participation to be deemed to be present for calculation of the quorum and the majority.
The nature of, and implementing regulations for, such media are determined in a Conseil d'Etat decree. The memorandum and articles of association may limit the nature of the decisions which may be made at such meetings and provide for a right of objection for a given number of directors.
Barring any contrary provision in the memorandum and articles of association, the chairman of the meeting has a casting vote in the event of a split vote.
The directors, and any other persons invited to attend board meetings, are bound by secrecy in regard to any information of a confidential nature presented as such by the chairman of the board of directors.
In companies that make public offerings, the chairman of the board of directors describes the preparation and organisation of the board's work and the internal auditing procedures put in place by the company in a report attached to the report referred to in Articles L225-100, L225-102, L225-102-1 and L233-26. Without prejudice to the provisions of Article L225-56, the said report also indicates any limitations the board of directors places on the powers of the general manager.
Article L225-38
(Law No 2001-420 of 15 May 2001 Article 105 and Article 111 (1) Official Gazette of 16 May 2001)
(Law No 2003-706 of 1 August 2003 Article 123 (I) (6) Official Gazette of 2 August 2003)
Any agreement entered into, either directly or through an intermediary, between the company and its general manager, one of its assistant general managers, one of its directors, one of its shareholders holding a fraction of the voting rights greater than 10% or, in the case of a corporate shareholder, the company which controls it within the meaning of Article L. 233-3, must be subject to the prior consent of the board of directors.
The same applies to agreements in which a person referred to in the previous paragraph has an indirect interest. Agreements entered into between the company and another firm are also subject to prior consent if the company's general manager, one of its assistant general managers or one of its directors is the owner, an indefinitely liable partner, a manager, a director or a member of that firm's supervisory board or, more generally, is in any way involved in its management.
Article L225-39
(Law No 2001-420 of 15 May 2001 Article 105 and Article 111 (5) Official Gazette of 16 May 2001)
(Law No 2003-706 of 1 August 2003 Article 123 (I) (1) Official Gazette of 2 August 2003)
The provisions of Article 225-38 are not applicable to agreements relating to current operations entered into under normal terms and conditions.
Such agreements are nevertheless made known to the chairman of the board of directors by the interested party unless they are of no significance to any party, given their objective or their financial implications. A list of such agreements and their objectives is sent to the members of the board of directors and to the auditors by the chairman.
Article L225-40
(Act No 2001-420 of 15 May 2001 Article 105 and Article 111(8) Official Gazette of 16 May 2001)
The interested party must inform the board immediately upon becoming aware of an agreement to which Article L. 225-38 applies. They may not participate in the vote on the requested prior approval of the Board. The chairman of the board of directors shall advise the auditors of all agreements authorised and shall submit them to the general meeting for approval.
The auditors shall present a special report on the agreements to the meting, which shall rule on this report. The interested party may not participate in the vote and their shares shall not be taken into account for the calculation of the quorum and the majority.
Article L225-41
(Act No 2001-420 of 15 May 2001 Article 105 and Article 111(10) Official Gazette of 16 May 2001)
Agreements approved by the meeting shall produce their effects with respect to third parties, as shall those which it refuses, unless they are cancelled in the event of fraud.
Even in the absence of fraud, the prejudicial consequences to the company of refused agreements may be charged to the interested party and, potentially, to the other members of the board of directors.
Article L225-42
(Act No 2001-420 of 15 May 2001 Article 105 and Article 111(10) Official Gazette of 16 May 2001)
Without prejudice to the liability of the interested party, agreements referred to in Article L. 225-38 and entered into without the prior authorisation of the board of directors may be cancelled if they have prejudicial consequences for the company.
Nullity proceedings shall be time-barred after three years with effect from the date of the agreement. However, should the agreement have been dissembled, the starting point for the term of limitation shall be carried forward to the date on which it was revealed.
Nullity may be covered by a vote of the general meeting taken on the special report of the auditors setting out the circumstances by virtue of which the authorisation procedure has not been followed. The provisions of subparagraph four of Article L. 225-40 shall apply.
Article L225-43
(Act No 2001-420 of 15 May 2001 Article 105 and Article 111(11) Official Gazette of 16 May 2001)
In order for the contract to be valid, directors other than legal personalities shall be prohibited from contracting loans from the company irrespective of their form, from arranging for it to grant them a loan account or other borrowing whatsoever, or to arrange for the company to stand surety for them or act as their guarantor in respect of their obligations to third parties.
However, if the company operates a banking or financial establishment, this prohibition shall not apply to current commercial transactions entered into under normal conditions.
The same prohibition shall apply to the general manager, to assistant general managers and to permanent representatives of directors which are legal personalities. It shall also apply to the spouse and relatives in the ascending and descending line of the persons referred to in this article, as well as to any intermediary.
The prohibition shall not apply to loans granted to directors elected by the employees by the company in application of the provisions of Article L. 313-1 of the construction and dwelling place code.
Article L225-44
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
Subject to the provisions of Article L. 225-22 and Article L. 225-27, the directors may not receive any permanent or other remuneration from the company other than those specified in Articles L. 225-45, L. 225-46, L. 225-47 and L. 225-53.
Any clause to the contrary in the memorandum and articles of association shall be deemed null and void and any decision to the contrary shall be deemed null and void.
Article L225-45
(Act No 2001-420 of 15 May 2001 Article 105 and Article 117(1) Official Gazette of 16 May 2001)
As remuneration for their activities and in the form of directors' fees, the general meeting may grant the directors an annual fixed amount which this meeting shall determine without being bound by the provisions of the memorandum and articles of association or previous decisions. The amount of these shall be charged to operating expenses. Their distribution among the directors shall be determined by the board of directors.
Article L225-46
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The board of directors may grant exceptional remunerations for missions or mandates conferred upon directors. In such cases, these remunerations shall be charged to operating expenses and subject to the provisions of Articles L. 225-38 to L. 225-42.
Article L225-47
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The board of directors shall elect a chairman from among its members who, in order for their appointment to be valid, must be a natural person. It shall determine their remuneration.
The chairman shall be appointed for a term which may not exceed their term of office as a director. They shall be eligible for re-election.
The board of directors may dismiss them at any time. Any provision to the contrary shall be deemed null and void.
Article L225-48
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
The memorandum and articles of association must specify an age limit for the performance of the office of chairman of the board of directors which, in the absence of an explicit provision, shall be fixed at sixty-five years.
Any appointment made in breach of the provisions specified in the preceding subparagraph shall be deemed null and void. A chairman of the board of directors shall be deemed to retire from office on reaching the age limit.
Article L225-50
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
In the event of the temporary incapacity or death of the chairman, the board of directors, may delegate a director to the office of the chairman.
In the event of temporary incapacity, this delegation shall be made or a limited term. It may be renewed. In the event of death, it shall be valid until the election of the new chairman.
Article L225-51
(Law No 2001-420 of 15 May 2001 Article 105 and Article 106 (3) Official Gazette of 16 May 2001) (Law No 2003-706 of 1 August 2003 Article 117 (I) (3) Official Gazette of 2 August 2003)
The chairman of the board of directors organises and oversees its work and reports to the General Meeting thereon. He sees to it that the company's management structures function well and ensures, in particular, that the directors are able to accomplish their task.
Article L225-51-1
(Act No 2001-420 of 15 May 2001 Article 105 and 106(4) Official Gazette of 16 May 2001)
The general management of the company shall be assumed under their responsibility by either the chairman of the board of directors or by another natural person appointed by the board of directors and bearing the title of general manager.
In accordance with the conditions defined by its memorandum and articles of association, the board of directors shall choose between the two forms of performance of the general management referred to in subparagraph one. The shareholders and third parties shall be informed of this choice in accordance with the conditions laid down by Conseil d'Etat decree
If the general management of the company is assumed by the chairman of the board of directors, the provisions of this sub-section relating to the general manager shall apply to them.
Article L225-52
(Act No 2001-420 of 15 May 2001 Article 105 Official Gazette of 16 May 2001)
In the event of the instigation of an administrative order or winding-up proceedings in application of title II of book VI, the persons referred to by these provisions may be rendered liable for the debts of the company and shall be subject to the prohibitions and forfeitures in accordance with the conditions specified by these provisions.
Article L225-53
(Act No 2001-420 of 15 May 2001 Article 105 and Article 107(1) Official Gazette of 16 May 2001) On the proposal of the general manager, the board of directors may appoint one or more natural persons charged with assisting the general manager, with the title of assistant general manager.
The memorandum and articles of association shall determine the maximum number of assistant general managers, which may not exceed five. The board of directors shall determine the remuneration of the general manager and the assistant general managers.
Article L225-54
(Act No 2001-420 of 15 May 2001 Article 105 and Article 107(2) Official Gazette of 16 May 2001)
The memorandum and articles of association shall specify an age limit for the performance of the office of general manager and the assistant general manager which, in the absence of an explicit provision, shall be fixed at sixty-five years.
Any appointment made in breach of the provisions specified in the preceding subparagraph shall be deemed null and void. A general manager or assistant general manager shall be deemed to retire from office on reaching the age limit.
Article L225-54-1
(Law No 2001-420 of 15 May 2001 Article 105 and Article 110 (3) Official Gazette of 16 May 2001)
(Law No 2002-1303 of 29 October 2002 Article 1 (II) Official Gazette of 30 0ct 2002)
No natural person shall concurrently act as a general manager of more than one limited company having its registered office on French soil.
Contrary to the provisions of the first paragraph:
-
a natural person can concurrently act as a general manager, a director or the sole managing director of another company which is controlled, within the meaning of Article L. 233-16, by the company of which that natural person is a general manager;
-
a natural person who is a general manager of one company may also be a managing director, a director or the sole managing director of another company, provided that its shares are not quoted on a regulated stock market.
Any natural person who is in breach of the provisions of the present Article shall resign from one of his directorships within three months of being appointed, or from the directorship in question within three months of the occurrence of the event which resulted in a condition laid down in the previous paragraph no longer being met. Upon expiry of that period, he shall be deemed to have resigned either from his new directorship or from the directorship which no longer meets the conditions laid down in the previous paragraph, whichever applies, and shall return the remuneration received. This shall not affect the validity of the deliberations in which he participated.
Article L225-55
(Act No 2001-420 of 15 May 2001 Article 105 and Article 107(3) Official Gazette of 16 May 2001)
The general manager may be dismissed at any time by the board of directors. The same shall apply, on the proposal of the general manager, to the assistant general managers. Should the dismissal be decided without good cause, it may give rise to damages, except when the general manager assumes the office of chairman of the board of directors.
Should the general manager cease to or be unable to perform their office, the assistant general managers shall retain their office and remuneration, unless decided otherwise by the board, until the appointment of the new general manager.
Article L225-56
(Act No 2001-420 of 15 May 2001 Article 105 and Article 107(4) Official Gazette of 16 May 2001)
I. - The general manager shall be invested with the most extensive powers to act on behalf of the company in all circumstances. They shall exercise their powers subject to those that the Law allocates explicitly to shareholders’ meetings and to the board of directors.
They shall represent the company in its dealings with third parties. The company shall be bound even by those acts of the general manager not covered by the purpose of the company unless it is able to prove that the third party was aware that the act exceeded these objects or that could not have known it in view of the circumstances, the simple publication of the memorandum and articles of association being excluded from constituting this proof.
Provisions in the memorandum and articles of association and decisions of the board of directors limiting the powers of the managers resulting from this article shall not be demurrable with respect to third parties.
II. - In agreement with the general manager, the board of directors shall determine the scope and the term of the powers conferred upon the assistant general managers.
The assistant general managers shall have the same powers as the general manager with respect to third parties.
Article L225-22-1
(inserted by Act No. 2005-842 of 26 July 2005 Art. 8 I Official Journal of 27 July 2005)
In companies whose securities are admitted to trading on a regulated market, if a person bound by a contract of employment to the company or to any other controlled company or controlling company within the meaning of II and III of Article L233-16 is appointed as its general manager or chief executive officer, the said contract's provisions, if any, relating to elements of remuneration, compensation or benefits payable or likely to become payable on account of those functions being transferred or altered, or thereafter, shall be subject to the provisions of Articles L225-38 and L225-40 to L225-42.
NB: Act No. 2005-842 of 26 July 2005 Art. 8 II: the provisions of Article 8 I are applicable to agreements entered into with effect from 1 May 2005.
Article L225-42-1
(inserted by Act No. 2005-842 of 26 July 2005 Art. 8 I Official Journal of 27 July 2005)
In companies whose securities are admitted to trading on a regulated market, commitments made to their chairmen, general managers or chief executive officers, by the company itself or by any controlled or controlling company within the meaning of II and III of Article L233-16, relating to elements of remuneration, compensation or benefits payable or likely to become payable on account of their functions ceasing or changing, or thereafter, are subject to the provisions of Articles L225-38 and L225-40 to L225-42.
NB: Act No. 2005-842 of 26 July 2005 Art. 8 II: the provisions of Article 8 I are applicable to agreements entered into with effect from 1 May 2005.
Subsection 2
Management and supervisory board Articles L225-57 to L225-90-1
Article L225-57
The memorandum and articles of association of any public limited company may stipulate that it shall be governed by the provisions of this sub-section. If so, the company shall remain subject to all rules applicable to public limited companies, except those contained in Articles L. 225-17 to L.225-56.
It may be decided during the existence of the company that this stipulation shall be introduced into, or deleted from, its memorandum and articles of association.
Article L225-58
(Order No 2000-916 of 19 September 2000 Article 4 and Annex II, Official Gazette of 22 September 2000, in force on 1 January 2002)
A public limited company shall be managed by a management consisting of not more than five members. Where the company's shares are admitted for trading on a regulated market, the said number may be increased to seven by the memorandum and articles of association.
In public limited companies with a share capital of less than 150,000 euros, the functions conferred on the management may be exercised by a single person. The management shall exercise its functions under the supervision of a supervisory board.
Article L225-59
The members of the management shall be appointed by the supervisory board, which shall appoint one of the said members as chairman.
Where a single person exercises the functions conferred on the management, that person shall take the title of"sole managing director".
Members of the management, or the sole managing director, must be natural persons, failing which their appointment shall be void. They may be chosen from outside the shareholders.
Article L225-60
The memorandum and articles of association must lay down an age limit for the exercising of the functions of a member of the management or of a sole managing director. In the absence of any express provision, the said age limit shall be sixty-five years.
Any nomination made in breach of the provisions of the preceding sub-paragraph shall be void.
On attaining the said age, a member of the management or the sole managing director shall be deemed to resign from office.
Article L225-61
(Law No 2001-420 of 15 May 2001 Article 108 Official Gazette of 16 May 2001)
The members of the management or the sole managing director may be dismissed by the general meeting, and also, if the memorandum and articles of association so provide, by the supervisory board. If the decision to dismiss them is unreasonable, they may be entitled to sue for damages.
If the interested party has entered into a contract of employment with the company, their dismissal from the post of director shall not have the effect of terminating the said contract.
Article L225-62
The memorandum and articles of association shall determine the term of office of the management within limits of between two and six years. In the absence of any provision in the memorandum and articles of association, the term of office shall be four years. If any post becomes vacant during the said term, the replacement director shall be appointed for the remainder of the mandate of the current management.
Article L225-63
The deed of appointment shall fix the method and amount of the remuneration to be paid to each member of the management.
Article L225-64
The management shall have the widest powers to act on the company's behalf in any circumstances. It shall exercise its said powers within the limits of the purpose of the company and subject to the powers expressly attributed by the law to the supervisory board and shareholders' meetings.
In dealings with third parties, the company shall be bound even by acts of the management that do not relate to its objects, unless it can prove that the third party was aware that the act in question was beyond the scope of the said objects or that in the circumstances it could not have been unaware of that fact. Mere publication of the memorandum and articles of association is considered not to be sufficient proof thereof.
Provisions of the memorandum and articles of association limiting the powers of the management shall not be binding on third parties.
The management shall consider and take its decisions in accordance with the conditions laid down by the memorandum and articles of association.
Article L225-65
The supervisory board may decide to move the company's registered office within the same department or to an adjacent department, subject to the ratification of its said decision by the next routine shareholders’ meeting.
Article L225-66
The chairman of the management or the sole managing director, as the case may be, shall represent the company in its dealings with third parties.
Nevertheless, the memorandum and articles of association may empower the supervisory board to attribute the same power of representation to one or more other members of the management, who will then be known as the managing director(s).
Provisions of the memorandum and articles of association limiting the powers of representation of the company shall not be binding on third parties.
Article L225-67
(Law No 2001-420 of 15 May 2001 Article 105 and Article 110 (4) Official Gazette of 16 May 2001) (Law No 2002-1303 of 29 October 2002 Article 1 (III) Official Gazette of 30 0ct 2002)
No natural person shall concurrently hold more than one directorship or sole managing directorship of companies having their registered office on French soil.
Contrary to the provisions of the first paragraph:
-
a natural person can concurrently act as a managing director or the sole managing director of another company which is controlled, within the meaning of Article L. 233-16, by the company of which that natural person is a director or the sole managing director;
-
a natural person who is a managing director of a company may also be a managing director or the sole managing director of another company, provided that its shares are not quoted on a regulated stock market.
Any natural person who is in breach of the provisions of the present Article shall resign from one of his directorships within three months of being appointed, or from the directorship in question within three months of the occurrence of the event which resulted in a condition laid down in the previous paragraph no longer being met. Upon expiry of that period, he shall be deemed to have resigned either from his new directorship or from the directorship which no longer meets the conditions laid down in the previous paragraph, whichever applies, and shall return the remuneration received. This shall not affect the validity of the deliberations in which he participated.
Article L225-68
(Act No. 2003-706 of 1 August 2003 Art. 117 I 2 Official Journal of 2 August 2003)
(Act No. 2005-842 of 26 July 2005 Art. 7 II, Art. 11 II Official Journal of 27 July 2005)
The supervisory board permanently supervises the executive board's management of the company.
The memorandum and articles of association may make execution of the latter's transactions subject to prior approval from the supervisory board. However, the assignment of real property, the total or partial assignment of equity holdings, the provision of sureties, security, avals and guarantees shall require the supervisory board's approval as determined in a Conseil d'Etat decree unless the company is a banking or financial institution. The said decree also determines how any transaction lacking such approval may be raised against third parties.
Throughout the year, the supervisory board carries out the verifications and inspections it considers appropriate and may request sight of any document it considers necessary for the accomplishment of its mission. The executive board presents a report to the supervisory board at least once each quarter.
Following the close of each accounting period and within a time limit determined in a Conseil d'Etat decree, the executive board also presents to it, for verification and inspection purposes, the documents referred to in the second paragraph of Article L225-100.
The supervisory board presents its observations on the executive board's report and the accounts for the period to the general meeting referred to in Article L225-100.
In companies that make public offerings, the chairman of the supervisory board describes the preparation and organisation of the board's work and the internal auditing procedures put in place by the company in a report attached to the report referred to in the previous paragraph and in Article L233-26
Article L225-69
(Law No 2001-420 of 15 May 2001 Article 104 (2) Official Gazette of 16 May 2001)
The Supervisory board shall consist of at least three members. The memorandum and articles of association shall fix the maximum number of members of the board, which shall be limited to eighteen.
Article L225-70
The memorandum and articles of association must stipulate an age limit for the exercise of the functions of a member of the supervisory board, applicable either to all members of the supervisory board or to a specific percentage of them. In the absence of any express provision in the memorandum and articles of association, the number of members of the supervisory board who have attained the age of seventy years must not exceed one third of the members of the supervisory board currently in office.
Any appointment made in breach of the provisions of the preceding sub-paragraph shall be void.
In the absence of any express provisions in the memorandum and articles of association stipulating some other procedure, where the limit fixed by the memorandum and articles of association or the law as to the age of members of the supervisory board is exceeded, the oldest member of the supervisory board shall be deemed to have resigned from their post.
Article L225-71
(Law No 2001-152 of 19 February 2001 Article 24 (3) and (4) and Article 25 (II) Official Gazette of 20 February 2001)
(Law No 2001-1168 of 11 December 2001 Article 33 (III) Official Gazette of 12 December 2001)
(Law No 2002-73 of 17 January 2002 Article 217 (3) and (4) Official Gazette of 18 January 2002)
If the report presented to the general meeting by the executive board pursuant to Article L. 225-102 establishes that the shares held by the company's staff and by the staff of affiliated companies within the meaning of Article L.225-180 represent more than 3% of the company's share capital, one or more members of the supervisory board shall be elected by the general meeting of shareholders on a proposal from the shareholders as provided for in Article L. 225-102 and as prescribed in the relevant decree. Those members shall be elected from among the employee-shareholders or, if appropriate, from among the employee-shareholders who are members of the supervisory board of a company investment trust which holds shares in the company. Such members are not counted when the minimum and maximum numbers of supervisory board members are determined pursuant to Article L. 225-69.
If an extraordinary general meeting is not held within eighteen months of the report being presented, any employee-shareholder may request the presiding judge, ruling on a summary basis, to direct the executive board, under pain of a coercive fine, to convene an extraordinary general meeting and submit draft resolutions to it aimed at amending the memorandum and memorandum and articles of association as provided for in the preceding paragraph and in the final paragraph of the present Article. If the request is upheld, the coercive fine and the legal costs shall be paid by the board members.
Companies whose supervisory board includes one or more members designated by the members of the supervisory boards of company investment trusts representing the members, or one or more employees elected pursuant to the provisions of Article L. 225-79, are exempted from the obligations referred to in the first paragraph.
If an extraordinary general meeting is convened pursuant to the first paragraph, it also rules on a draft resolution to provide for the election of one or more members of the supervisory board by the staff of the company and of the direct or indirect subsidiaries having their registered office in France. If appropriate, these representatives are designated as provided for in Article 225-79.
Article L225-72
(Law No 2001-420 of 15 May 2001 Article 115 (4) Official Gazette of 16 May 2001)
Every member of the supervisory board must own such number of shares in the company as is determined by the memorandum and articles of association.
If, on the day of their appointment, a member of the supervisory board does not own the requisite number of shares or if, during their period of office, they shall cease to own the same, they shall be deemed to have resigned their post, unless they shall have remedied the said situation within a period of three months.
The provisions of the first sub-paragraph shall not apply to paid employees holding shares who are appointed as members of the supervisory board pursuant to Article L. 225-71.
Article L225-73
The auditors shall be responsible, on their own liability, for ensuring that the rules laid down in Article L225-72 are duly observed and shall disclose any breach thereof in their report to the annual general meeting.
Article L225-74
No member of the supervisory board may be a member of the management.
Article L225-75
Members of the supervisory board shall be appointed by the inaugural general meeting or the routine shareholders’ meeting. In the circumstances specified in Article L225-16, they shall be designated in the memorandum and articles of association. Their terms of office shall be determined by the memorandum and articles of association, but may not exceed six years where they are appointed by the general meetings and three years where they are appointed in the memorandum and articles of association.
They shall be eligible for re-election unless otherwise stipulated by the memorandum and articles of association. They may be dismissed by the routine shareholders’ meeting at any time.
Any appointment made in breach of the foregoing rules shall be void except any that may be made in the circumstances specified in Article L. 225-78.
Article L225-76
A legal person may be appointed on to the supervisory board. On appointment, it must designate a permanent representative who shall be subject to the same conditions and obligations and shall incur the same civil and criminal liabilities as if they were a member of the Board in their own name, without prejudice to the joint and several liability of the legal person they represent.
If a legal person dismisses its representative, it must simultaneously replace them.
Article 225-77
(Law No 2001-420 of 15 May 2001 Article 110 (5) Official Gazette of 16 May 2001)
(Law No 2002-1303 of 29 October 2002 Article 1 (IV) Official Gazette of 30 October 2002)
No natural person shall concurrently be a member of the supervisory board of more than five limited companies having their registered office on French soil.
Contrary to the provisions of the first paragraph, this shall not apply to supervisory board membership or directorships of companies which are controlled, within the meaning of Article L. 233-16, by the company on whose supervisory board that natural person sits.
For the purposes of the present Article, seats on the supervisory board of companies whose shares are not quoted on a regulated stock market, within the meaning of Article L. 233-16, that are occupied by a single company count as one directorship, subject to the number of such directorships held not exceeding five.
Any natural person who is in breach of the provisions of the present Article shall resign from one of his directorships within three months of being appointed, or from the directorship in question within three months of the occurrence of the event which resulted in a condition laid down in the previous paragraph no longer being met. Upon expiry of that period, he shall be deemed to have resigned either from his new directorship or from the directorship which no longer meets the conditions laid down in the previous paragraph, whichever applies, and shall return the remuneration received. This shall not affect the validity of the deliberations in which he participated.
Article L225-78
Should one or more vacancies on the supervisory board occur through death or resignation, the Board may make temporary appointments between two general meetings.
Where the number of members of the supervisory board shall have fallen below the legal minimum, the management must immediately call an routine shareholders’ meeting to complete the membership of the supervisory board.
Where the number members of the supervisory board shall have fallen below the minimum required by the memorandum and articles of association, although not below the legal minimum, the supervisory board must make temporary appointments with the object of completing the membership of the Board within three months of the date on which the vacancy occurs.
Appointments made by the board pursuant to the first and third sub-paragraphs above shall be subject to ratification by the next routine shareholders’ meeting. If the appointments are not so ratified, any decisions previously taken and acts previously effected by the board shall nevertheless remain valid.
If the board shall neglect to make the requisite appointments or if the meeting shall not be called, any interested party may bring a legal action for the appointment of a representative to be responsible for calling a general meeting, with the object of making or ratifying the appointments referred to in the third sub-paragraph.
Article L225-79
It may be stipulated in the memorandum and articles of association that, apart from those members whose number and method of appointment are specified in Articles L.225-69 and L.225-75, the supervisory board shall include members elected either by the company's personnel or by the personnel of the company and those of its direct or indirect subsidiaries whose registered offices are situated on French territory.
The number of members of the supervisory board elected by the employees may not exceed four, nor a third of the number of other members. Where the number of members elected by the employees is two or more, engineers, executives and employees of similar rank shall have at least one seat.
Members of the supervisory board elected by the employees shall not be taken into account when determining the minimum and maximum number of members stipulated in Article L.225-69.
Article L225-80
Conditions relating to eligibility, the electorate, the composition of electing bodies, voting methods, objections, terms and conditions of office, dismissal, the protection of contracts of employment and the replacement of members of the supervisory board elected by the employees shall be fixed in accordance with the rules defined in Articles L.225-28 to L.225-34.
Article L225-81
The supervisory board shall elect from among its own members a chairman and a deputy chairman who shall be responsible for calling meetings and conducting its discussions. It shall determine their remuneration if it sees fit.
The chairman and deputy chairman of the supervisory board must be natural persons, failing which their appointment shall be void. They shall hold office throughout the term of office of the supervisory board.
Article L225-82
(Act No. 2001-420 of 15 May 2001 Art. 109 2 Official Journal of 16 May 2001)
(Act No. 2005-842 of 26 July 2005 Art. 5 II Official Journal of 27 July 2005)
The Supervisory Board may validly deliberate only if at least half of its members are present.
Unless the memorandum and articles of association require a larger majority, the decisions are taken on a majority vote of the members present or represented.
Unless the board is convened to deal with matters referred to in Articles L232-1 and L233-16, and barring any contrary provision in the memorandum and articles of association, the internal regulations may provide for supervisory board members who participate in the meeting via videoconferencing or via a telecommunications medium which permits their identification and guarantees their effective participation to be deemed to be present for calculation of the quorum and the majority. The nature of, and implementing regulations for, such media are determined in a Conseil d'Etat decree. The memorandum and articles of association may limit the nature of the decisions which may be made at such meetings and provide for a right of objection for a given number of supervisory board members.
Barring any contrary provision in the memorandum and articles of association, the chairman of the meeting has a casting vote in the event of a split vote.
Article L225-83
(Law No 2001-420 of 15 May 2001, Article 117 II, Official Gazette of 16 May 2001)
The general meeting may allocate to members of the supervisory board, in remuneration for their work, by way of attendance fees, a fixed annual sum to be determined by the said meeting, which shall not be bound by the provisions of the memorandum and articles of association or previous decisions. The amount of the said sum shall be entered in the accounts as operating expenses. The distribution thereof among the members of the supervisory board shall be fixed by the latter.
Article L225-84
The supervisory board may allocate extraordinary payments in remuneration of duties or mandates entrusted to members of the board. In any such case, the said payments, which shall be entered in the accounts as operating expenses, shall be subject to the provisions of Articles L.225-86 to L.225-90.
Article L225-85
Members of the supervisory board shall not receive any remuneration, whether permanent or otherwise, from the company, other than that provided in Articles L.225-81, L.225-83 and L.3225-84, and, if appropriate, those payable under a contract of employment for a post actually held.
The number of members of the supervisory board bound to the company by a contract of employment must not exceed a third of the members in office at any given time. Nevertheless, members of the supervisory board elected in accordance with Articles L.225-79 and L.225-80 and those appointed in accordance with the provisions of Article L.225-71 shall not be counted when determining the said number.
Any clause to the contrary in the memorandum and articles of association shall be deemed non-existent and any decision to the contrary shall be void.
Article L225-86
(Law No 2001-420 of 15 May 2001 111 (2) Official Gazette of 16 May 2001)
(Law No 2003-706 of 1 August 2003 Article 123 (I) (6) Official Gazette of 2 August 2003)
Any agreement entered into, either directly or through an intermediary, between the company and a member of the executive board or of the supervisory board, one of its shareholders holding a fraction of the voting rights greater than 10% or, in the case of a corporate shareholder, the company which controls it within the meaning of Article L. 233-3, must be subject to the prior consent of the supervisory board.
The same applies to agreements in which a person referred to in the previous paragraph has an indirect interest. Agreements entered into between the company and another firm are also subject to prior consent if a member of
the company's executive board or supervisory board is the owner, an indefinitely liable partner, a manager, a director or a member of that firm's supervisory board or, more generally, is in any way involved in its management.
Article L225-87
(Law No 2001-420 of 15 May 2001 Article 111 (7) Official Gazette of 16 May 2001)
(Law No 2003-706 of 1 August 2003 Article 123 (I) (2) Official Gazette of 2 August 2003)
The provisions of Article 225-86 are not applicable to agreements relating to current operations entered into under normal terms and conditions.
Such agreements are nevertheless made known to the chairman of the supervisory board by the interested party unless they are of no significance to any party, given their objective or their financial implications. A list of such agreements and their objectives is sent to the members of the supervisory board and to the auditors by the chairman.
Article L225-88
(Law No 2001-420 of 15 May 2001, Article 111(9), Official Gazette of 16 May 2001)
The interested party must inform the supervisory board as soon as they become aware of an agreement to which Article L.225-86 applies. If they sit as a member of the supervisory board, they may not take part in the vote on the consent requested.
The chairman of the supervisory board shall notify the auditors of all agreements approved and shall submit the same to the general meeting for approval.
The auditors shall present a special report on the said agreements to the meeting, which shall pass a resolution regarding the said report.
The interested party shall not be entitled to take part in the vote and their shares shall not be taken into account when calculating the quorum and the majority.
Article L225-89
(Law No 2001-420 of 15 May 2001, Article 111(12), Official Gazette of 16 May 2001)
Whether or not approved by the meeting, agreements shall have legal effect so far as third parties are concerned, unless the annulled for fraud.
Even where there is no fraud, the interested party, and other members of the management if appropriate, may be held liable for any consequences of unapproved agreements that are damaging to the company.
Article L225-90
Without prejudice to the liability of the interested party, any such agreements as are referred to in Article L.225-86, if entered into without the prior consent of the supervisory board, may be annulled if they have had damaging effects on the company.
An action for annulment must be brought within three years of the date of the agreement. Nevertheless, if the agreement was concealed, time shall begin to run with effect from the date on which its existence became known.
The annulment of such an agreement may be covered by a vote of the general meeting acting on a special auditors' report stating the reasons why the consent procedure was not followed. The fourth sub-paragraph of Article L.225-88 shall apply.
Article L225-91
It shall be prohibited for members of the management and non-corporate members of the supervisory board to obtain loans from the company in any form, or overdraft facilities, on a current account or otherwise, or to obtain any pledge of security or guarantee from the company for any obligations they may contract to third parties. Any agreement to do so shall be void.
This prohibition shall apply to permanent representatives of corporate members of the supervisory board. It shall likewise apply to the spouses, ascendants and descendants of persons referred to in this Article, or any intermediary.
Nevertheless, where the company operates a banking or financial institution, the prohibition shall not apply to ordinary transactions concluded on normal terms and conditions in the course of its business..
The prohibition shall not apply to loans granted by the company to members of the supervisory board elected by the employees, pursuant to Article 313-1 of the Building and Housing Code.
Article L225-92
Members of the management and the supervisory board, and likewise any person called to attend meetings of the said boards, shall required to maintain the secrecy of any information of a confidential nature given as such by the chairman.
Article L225-93
Should proceedings be commenced for a Court order for financial reorganisation on insolvency or liquidation subject to judicial supervision, pursuant to Title II of Book VI, the persons referred to in the said provisions may be held liable for the debts of the company and shall be subject to the relevant prohibitions and prohibition, as laid down by the said provisions.
Article L225-79-1
(inserted by Act No. 2005-842 of 26 July 2005 Art. 8 I Official Journal of 27 July 2005)
In companies whose securities are admitted to trading on a regulated market, if a person bound by a contract of employment to the company or to any other controlled company or controlling company within the meaning of II and III of Article L233-16 is appointed as a member of the executive board, the said contract's provisions, if any, relating to elements of remuneration, compensation or benefits payable or likely to become payable on account of those functions ceasing or changing, or thereafter, shall be subject to the provisions of Articles L225-86 and L225-88 to L225-90.
NB: Act No. 2005-842 of 26 July 2005 Art. 8 II: the provisions of Article 8 I are applicable to agreements entered into with effect from 1 May 2005.
Article L225-90-1
(inserted by Act No. 2005-842 of 26 July 2005 Art. 8 I Official Journal of 27 July 2005)
In companies whose securities are admitted to trading on a regulated market, commitments made to executive board members, by the company itself or by any controlled or controlling company within the meaning of II and III of Article L233-16, relating to elements of remuneration, compensation or benefits payable or likely to become payable on account of their functions ceasing or changing, or thereafter, are subject to the provisions of Articles L225-86 and L225-88 to L225-90.
NB: Act No. 2005-842 of 26 July 2005 Art. 8 II: the provisions of Article 8 I are applicable to agreements entered into with effect from 1 May 2005.
Subsection 3
Provisions common to managing agents of public limited companies Articles L225-94 to L225-95-1
Article L225-94
(Law No 2001-420 of 15 May 2001 Article 110 (6) Official Gazette of 16 May 2001)
(Law No 2002-1303 of 29 October 2002 Article 1 (V) Official Gazette of 30 October 2002)
The limitation of the number of seats on the board of directors or the supervisory board that any one natural person can occupy concurrently by virtue of Articles L. 225-212 L. 225-77 is applicable to the concurrent holding of seats on both the board of directors and the supervisory board.
For the purposes of Articles L. 225-54-1 and L. 225-67, it is permissible for a natural person to hold the general managership of one company and that of another company which is controlled by that company within the meaning of Article L. 233-16.
Article L225-94-1
(Law No 2001-420 of 15 May 2001 Article 110 (7) Official Gazette of 16 May 2001)
(Law No 2002-1303 of 29 October 2002 Article 1 (VI) Official Gazette of 30 October 2002)
(Law No 2003-706 of 1 August 2003 Article 131 (1) Official Gazette of 2 August 2003)
Without prejudice to the provisions of Articles L. 225-21, L. 225-54-1, L. 225-67, L. 225-77 and L. 225-94, no natural person shall concurrently hold more than five posts as managing director, director, sole managing director or member of the supervisory board of limited companies having their registered office on French soil. For the purposes of these provisions, the assumption of general management duties by a director counts as a single post.
Contrary to the above provisions, this shall not apply to directorships, or supervisory board membership, of companies which are controlled, within the meaning of Article L. 233-16, by the company in which a post referred to in the first paragraph is occupied. (1)
Any natural person who is in breach of the provisions of the present Article shall resign from one of his directorships within three months of being appointed, or from the directorship in question within three months of the occurrence of the event which resulted in a condition laid down in the previous paragraph no longer being met. Upon expiry of that period, he shall be deemed to have resigned either from his new directorship or from the directorship which no longer meets the conditions laid down in the previous paragraph, whichever applies, and shall return the remuneration received. This shall not affect the validity of the deliberations in which he participated.
NB (1): These provisions enter into force on 16 November 2002.
Article L225-95
(Law No 2001-420 of 15 May 2000 Article 104 (3) Official Gazette of 16 May 2001)
In the event of a merger of public limited companies, the number of members of the board of directors or supervisory board, as the case may be, may exceed the total of eighteen specified in Articles L.225-17 and L.225-69, for a period of three years from the date of the merger, as laid down in Article L.236-4, but may not exceed twenty-four.
Article L225-95-1
(Act No. 2001-420 of 15 May 2001 Art. 110 8 Official Journal of 16 May 2001) (Act No. 2002-1303 of 29 October 2002 Art. 2 Official Journal of 30 October 2002) (Act No. 2003-706 of 1 August 2003 Art. 63 V Official Journal of 2 August 2003)
Notwithstanding the provisions of Articles L225-21, L225-77 and L225-94-1, a remit as a permanent representative of a venture capital company referred to in Article 1 of Act No. 85-695 of 11 July 1985 containing various provisions of an economic and financial nature, or of an innovation venture capital company referred to in III (B) of Article 4 of Act No. 72-650 of 11 July 1972 containing various provisions of an economic and financial nature, or of a management company authorised to manage open-end investment companies governed by paragraph 1 of Subsection 6 of Section 1 of Chapter IV of Part I of Book II and Articles L214-36 and L214-41 of the Monetary and Financial Code, are not taken into account.
If the conditions stipulated in the present article are no longer met, any natural person must resign from the functions which do not meet the requirements of Articles L225-21, L225-77 and L225-94-1 within three months. Upon expiry of that period, he shall be deemed to no longer represent the legal entity and must return the remuneration received. This shall not affect the validity of the deliberations he participated in.
Notwithstanding Articles L225-21, L225-54-1, L225-67 and L225-94-1, remits as chairman, general manager, sole general manager, executive board member or director of a local semipublic limited company performed by a representative of a territorial authority or of a group of territorial authorities are not taken into account for application of the rules relating to plurality of offices.
SECTION III
Shareholders’ meetings Articles L225-96 to L225-126
Article L225-96
(Act No. 2005-842 of 26 July 2005 Art. 6 I Official Journal of 27 July 2005)
Only an extraordinary General Meeting is authorised to amend any provision of the articles of association. Any clause to the contrary is deemed unwritten. It may nevertheless not increase the shareholders' commitments, without prejudice to transactions resulting from a properly executed share consolidation.
It may validly deliberate when first convened only if the shareholders present or represented hold at least one quarter of the voting shares and, if reconvened, one fifth of the voting shares. Failing this, the second meeting may be postponed to a date not later than two months after the date originally scheduled. In companies which do not make public offerings, the memorandum and articles of association may require higher quorums.
It rules on a majority of two thirds of the votes held by the shareholders present or represented.
Article L225-97
An special shareholders’ meeting may change the nationality of the company, provided that the new host country shall have entered into a special agreement with France permitting the company to acquire its nationality and to transfer its registered office to the new host country's territory, while retaining its legal personality.
Article L225-98
(Act No. 2005-842 of 26 July 2005 Art. 6 II Official Journal of 27 July 2005)
The ordinary general meeting makes all decisions other than those referred to in Articles L225-96 and L225-97.
It may validly deliberate when first convened only if the shareholders present or represented hold at least one fifth of the voting shares. In companies which do not make public offerings, the memorandum and articles of association may require a higher quorum. If it is reconvened, no quorum is required. It rules on a majority of the votes held by the shareholders present or represented.
Article L225-99
(Act No. 2005-842 of 26 July 2005 Art. 6 III Official Journal of 27 July 2005)
The holders of shares in a given category attend special meetings.
A decision to vary the rights relating to a share category taken at a general meeting is not final until it has been approved by that category's special meeting of shareholders.
Special meetings may only validly deliberate when first convened if the shareholders present or represented hold at least one third of the voting shares whose rights are to be varied and, if reconvened, one fifth of those shares. Failing this, the second meeting may be postponed to a date not later than two months after the date originally scheduled. In companies which do not make public offerings, the memorandum and articles of association may require higher quorums. They rule as stipulated in the third paragraph of Article L225-96.
Article L225-100
(Act No. 2001-420 of 15 May 2001 Art. 118 Official Journal of 16 May 2001)
(Order No. 2004-604 of 24 June 2004 Art. 51 I Official Journal of 26 June 2004)
(Order No. 2004-1382 of 20 December 2004 Art. 3 Official Journal of 22 December 2004)
An ordinary general meeting is held at least once each year within six months of the close of the financial year, without prejudice to any extension of that time limit by a court decision.
The board of directors or the executive board presents its report and the annual accounts to the meeting and also, where applicable, the consolidated accounts and the management report relating thereto.
The said report includes an objective and exhaustive analysis of the company's business development, results and financial position, and in particular its borrowings relative to the volume and complexity of the business. To the extent necessary for an understanding of the company's business development, results or position, and independently of the key performance indicators of a financial nature which must be included in the report by virtue of other provisions of the present code, the analysis includes, where appropriate, the key performance indicators of a non-financial nature which relate to the company's specific business, such as information pertaining to environmental issues and personnel matters.
The report also includes a description of the main risks and uncertainties the company faces.
The analysis referred to in the third paragraph contains, where applicable, references to the figures shown in the annual accounts and additional explanations relating thereto.
The report also contains indications concerning the company's use of financial instruments, when this is relevant for an evaluation of its assets, its liabilities, its financial position and its profits or losses. These indications relate to the company's objectives and policy in regard to financial risk management, including its policy on the hedging of each main transaction category envisaged for which hedge accounting is used. They also relate to the company's exposure to price, credit, liquidity and cash-flow risks.
A summary table of the powers granted to the board of directors or the executive board by the general meeting of shareholders in connection with capital increases pursuant to Articles L. 225-129-1 and L. 225-129-2 is attached to the said report. The table shows the use made of those powers during the financial year. In their report, the auditors comment on the fulfilment of the task entrusted to them by Article L. 225-235.
The meeting deliberates and rules on all matters relating to the annual accounts and, where applicable, the consolidated accounts, for the previous financial year.
It exercises the powers vested in it, inter alia, by Article L. 225-18, the fourth paragraph of Article L. 225-24, the third paragraph of Article L. 225-40, the third paragraph of Article L. 225-42 and Article L. 225-45, or, where applicable, Article L. 225-75, the fourth paragraph of Article L. 225-78, Article L. 225-83, the third paragraph of Article L. 225-88 and the third paragraph of Article L. 225-90.
NB: Order 2004-1382 2004-12-20 Art. 12: The provisions of the present order shall apply with effect from the first financial year commenced on or after 1 January 2005.
Article L225-100-1
(inserted by Order No. 2004-1382 of 20 December 2004 Art. 4 Official Journal of 22 December 2004)
The third to sixth paragraphs of Article L. 225-100 do not apply to companies which, at the close of the financial year, do not exceed the figures determined by decree for two of the following criteria: the balance sheet total, the net amount of their turnover or the average number of permanent staff employed during the financial year. The present paragraph does not apply to companies whose financial instruments referred to in 1 or 2 of I of Article L. 211-1 of the Monetary and Financial Code are admitted to trading on a regulated market.
Companies which, at the close of the financial year, do not exceed the figures determined by decree for two of the following criteria: the balance sheet total, the net amount of their turnover or the average number of permanent staff employed during the financial year, are not required to provide the information of a non-financial nature referred to in the last sentence of the third paragraph of Article L. 225-100. The present paragraph does not apply to companies whose financial instruments referred to in 1 or 2 of I of Article L. 211-1 of the Monetary and Financial Code are admitted to trading on a regulated market.
NB: Order 2004-1382 2004-12-20 Art. 12: The provisions of the present order shall apply with effect from the first financial year commenced on or after 1 January 2005.
Article L225-100-2
(inserted by Order No. 2004-1382 of 20 December 2004 Art. 4 Official Journal of 22 December 2004)
When the company draws up consolidated accounts pursuant to Article L. 233-16, the consolidated management report includes an objective and exhaustive analysis of the business trend, of the results and of the financial position of all the companies included in the consolidation, and in particular their borrowings relative to the volume and complexity of the business. To the extent necessary for an understanding of the companies' business development, results or situation, the analysis increases the key performance indicators of a nature financial and, where applicable, non-financial nature which relate to the companies' specific business, such as information pertaining to environmental issues and personnel matters.
The report also includes a description of the main risks and uncertainties faced by all the companies included in the consolidation.
The analysis referred to in the first paragraph contains, where applicable, references to the figures shown in the consolidated accounts and additional explanations relating thereto.
The report also contains indications concerning the company's use of financial instruments, when this is relevant for an evaluation of its assets, its liabilities, its financial position and its profits or losses. These indications relate to the company's objectives and policy in regard to financial risk management, including its policy on the hedging of each main transaction category envisaged for which hedge accounting is used. They also relate to the company's exposure to price, credit, liquidity and cash-flow risks.
NB: Order 2004-1382 2004-12-20 Art. 12: The provisions of the present order shall apply with effect from the first financial year commenced on or after 1 January 2005.
Article L225-101
Where, within two years of registration, a company acquires an asset belonging to a shareholder which is worth at least one-tenth of its share capital, a valuer shall be appointed by a Court order to value the asset in question on his own liability, on an application by the chairman of the board of directors or the management, as the case may be. The appointment of the said valuer shall be subject to the incompatibility rules set out in Article L.225-224.
The valuer's report shall be made available to the shareholders. The routine shareholders’ meeting shall rule on the valuation of the asset, failing which the acquisition shall be void. The seller shall not have the right to vote either on its own behalf or as a representative.
The provisions of this Article shall not apply where the acquisition is effected on the Stock Exchange, under the supervision of a judicial authority or in connection with the company's ordinary business, concluded on normal terms and conditions.
Article L225-102
(Law No 2001-152 of 19 February 2001 Article 26 Official Gazette of 20 February 2001)
The report submitted to the routine meeting by the board of directors or the management, as the case may be, shall give an annual account of the number of shares of the company's capital held by employees at the last day of the financial year and shall establish the proportion of the share capital represented by shares held by company personnel and personnel of companies associated with it for the purposes of Article L.225-180 under a company savings scheme as provided for by Articles L.443-1 to L.443-9 of the Employment Code and by employees and former employees in connection with company investment trusts governed by Chapter III of Law No 88-1201 of 23 December 1988 relating to security investment trusts and creating debt investment trusts. Shares directly held by employees during the periods of inaccessibility specified in Articles L.225-194 and L.225-197, in Article 11 of Law No 86-912 of 6 August 1986 relating to terms and conditions of privatisation and Article 442-7 of the Employment Code shall also be taken into account.
Shares acquired by employees in connection with the buy-out of a company by its employees, as provided for by Law No 84-578 of 9 July 1984 on the development of economic initiatives, or by employees of a production workers' co-operative within the meaning of Law No 78-763 of 19 July 1978 laying down rules for production co-operatives shall not be taken into account when evaluating the proportion of capital as mentioned in the preceding sub-paragraph.
Where the Annual Report does not contain the information referred to in the first sub-paragraph, any interested party may make an interlocutory application to the Presiding Judge of the Court for an order to the effect that the board of directors or the management, as the case may be, must disclose the said information, subject to a daily penalty if it fails to do so.
Where the application is granted, any penalty and the expenses of the proceedings shall be payable by the directors or members of the management, as the case may be.
Article L225-102-1
(Act No. 2001-420 of 15 May 2001 Art. 116 I Official Journal of 16 May 2001)
(Act No. 2003-706 of 1 August 2003 Art. 138 Official Journal of 2 August 2003)
(Order No. 2004-604 of 24 June 2004 Art. 51 II Official Journal of 26 June 2004)
(Act No. 2005-842 of 26 July 2005 Art. 9 I Official Journal of 27 July 2005)
The report referred to in Article L225-102 itemises the total remuneration and benefits of all kinds paid to each company officer during the accounting period including any allotments of capital securities, debt instruments or securities giving access to the capital or giving entitlement to an allotment of debt instruments of a company or companies referred to in Articles L228-13 and L228-93.
It also indicates the amount of the remuneration and benefits of all kinds which each company officer received from controlled companies within the meaning of Article L233-16 or from the company which controls the company in which the duties are performed within the meaning of that same article during the accounting period.
The said report also describes and distinguishes between the fixed, variable and exceptional elements that make up that remuneration and those benefits as well as the criteria used to calculate them or the circumstances giving rise to them. It likewise indicates the commitments of all kinds made by the company in favour of the company officers relating to elements of remuneration, compensation or benefits payable or likely to be payable on account of them taking up or ceasing their functions or of their functions changing, or subsequently thereto. The information provided in this regard must specify the method used to determine those commitments. Barring arrangements made in good faith, payments and commitments made in violation of the provisions of the present paragraph may be cancelled.
It also includes a list of all the remits and functions performed in each company by each company officer during the accounting period.
It also includes a list of information as laid down in a Conseil d'Etat decree concerning the manner in which the company deals with the social and environmental consequences of its business. The present paragraph does not apply to companies whose securities are not admitted to trading on a regulated market.
The provisions of the last two paragraphs of Article L225-102 apply to the information referred to in the present article.
The provisions of the first to third paragraphs do not apply to companies whose securities are not admitted to trading on a regulated market and which are not controlled within the meaning of Article L233-16 by a company whose securities are admitted to trading on a regulated market. Moreover, these provisions do not apply to company officers who do not hold any remit in a company whose securities are admitted to trading on a regulated market.
Article L225-102-2
(inserted by Law No. 2003-699 of 30 July 2003 Article 23 Official Gazette of 31 July 2003)
For companies which operate at least one installation of a type indicated on the list provided in IV of Article L. 515-8 of the Environmental Code, the report referred to in Article L. 225-102 of the present code shall:
-
provide details of the technological accident risk-prevention policy the company applies;
-
explain how the company has covered its civil liability in regard to property and persons which the use of such installations gives rise to;
-
specify the measures the company has put in place to ensure proper compensation of the victims in the event of it incurring liability for a technological accident.
Article L225-103
(Law No 2001-420 of 15 May 2001 Article 114 (2) Official Gazette of 16 May 2001)
I.- The general meeting shall be convened by the board of directors or the management, as the case may be. II.- If not so convened, the general meeting may also be convened:
1. By the auditors;
2. By a representative appointed by the Court, on an application either by any interested party, in the event of emergency, or by one or more shareholders who together hold more than 5% of the share capital, or by an association of shareholders in accordance with the conditions laid down in Article L.225-120;
3. By the liquidators;
4. By the majority shareholders in terms of capital or voting rights after a public take-over bid or exchange offer or the transfer of a controlling block of shares.
III.- In companies subject to Articles L.225-57 to L.225-93, the general meeting may be convened by the supervisory board.
IV.- The foregoing provisions shall be applicable to special meetings. Shareholders applying for the appointment of a judicial representative must hold at least one tenth of the shares of the relevant class.
V. Unless otherwise provided by the memorandum and articles of association, shareholders' meetings shall be held at the registered office or anywhere else in the same department.
Article L225-104
Shareholders' meetings shall be convened in the manner and subject to time limits to be laid down by an Order approved by the Conseil d'Etat.
Any meeting may be cancelled if incorrectly convened. An application for cancellation shall not, however, be admissible where all the shareholders were present or represented.
Article L225-105
(Law No 2003-706 of 1 August 2003 Article 119 Official Gazette of 2 August 2003)
The agenda for general meetings is determined by the convener.
However, one or more shareholders representing at least 5% of the capital, or a shareholders' association which meets the conditions laid down in Article L. 225-120, are entitled to request the inclusion of draft resolutions on the agenda. Such draft resolutions are included on the agenda for the meeting and brought to the knowledge of the shareholders in the manner determined in a Conseil d'Etat decree. The said decree may reduce the percentage imposed by the present paragraph if the share capital exceeds a level specified therein.
The meeting cannot deliberate on an item which is not on the agenda. It may nevertheless remove one or more directors or supervisory board members from office and replace them, in any circumstances. The agenda for the meeting cannot be amended when a second notice to attend is sent out. When the meeting is called upon to deliberate on changes to the company's financial or legal organisation in respect of which the works council has been consulted pursuant to Article L. 432-1 of the Labour Code, that body's opinion is conveyed to it.
Article L225-106
(Law No 2001-152 of 19 February 2001 Article 27 Official Gazette of 20 February 2001)
A shareholder may be represented by another shareholder or by his or her spouse.
Any shareholder may receive powers issued by other shareholders to represent them at a meeting, without limits other than those imposed by the law or the memorandum and articles of association fixing the maximum number of votes a single person may hold either on his own behalf or as a proxy.
Before every general shareholders' meeting,, the chairman of the board of directors or the management, as the case may be, may organise a consultation with the shareholders mentioned in Article L.225-102 to enable them to appoint one or more proxies to represent them at the meeting in accordance with the provisions of this Article.
Such a consultation shall be obligatory where, following the amendment of the memorandum and articles of association pursuant to Article L.225-23 or Article L.225-71, the routine shareholders’ meeting is required to appoint to the board of directors or the supervisory board, as the case may be, one or more shareholder employees or members of the supervisory board of the company investment trusts that holds the company's shares.
Such a consultation shall also be obligatory where an special shareholders’ meeting is required to take a decision on an amendment to the memorandum and articles of association pursuant to Article L.225-23 or Article L.225-71. Any clauses that conflict with the provisions of the preceding sub-paragraphs shall be deemed non-existent. In the case of any power of representation given by a shareholder without naming a proxy, the chairman of the general meeting shall issue a vote in favour of adopting an draft resolutions submitted or approved by the board of directors or the management, as the case may be, and a vote against adopting any other draft resolutions. To issue any other vote, the shareholder must appoint a proxy who agrees to vote in the manner indicated by his principal.
Article L225-107
(Law No 2001-420 of 15 May 2001 Article 115 (1) Official Gazette of 16 May 2001)
I. Any shareholder may vote by post, using a form the wording of which shall be fixed by an Order approved by the Conseil d'Etat. Any provisions to the contrary contained in the memorandum and articles of association shall be deemed non-existent.
When calculating the quorum, only forms received by the company before the meeting shall be taken into account, on conditions to be laid down by an Order approved by the Conseil d'Etat. Forms not indicating any vote or expressing an abstention shall be considered negative votes.
II. If the memorandum and articles of association so provide, shareholders participating in a meeting by video-conferencing or means of telecommunication that enable them to be identified, the nature and conditions of which shall be determined by an Order approved by the Conseil d'Etat, shall be deemed to be present at the said meeting for the purposes of calculating the quorum and majority.
Article L225-107-1
(Act No. 2001-420 of 15 May 2001 Art. 119 1 Official Journal of 16 May 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 III Official Journal of 26 June 2004)
The owners of securities referred to in the seventh paragraph of Article L. 228-1 may arrange to be represented by a registered intermediary as provided for in the said article.
Article L225-108
The board of directors or management, as the case may be, must send or make available to the shareholders the necessary documents to enable them to make decisions based on a knowledge of the facts and arrive at an informed judgment on the management and progress of the company and its business.
The nature of the said documents and the conditions upon which they are sent or made available to shareholders shall be determined by an Order approved by the Conseil d'Etat.
From the date of the delivery of documents specified in the first sub-paragraph, any shareholder shall be entitled to submit written questions, to which the board of directors or the management, as the case may be, shall required to reply in the course of the meeting.
Article L225-109
The chairman, managing directors and directors of a company, and any natural persons or legal persons exercising the functions of a director or member of the supervisory board, and also permanent representatives of legal persons exercising the said functions, shall be required, upon conditions to be determined by an Order approved by the Conseil d'Etat, to register or deposit any shares belonging to themselves or their non-emancipated minor children that have been issued by the company itself, by its subsidiaries or parent company or by other subsidiaries of its parent company, where the said shares are admitted to trading on a regulated market.
Spouses of the persons mentioned in the preceding sub-paragraph shall (unless judicially separated) be subject to the same obligation.
Article L225-110
Where shares are subject to a life interest, voting rights attached thereto shall belong to the beneficiary thereof at routine shareholders’ meetings and to the remainderman at special shareholders’ meetings.
Joint owners of undivided shares shall be represented at routine shareholders’ meetings by one of them or by a single proxy. In the event of disagreement, the proxy shall be appointed by the Court at the request of the joint owner taking the initiative.
Voting rights shall be exercised by the owner in the case of shares pledged by way of security. To that end, the pledgee shall, at the debtor's request, place the shares he holds as security on deposit, on conditions and within time limits to be fixed by an Order approved by the Conseil d'Etat.
The memorandum and articles of association may create exceptions to the rule contained in the first sub-paragraph hereof.
Article L225-111
The company shall not be entitled to voting rights attached to shares it shall itself have subscribed, acquired or taken as a pledge. Such shares shall not be taken into account when calculating the quorum.
Article L225-113
Any shareholder may take part in special shareholders’ meetings and any shareholder holding shares of the type referred to in Article L225-99 may take part in special meetings. Any clause to the contrary shall be deemed non-existent.
Article L225-114
An attendance sheet, the wording of which shall be determined by an Order approved by the Conseil d'Etat, shall be kept at every meeting.
Article L225-115
(Act No. 2001-420 of 15 May 2001 Art. 111 6 Official Journal of 16 May 2001) (Act No. 2003-706 of 1 August 2003 Art. 123 I 3 Official Journal of 2 August 2003) (Order No. 2004-604 of 24 June 2004 Art. 51 VI Official Journal of 26 June 2004)
Any shareholder is entitled, under the conditions and subject to the time limits determined in a Conseil d'Etat decree, to discovery of:
1. The inventory, the annual accounts and the list of directors or members of the executive board and the supervisory board, and, where applicable, the consolidated accounts;
2. The reports of the board of directors or the executive board and the supervisory board, as applicable, and the auditors, which shall be presented to the meeting;
3. Where applicable, the text of, and the objects and reasons for, the proposed resolutions, as well as information concerning candidates for the board of directors or the supervisory board, whichever applies;
4. The total amount, certified as accurate by the auditors, of the remuneration paid to the highest-paid persons, the number of such persons being ten or five depending on whether or not the workforce exceeds two hundred employees;
5. The total amount, certified as accurate by the auditors, of the payments made pursuant to 1 and 4 of Article 238 bis of the General Tax Code, as well as a list of the registered shares under sponsorship and the registered shares under patronage;
6. A list of the agreements relating to normal business entered into under normal terms and conditions, and their objects, drawn up pursuant to Articles L. 225-39 and L. 225-87.
Article L225-116
Before any general meeting is held, every shareholder shall be entitled, subject to conditions and time limits to be determined by an Order approved by the Conseil d'Etat, to obtain the disclosure of a list of shareholders.
Article L225-117
Every shareholder shall be entitled at any time to obtain the disclosure of the documents referred to in Article L.225-115 relating to the last three financial years, and the minutes and attendance sheets of meetings held during the said last three years.
Article L225-118
The right to disclosure of documents, provided in Articles L.225-115, L.225-116 and L.225-117, shall be equally enjoyed by each joint owner in the case of undivided shares, and the remainderman and the beneficiary in the case of shares subject to a life interest.
Article L225-120
(Order No 2000-916 of 19 September 2000 Article 4 and Annex II Official Gazette of 22 September 2000, in force on 1 January 2002)
I.- In companies whose shares are admitted to trading on a regulated stock market, shareholders whose shares have been registered for at least two years and who hold at least 5% of the voting rights may form associations to represent their interests within the company. In order to exercise the rights to which they are entitled under Articles L225-103, L225-105, L225-230, L225-231, L225-232, L225-233 and L225-252, such associations must have notified the company and the Commission des Operations de Bourse [Securities and Investments Board] of their legal status.
Where, however, the company's capital exceeds 5,000,000 F, the share of voting rights to be represented pursuant to the preceding paragraph is reduced according to the number of the voting rights relating to the capital, as follows:
1. 4% over 750,000 euros and up to 4,500,000 euros;
2. 3% over 4,500,000 euros and up to 7,500,000 euros;
3. 2% over 7,500,000 euros and up to 15,000,000 euros;
4. 1% over 15,000,000 euros.
Article L225-121
Decisions taken by meetings in breach of Articles L.225-96, L.225-97, L.225-98, the third and fourth sub-paragraphs of Article L.225-99, the second sub-paragraph of Article L.225-100 and Articles L.225-105 and L.225-114 shall be void.
In the event of breach of the provisions of Articles L.225-115 and L.225-116 or their implementing order, the meeting may be annulled.
Article L225-122
I.- Subject to the provisions of Articles L.225-10, L.225-123, L.225-124, L.225-125 and L.225-126, voting rights attached to capital or dividend shares shall be in proportion to the share of the capital they represent and each share shall entitle the holder to at least one vote. Any clause to the contrary shall be considered non-existent.
II.- In limited partnerships with shares, whose capital is partly owned by the State, departments, municipalities or public institutions as a matter of public policy, and those whose object is to operate services under licence from the competent Government authorities, outside mainland France, voting rights shall be governed by the memorandum and articles of association in force at 1 April 1967.
Article L225-123
A voting right equivalent to twice that attributed to other shares may be attributed to fully paid shares which can be proved to have been registered in the name of the same shareholder for at least two years, depending on the proportion of the share capital they represent, by the memorandum and articles of association or an special shareholders’ meeting.
Furthermore, in the event of an increase in capital by incorporation of reserve funds, profits or issue premiums, a double voting right may be conferred from the date of issue on registered shares allocated to a shareholder free of charge in proportion to any former shares for which he has the benefit of that right.
The voting right provided in the first and second sub-paragraphs above may be reserved to French shareholders and those that are nationals of a Member State of the European Community or a Member State of the European Economic Area.
Article L225-124
Any share converted into a bearer share or changing hands shall lose the right to a double vote attributed pursuant to Article L.225-123. Nevertheless, a transfer on succession, or on the partition of property jointly owned by spouses, or a gift inter vivos to a spouse or a relative entitled to succeed to the donor's estate shall not cause the right to be lost, nor interrupt the period of time referred to in the said Article.
The merger or division of a company shall have no effect on double voting rights capable of being exercised within the beneficiary company or companies, where the memorandum and articles of association of the latter created it.
Article L225-125
The memorandum and articles of association may limit the number of votes attributed to each shareholder at meetings, provided that any such limitation shall be imposed on all shares irrespective of class, other than non-voting preferred stock.
Article L225-126
Subject to the provisions of Articles L.225-161 and L.225-174, the memorandum and articles of association may provide for the creation of preference shares not carrying the right to vote at general shareholders' meetings. They shall be governed by Articles L.228-12 to L.228-20.
Only companies that shall have made a distributable profit as defined by the first sub-paragraph of Article L.232-11 during the last two financial years shall be entitled to create non-voting preferred stock.
SECTION IV
Changes to share capital and the body of employee shareholders
Articles L225-127 to
L225-217
Subsection 1
Capital increases
Articles L225-127 to
L225-149-3
Article L225-127
(Order No. 2004-604 of 24 June 2004 Art. 2 Official Journal of 26 June 2004)
The share capital is increased either by an issue of ordinary shares or preference shares, or by increasing the nominal value of the existing capital securities.
It may also be increased by exercise of the rights attached to transferable securities giving access to the capital, as provided for in Articles L. 225-149 and L. 225-177.
Article L225-128
(Order No. 2004-604 of 24 June 2004 Art. 3 Official Journal of 26 June 2004)
The new capital securities are issued either for their nominal value, or for that value plus a share premium.
They are paid up either by a cash contribution, including compensation against encashable and due receivables on the company, or by a contribution in kind, or by incorporation of reserves, profits or share premiums, or as a result of a merger or demerger.
They may also be paid up following the exercise of a right attached to transferable securities giving access to the capital, including, where applicable, payment of the corresponding sums.
Article L225-129
(Act No. 2001-152 of 19 February 2001 Art. 29 1 Official Journal of 20 February 2001) (Act No. 2003-7 of 3 January 2003 Art. 50 II Official Journal of 4 January 2003) (Act No. 2003-706 of 1 August 2003 Art. 132 Official Journal of 2 August 2003) (Order No. 2004-604 of 24 June 2004 Art. 4 Official Journal of 26 June 2004)
Only an extraordinary general meeting is competent to decide an immediate or eventual capital increase, on the basis of a report from the board of directors or the executive board. It may delegate this competence to the board of directors or the executive board in the manner indicated in Article L. 225-129-2.
Without prejudice to the provisions of Articles L. 225-129-2 and L. 225-138, the capital increase must be effected within five years of that decision or delegation being made. This time limit does not apply to capital increases made subsequent to the exercise of a right attached to a transferable security giving access to the capital or subsequent to the exercise of options as envisaged in Article L. 225-177.
Article L225-129-1
(inserted by Order No. 2004-604 of 24 June 2004 Art. 5 Official Journal of 26 June 2004)
When the extraordinary general meeting decides to effect a capital increase, it may delegate the power to determine the terms and conditions of the issue of securities to the board of directors or the executive board.
Article L225-129-2
(Order No. 2004-604 of 24 June 2004 Art. 5 Official Journal of 26 June 2004) (Finance Act 2005 No. 2004-1484 of 30 December 2004 Art. 83 I b Official Journal of 31 December 2004)
When the extraordinary general meeting delegates its competence to decide a capital increase to the board of directors or the executive board, it determines the period, which shall not exceed twenty-six months, during which that delegation may be used, and the overall ceiling for that increase.
Such delegation renders any prior delegation having the same object ineffective.
The issues referred to in Articles L. 225-135 to L. 225-138-1 and L. 225-177 to L. 225-186, and L. 225-197-1 to L. 225-197-3, and likewise the issues of preference shares referred to in Articles L. 228-11 to L. 228-20, must be the subject of special resolutions.
Within the limits of the delegation given by the general meeting, the board of directors or the executive board has the powers required to determine the conditions of issue, to declare the completion of the resultant capital increases and to make the appropriate amendment to the articles of association.
Article L225-129-3
(inserted by Order No. 2004-604 of 24 June 2004 Art. 5 Official Journal of 26 June 2004)
Any delegation made by the general meeting is suspended while a takeover bid or exchange offer for the company's securities is in progress, unless it forms part of the company's normal business activities and its implementation is not liable to cause the offer to fail.
Article L225-129-4
(inserted by Order No. 2004-604 of 24 June 2004 Art. 5 Official Journal of 26 June 2004)
In limited companies whose securities are admitted to trading on a regulated market:
a) The board of directors may, within limits which it has previously set, delegate to the general manager or, with his agreement, to one or more delegated general managers, the power to decide to proceed with the issue, or to postpone it;
b) The executive board may delegate to its chairman or, with his agreement, to one of its members, the power to decide to proceed with the issue, or to postpone it.
The designated persons report to the board of directors or the executive board on the use made of that power in the manner stipulated by the latter.
Article L225-129-5
(inserted by Order No. 2004-604 of 24 June 2004 Art. 5 Official Journal of 26 June 2004)
When use is made of delegations as provided for in Articles L. 225-129-1 and L. 225-129-2, the board of directors or the executive board draws up a supplementary report for the next ordinary general meeting in the manner determined in a Conseil d'Etat decree.
NB: Order 2004-604 2004-06-24 Art. 64: The provisions of Article L. 225-129-5 of the Commercial Code apply to financial years commenced on or after 1 January 2004.
Article L225-129-6
(Order No. 2004-604 of 24 June 2004 Art. 5 Official Journal of 26 June 2004)
(Act No. 2004-1343 of 9 December 2004 Art. 78 XXVII Official Journal of 10 December 2004) (Act No. 2005-842 of 26 July 2005 Art. 42 Official Journal of 27 July 2005)
When any capital increase via a cash contribution takes place, unless it results from a prior issue of transferable securities giving access to the capital, an extraordinary general meeting shall rule on a draft resolution to increase the capital as provided for in Article L443-5 of the Labour Code. An extraordinary general meeting shall also rule on such a draft resolution when it delegates its power to increase the capital pursuant to Article L225-129-2.
Every three years, an extraordinary general meeting is convened to rule on a draft resolution to increase the capital as provided for in Article L443-5 of the Labour Code if, in view of the report presented to the general meeting by the board of directors or the executive board pursuant to Article L225-102, the securities held by the staff of the company and of any companies linked to it within the meaning of Article L225-180 represent less than 3% of the capital.
Article L225-130
(Order No. 2004-604 of 24 June 2004 Art. 6 Official Journal of 26 June 2004)
When a capital increase effected by issuing new capital securities or increasing the nominal value of the existing capital securities takes place through incorporation of reserves, profits or share premiums, the general meeting, contrary to the provisions of Article L. 225-96, decides this under the quorum and majority conditions laid down in Article L. 225-98. In which case, it may decide that the rights attached to fractional shares are neither tradable nor assignable and that the corresponding capital securities must be sold. The proceeds of the sale are allocated to the holders of rights within a time limit determined in a Conseil d'Etat decree.
With the exception of the cases envisaged in the previous paragraph, a capital increase effected by increasing the nominal value of the capital securities may only be decided with the unanimous consent of the shareholders.
Article L225-131
(Order No. 2004-604 of 24 June 2004 Art. 51 IV Official Journal of 26 June 2004)
The capital must be fully paid up before any issue of new shares to be paid up in cash takes place.
Moreover, a capital increase by way of public offering effected less than two years after the formation of a company pursuant to Articles L. 225-12 to L. 225-16 must be preceded, as provided for in Articles L. 225-8 to L. 225-10, by a verification of the assets and liabilities, and, where applicable, the specific benefits granted.
Article L225-132
(Order No. 2004-604 of 24 June 2004 Art. 7, Art. 51 V Official Journal of 26 June 2004)
The shares confer a preferential right to subscribe to capital increases.
Proportionate to the value of their shares, shareholders have a preferential right to subscribe shares issued for cash to increase the capital.
Throughout the subscription period, that right is transferable when it is detached from shares which are themselves transferable. When this is not the case, it is assignable in the same way as the shares themselves.
Shareholders may individually waive their preferential rights.
A decision to convert preference shares entails the waiving of the shareholders' preferential right to subscribe the shares resulting from the conversion.
A decision to issue transferable securities giving access to the capital also entails the waiving of the shareholders' preferential right to subscribe the capital securities to which the transferable securities issued give entitlement.
Article L225-133
(Order No. 2004-604 of 24 June 2004 Art. 8 Official Journal of 26 June 2004)
If the general meeting or, in the event of delegation as provided for in Article L. 225-129, the board of directors or the executive board, expressly so decides, capital securities which are not irrevocably subscribed are allotted to the shareholders who have subscribed a number of securities greater than that which they could subscribe preferentially, in proportion to the subscription rights they hold and, in any event, within the limit of their requests.
Article L225-134
(Order No. 2004-604 of 24 June 2004 Art. 9 Official Journal of 26 June 2004)
I. - If the irrevocable subscriptions and, where applicable, the free subscriptions, have not absorbed the total capital increase:
1. The amount of the capital increase may be limited to the amount of the subscriptions unless the general meeting decides otherwise. Under no circumstances shall the amount of the capital increase be less than three quarters of the increase decided;
2. Unsubscribed shares may be freely allotted, in whole or in part, unless the meeting decides otherwise;
3. Unsubscribed shares may be offered to the public, in whole or in part, if the meeting has made express provision for such an eventuality.
II. - The board of directors or the executive board may use the rights provided for above, or certain of them, in whatever order it determines. The capital increase is not effected if, after exercise of those rights, the amount of the subscriptions received does not amount to the total capital increase, or three quarters of that increase in the case envisaged in 1 of I.
III. - However, the board of directors or the executive board may, as a matter of course and in all instances, limit the capital increase to the amount received when the unsubscribed shares represent less than 3% of the capital increase. Any contrary decision is deemed not to have been taken.
Article L225-135
(Order No. 2004-604 of 24 June 2004 Art. 10 Official Journal of 26 June 2004)
A meeting which decides or authorises a capital increase may remove the preferential subscription right for the total capital increase or one or more tranches thereof. It decides this on the basis of a report from the board of directors or the executive board. When it decides to proceed with a capital increase, it also takes account of an auditor's report. In the case of issues made by the board of directors or the executive board pursuant to authorisation given by the general meeting, the auditor draws up a report for the board of directors or the executive board.
For companies whose capital securities are admitted to trading on a regulated market, the meeting may require that the capital increase it decides on or authorises have a subscription priority period in favour of the shareholders of a minimum duration determined in a Conseil d'Etat decree. It may also delegate to the board of directors or the executive board the task of determining whether such a priority period is warranted and, should this be the case, of establishing its duration on the same basis.
A Conseil d'Etat decree determines the particulars of the auditor's reports referred to in the present article.
Article L225-135-1
(inserted by Order No. 2004-604 of 24 June 2004 Art. 11 Official Journal of 26 June 2004)
When a capital increase is effected, with or without a preferential subscription right, the meeting may request that the number of securities be increased for a period determined in a Conseil d'Etat decree, proportionate to a fraction of the initial issue determined in that same decree, and at the same price as that initial issue. The limit provided for in 1 of I of Article L. 225-134 is then increased in the same proportion.
Article L225-136
(Order No. 2004-604 of 24 June 2004 Art. 12 Official Journal of 26 June 2004)
An issue of capital securities by way of public offering without a preferential subscription right is subject to the following conditions:
1. For companies whose capital securities are admitted to trading on a regulated market, if the transferable securities to be issued immediately or subsequently shall have equivalent status, the issue price must be determined as stipulated in a Conseil d'Etat decree issued following consultation with the Financial Markets Authority.
However, subject to a limit of 10% of the share capital per annum, the extraordinary general meeting may authorise the board of directors or the executive board to set the issue price on the basis of terms which it determines in the light of a report from the board of directors or the executive board, and a special report from the auditor. When such authorisation is used, the board of directors or the executive board draws up a supplementary report, certified by the auditor, which describes the definitive conditions of the operation and provides information which facilitates assessment of the effective impact on the shareholder's situation.
2. In other cases, the issue price or the conditions for determining that price are determined by the extraordinary general meeting on a report of the board of directors or the executive board and on special report from the auditor.
Article L225-137
Public issues without rights of subscription of new shares not conferring the same rights on their holders as those conferred by the previous shares shall be subject to the following conditions:
1. The issue must take place within two years of the date of the meeting that authorised it;
2. The issue price or conditions on which the same is fixed shall be determined by an special shareholders’ meeting on a report by the board of directors or management and a special auditor's report.
II.- If the issue shall not have taken place by the date of the next annual general meeting following the decision, an special shareholders’ meeting must decide, on the basis of the report by the board of directors or management and the special auditor's report, whether to maintain or adjust the issue price or the conditions in accordance with which it is determined. If it fails to do so, the decision of the earlier meeting shall lapse.
Article L225-138
(Act No. 2001-152 of 19 February 2001 Art. 10 III, Art. 17 VII, Art. 29 2 Official Journal of 20 February 2001) (Act No. 2003-706 of 1 August 2003 Art. 124 Official Journal of 2 August 2003)
(Act No. 2003-775 of 21 August 2003 Art. 109 III 3 Official Journal of 22 August 2003) (Order No. 2004-604 of 24 June 2004 Art. 13 Official Journal of 26 June 2004)
I. - A general meeting which decides on a capital increase may reserve it for one or more persons designated by name or for categories of persons who meet certain criteria. To that end, it may remove the preferential subscription right. The persons designated by name who benefit from that provision shall not participate in the vote. The quorum and majority required are calculated after deduction of the shares that they hold. The procedure provided for in Article L. 225-147 shall not apply.
When the extraordinary general meeting removes the preferential subscription right in favour of one or more categories of persons who meet the criteria it sets, it may delegate to the board of directors or the executive board the task of drawing up a list of the beneficiaries within that category, or those categories, and the number of securities to be allotted to each of them, subject to the ceilings specified in the first paragraph of Article L. 225-129-2. When such a delegation is used, the board of directors or the executive board draws up a supplementary report for the next ordinary general meeting, certified by the auditor, which sets out the definitive terms of the operation.
II. - The issue price or the formula for calculating it is determined by the extraordinary general meeting on a report of the board of directors or the executive board and a special report from the auditor.
III. - The issue must take place within eighteen months of the general meeting which decided it or which approved the delegation provided for in Article L. 225-129.
Article L225-138-1
(inserted by Order No. 2004-604 of 24 June 2004 Art. 13, Art. 14 Official Journal of 26 June 2004)
For application of the first paragraph of Article L. 443-5 of the Labour Code relating to capital increases reserved for members of a company savings plan, when the general meeting has removed the preferential subscription right in favour of employees of the company or of the companies affiliated to it within the meaning of Article L. 225-180, the provisions of I and II of Article L. 225-138 apply and:
1. The subscription price is still determined in the manner described in Article L. 443-5 of the Labour Code;
2. The capital increase is only effected in the amount of the capital securities subscribed by the employees individually or through an open-end investment company or of the securities issued by unit trusts governed by Article L. 214-40-1 of the Monetary and Financial Code. It does not give rise to the formalities referred to in Articles L. 225-142, L. 225-144 and L. 225-146;
3. (deleted)
4. The time granted to subscribers for paying up their securities shall not exceed three years;
5. Capital securities or transferable securities giving access to the capital may be paid up, at the request of the company or the subscriber, either by periodic payments, or by equal and regular deductions from the subscriber's salary;
6. The capital securities or transferable securities giving access to the capital thus subscribed which are delivered prior to expiry of the five-year period referred to in Article L. 443-6 of the Labour Code are not transferable until they are fully paid up;
7. The capital securities or transferable securities giving access to the capital reserved for members of the savings plans referred to in Article L. 443-1 of the Labour Code may, contrary to the provisions of the first paragraph of Article L. 225-131 of the present code, be issued even when the share capital has not been fully paid up.
The fact of the securities referred to in the previous paragraph not having been fully paid up does not prevent the issue of capital securities from being paid up in cash.
Members of the company savings plan referred to in Article L. 443-1 of the Labour Code may cancel or reduce their commitment to subscribe or to hold capital securities or transferable securities giving access to the capital issued by the company in the circumstances and under the terms and conditions laid down in the Conseil d'Etat decrees referred to in Article L. 442-7 of that same code.
Article L225-139
(Order No. 2004-604 of 24 June 2004 Art. 15 Official Journal of 26 June 2004)
A Conseil d'Etat decree determines the elements which must appear in the reports referred to in Articles L. 225-129, L. 225-135, L. 225-136 and L. 225-138, and also in the reports provided for in the event of preference shares or transferable securities giving access to the capital being issued.
Article L225-140
(Order No. 2004-604 of 24 June 2004 Art. 16 Official Journal of 26 June 2004)
When capital securities are subject to a usufruct, the preferential subscription right attached to them shall belong to the bare owner. If the latter sells the subscription rights, the proceeds of the sale or the property he purchases therewith shall be subject to the usufruct. If the bare owner fails to exercise his right, the usufructuary may subscribe new shares or sell the rights in his place. In the latter case, the bare owner may demand re-use of the proceeds of sale. The property thus acquired is subject to the usufruct.
The new shares shall belong to the bare owner for the bare ownership and to the usufructuary for the usufruct. However, where funds are paid out by the bare owner or the usufructuary to pay for or complete a subscription, the new shares shall belong to the bare owner or the usufructuary only up to the value of the subscription rights. Any surplus on the new shares shall be the absolute property of he who paid out the funds.
A Conseil d'Etat decree determines the present article's implementing regulations, the provisions of which shall also apply in the event of securities being allotted at no cost.
The provisions of the present article shall apply in the absence of any agreement between the parties.
Article L225-141
(Order No. 2004-604 of 24 June 2004 Art. 17 Official Journal of 26 June 2004)
The period within which shareholders must exercise their subscription right shall not be less than five trading days after the opening date for subscriptions.
The said period shall in fact end as soon as all irrevocable subscription rights are exercised or as soon as the capital increase is fully subscribed following individual waivers of subscription rights by the non-subscribing shareholders.
Article L225-142
Before the opening date of subscription, the company shall deal with the publication formalities, details of which shall be fixed by an Order approved by the Conseil d'Etat.
Article L225-143
(Order No. 2004-604 of 24 June 2004 Art. 18 Official Journal of 26 June 2004)
The subscription agreement for capital securities or transferable securities giving access to the capital is based on an application form drawn up as determined in a Conseil d'Etat decree.
An application form is not required, however, from credit institutions and investment service providers who subscribe on behalf of a client, provided that they can produce evidence of their instructions.
Article L225-144
Shares paid in cash must be paid as to at least a quarter of their nominal value and the whole of any issue premium on subscription. Payment of the balance must be made by one or more instalments within five years of the date on which the increase in share capital became unconditional.
The provisions of the first sub-paragraph of Article L.225-5 shall apply, except those relating to the subscribers’ list. A representative of the company may withdraw funds derived from subscriptions paid in cash when the deposit certificate has been issued.
If the increase in capital shall not have taken place within six months of the opening subscription date, the provisions of the second sub-paragraph of Article L.225-11 may be applied.
Article L225-145
(Act No. 2001-1168 of 11 December 2001 Art. 27 II Official Journal of 12 December 2001)
In companies which make public offerings to distribute their shares, an increase in capital is deemed to have taken place when one or more investment service providers authorised to provide the investment service referred to in 6 of Article L321-1 of the Monetary and Financial Code, or persons referred to in Article L532-18 of that code authorised to provide the same service in their country of origin, have irrevocably guaranteed its proper execution. Settlement of the paid-up fraction of the nominal value and the entirety of the issue premium must take place within thirty-five days of the close of the subscription period.
Article L225-146
Subscriptions and payments shall be recorded by a deposit certificate issued on the deposit of funds, on production of a subscription report.
Payment of shares by set-off against liquidated enforceable debts owed by the company shall be recorded by a notarial or auditor's certificate. Such a certificate shall replace the deposit certificate.
Article L225-147
(Order No. 2004-604 of 24 June 2004 Art. 19 Official Journal of 26 June 2004)
When contributions in kind are made or special privileges are stipulated, one or more valuers of contributions in kind are appointed by a court decision. They are subject to the incompatibilities referred to in Article L. 822-11.
The said valuers shall assess the value of the contributions in kind and the special privileges under their own liability. A Conseil d'Etat decree determines the main headings of their report, the time limit for its submission, and the manner in which it is made available to the shareholders. The provisions of Article L. 225-10 apply to the extraordinary general meeting.
If the meeting approves the valuation of the contributions and the grant of special privileges, it shall declare the capital increase to have been effected.
If the meeting reduces the valuation of the contributions and the grant of special privileges, express approval of the changes is required from the contributors and the beneficiaries, or their duly authorised representatives. Failing this, the capital increase is not proceeded with.
The capital securities issued in respect of a contribution in kind are fully paid up at the time of issue.
The extraordinary general meeting of a company whose securities are admitted to trading on a regulated market may delegate to the board of directors or the executive board, for a maximum period of twenty-six months, the powers required to carry out a capital increase of not more than 10% of its share capital in order to compensate the contributions in kind made to the company in return for capital securities or transferable securities giving access to the capital, when the provisions of Article L. 225-148 are not applicable. The board of directors or the executive board decides on the report of the valuer(s) of contributions in kind referred to in the first and second paragraphs above pursuant to the third or fourth paragraphs above.
Article L225-148
(Order No. 2004-604 of 24 June 2004 Art. 51 VIII Official Journal of 26 June 2004)
The provisions of Article L. 225-147 are not applicable in the event of a company whose shares are admitted to trading on a regulated market effecting a capital increase for the purpose of paying for securities contributed through an exchange offer for the securities of a company whose shares are admitted to trading on a regulated market of a European Economic Area member state or a member state of the Organisation for Economic Cooperation and Development.
The capital increase takes place as provided for in Articles L. 225-129 to L. 225-129-6. However, the auditors may express an opinion on the conditions and consequences of the issue in the prospectus distributed at the time of its implementation and in their report to the first ordinary general meeting held subsequent to the issue.
Article L225-149
(Order No. 2004-604 of 24 June 2004 Art. 20 Official Journal of 26 June 2004)
A capital increase resulting from exercise of the rights attached to transferable securities giving access to the capital is not subject to the formalities referred to in Article L. 225-142, the second paragraph of Article L. 225-144 and Article L. 225-146. When the holder of a transferable security issued pursuant to Article L. 225-149-2 is not entitled to a whole number, a cash payment shall be made in respect of the fractional shares pursuant to a calculation method determined in a Conseil d'Etat decree.
The capital increase is definitively effected simply upon exercise of the rights and, where applicable, payment of the sums due.
At any time during the financial year then current, and at the first meeting held subsequent to its close, at the latest, the board of directors or the executive board shall record the number and nominal value of the shares, if any, created for the benefit of the holders of rights during the previous financial year and make the necessary amendments to the articles of association relative to the amount of the share capital and the number of securities that represent it.
The chairman of the executive board or the general manager may, if duly empowered by the executive board or the board of directors, proceed with such transactions at any time during the financial year, and within the time limit set in a Conseil d'Etat decree at the latest.
Article L225-149-1
(Act No. 2003-706 of 1 August 2003 Art. 134 IV Official Journal of 2 August 2003) (Order No. 2004-604 of 24 June 2004 Art. 21 Official Journal of 26 June 2004) (Act No. 2004-1343 of 9 December 2004 Art. 78 XXVII Official Journal of 10 December 2004)
In the event of new capital securities or new transferable securities giving access to the capital being issued, and likewise in the event of a merger or demerger of the company issuing such securities, the board of directors or the executive board may, during a maximum period determined in a Conseil d'Etat decree, suspend the option to obtain an allotment of capital securities through exercise of the right referred to in Article L. 225-149 and Article L. 225-178.
Except as otherwise provided in the issuance contract, the capital securities obtained after the suspension period through exercise of the rights attached to transferable securities give entitlement to the dividends paid in respect of the financial year during which they were issued.
Article L225-149-2
(inserted by Order No. 2004-604 of 24 June 2004 Art. 22 Official Journal of 26 June 2004)
The rights attached to shares giving access to the capital which have been used or acquired by the issuing company or by the company issuing the new capital securities are cancelled by the issuing company.
Article L225-149-3
(inserted by Order No. 2004-604 of 24 June 2004 Art. 22 Official Journal of 26 June 2004)
Decisions founded on the second paragraph of Article L. 225-129-6 or relating to the supplementary reports referred to in Article L. 225-129-5, the second paragraph of 1 of Article L. 225-136 and the second paragraph of I of Article L. 225-138 may give rise to an order pursuant to the terms and conditions set forth in Articles L. 238-1 and L. 238-6. Decisions taken in violation of Articles L. 225-129-3 and L. 225-142 may be cancelled.
Decisions taken in violation of the provisions of the present subsection other than those referred to in the present article are null and void.
Subsection 2
Subscription and purchase of shares by employees Articles L225-150 to L225-197-5
Article L225-150
On a report by the board of directors or the management, as the case may be, and a special auditors' report, an special shareholders’ meeting may authorise the issue of bonds with one or more subscription warrants. The said warrants shall entitle the holder to subscribe shares to be issued by the company at one or more prices and according to the conditions and within the time limits fixed by the issue agreement. The time limit for the exercise of the right must not be more than three months later than the date of final repayment of the loan.
A company may issue bonds with warrants giving the holder the right to subscribe to shares to be issued by a company that directly or indirectly owns more than half its share capital. In any such case, the bond issue must be authorised by the routine shareholders’ meeting of the subsidiary company issuing the bonds, and the share issue by an special shareholders’ meeting of the company required to issue the shares.
The special shareholders’ meeting shall, in particular, decide the method of calculation of the price or prices at which the right of subscription shall be exercised and the maximum total number of shares that can be subscribed by warrant holders. The total price or prices at which the right of subscription shall be exercised must not be less than the nominal value of the shares subscribed on the presentation of warrants.
Unless otherwise stipulated in the issue agreement, warrants may be transferred or negotiated independently of the bonds.
Article L225-151
Shareholders of the company required to issue the shares shall have a preferential right of subscription of bonds with warrants. The said preferential right of subscription shall be governed by Articles L.225-132 to L.225-141.
The consent of an special shareholders’ meeting to the issue shall imply the waiver by the shareholders of their preferential right of subscription of the shares to be subscribed on presentation of the said warrants in favour of the warrant holders.
Issues of bonds with warrants must take place within a maximum period of five years of the date of the decision of the special shareholders’ meeting. The said period shall be reduced to two years where the shareholders waive their preferential right of subscription of the bonds with warrants.
Article L225-152
In the event of an increase in capital, merger or division of the company required to issue the shares, the board of directors or the management may suspend the exercise of the right of subscription for a period not exceeding three months.
Shares subscribed by warrant holders shall entitle the holder to dividends paid in respect of the financial year during which the said shares were subscribed.
Article L225-153
With effect from the date of the vote by the special shareholders’ meeting of the company required to issue the shares, and as long as there are valid warrants in existence, the company shall not be permitted to amortise its share capital or vary the distribution of its profits.
Nevertheless, the company may create non-voting preferred stock provided that the rights of the bond holders are preserved as stipulated by Article L.225-154.
In the event of a reduction in capital caused by losses and effected by reducing the nominal total value or number of shares, the rights of warrant holders shall be reduced accordingly, as if the said holders had been shareholders since the date of issue of the bonds with share warrants.
Article L225-154
With effect from the date of the vote by the special shareholders’ meeting of the company required to issue the shares, and as long as there are valid warrants in existence, the issue of shares to be subscribed against cash payments reserved to shareholders, the incorporation of reserve funds, profits or issue premiums into the share capital, and the distribution of reserve funds in cash or portfolio securities shall be authorised only provided that the rights of any warrant holders exercising their right of subscription are preserved.
To that end, the company must, in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat, allow warrant holders exercising their right of subscription either to subscribe whole shares or obtain new shares free of charge, or to receive cash or securities similar to those distributed in the same quantities or proportions and according to the same conditions, save as regards the enjoyment of possession thereof, as if they had been shareholders at the date of the said issue, incorporation or distribution.
In the event of an issue of bonds with warrants or further convertible or exchangeable bonds, the company shall give notice of the said issue to the holders or bearers of warrants by public notice, in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat, to enable them to opt for conversion within the time limit specified in the said notice. If the period within which the right of subscription may be exercised has not yet commenced, the exercise price to be adopted shall be the first price shown in the issue agreement. The provisions of this sub-paragraph shall apply to any other operation involving a right of subscription reserved to shareholders.
Nevertheless, where the warrants entitle the holder to subscribe shares admitted to trading on a regulated market, the issue agreement may provide, instead of the measures specified in the preceding sub-paragraphs, for the adjustment of the conditions of subscription originally laid down, in order to allow for the effects of the issue, incorporation or distribution, in accordance with conditions and by methods of calculation to be laid down by an Order approved by the Conseil d'Etat, under the supervision of the Commission des Opérations de Bourse [Securities and Investments Board].
Article L225-155
Increases in capital resulting from the exercise of the right of subscription shall not require the formalities specified in Article L.225-142, the second sub-paragraph of Article L.225-144 and Article L.225-146. They shall be unconditionally effected merely by virtue of the payment of the subscription price accompanied by the subscription report and, if appropriate, the sums rendered payable by the subscription of cash shares under the circumstances referred to in Article L.225-154.
At its first meeting after the end of each financial year, the board of directors or management of the company, as the case may be, shall, if necessary, record the number and total nominal value of the shares subscribed by warrant holders during the year just ended and make the necessary amendments to the memorandum and articles of association relating to the total share capital and the number of shares it comprises. The chairman may, on being delegated by the board of directors or the management to do so, effect these operations in the months immediately following the end of the financial year. The board of directors or the management, or the chairman if delegated, may also, at any time, record the same information for the current year and amend the memorandum and articles of association accordingly.
Where, as a result of one of the operations mentioned in Articles L.225-154 and L.225-156, a holder of warrants presenting their certificates of entitlement to a number of shares including a fractional share, the fraction in question must be paid in cash according to methods of calculation to be fixed by an Order approved by the Conseil d'Etat.
Where the company required to issue shares is absorbed by another company or merges with one or more other companies to form a new company, or de-merges, by transferring its shares to existing or new companies, warrant holders may subscribe shares in the absorbing company or new companies. The number of shares they shall be entitled to subscribe shall be determined by correcting the number of shares to which they were entitled in the company required to issue the shares by the ratio of exchange of the latter company's shares for shares in the absorbing company or the new company or companies, taking the provisions of Article L.225-154 into account if appropriate.
The general meeting of the absorbing company or the new company or companies shall decide, in accordance with the conditions specified in the first paragraph of Article L.225-150, whether to waive the preferential right of subscription mentioned in Article L.225-151.
The absorbing company or the new company or companies shall replace the company issuing the shares for the purposes of Articles L.225-153 to L.225-155.
Article L225-157
Decisions taken in breach of Articles L.225-150 to L.225-156 shall be void.
Article L225-158
Warrant holders may, in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat, obtain disclosure of the documents listed in paragraphs 1 and 2 of Article L.225-115 for the last three financial years of the company issuing the shares, except its inventory of assets.
Article L225-159
Share warrants purchased by the issuing company and warrants used for share subscriptions shall be cancelled.
Article L225-160
The provisions of Articles L.225-150 to L.225-159 shall apply to the issue of bonds with warrants allocated to employees by way of a share of the profits derived from the expansion of companies.
Article L225-161
On a report by the board of directors or the management, as the case may be, and a special auditors' report relating to the proposed conversion basis, an special shareholders’ meeting may authorise the issue of bonds convertible into shares, to which the provisions of Part 5 of Chapter VIII of this Title shall be applicable. Unless it is decided to make an exception in accordance with Article L.225-135, shareholders shall be entitled to subscribe convertible bonds in accordance with the same conditions as those laid down for the subscription of new shares.
The said authority must contain an express waiver by the shareholders, in favour of the bond holders, of their preferential right to subscribe shares issued on the conversion of bonds.
Conversion may take place only with the agreement of the bearers, and in accordance with the conditions and conversion bases laid down by the bond issue agreement. The said agreement shall indicate either that conversion shall take place during one or more specific option periods, or that conversion may take place at any time.
The issue price of bonds convertible into shares must not be less than the nominal value of the shares to be received by the bond holders if they opt for conversion.
With effect from the date of the vote by the meeting and as long as there are any bonds convertible into shares in existence, the company shall be prohibited from amortising its share capital or varying the distribution of dividends. Nevertheless, the company may create non-voting preferred stock provided that the rights of bond holders are preserved, as stipulated by Article L.225-162.
In the event of a capital reduction caused by losses, by reducing either the total nominal value or number of shares, the rights of bond holders opting for the conversion of their securities shall be reduced accordingly, as if the said bond holders had been shareholders with effect from the date of issue of the bonds.
Article L225-162
With effect from the date of the vote by the meeting referred to in Article L.225-161, and as long as there are any bonds convertible into shares in existence, the incorporation of reserve funds, profits or issue premiums into the share capital, and the distribution of reserve funds in cash or portfolio securities shall be authorised only on condition that the rights of bond holders opting for conversion shall be preserved.
To that end, the company must, in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat, allow bond holders opting for conversion either to subscribe whole shares or obtain new shares free of charge, or to receive cash or securities similar to those distributed in the same quantities or proportions and likewise in accordance with the same conditions, save as regards the enjoyment of possession thereof, as if they had been shareholders at the date of the said issue, incorporation or distribution.
In the event of an issue of bonds with warrants or new convertible or exchangeable bonds, the company shall give notice of the said issue to the holders or bearers of warrants by notice to be published in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat, to enable them, if they wish to participate in the operation, to exercise their option within the time limit specified in the said notice. If the period within which the right of subscription may be exercised has not yet commenced, the exercise price to be adopted shall be the first price shown in the issue agreement. The provisions of this sub-paragraph shall apply to any other operation involving a right of subscription reserved to shareholders, except those arising from the application of the first sub-paragraph of Article L.225-177.
Nevertheless, provided that the company's shares are admitted to trading on a regulated market, the issue agreement may provide, instead of the measures specified in the preceding sub-paragraph for the adjustment of the conditions of subscription originally laid down, in order to allow for the effects of the issue, incorporation or distribution, in accordance with conditions and by methods of calculation to be laid down by an Order approved by the Conseil d'Etat, under the supervision of the Commission des Opérations de Bourse [Securities and Investments Board].
In the case of shares issued to subscribers for cash or new convertible or exchangeable bonds, where a general meeting has removed the preferential right of subscription, the decision must be approved by the routine shareholders’ meeting of bond holders affected thereby.
Article L225-163
In the case of an issue of bonds convertible into shares at any time, conversion may be applied for during a period commencing no later than either the first repayment date or the fifth anniversary of the start of the issue, and expiring three months after the date on which the bond is required to be repaid. Nevertheless, in the event of an increase in capital or merger, the board of directors or management, as the case may be, may suspend the exercise of the right for a period not exceeding three months. Shares delivered to bond holders shall entitle the holder to dividends distributed for the year in which conversion was applied for.
Where, as a result of one or more of the operations referred to in Articles L.225-162 and L.225-164, a bond holder applying for conversion of their shares is entitled to a number of shares that includes a fraction of a share, the said fraction must be paid in cash in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat.
Increases in capital rendered necessary by the conversion of bonds shall not require the formalities specified in Article L.225-142, the second sub-paragraph of Article L.225-144 and Article L.225-146. It shall be unconditionally effected merely by virtue of the application for conversion, except where the second sub-paragraph of Article L.225-143 applies, the subscription report and, if appropriate, the sums rendered payable by the subscription of cash shares in the circumstances referred to in Article L225-162.
At its first meeting after the end of each financial year, the board of directors or management of the company, as the case may be, shall if necessary record the number and total nominal value of the shares issued on conversion during the year just ended and make the necessary amendments to the memorandum and articles of association relating to the total share capital and the number of shares it comprises.
The Chairman may, on being delegated by the board of directors or the management, effect these operations within a month of the end of the financial year. The board of directors or the management, or the Chairman if delegated, may also, at any time, record the same information for the current year and amend the memorandum and articles of association accordingly.
Article L225-164
With effect from the date of issue of the bonds convertible into shares, and as long as such bonds exist, the absorption of the issuing company by another company or the merger thereof with one or more other companies to form a new company shall be subject to the approval of an special shareholders’ meeting of the bond holders affected. If the meeting shall not have approved the absorption or merger, or if it shall not have been able to take a valid decision for lack of the requisite quorum, the provisions of Article L.228-73 shall apply.
Bonds convertible into shares may be converted into shares in the absorbing or new company, either during the option period or periods provided by the issue agreement, or at any time, as the case may be. The conversion basis shall be determined by correcting the ratio of exchange of shares in the issuing company against shares in the absorbing or new company as specified in the said agreement, taking the provisions of Article L.225-162 into account if appropriate.
On the contribution auditors' report, as provided in Article L.225-147, that of the board of directors or management, as the case may be, and the company auditors' report, as provided in Article L.225-161, the general meeting of the absorbing or new company shall decide whether to approve the merger and the waiver of the preferential right of subscription specified in the second sub-paragraph of Article L.225-161.
The absorbing or new company shall replace the issuing company for the purposes of the third and fifth sub-paragraphs of Article L.225-161, Article L.225-162 and, if applicable, Article L.225-163.
Article L225-165
Decisions taken in breach of Articles L.225-161 to L.225-164 shall be void.
Article L225-166
The provisions of Articles L.225-161 to L.225-165 shall apply to the issue of bonds convertible into shares allocated to employees by way of a share of the profits derived from the expansion of companies.
Article L225-167
If proceedings for judicial reorganisation on insolvency are commenced in respect of a company issuing convertible bonds, the time limit for the conversion of the said bonds into shares shall commence on the date on which judgment is given drawing up the rehabilitation plan and the conversion may take place, with the agreement of every bond holder, subject to the conditions laid down in the plan.
Article L225-168
Companies whose shares are admitted to trading on a regulated market may issue bonds exchangeable for shares in accordance with the conditions laid down by Articles L.225-169 to L.225-176. The provisions of Articles L.228-38 to L.228-90 shall apply to such bonds.
Article L225-169
On a report by the board of directors or management, as the case may be, and a special auditors' report, an special shareholders’ meeting may authorise the issue of bonds that may be exchanged for shares already issued and held by third parties or for shares created on a simultaneous increase in capital. In the latter case, the shares shall be subscribed either by one or more credit institutions, or by one or more persons who shall have obtained a pledge of security from credit institutions.
The said authority shall imply the waiver by the shareholders of their preferential right of subscription in relation to the increase in capital.
Unless they waive the same in accordance with the conditions specified in Article L.225-135, the shareholders shall have a preferential right of subscription in relation to the exchangeable bonds issued. The said right shall be governed by Articles L.225-132 to L.225-141.
Article L225-170
On the same reports as are mentioned in the first sub-paragraph of Article L.225-169, an special shareholders’ meeting must be called to approve any agreement between the company and persons who undertake to effect the exchange of the bonds after subscribing a corresponding number of shares. The auditors' special report must specifically state the remuneration stipulated for the said persons.
Article L225-171
The issue price of exchangeable bonds must not be less than the nominal value of the shares the bond holders will receive in the event of exchange.
The exchange may not take place without the bond holders' agreement. It shall be effected in accordance with the conditions and basis laid down by the issue agreement and by the agreement referred to in Article L.225-170. It may be applied for at any time within a period of three months after the date on which the bond is repayable.
Article L225-172
Immediately upon the issue of the bonds, and until the expiration of the option exercise period, the persons who have undertaken to effect the exchange must exercise all rights of subscription relating to whole numbers of shares and all rights of allocation attached to the shares subscribed. In the event of exchange the new shares so obtained must be offered to the bond holders, who must be responsible for repaying the total amount of the sums paid to subscribe and pay up the said shares or to purchase the necessary supplemental rights to complete the number of rights attached to the old shares, together with interest on the said sums if so stipulated by the agreement referred to in Article L.225-170. In the case of fractional shares, the bond holder shall be entitled to payment in cash of the value of the said fractional shares, as valued at the date of exchange.
Article L225-173
The requisite shares to effect the exchange of bonds must be registered, non-transferable and non-attachable. They may be transferred only when the exchange can be proved to have taken place.
They must also be pledged in favour of the bond holders as security for the due performance of the obligations assumed by the persons who have undertaken to effect the exchange.
The provisions of the two preceding sub-paragraphs shall be applicable to new shares obtained pursuant to Article L.225-172.
Article L225-174
With effect from the date of the vote by the meeting referred to in Article L.225-169, it shall be prohibited for the company to amortise its share capital or vary the distribution of dividends until all the bonds issued have been exchanged or become repayable. The company may, however, create non-voting preferred stock.
In the case of distribution by the company of reserves in the form of shares during the same period, shares earmarked for exchange shall be subject to the provisions of the first and second sub-paragraphs of Article L.225-172.
Shares to be delivered to bond holders in the event of exchange must correspond to the number of shares to which they are entitled. Any fractional shares must be paid for in cash, the price being calculated according to the value of the shares at the date of exchange. Dividends and interest becoming due between the date of distribution and the date of exchange shall be payable to the persons who have undertaken to effect the exchange.
In the event of distribution by the company of reserves in cash during the period referred to in the first sub-paragraph above, bond holders shall be entitled on the exchange of their shares to a sum equivalent to that which they would have received if they had been shareholders at the time of distribution.
Article L225-175&*
Between the issue of bonds exchangeable for shares and the date at which all bonds must have been exchanged or repaid, the absorption of the issuing company by another company or the merger of the issuing company with one or more companies to form a new company shall be subject to the prior approval of an special shareholders’ meeting of the bond holders affected.
Bonds exchangeable for shares may in any such case be exchanged, within the period stipulated in the second sub-paragraph of Article L.225-171, for shares in the absorbing or new company that have been received by the persons who have undertaken to effect the exchange. The exchange bases shall be fixed by correcting the ratio of exchange fixed by the issue agreement according to the ratio of exchange between shares in the issuing company and shares in the absorbing or new company.
The absorbing or new company shall replace the issuing company for the purposes of Article L.225-174 and the agreement referred to in Article L.225-170.
Article L225-176
Any decisions taken in breach of the provisions of Articles L.225-169, L.225-170, L.225-171, L.225-174 and L.225-175 shall be void.
Article L225-177
(Act No. 2001-420 of 15 May 2001 Art. 132 I Official Journal of 16 May 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004) On the basis of a report from the board of directors or the executive board, as applicable, and the auditors' special report, the extraordinary general meeting may authorise the board of directors or the executive board to grant stock options to some or all of the company's staff. The extraordinary general meeting determines the period during which the said authorisation may be used by the board of directors or the executive board, which shall not exceed thirty-eight months. However, authorisations granted before the publication date of Act No. 2001-420 of 15 May 2001 relating to the new financial regulations shall remain valid until they expire.
The board of directors or the executive board determines the conditions under which the options shall be granted. The said conditions may include a prohibition on the immediate reselling of some or all of the shares, but the period imposed for retaining the shares shall not exceed three years from the date on which the option is exercised. Options may be granted or exercised even before the share capital has been fully paid up.
The subscription price is determined by the board of directors or the executive board, on the day on which the option is granted, in the manner stipulated by the extraordinary general meeting based on the auditors' report. If the company's shares are not admitted to trading on a regulated market, the subscription price is determined in accordance with the objective methods applicable to the valuation of shares which takes account of the company's net assets position, profitability and business prospects, applying a weighting specific to each case. The said criteria are assessed, if appropriate, on a consolidated basis or, failing that, by taking the financial elements of their significant subsidiaries into account. Failing this, the subscription price is determined by dividing the amount of the revalued net assets by the number of securities in existence calculated on the basis of the most recent balance sheet. A decree determines the method for calculating the subscription price. If the company's shares are admitted to trading on a regulated market, the subscription price cannot be lower than 80% of the average of the prices quoted at the twenty stock-exchange trading days preceding that day, and no option shall be granted less than twenty stock-exchange trading days after detachment from the shares of a coupon giving entitlement to a dividend or a capital increase.
In a company whose securities are admitted to trading on a regulated market, options shall not be granted:
1. During the ten stock-exchange trading days preceding and following the date on which the consolidated accounts, or failing that the annual accounts, are published;
2. During the period between the date on which the company's management structures have knowledge of information which, were it to be published, could have a significant impact on the price of the company's securities, and the date ten stock-exchange trading days after that on which the said information is published.
Options to subscribe to securities which are not admitted to trading on a regulated market may only be granted to employees of the company granting them or to those of the companies referred to in 1 of Article L. 225-180.
Article L225-178
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The authorisation given by the extraordinary general meeting entails an express waiver by the shareholders, in favour of the option holders, of their preferential right to subscribe the shares that are issued as and when the options are exercised.
The capital increase resulting from the exercise of those options does not give rise to the formalities referred to in Article L. 225-142, the second paragraph of Article L. 225-144 and Article L. 225-146. It is definitively effected merely upon submission of the option-exercise declaration together with the application form and payment of the appropriate sum in cash or through offsetting against monies owed by the company.
At its first meeting following the close of each financial year, the board of directors or the executive board, as applicable, duly records the number and value of the shares, if any, issued during the financial year as a result of options being exercised, and makes the necessary amendments to the articles of association to reflect the new amount of the share capital and the number of shares that represent it. If duly empowered by the board of directors or the executive board, the chairman may proceed with this during the month which follows the close of the financial year. The board of directors or the executive board, or the chairman if so empowered, may also record the same information, at any time, for the financial year in progress and make the relevant amendments to the articles of association.
Article L225-179
(Act No. 2001-420 of 15 May 2001 Art. 132 II Official Journal of 16 May 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004) The extraordinary general meeting may also authorise the board of directors or the executive board, as applicable, to grant some or all of the company's staff options to purchase shares deriving from a redemption effected by the company itself prior to the opening of the option in the manner described in Articles L. 225-208 or L. 225-209. The extraordinary general meeting determines the period during which that authorisation may be used by the board of directors or the executive board, which shall not exceed thirty-eight months. However, authorisations granted before the publication date of Act No. 2001-420 of 15 May 2001 relating to the new financial regulations shall remain valid until they expire.
In such cases, the provisions of the second and fourth to seventh paragraphs of Article L. 225-177 are applicable. Moreover, the share price on the day on which the option is granted cannot be lower than 80% of the average purchase price of the shares held by the company by virtue of Articles L. 225-208 and L. 225-209.
Options entitling the holder to purchase securities which are not admitted to trading on a regulated market may be granted only to employees of the company granting the option or those of the companies referred to in 1 of Article L. 225-180.
Article L225-180
(Act No. 2001-420 of 15 May 2001 Art. 32 Official Journal of 16 May 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
I. - Options may be granted, under the terms and conditions set forth in Articles L. 225-177 to L. 225-179 above:
1. To the employees of companies or economic interest groups having at least 10% of their shares or voting rights directly or indirectly held by the company granting the options;
2. Or the employees of companies or economic interest groups directly or indirectly holding at least 10% of the capital or voting rights of the company granting the options;
3. Or the employees of companies or economic interest groups having at least 50% of their shares or voting rights directly or indirectly held by a company which itself directly or indirectly holds at least 50% of the capital of the company granting the options.
II. - The ordinary general meeting of the company which has direct or indirect majority control of the company granting the options is informed as provided for in Article L. 225-184.
Options may also be granted under the terms and conditions set forth in Articles L. 225-177 to L. 225-179 by a company which is directly or indirectly and solely or jointly controlled by a central body or by credit institutions affiliated thereto within the meaning of Articles L. 511-30 to L. 511-32 of the Monetary and Financial Code, to employees of the said companies and those of entities having more than 50% of their shares held directly or indirectly and solely or jointly by that central body or its affiliated institutions.
Article L225-181
(Order No. 2004-604 of 24 June 2004 Art. 51 IX, X Official Journal of 26 June 2004)
The price established for the subscription or purchase of the shares may not be changed during the option period. However, when the company proceeds with a capital write-off or reduction, a change to the appropriation of profits,
a free allotment of shares, a capitalisation of reserves, profits or share premiums, a distribution of reserves or any issue of capital securities or securities giving entitlement to an allotment of capital securities conferring a subscription right reserved for shareholders, it must take the necessary measures to protect the interests of the option holders as provided for in Article L. 228-99.
Article L225-182
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The total number of options open and not yet exercised shall not constitute entitlement to subscribe a number of shares in excess of a fraction of the share capital determined in a Conseil d'Etat decree. Options shall not be granted to employees and executives holding more than 10% of the share capital.
Article L225-183
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The extraordinary general meeting determines the period during which the options must be exercised. The rights deriving from the options granted are non-transferable until the option has been exercised. In the event of the option holder's death, his heirs shall have a period of six months starting on the date of his death in which to exercise the option.
Article L225-184
(Act No. 2001-420 of 15 May 2001 Art. 132 III Official Journal of 16 May 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
A special report informs the ordinary general meeting each year of the transactions carried out by virtue of the provisions of Articles L. 225-177 to L. 225-186.
The said report also indicates:
-
the number, expiry dates and price of the options to subscribe or purchase shares which, during the year and relative to the duties and functions performed in the company, have been granted to each of those executives by the company and the companies affiliated to it as provided for in Article L. 225-180;
-
the number, expiry dates and price of the options to subscribe or purchase shares which have been granted during the year to each of those executives relative to the duties and functions they perform by controlled companies within the meaning of Article L. 233-16;
-
the number and price of the shares subscribed or purchased by the company's executives during the financial year through exercise of one or more of the options held on the companies referred to in the previous two paragraphs.
The said report also indicates:
-
the number, price and expiry dates of the options to subscribe or purchase shares granted during the year by the company and the companies or groups associated with it as provided for in Article L. 225-180 to each of the ten non-executive employees of the company who were granted the highest number of options;
-
the number and price of the shares which have been subscribed or purchased during the year through the exercise of one or more options held on the companies referred to in the previous paragraph by each of the ten non-executive employees of the company who thus purchased or subscribed the highest number of shares.
Article L225-185
(Act No. 2001-420 of 15 May 2001 Art. 132 IV Official Journal of 16 May 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
Options giving entitlement to subscribe to shares may be granted for a period of two years, commencing on the date of the company's registration, to natural-person executives who participate with employees in the formation of a company.
Such options may also be granted, for a period of two years with effect from the purchase, to natural-person executives of a company who combine with employees to purchase the majority of the voting rights in order to ensure the company's continued existence.
In the event of options being granted within two years of a company's creation or of the purchase of the majority of a company's shares by its employees or executives, the maximum indicated in the last paragraph of Article L. 225-182 is increased to one third of the capital.
The chairman of the board of directors, the general manager, the acting general managers, the members of the executive board or the chief executive of a joint-stock company may be granted options by that company which confer entitlement to subscribe or purchase shares as provided for in Articles L. 225-177 to L. 225-184.
They may also be granted options which give entitlement to subscribe or purchase shares of an associated company as provided for in Article L. 225-180, provided that the said company's shares are admitted to trading on a regulated market.
Article L225-186
(Act No. 2001-420 of 15 May 2001 Art. 31 Official Journal of 16 May 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
Articles L. 225-177 to L. 225-185 are applicable to investment certificates, cooperative investment certificates and members' investment certificates.
Article L225-187-1
(Act No. 2001-152 of 19 February 2001 Art. 29 5 Official Journal of 20 February 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The wording of Articles L. 225-192 to L. 225-194 and Article L. 225-197 which predates the publication of Act No. 2001-152 of 19 February 2001 relating to save-as-you-earn schemes shall remain applicable until a period of five years has elapsed since its publication.
Article L225-197-1
(inserted by Finance Act 2005 No. 2004-1484 of 30 December 2004 Art. 83 I a Official Journal of 31 December 2004)
I. - The extraordinary general meeting may, on the basis of a report from the board of directors or the executive board, as applicable, and the auditors' special report, authorise the board of directors or the executive board to make a free allotment of existing or new shares to the company's staff or to certain categories of staff.
The extraordinary general meeting determines the maximum percentage of the share capital which may be allotted as indicated above. The allotment of the shares to the beneficiaries becomes absolute upon expiry of an acquisition period of a minimum duration determined by the extraordinary general meeting which shall not be less than two years. The extraordinary general meeting also determines the minimum period during which the beneficiaries must hold the shares. The said period shall run from the date on which the allotment of shares becomes absolute, but shall never be less than two years.
In a company whose securities are admitted to trading on a regulated market, even when the compulsory holding period has expired, the shares may not be sold:
1. During the period of ten stock-exchange trading days that precede or follow the date on which the consolidated accounts, or failing that the annual accounts, are published;
2. During the period between the date on which the company's management structures have knowledge of information which, were it to be published, could have a significant impact on the price of the company's securities, and the date ten stock-exchange trading days after that on which the said information is published.
The board of directors or, where applicable, the executive board, determines the identity of the beneficiaries of the share allotments referred to in the first paragraph. It also lays down the conditions and, where applicable, the allotment criteria, applicable to the shares.
The extraordinary general meeting determines the period during which the board of directors or the executive board may use the said authorisation. Which period shall not exceed thirty-eight months.
The total number total of shares freely allotted shall not exceed 10% of the share capital.
II. - The chairman of the board of directors, the general manager, the acting general managers, the members of the executive board or the chief executive of a joint-stock company may be allotted shares in the company in the same way as other staff members.
They may also be allotted shares in an associated company as provided for in Article L. 225-197-2, provided that the said company's shares are admitted to trading on a regulated market.
Shares may not be allotted to employees and executives who individually hold more than 10% of the share capital. Moreover, a free allotment of shares shall not result in individual employees and executives holding more than 10% of the share capital.
Article L225-197-2
(inserted by Finance Act 2005 No. 2004-1484 of 30 December 2004 Art. 83 I a Official Journal of 31 December 2004)
I. - Shares may be allotted, in the same way as those referred to in Article L. 225-197-1:
1. To the employees of companies or economic interest groups having at least 10% of their shares or voting rights directly or indirectly held by the company allotting the shares;
2. Or the employees of companies or economic interest groups directly or indirectly holding at least 10% of the capital or voting rights of the company allotting the shares;
3. Or the employees of companies or economic interest groups having at least 50% of their shares or voting rights directly or indirectly held by a company which itself directly or indirectly holds at least 50% of the capital of the company allotting the shares.
Shares which are not admitted to trading on a regulated market can only be allotted as provided for above to employees of the company making the allotment or to those referred to in 1.
II. - Shares may also be allotted under the terms and conditions set forth in Article L. 225-197-1 by a company which is directly or indirectly and solely or jointly controlled by a central body or by credit institutions affiliated thereto within the meaning of and pursuant to Articles L. 511-30 to L. 511-32 of the Monetary and Financial Code, to employees of the said companies and those of entities having more than 50% of their shares held directly or indirectly and solely or jointly by that central body or those credit institutions.
Article L225-197-3
(inserted by Finance Act 2005 No. 2004-1484 of 30 December 2004 Art. 83 I a Official Journal of 31 December 2004) The rights deriving from the free allotment of shares are non-transferable until the end of the acquisition period.
In the event of the beneficiary's death, his heirs may request allotment of the shares within six months of the date of his death.
Article L225-197-4
(inserted by Finance Act 2005 No. 2004-1484 of 30 December 2004 Art. 83 I a Official Journal of 31 December 2004)
A special report informs the ordinary general meeting each year of the transactions carried out by virtue of the provisions of Articles L. 225-197-1 to L. 225-197-3.
The said report also indicates:
-
the number and value of the shares which have been freely allotted to each of those executives by the company and the companies affiliated to it, as provided for in Article L. 225-197-2, relative to the duties and functions performed in the company during the year;
-
the number and value of the shares which have been freely allotted during the year to each of those executives by controlled companies within the meaning of Article L. 233-16 relative to the duties and functions they perform.
The said report also indicates the number and value of the shares which, during the year, have been freely allotted by the company and by the companies or groups associated with it, as provided for in Article L. 225-197-2, to each of the ten non-executive employees of the company who received the highest number of freely allotted shares.
Article L225-197-5
(inserted by Finance Act 2005 No. 2004-1484 of 30 December 2004 Art. 83 I a Official Journal of 31 December 2004)
The ordinary general meeting of the company which has direct or indirect majority control of the company making the free allotment of shares is informed as provided for in Article L. 225-197-4.
Subsection 3
Capital write-offs Articles L225-198 to L225-203
Article L225-198
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
Capital write-offs are effected by virtue of a stipulation in the articles of association or a decision of the extraordinary general meeting by making use of distributable sums within the meaning of Article L. 232-11. Such write-offs may only be effected through equal redemption of every share within a given category and do not entail any capital reduction.
The fully redeemed shares are known as dividend shares.
Article L225-199
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The fully or partially redeemed shares lose entitlement, pro tanto, to the first dividend referred to in Article L. 232-19 and to repayment of the nominal value. They retain all their other rights.
Article L225-200
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
When the capital is divided either into capital shares and fully or partially redeemed shares or into unequally redeemed shares, the general meeting of shareholders may decide, applying the procedure used to amend the articles of association, to convert the fully or partially redeemed shares into capital shares.
To that end, it makes provision for a compulsory deduction to be made from the portion of the company's profits, for one or more financial years, that relates to those shares in respect of the redeemed amount of the shares to be converted, after payment of the first dividend or any cumulative preferred dividend to which the partially redeemed shares may give entitlement.
Article L225-201
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The shareholders may be authorised, in the same circumstances, to pay the company the redeemed amount of their shares and, where applicable, the first dividend or the cumulative preferred dividend for the elapsed portion of the then current financial year and, where appropriate, the previous financial year.
Article L225-202
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The decisions referred to in Articles L. 225-200 and L. 225-201 are subject to ratification by the special meetings of each shareholder category having the same rights.
Article L225-203
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The board of directors or the executive board, as applicable, makes the necessary amendments to the articles of association, insofar as the said amendments correspond materially to the actual results of the transactions referred to in Articles L. 225-200 and L. 225-201.
Subsection 4
Capital reductions Articles L225-204 to L225-205
Article L225-204
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
A capital reduction is authorised or decided by the extraordinary general meeting, which may delegate to the board of directors or the executive board, as applicable, all powers required to effect it. Under no circumstances shall it jeopardise equality among the shareholders.
An auditors' report on the planned transaction is sent to the company's shareholders within a time limit determined in a Conseil d'Etat decree. The meeting deliberates on the auditors' report which presents their assessment of the reasons and arrangements for the reduction.
When the board of directors or the executive board, as applicable, is duly empowered to proceed with the reduction by the general meeting, it draws up a report thereon which must be published and makes the appropriate amendment to the articles of association.
Article L225-205
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
When the meeting approves a capital reduction plan which is not motivated by losses, the representative of the general body of bondholders and creditors whose debt predates the date on which the minutes of the meeting were filed at the court registry, may raise an objection to the reduction within a time limit stipulated in a Conseil d'Etat decree.
A court decision may reject the objection or order either that the debts be repaid or that guarantees be provided if the company offers them and they are deemed to be sufficient.
The capital reduction procedure shall not commence during the time limit for raising an objection, nor, where applicable, before a decision on first hearing has been given on any objection raised.
If the judge of original jurisdiction grants the objection, the capital reduction procedure is immediately halted until sufficient guarantees are provided or until the debts are repaid. If he rejects it, the reduction procedure may recommence.
Subsection 5
Subscription, purchase or taking pledge of their own shares by companies Articles L225-206 to L225-217
Article L225-206
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
I. - The company is prohibited from subscribing its own shares, either directly or through a person acting in their own name but on the company's behalf.
The founders, or, in the case of a capital increase, the members of the board of directors or the executive board, as applicable, are required, as provided for in Article L. 225-251 and the first paragraph of Article L. 225-256, to pay up any shares subscribed by the company in violation of the first paragraph.
When the shares have been subscribed by a person acting in their own name but on the company's behalf, that person is obliged to pay up the shares, jointly and severally with the founders or, as applicable, the members of the board of directors or the executive board. The said person is, moreover, deemed to have subscribed those shares for his own account.
II. - The purchase by a company of its own shares is authorised in the circumstances and pursuant to the terms indicated in Articles L. 225-207 to L. 225-217.
The purchasing of shares by a person acting on behalf of the company is prohibited unless the said person is an investment service provider or a member of a regulated market acting as provided for in I of Article 43 of Act No. 96-597 of 2 July 1996 on the modernisation of financial activities.
Article L225-207
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
A general meeting which has decided a capital reduction not motivated by losses may authorise the board of directors or the executive board, as applicable, to purchase a specified number of shares in order to cancel them.
Article L225-208
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004) (Finance Act 2005 No. 2004-1484 of 30 December 2004 Art. 83 I b Official Journal of 31 December 2004)
Companies which allot shares to their employees in the context of a profit-sharing scheme, those which allot their shares as provided for in Articles L. 225-197-1 to L. 225-197-3, and those which grant share options as provided for in Articles L. 225-177 et seq, may repurchase their own shares for such purposes. The shares must be allotted, or the options must be granted, within one year of the repurchase.
Article L225-209
(Act No. 2003-7 of 3 January 2003 Art. 50 II Official Journal of 4 January 2003) (Order No. 2004-604 of 24 June 2004 Art. 23, Art. 51 IX Official Journal of 26 June 2004)
(Act No. 2004-1484 of 30 December 2004 Art. 83 I b Finance for 2005 Official Journal of 31 December 2004) (Act No. 2005-842 of 26 July 2005 Art. 27 Official Journal of 27 July 2005)
The general meeting of a company whose shares are admitted to trading on a regulated market may authorise the board of directors or the executive board, as applicable, to purchase a number of shares representing up to 10% of the company's capitaL.The general meeting defines the purposes and terms of the transaction, as well as its ceiling. Such authorisation may not be given for a period longer than eighteen months. The works council is informed of the resolution adopted by the general meeting.
A special annual report informs the general meeting of the execution of the share purchase transactions it has authorised and specifies, for each purpose, the number and price of the shares thus acquired, the volume of the shares used and any reallocations thereof to other purposes.
The board of directors may delegate to the general manager or, with his agreement, to one or more assistant general managers, the powers required to execute such transactions. The executive board may delegate to its chairman or, with his agreement, to one or more of its members, the powers required to execute such transactions. The persons thus designated report to board of directors or the executive board on the use made of that power as determined by the said boards.
The acquisition, assignment or transfer of the said shares may be effected by any means. Shares representing up to 10% of the company's capital may be cancelled every twenty-four months. The company reports to the Financial Markets Council each month on the purchases, assignments, transfers and cancellations thus effected. The Financial Markets Council brings this information to the attention of the public.
Companies which enable their employees to participate in the benefits of their expansion by allocating their own shares to them, those which allocate their shares as provided for in Articles L225-197-1 to L225-197-3 and those which plan to grant stock options to their employees may use for such purposes some or all of the shares acquired as provided for above. They may also offer their own shares to them as provided for in II of Article L225-196 and in Articles L443-1 et seq of the Labour Code.
The number of shares the company acquires and retains for possible subsequent use for payment or exchange purposes within the framework of a merger, demerger or contribution cannot exceed 5% of its capitaL.These provisions apply to redemption schedules submitted to general meetings for approval from 1 January 2006 onwards.
In the event of shares purchased being cancelled, the capital reduction is authorised or decided by an extraordinary general meeting, which may delegate full powers to effect such cancellation to the board of directors or the executive board, as applicable. A special report on the planned transaction, drawn up by the auditors, is sent to the company's shareholders within a time limit determined in a Conseil d'Etat decree.
Article L225-210
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The company shall not hold, either directly or through a person acting in their own name but on the company's behalf, more than 10% of the total of its own shares, or more than 10% of any given category. The said shares must be in registered form and be fully paid up when purchased. Failing this, the members of the board of directors or the executive board, as applicable, are required, as stipulated in Article L. 225-251 and the first paragraph of Article L. 225-256, to pay up the shares.
The acquisition of the company's shares shall not have the effect of reducing the share capital to an amount below that of the capital plus the non-distributable reserves.
The company must have reserves, in addition to the statutory reserve, of an amount at least equal to the value of all the shares it holds.
The shares held by the company do not give entitlement to dividends and are stripped of voting rights. In the event of the capital being increased by share subscriptions in cash, the company may not exercise the preferential subscription right itself. The general meeting may decide not to take account of such shares when determining the preferential subscription rights attached to the other shares. Failing this, the rights attached to the shares held by the company must be either sold on the stock market or distributed among the shareholders in proportion to their individual rights before the close of the subscription period.
Article L225-211
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The company or person responsible for administration of its securities shall keep registers of the purchases and sales made pursuant to Articles L. 225-208 and L. 225-209, as stipulated in a Conseil d'Etat decree.
The board of directors or the executive board, as applicable, must indicate in the report referred to in Article L. 225-100 the number of shares bought and sold during the financial year pursuant to Articles L. 225-208 and L. 225-209, the average prices of the purchases and sales, the trading commission, the number of shares registered in the company's name at the close of the financial year, their value based on the buying price, their nominal value, the reasons for the purchases made and the fraction of the capital that they represent.
Article L225-212
(Act No. 2003-706 of 1 August 2003 Art. 46 I 1, V 1 Official Journal of 2 August 2003) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
Companies shall declare the transactions that they envisage carrying out pursuant to the provisions of Article L. 225-209 to the Financial Markets Authority, and shall report their acquisitions to it as soon as they are made. The Financial Markets Authority may request them to provide any explanation or proof in this regard which it considers necessary.
If such requests are not complied with, or if it finds that the transactions breach the provisions of Article L. 225-209, the Financial Markets Authority may take all necessary measures to prevent execution of orders transmitted directly or indirectly by such companies. NB: Act No. 2003-706 of 1 August 2003 article 46 V 1 and 2:
1. All references to the Stock Exchange Commission and the Disciplinary Board for Financial Management are replaced with a reference to the Financial Markets Authority;
2. All references to the Stock Exchange Commission's Rules and the General Regulations of the Financial Markets Council are replaced with a reference to the General Regulations of the Financial Markets Authority.
Article L225-213
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The provisions of Articles L. 225-206 and L. 225-209 do not apply to fully paid-up shares acquired subsequent to a general transfer of assets or following a court decision.
The shares must nevertheless be sold within two years of the date of acquisition if the company holds more than 10% of its capital. Upon expiry of that period, they must be cancelled.
Article L225-214
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
Shares held in violation of Articles L. 225-206 to L. 225-210 must be sold within one year of their subscription or acquisition. Upon expiry of that period, they must be cancelled.
Article L225-215
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
The company is prohibited from taking pledge of its own shares, either directly or through a person acting in their own name but on the company's behalf.
Shares taken in pledge by the company must be returned to their owner within one year. They may be returned within two years if the transfer of the pledge to the company results from a general transfer of assets or a court decision. Failing this, the contract of pledge is automatically null and void. The prohibition referred to in the present article shall not apply to the ordinary transactions of credit institutions.
Article L225-216
(Act No. 2001-152 of 19 February 2001 Art. 29 3 Official Journal of 20 February 2001) (Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
A company shall not advance funds, grant loans or grant sureties to enable a third party to subscribe or purchase its own shares.
The provisions of the present article do not apply to the ordinary transactions of credit institutions or transactions carried out to enable employees to buy shares in the company, one of its subsidiaries or a company included in a group savings scheme as provided for in Article L. 444-3 of the Labour Code.
Article L225-217
(Order No. 2004-604 of 24 June 2004 Art. 51 IX Official Journal of 26 June 2004)
Articles L. 225-206 to L. 225-216 are applicable to investment certificates.
SECTION V
Supervision of public limited companies Articles L225-218 to L225-242
Article L225-218
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003) (Law No 2003-706 of 1 August 2003 Article 104 (I) Official Gazette of 2 August 2003) In each company, the auditing function is performed by one or more auditors.
Article L225-219
I.- No person may act as an auditor unless they is enrolled in an official list to be prepared for that purpose.
II.- An Order to be approved by the Conseil d'Etat shall fix the structure of the auditors' profession. It shall in particular determine:
1. The method by which the list is prepared and revised, which shall be the prerogative of regional registration boards, and, at appeal, a National Registration Board the composition of which is specified in Article L.225-220;
2. The conditions of registration in the list;
3. The disciplinary system, which shall be the prerogative of regional disciplinary boards, and, at appeal, a National Disciplinary Authority, as mentioned in Article L.225-221;
4. The conditions upon which auditors shall be grouped into professional associations.
Article L225-220
I.- Every regional registration board must include:
1. A judge of the Cour d'appel, as chairman;
2. A judge of a Tribunal de grande instance [Tribunal de grande instance] of the jurisdiction of the Cour d'appel, as deputy chairman;
3. A judge of the Tribunal de grande instance of Local Government Auditors;
4. A member of the Tribunaux de commerce;
5. A professor of law, economics or management;
6. A person qualified in the field of business management;
7. A representative of the Minister of Economy and Finance;
8. A member of the Regional Society of Auditors.
II.- Decisions of the Regional Registration Boards may be referred to a National Registration Board on appeal. The National Board must include:
1. A judge of the Civil and Criminal jurisdiction system, as chairman;
2. A judge of the Court of Auditors;
3. A professor of law, economics or management;
4. A person qualified in the field of business management;
5. A representative of the Minister of Economy and Finance;
6. A member of the Tribunaux de commerce;
7. Two auditors.
III.- If a vote is tied between members of the Regional or National Board, the chairman shall have the casting vote. IV.- Members of the Regional Boards and the National Board and their deputies, in equal numbers and chosen from the same categories, shall be appointed in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat. With regard to the auditors, they shall be appointed on the proposal of their regional societies or their national society respectively.
Article L225-221
The Regional Registration Board shall be given the status of a regional disciplinary board to rule in disciplinary proceedings taken against an auditor who is a member of a regional society, wherever the acts of which they is accused may have been committed.
The National Registration Board shall be given the status of a regional disciplinary board to rule on appeals against decisions of the regional disciplinary boards.
A judge of the civil and criminal jurisdiction system belonging to the Parquet at local or national level shall act as Procureur de la République on each regional or national disciplinary board. The said judges shall be appointed by the Minister for Justice.
Article L225-222
The functions of an auditor shall be incompatible:
1. With any activity or act of such a nature as to affect their independence;
2. With any paid employment; nevertheless, an auditor may give instruction in the skills of their profession or occupy a paid post in a firm or company of auditors or accountants;
3. With any commercial activity, whether exercised directly or through an intermediary.
Article L225-223
Within a month of being enrolled in the list referred to in Article L.225-219, every auditor must take an oath in the Cour d'appel having jurisdiction over their locality, to discharge the duties of their profession honourably and with integrity and to observe the laws and cause them to be observed.
Article L225-224
The following may not be auditors of a public limited company:
1. Founders, contributors in kind, holders of special privileges, directors or members of the management or supervisory board, as the case may be, of the company or its subsidiaries as defined in Article L.233-1;
2. Relatives of the persons referred to in sub-paragraph 1 by blood or marriage up to and including the fourth degree of kinship;
3. Directors, members of the management or supervisory board, and, if applicable, spouses of directors or of members of the management or supervisory board holding one tenth of the company's capital or a company of which the company owns one tenth of the capital;
4. Persons who, directly or indirectly or through an intermediary, receive from those mentioned in sub-paragraph 1 of this Article, or from the company or any company to which sub-paragraph 3 above applies, any salary, wages or remuneration whatsoever in respect of any activity other than that of an auditor; this provision shall not apply either to complementary professional activities carried on abroad or to specific review missions carried out by the auditor on behalf of the company in companies consolidated or intended to be consolidated therewith. Auditors may receive remuneration from the company for temporary missions with limited objectives, carried out in the course of their duties, provided that the said missions are assigned to them by the company at the request of a public authority;
5. Companies or firms of auditors where one of their partners, shareholders or directors is in one of the situations described in sub-paragraph 1, 2, 3 or 4;
6. Spouses of persons who receive any salary, wages or remuneration in respect of a permanent activity other than that of auditor either from the company or its directors or members of its management or supervisory board, or from companies owning one tenth of the company's capital or of which the company owns one tenth of the capital,;
7. Firms or companies of auditors where the spouse of one of their directors, or of the partner or shareholder acting as auditor on behalf of the company, is in one of the situations described in sub-paragraph 6.
Article L225-225
Auditors may not be appointed as directors, managing directors or members of the management of the companies they audit within five years of relinquishing their functions. The same prohibition shall apply to partners, shareholders or directors of a firm or company of auditors.
They shall not exercise their functions within the same period in companies holding 10% of the capital of the company they audit or in a company of which the latter holds 10% of the capital at the date when they relinquish the functions of an auditor.
Article L225-226
Persons who have been directors, managing directors, members of the management, managers or paid employees of a company may not be appointed as auditors of the said company within five years of relinquishing their posts.
They may not be appointed within the same period as auditors in companies holding 10% of the capital of the company in which they held their posts or in a company of which the latter held 10% of the capital at the date when they relinquish their posts.
The prohibitions referred to in this Article for the persons mentioned in the first sub-paragraph shall apply to firms or companies of auditors of which the said persons are partners, shareholders or directors.
Article L225-227
Decisions taken in the absence of a legally appointed auditor, or on a report by auditors appointed or remaining in office in breach of the provisions of Articles L.225-219 and L.225-224 shall be void. An action to have such a decision declared void shall be extinguished if the said decisions are confirmed by a general meeting on a report by legally appointed auditors.
Article L225-228
(Law No 2003-706 of 1 August 2003 Article 105 Official Gazette of 2 August 2003)
The auditors are proposed for appointment by the general meeting in a draft resolution from the board of directors or the supervisory board or, in the circumstances defined in Section 3 of the present Chapter, the shareholders. If the company makes use of public issues, the board of directors chooses the auditors which it plans to propose, but the general manager and the assistant general manager do not participate in the voting if they are directors.
If the auditor has verified the contribution and merger operations of the companies which it controls within the meaning of subparagraph II of Article L. 233-16 for the two preceding financial years, the draft resolution referred to in the previous paragraph makes reference to that fact.
Save for the circumstances envisaged in Articles L. 225-7 and L. 225-16, the auditors are appointed by the ordinary general meeting.
One or more deputy auditors, whose task it is to replace the incumbent auditors in the event of refusal, unavailability, resignation or death, are appointed by the ordinary general meeting. The functions of a deputy auditor called upon to replace the incumbent cease upon expiry of the latter's term of office unless the unavailability is of a temporary nature. If this is the case, when the incumbent becomes available again he resumes his duties after the next general meeting called to approve the accounts has taken place.
Companies which are obliged to publish consolidated accounts pursuant to the provisions of the present Title are required to appoint at least two auditors.
The auditors carry out a joint examination of the accounting practices, in accordance with the instructions laid down in a code of professional standards established pursuant to the sixth paragraph of Article L. 821-1. A code of professional standards also determines the principles that govern the distribution of the tasks to be carried out by each auditor in the accomplishment of their mission.
Article L225-229
(Law No 2003-706 of 1 August 2003 Article 107 Official Gazette of 2 August 2003)
The auditors are appointed for six financial years. Their functions expire after the ordinary general meeting called to approve the accounts for the sixth financial year.
The auditor appointed by the meeting to replace another remains in office only until his predecessor's term of office has expired.
If the meeting should fail to elect an auditor, any shareholder may ask the court to appoint one after duly informing the chairman of the board of directors or the chairman of the executive board. The remit thus conferred ceases when one or more auditors have been appointed by the general meeting.
When an auditing firm is taken over by another auditing firm, the acquiring firm shall maintain the remit entrusted to the acquired firm until it expires.
Contrary to the provisions of the first paragraph, however, the controlled firm's first general meeting held subsequent to the acquisition may deliberate on the maintenance of the remit, after hearing the auditor.
Article L225-230
(Law No 2001-420 of 15 May 2001 Article 114 (1) Official Gazette of 16 May 2001)
One or more shareholders representing at least 5% of the share capital, the works council, the ministère public and, in companies issuing offers to the public, the Commission des opérations de bourse [Securities and Investments Board] may, within time limits and in accordance with conditions to be fixed by an Order approved by the Conseil d'Etat, apply to the Court for an Order for the withdrawal, on reasonable grounds, of one or more auditors appointed by the general meeting.
Such an application may also be made by an association meeting the requirements laid down in Article L.225-120. Where such an application is granted, a new auditor shall be appointed by an order of the Court. they shall remain in office until the auditor appointed by the general meeting shall take office.
Article L225-231
(Law No 2001-420 of 15 May 2001 Article 114 (3) Official Gazette of 16 May 2001)
An association meeting the requirements laid down in Article L.225-120, or one or more shareholders representing at least 5% of the share capital, either individually or as a group of any kind, may submit written questions to the chairman of the board of directors or the management on one or more of the company's management operations, and also, if appropriate, those of companies it controls for the purposes of Article L.223-3. In the latter case, the application must be evaluated in the light of the group's interests. The reply must be sent to the auditors.
If no reply shall have been received within a month, or if the information contained in the reply is unsatisfactory, the said shareholders may make an ex parte application to a Judge sitting in emergency interim proceedings for an Order appointing one or more experts to submit a report on one or more management transactions.
The ministère public, the works council, and, in companies issuing offers to the public, the Commission des opérations de bourse may likewise make an ex parte application to a Judge sitting in emergency interim proceedings for an Order appointing one or more experts to submit a report on one or more management transactions.
If the application is granted, the Court order shall determine the extent of the experts' instructions and powers. The company may be ordered to pay their fees.
The report shall be sent to the applicant, the ministère public, the works council, the auditors and the board of directors or management, as the case may be, and also, in companies issuing offers to the public, to the Commission des opérations de bourse. The said report must also be annexed to the auditors' report prepared for the next general meeting and must be similarly published.
Article L225-232
(Law No 2001-420 of 15 May 2001 Article 114 (1) Official Gazette of 16 May 2001)
One or more shareholders representing at least 5% of the share capital, or an association meeting the requirements laid down in Article L.225-120, may submit written questions to the chairman of the board of directors or the management twice a year on any matter of such a nature as to threaten the continued operation of the company. The reply must be sent to the auditors.
Article L225-233
(Law No 2001-420 of 15 May 2001 Article 114 (1) Official Gazette of 16 May 2001)
In case of default or inability to act, the auditors may, on an ex parte application by the board of directors, the management, the works council, one or more shareholders representing at least 5% of the share capital or the general meeting, be relieved of their duties by a Court order before the normal date of expiration of their term of office, in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat.
Such an application may also be made by the ministère public, and, in companies issuing offers to the public, by the Commission des opérations de bourse. It may also be made by an association meeting the requirements laid down in Article L.225-120.
Article L225-234
(Law No 2003-706 of 1 August 2003 Article 106 Official Gazette of 2 August 2003)
When it is proposed to the meeting that an auditor's remit should not be renewed upon expiry, the auditor is entitled to address the general meeting if he so requests, without prejudice to the provisions of Article L. 822-14.
Article L225-235
(Act No. 2003-706 of 1 August 2003 Art. 112, Art. 120 Official Journal of 2 August 2003) (Act No. 2005-842 of 26 July 2005 Art. 9 II Official Journal of 27 July 2005) (Order No. 2005-1126 of 8 September 2005 Art. 20 III Official Journal of 9 September 2005)
In a report attached to the report referred to in the second paragraph of Article L225-100, the auditors present their observations on the report referred to in Article L225-37 or Article L225-68, as applicable, concerning the internal auditing procedures relating to the preparation and processing of accounting and financial information.
Article L225-236
The auditors must at all times of the year, together or separately, make all such checks and inspections as they may consider appropriate and may demand the production in situ of all such documents as they shall consider of assistance in the performance of their duties, and in particular any contracts, agreements, books, accounting documents and minute books.
In order to carry out their inspections, the auditors may, under their own responsibility, obtain the assistance of such experts or assistants as they may choose. They must notify the company of the names of any such experts or assistants, who shall have the same rights of investigation as the auditors.
The said investigations may be carried out either at the company's premises or at those of parent or subsidiary companies as defined in Article L.233-1. They may also be carried out pursuant to the second sub-paragraph of Article L.223-235 at the premises of all companies included in the consolidation.
The auditors may also collect all such information as may be of assistance in the performance of their duties at the premises of third parties that have carried out operations on the company's behalf. This right of information shall not, however, extend to the disclosure of any papers, contracts and documents held by third parties, unless sanctioned by a Court order. The rule of professional secrecy may not be invoked against the auditors except by lawyers and other legal officials.
Article L225-237
The auditors must inform the board of directors or management, as the case may be, of:
1. The controls and inspections they have carried out and their various random checks;
2. Any items in the balance sheet and other accounting documents which they consider require amendment, together with any relevant comments on the evaluation methods used to prepare the said documents;
3. Any irregularities or inaccuracies they may have discovered;
4. The conclusions to be drawn from their aforementioned comments and amendments as regards the results for the financial year, as compared with those achieved the previous year.
Article L225-238
(Law No 2003-706 of 1 August 2003 Article 108 Official Gazette of 2 August 2003)
The auditors are invited to all meetings of the board of directors or the executive board which examine or close off the annual or interim accounts, and also to all shareholders' meetings.
Article L225-239
Auditors' fees shall be payable by the company. They shall be fixed by methods to be laid down by an Order approved by the Conseil d'Etat.
The Regional Disciplinary Board, and, on appeal, the National Disciplinary Board shall be competent to hear any dispute relating to their remuneration.
Article L225-240
(Law No 2003-706 of 1 August 2003 Article 112 Official Gazette of 2 August 2003)
The auditors draw the attention of the next general meeting to any irregularities or inaccuracies they discover? while performing their remit.
Furthermore, they report any criminal acts which they become aware of to the Public Prosecutor and incur no liability in connection with such disclosures.
Article L225-241
Auditors shall be liable both to the company and to third parties for the damaging consequences of any negligent or tortious acts they may commit in the performance of their duties. They shall not, however, be liable for any transmission or disclosure of information effected in the performance of their duties as defined in Articles L.234-1 and L.234-2.
They shall not be liable in civil law for any illegal acts committed by the directors or members of the management, unless, having been aware of the sad acts, they shall have failed to disclose the same in their report to the general meeting.
Article L225-242
Civil law actions against auditors shall be subject to the time limits specified in Article L.225-254.
SECTION VI
Conversion of public limited companies Articles L225-243 to L225-245-1
Article L225-243
Any public limited company may be converted to another legal form of legal person if, at the time of conversion, it has been in existence for at least two years and if it has drawn up balance sheets for its first two financial years and had them approved by the shareholders.
Article L225-244
The decision to change the form of a public limited company shall be taken on a report by the company's auditors. The report must certify that the equity capital is at least equal to the amount of the share capital.
The conversion shall be subject, if necessary, to the approval of the meetings of bond holders and holders of dividend or founders' rights.
The decision to change the company's form must be published in such manner as shall be determined by an Order approved by the Conseil d'Etat.
Article L225-245
Conversion into a general partnership shall require the agreement of all the partners. If such agreement is obtained, the conditions laid down in Articles L.225-243 and the first sub-paragraph of Article L.225-244 shall not be required.
Conversion into a limited partnership, with or without shares, shall be decided in accordance with the conditions laid down for the amendment of the memorandum and articles of association and subject to the agreement of all the partners who agree to be active partners. Conversion into a limited liability company shall be decided in accordance with the conditions laid down for the amendment of the memorandum and articles of association for companies incorporated in that legal form.
Article L225-245-1
(inserted by Act No. 2005-842 of 26 July 2005 Art. 11 II Official Journal of 27 July 2005)
In the event of a public limited company being converted into a European company, the first paragraph of Article L225-244 is not applicable.
The company draws up a plan to convert the company into a European company. The said plan is filed at the clerk's office of the court having jurisdiction at the place where the company is registered and is published as provided for in a Conseil d'Etat decree.
One or more court-appointed conversion commissioners draw up a report to the converting company's shareholders, under their own responsibility, attesting that the shareholders' equity is at least equivalent to the authorised capitaL.They are subject to the incompatibilities referred to in Article L822-11. Conversion into a European company is decided pursuant to the provisions of Articles L225-96 and L225-99.
SECTION VII
Dissolution of public limited companies Articles L225-246 to L225-248
Article L225-246
The premature dissolution of a company must be decided by a special shareholders’ meeting.
Article L225-247
The Tribunal de commerce may, on an application by any interested party, order the dissolution of a company, if it has had less than seven shareholders for more than a year.
It may allow a company a maximum period of six months to rectify the situation. It shall not make a dissolution order if the said rectification takes place on the day judgment is given on the merits.
Article L225-248
If, as a result of losses duly recorded in the accounting documents, a company's equity capital falls below half of its share capital, the board of directors or management, as the case may be, must call an special shareholders’ meeting within four months of the approval of the accounts revealing the said loss to decide whether the company should be prematurely dissolved.
If it is not decided to dissolve the company, the company must, by no later than the end of the second financial year after that in which the losses were recorded, and subject to the provisions of Article L.224-2, reduce its capital to a sum at least equal to that of any losses not imputed to reserves unless the equity capital shall have been restored to a figure at least equivalent to half the share capital within that time.
In either case, the decision of the general meeting shall be published in such manner as shall be determined by an Order approved by the Conseil d'Etat.
If no general meeting shall be held, or if the meeting shall not have been able to take a valid decision at the final time of asking, any interested party may make an ex parte application to the Court for an order that the company be dissolved. The same rule shall apply if the provisions of the second sub-paragraph above shall not have been observed. In any such case, the Court may grant the company a maximum period of six months to rectify the situation. It shall not make a dissolution order if the said rectification takes place on the day judgment is given on the merits.
The provisions of this Article shall not apply to companies undergoing judicial reorganisation or having the benefit of a recovery plan.
SECTION VIII
Civil liability Articles L225-249 to L225-257
Article L225-249
The founders of a company the incorporation of which is liable be held void, and its directors in office at the time the said liability is incurred, may be held jointly and severally liable for any loss or damage to its shareholders or to third parties arising from the non-incorporation of the company.
Those of the shareholders whose contributions and privileges have not been examined and approved may similarly be held jointly and severally liable.
Article L225-250
Any action for liability based on the non-incorporation of the company must be brought within the time limits laid down in Article 235-13.
Article L225-251
(Law No 2001-420 of 15 May 2001, Article 107 (6) and (7) Official Gazette of 16 May 2001)
The directors and managing director shall be individually or jointly and severally liable to the company or third parties either for infringements of the laws or regulations applicable to public limited companies, or for breaches of the memorandum and articles of association, or for tortious or negligent acts of management.
If more than one director, or more than one director and the managing director, have participated in the same acts, the Court shall determine the share to be contributed by each of them to the compensation awarded.
Article L225-252
(Law No 2001-420 of 15 May 2001, Article. 107 (8) Official Gazette of 16 May 2001)
Apart from actions for personal loss or damage, shareholders may either individually or in an association fulfilling the conditions laid down in Article L.225-120, or acting as a group in accordance with conditions to be laid down by an Order approved by the Conseil d'Etat, bring an action for liability on behalf of the company against its directors or managing director. The plaintiffs shall be authorised to sue for compensation for the full amount of the loss or damage suffered by the company, to which damages shall be awarded if necessary.
Article L225-253
(Law No 2001-420 of 15 May 2001, Article 107 (9) Official Gazette of 16 May 2001)
Any clause in the memorandum and articles of association the effect of which would be to make the exercise of any action subject to prior notice or to the consent of the general meeting, or to waive the right to any such action in advance, shall be deemed non-existent.
No decision of the general meeting shall have the effect of extinguishing an action for liability against the directors or managing director for a tortious or negligent act committed in the performance of their duties.
Article L225-254
(Law No 2001-420 of 15 May 2001, Article 107 (10) Official Gazette of 16 May 2001)
Any action for liability against the directors or managing director, either by an individual or individuals or by the company, must be brought within three years of the act or event causing the loss or damage, or, if the same was concealed, the discovery thereof. Nevertheless, where the act is defined as a criminal offence, the said period shall be extended to ten years.
Article L225-255
Where proceedings for judicial reorganisation or compulsory liquidation are brought pursuant to Title II of Book VI relating to the judicial reorganisation and compulsory liquidation of companies, the persons referred to in the said provisions may be held liable for the debts of the company and shall be subject to prohibition and prohibition, in accordance with the conditions stipulated thereby.
Article L225-256
Where a company is subject to the provisions of Articles L.225-57 to L.225-93, the members of its management shall be subject to the same liability as directors in the circumstances specified in Articles L.225-249 to L.225-255.
Where proceedings for judicial reorganisation or compulsory liquidation are brought pursuant to Title II of Book VI relating to the judicial reorganisation and compulsory liquidation of companies, the persons referred to in the said provisions may be held liable for the debts of the company and shall be subject to prohibition and prohibition, in accordance with the conditions stipulated thereby.
Article L225-257
Members of the supervisory board shall be liable for negligent or tortious acts committed by them in a personal capacity in the performance of their duties. They shall incur no liability for acts of management or the result thereof. They may be held liable in civil law for criminal offences committed by members of the management if, having been aware thereof, they did not report the said offences to the general meeting.
The provisions of Articles L.225-253 and L.225-254 shall apply.
SECTION IX
Public limited companies with worker participation Articles L225-258 to L225-270
Article L225-258
It may be stipulated in the memorandum and articles of association of any public limited company that the company has worker participation.
Companies whose memorandum and articles of association do not contain such a stipulation may change their legal form to that of companies partly owned by their employees, using the procedure laid down in Article L225-96.
Companies partly owned by their employees shall be subject to the provisions of this section, irrespective of the general rules applicable to public limited companies.
Article L225-259
Where the company exercises the power to issue employee shares, that fact must be stated in all deeds and documents to be delivered to third parties by means of the words"à participation ouvrière"[with worker participation].
Article L225-260
The shares of the company shall consist:
1. Of capital shares or share coupons;
2. Of shares known as"employee shares".
Article L225-261
Employee shares shall be collectively owned by paid personnel (employees and workers), in the form of a workers' commercial co-operative. The said co-operative must be exclusively formed by all paid employees who have been with the company for at least a year and are aged over eighteen. The loss of a paid job with the company shall result in the loss by the employee of all their rights in the workers' co-operative, without compensation. The liquidated value of the rights in the company acquired during the previous financial year by the interested party before they left shall be calculated on the basis of the proportion of that period they spent in the company's service, and the provisions of Article 225-269.
Where a company is incorporated from the outset as a public limited company with worker participation, the memorandum and articles of association of the public limited company must provide for the setting aside of the shares allocated to collective ownership by employees until the end of the year. At the end of that period, the shares shall be delivered to the legally constituted co-operative.
Dividends allocated to workers and employees belonging to the workers' co-operative must be distributed between them according to the rules laid down by the memorandum and articles of association of the co-operative and the decisions of its general meetings. Nevertheless, the memorandum and articles of association of the public limited company must provide that, before any distribution of dividends, there shall be deducted from the profits, for the benefit of holders of capital shares, a sum corresponding to that which would be yielded, at such interest rate as they shall fix, by the capital paid.
In no circumstances shall employee shares be individually allocated to employees of the company who are members of the co-operative.
Article L225-262
Employee shares must be registered in the name of the workers' co-operative, and non-transferable throughout the existence of the public limited company with worker participation.
Article L225-263
Members of the workers' co-operative shall be represented at general meetings of the public limited company by representatives elected by the said members at a meeting of the co-operative.
Representatives so elected must be chosen from among the members. The number of representatives shall be fixed by the memorandum and articles of association of the public limited company.
The number of votes held by the said representatives at each general meeting of the public limited company shall be fixed according to the number of votes held by the other shareholders present or represented, depending on the proportion of employee shares to capital shares that results from the application of the company's memorandum and articles of association. It shall be determined at the start of each general meeting according to the details in the attendance sheet.
Representatives present shall likewise share the votes attributed to them equally between themselves. Any remainder shall be allocated to the most senior representatives.
The general meeting of the workers' co-operative shall meet every year within a period fixed by the memorandum and articles of association, or, if they contain no such provisions, within four months after the general meeting of the public limited company.
Article L225-264
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
Each participant at the labour cooperative's general meeting has one vote.
The memorandum and articles of association may nevertheless allocate more than one vote to the participants, commensurate with their pay, within the limit of a maximum number of votes based on the numerical correlation between an individual's annual pay, established on the basis of the accounts as of the close of the previous financial year, and the lowest annual remuneration paid by the company to employees aged above eighteen years.
The memorandum and articles of association may make provision for the participants to be divided into colleges, each specific to a personnel category, with each college electing its representative(s) and the agreement of each college, with majorities as specified in the memorandum and articles of association, being necessary for amendments to the cooperative's memorandum and articles of association and other decisions indicated in the memorandum and articles of association.
Article L225-265
The general meeting of the workers' co-operative shall take valid decisions only if, at the first time of asking, two thirds of the members of the co-operative are present or represented at the meeting. The memorandum and articles of association shall fix the requisite quorum for a meeting held at the second time of asking. If the memorandum and articles of association contain no such provisions, the quorum shall not be less than half the members of the co-operative, present or represented.
The general meeting shall take decisions on a simple majority of votes cast. Where a secret ballot is held, blank votes shall not be included in the count.
Nevertheless, for amendments to the memorandum and articles of association and other decisions listed thereby, the quorum shall not be less than half the members of the co-operative. Furthermore, the same decisions shall be taken on a two-thirds majority of votes cast. Where a secret ballot is held, blank votes shall not be included in the count.
Article L225-266
In the event of a legal action, the representatives elected at the last general meeting shall appoint one or more from among their number to represent the members. If no representatives have yet been elected, or if none of the representatives is a member of the workers' co-operative, an election of special representatives shall be held, in the manner and in accordance with the conditions laid down in the first sub-paragraph of Article L.225-263 and in Articles L.225-264 and L.225-265.
Article L225-267
Nevertheless, general meetings of public limited companies with worker participation called to decide on amendments to be made to the memorandum and articles of association or proposals that the company shall continue in existence beyond the term fixed for its duration, or that it be dissolved before the expiration of the said term, shall be validly constituted and able to take valid decisions only provided that they include a number of shareholders representing three quarters of the share capital. The memorandum and articles of association may decide otherwise.
Where a decision of the general meeting includes a change in the rights attached to employee shares, the said decision shall not be final until it has been ratified by a general meeting of the workers' co-operative.
Article L225-268
The board of directors of a public limited company with worker participation must include one or more representatives of the workers' co-operative. The said representatives shall be elected by the general meeting of shareholders and chosen from among the representatives who represent the co-operative at the said general meeting. Their number shall be fixed according to the ratio of employee shares to capital shares. They shall be appointed for the same term as the other directors and shall similarly be eligible for re-election. Nevertheless, their term of office shall end if they cease to be paid employees of the company and, therefore, members of the co-operative. If the board of directors consists of only three members, it must include at least one member of the co-operative.
Article L225-269
In the event of dissolution, the company's share capital shall not be distributed among the shareholders until the capital shares have been fully amortised.
The proportion representing employee shares shall then be distributed, in accordance with decision taken by a general meeting of the workers' co-operative called for that purpose, between members and former members with at least ten years' consecutive service with the company, or at least an uninterrupted period of service equivalent to half the duration of the company, who have left the company for one of the following reasons: voluntary retirement or official retirement with pension rights, sickness or disablement involving incapacitation for the post previously occupied, or redundancy caused by abolition of jobs or a reduction in personnel.
Nevertheless, former members who fulfil the conditions set out in the preceding sub-paragraph shall be included in the distribution only as to a share corresponding to their length of service reduced by a tenth of the total thereof for every year since they ceased to be employed by the company. The dissolution of the public limited company shall entail the dissolution of the workers' co-operative.
Article L225-270
I.- Where a public limited company with worker participation finds itself in the situation referred to in Article L.225-248, and it is not decided to dissolve it, an special shareholders’ meeting may decide, within the period fixed in the final sub-paragraph of the same Article, to amend the memorandum and articles of association to provide for the loss of the status of a public limited company with worker participation, and consequently the dissolution of the workers' co-operative, notwithstanding the provisions of the second sub-paragraph of Article L.227-267 and any provision to the contrary in the memorandum and articles of association.
Nevertheless, the implementation of any such decision shall be subject to the existence of a collective company agreement with one or more unions or associations, representative of employees for the purposes of Article L.132-2 of the Employment Code, providing for the dissolution of the workers' co-operative. Where there is an existing collective company agreement, covering the same subject-matter and entered into in accordance with the same conditions, dating from before the entry into force of Law No 94-679, of 8 August 1994, introducing miscellaneous economic and financial provisions, the stipulations contained in this sub-paragraph shall be considered to have been complied with.
II.- Where a workers' co-operative is dissolved pursuant to the provisions of sub-paragraph I above, compensation shall be paid to the members and former members mentioned in the second sub-paragraph of Article L.225-269.
The amount of the said compensation, the calculation of which must specifically take the nature and specific scope of the rights attached to employee shares into account, shall be fixed by an special shareholders’ meeting of shareholders of the public limited company after consulting the representatives of the workers' co-operative and in the light of a report to be provided by an independent expert appointed by methods to be laid down by an Order approved by the Conseil d'Etat.
III.- On the decision of an special shareholders’ meeting of shareholders of the public limited company, compensation may take the form of an exclusive allocation of shares to the members and former members mentioned in the second sub-paragraph of Article L.225-269.
The said shares may be created by deduction at source from available premiums and reserve funds. By way of exception to the provisions of Article L.225-206, a public limited company may also acquire its own shares in order to allocate them, within a period of a year from the date of acquisition, to the members and former members mentioned in the second sub-paragraph of Article L.225-269.
Shares so allocated may not be disposed of within a period of three years after the date of dissolution of the workers' co-operative.
Notwithstanding the provisions of the preceding sub-paragraph, an special shareholders’ meeting of shareholders of the public limited company may decide to assign the management of the shares in question to a company investment trust governed by the provisions of Article 21 of Law No 88-1201, of 23 December 1988, relating to collective security investment institutions and creating debt investment trusts, specifically and exclusively constituted for that purpose by no later than the date of allocation of the shares. In any such case, the proportion of the funds that constitute its assets may not be disposed of within the period mentioned in the preceding sub-paragraph. The rules governing the said funds shall be approved by a collective employees' agreement.
IV.- For the purposes of the provisions of this Article, decisions taken by the general shareholders' meeting of the public limited company shall automatically be binding on every shareholder and every bearer or holder of bonds or other securities giving immediate or future access to its share capital.
V.- The compensation referred to in sub-paragraph II shall be distributed between those entitled thereto, taking into account the length of their service with the company, their length of membership of the workers' co-operative and their pay levels.
Following the dissolution of a workers' co-operative, and within six months of the decision of an extraordinary general shareholders' meeting of the public limited company fixing the amount and form of compensation, the said compensation shall be distributed in accordance with the decisions taken by the general meeting of the workers' co-operative on a proposal by its representatives. Should the said distribution not take place within six months, it shall be implemented by a liquidator appointed by the Presiding Judge of the Tribunal de commerce of the jurisdiction within which the company's registered office is situated.
The provisions of the third sub-paragraph of Article L.225-169 shall apply in the case referred to in the present sub-paragraph V.
VI.-The compensation referred to in sub-paragraph II or, if appropriate, the value of the shares allocated pursuant thereto shall not be counted as income for the purposes of the employment and social security legislation. The said items shall not be used when calculating the basis of calculation for any taxes, charges or deductions affecting wages, salaries or income, subject to the provisions of Article 94A of the General Tax Code.
CHAPTER VI
Partnerships limited by shares Articles L226-1 to L226-14
Article L226-1
Partnerships limited by shares, whose capital is divided into shares, shall be formed by one or more managing partners, who shall have the capacity of traders and who shall be indefinitely and jointly liable for the partnership’s debts, and limited partners who shall have the capacity of shareholders and who shall support the losses only up to the amount of their contributions. The number of limited partners may not be less than three.
Where they are compatible with the special provisions specified by this chapter, the rules on limited partnerships and public limited companies, with the exception of Articles L.225-17 to L.225-93, shall apply to partnerships limited by shares.
Article L226-2
The initial manager or managers shall be appointed by the articles of association. They shall carry out the formation formalities with which the founders of public limited companies are charged by Articles L.225-2 to L.225-16.
During the existence of the partnership, unless otherwise specified in the articles of association, the manager or managers shall be appointed by the routine shareholders’ meeting with the agreement of all the managing partners.
The manager, whether or not a partner, shall be dismissed in accordance with the conditions specified by the articles of association.
In addition, the manager may be dismissed by the Tribunal de commerce for a legitimate reason, at the request of any partner or the partnership. Any clause to the contrary shall be deemed to be unwritten.
Article L226-3
The articles of association shall specify, in order to carry out the duties of manager, an age limit which, failing an express provision, shall be fixed at sixty-five years.
Any appointment made in breach of the provisions specified in the above paragraph shall be invalid. When managers reach the age limit, they shall be deemed to automatically resign.
Article L226-4
The routine shareholders’ meeting shall appoint, in accordance with the conditions fixed by the articles of association, a supervisory board composed of at least three shareholders.
In order for its appointment to be valid, managing partners may not be members of the supervisory board. Shareholders who have the capacity of managing partner may not participate in appointing the members of this board.
Unless otherwise specified in the articles of association, the rules on the appointment and term of office of directors of public limited companies shall apply.
Article L226-5
(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)
The memorandum and articles of association must make provision, in regard to membership of the supervisory board, for an upper age limit which applies either to all the council's members or to a specific percentage among them.
Failing an express provision in the memorandum and articles of association, the number of members of the supervisory board having reached the age of seventy years cannot exceed one third of the members of the supervisory board in office. Any appointment made in breach of the provisions of the previous paragraph is null and void.
Failing an express provision in the memorandum and articles of association which stipulates a different procedure, when the age limit for supervisory board membership imposed by the Articles or by the law has been exceeded, the oldest member of the supervisory board is automatically deemed to have resigned.
Article L226-6
The routine shareholders’ meeting shall appoint one or more auditors.
Article L226-7
The manager shall be invested with the widest powers in order to act in all circumstances on behalf of the partnership.
In relations with third parties, the partnership shall be committed even by acts of the manager which do not fall within the partnership’s object, unless the latter proves that the third party knew that the act exceeded this object or that the third party could not be unaware of this given the circumstances. It is excluded that the publication alone of the articles of association is sufficient to constitute this proof.
The clauses of the articles of association limiting the powers of the manager which result from this article shall not be binding on third parties.
In the event of multiple managers, these shall separately hold the powers specified in this article. The objection made by one manager to the acts of another manager shall be null and void with regard to third parties, unless it is established that they knew about this.
Subject to the provisions of this chapter, the manager shall have the same obligations as the board of directors of a public limited company.
Article L226-8
Any remuneration other than that specified in the articles of association may be allocated to the manager only by the routine shareholders’ meeting. This may only occur with the agreement of the managing partners given unanimously, unless otherwise specified.
Article L226-9
The supervisory board shall carry out the permanent supervision of the partnership’s management. It shall have, to this end, the same powers as the auditors.
It shall submit to the annual routine shareholders’ meeting a report in which it shall indicate, in particular, the irregularities and inaccuracies identified in the annual accounts and, where applicable, the consolidated financial statements for the financial year.
It shall receive, at the same time as the auditors, the documents made available to the latter. It may convene the general meeting of shareholders.
Article L226-10
(Law No 2001-420 of 15 May 2001 Article 111 (3) Official Gazette of 16 May 2001) (Law No 2003-706 of 1 August 2003 Article 123 (I) (6) Official Gazette of 2 August 2003)
The provisions of Articles L. 225-38 to L. 225-43 are applicable to agreements entered into, either directly or through an intermediary, between the company and one of its executives, a member of its supervisory board, one of its shareholders holding a fraction of the voting rights greater than 10% or, in the case of a corporate shareholder, the company which controls it within the meaning of Article L. 233-3. These provisions are likewise applicable to agreements in which such a person is indirectly involved.
They are also applicable to agreements entered into between a company and a firm if one of the company's managers or a member of its supervisory board is the owner, an indefinitely liable partner, a manager, a director or a general manager of that firm or a member of its executive board or supervisory board. The authorisation referred to in the first paragraph of Article L. 225-38 is given by the supervisory board.
Article L226-11
The amendment of the articles of association shall require, unless otherwise specified, the agreement of all the managing partners. The amendment of the articles of association resulting from an increase in capital shall be noted by the managers.
Article L226-12
The provisions of Articles L.225-109 and L.225-249 shall apply to the managers and members of the supervisory board.
The provisions of Articles L.225-52, L.225-251 and L.225-255 shall apply to the managers, even where they are not partners.
Article L226-13
The members of the supervisory board shall not incur any liability due to the acts of the management and the result thereof.
They may be declared civilly liable for the misdemeanours committed by the managers if they were aware of these and did not reveal them to the general meeting. They shall be liable for personal faults committed in the performance of their mandate.
Article L226-14
The conversion of the limited partnership that issues shares into a public limited company or a limited liability company shall be decided by the special shareholders’ meeting of shareholders, with the agreement of the majority of the managing partners.
CHAPTER VII
Simplified joint-stock companies Articles L227-1 to L227-20
Article L227-1
(Act No 420 of 15 May 2001, Article 101, Official Gazette of 16 May 2001)
A simplified joint-stock company may be established by one or more persons who shall support its losses only up to the amount of their contributions.
When this company consists of one person only, the latter shall be referred to as the sole proprietor. The sole proprietor shall exercise the powers conferred on the partners when this chapter specifies collective decision-making.
Where they are compatible with the special provisions specified by this chapter, the rules on public limited companies, with the exception of Articles L.225-17 to L.225-126 and L.225-243, shall apply to the simplified joint-stock company. In order to apply these rules, the powers of the board of directors or its chairman shall be exercised by the chairman of the simplified joint-stock company or by those of its directors which the articles of association specify for this purpose.
Article L227-2
The simplified joint-stock company may not make a public offering.
Article L227-3
The decision to convert into a simplified joint-stock company shall be taken unanimously by the partners.
Article L227-4
If one person holds all the shares in a simplified joint-stock company, the provisions of Article 1844-5 of the Civil Code on winding-up proceedings shall not apply.
Article L227-5
The articles of association shall fix the conditions in accordance with which the company is managed.
Article L227-6
(Law No 2003-706 of 1 August 2003 Article 118 Official Gazette of 2 August 2003)
The company is represented in its dealings with third parties by a chairman appointed as prescribed in the memorandum and articles of association. The chairman is invested with the broadest powers to act on behalf of the company in all circumstances, within the purview of the corporate mission.
In its dealings with third parties, the company is bound even by acts of the chairman which do not come within the purview of the company's corporate mission, unless it can prove that the third party knew that a specific action was extraneous to that mission or, given the circumstances, could not have been ignorant of that fact, and mere publication of the memorandum and articles of association does not suffice to constitute such proof.
The memorandum and articles of association may stipulate the circumstances in which one or more persons other than the chairman, having the title of general manager or assistant general manager, may exercise the powers conferred on the chairman by the present Article.
Provisions in the memorandum and articles of association which limit the chairman's powers cannot be raised against third parties.
Article L227-7
When a legal person is appointed chairman or director of a simplified joint-stock company, the directors of said legal person shall be subject to the same conditions and obligations and shall incur the same civil and criminal liabilities as if they were chairman or director in their own name, without prejudice to the joint liability of the legal person which they manage.
Article L227-8
The rules establishing the liability of members of the board of directors and management of public limited companies shall apply to the chairman and directors of the simplified joint-stock company.
Article L227-9
(Act No 420 of 15 May 2001, Article 125, Official Gazette of 16 May 2001)
The articles of association shall determine the decisions which must be taken collectively by the partners in the forms and in accordance with the conditions which they specify.
However, the powers conferred on the extraordinary and routine shareholders’ meetings of public limited companies in terms of the increase, amortisation or reduction of capital, merger, division, dissolution, conversion into another form of company, appointment of auditors, annual accounts and profits shall, in accordance with the conditions specified by the articles of association, be exercised collectively by the partners.
In companies consisting of only one partner, the annual report, annual accounts and, where applicable, consolidated financial statements shall be made up by the chairman. The sole proprietor shall approve the accounts, following a report from the auditor, within six months of the end of the financial year. The sole proprietor may not delegate their powers. Their decisions shall be listed in a register.
Decisions taken in breach of the provisions of this article may be cancelled at the request of any interested party.
Article L227-10
(Law No 2001-420 of 15 May 2001 Article 111 (4) Official Gazette of 16 May 2001) (Law No 2003-706 of 1 August 2003 Article 123 (I) (6) Official Gazette of 2 August 2003)
The auditor presents a report to the partners on any agreement entered into, either directly or through an intermediary, between the company and its chairman, one of its executives, one of its shareholders holding a fraction of the voting rights greater than 10% or, in the case of a corporate shareholder, the company which controls it within the meaning of Article L. 233-3.
The partners give a decision on that report. Agreements which are not approved nevertheless produce their effects, and the onus is on the person concerned and, possibly, the chairman and the other members of the management, to bear any consequences which are prejudicial to the company.
Contrary to the provisions of the first paragraph, when the company has but a single partner, only agreements entered into either directly or through an intermediary between the company and its manager are recorded in the decisions register.
Article L227-11
(Law No 2001-420 of 15 May 2001 Article 111 (13) Official Gazette of 16 May 2001) (Law No 2003-706 of 1 August 2003 Article 123 (I) (4) Official Gazette of 2 August 2003)
When agreements relating to current operations entered into under normal terms and conditions are of no significance to any party, given their objective or their financial implications, they are reported to the auditor. Any partner is entitled to have sight of them.
Article L227-12
The prohibitions specified in Article L.225-43 shall apply, in accordance with the conditions determined by this article, to the chairman and directors of the company.
Article L227-13
The articles of association of the company may specify the inalienability of the shares for a period not exceeding ten years.
Article L227-14
The articles of association may subject any assignment of shares to prior approval by the company.
Article L227-15
Any assignment carried out in breach of the clauses of the articles of association shall be invalid.
Article L227-16
In accordance with the conditions which they determine, the articles of association may specify that a partner may be required to assign the shares held thereby.
They may also specify the suspension of the non-financial rights of this partner until the latter has carried out this assignment.
Article L227-17
The articles of association may specify that partner companies whose control is altered within the meaning of Article L.233-3 must, on this alteration, inform the simplified joint-stock company of this. The latter may decide, in accordance with the conditions fixed by the articles of association, to suspend the exercise of the non-financial rights of these partners and to exclude the latter.
The provisions of the above paragraph may be applied, in accordance with the same conditions, to partners who have acquired this capacity following a merger, division or dissolution operation.
Article L227-18
If the articles of association do not specify the terms for deciding the share assignment price when the company implements a clause introduced pursuant to Articles L.227-14, L.227-16 and L.227-17, this price shall be fixed by agreement between the parties or, failing this, in accordance with the conditions specified in Article 1843-4 of the Civil Code.
When the shares are repurchased by the company, the latter shall be obliged to assign them within six months or to cancel them.
Article L227-19
The clauses of the articles of association referred to in Articles L.227-13, L.227-14, L.227-16 and L.227-17 may be adopted or amended only with the unanimous agreement of the partners.
Article L227-20
Articles L.227-13 to L.227-19 shall not apply to companies consisting of only one partner.