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Archiving company documents

FBA team — Mon, 16 Dec 2024 11:54:34 +0000

The conservation methods
& The conservation periods

Archiving company documents is an essential legal obligation, particularly regulated by the French Commercial Code and the French General Tax Code (CGI). These documents (accounting documents, contracts, tax returns, etc.) must be kept in order to guarantee the traceability of operations and to respond to possible audits or disputes.

Companies must therefore implement effective methods, such as paper or digital archiving, while respecting security and confidentiality requirements. Rigorous management of these archives not only meets legal obligations, but also optimizes internal data management.

We will present the subject in three points:

Methods of document conservation
Various conservation periods
Sanctions incurred in the event of non-compliance with these obligations

If you would like to clarify any other point on this subject, you can call upon one of our experts who will provide you with the explanations you require.

I – Methods of document conservation

At this point, two major questions arise:

Should I keep the original or a copy of the document?
Should I keep the document in paper or electronic format?

1. The original when possible

In principle, it is necessary to keep the original of a document. However, in the context of legal proceedings, the law accepts that a party provides a copy provided that this copy is a “faithful and durable (indelible)” reproduction of the original. The judges must then recognize the probative force of this copy.

We also specify that companies must present the originals of the documents to public finance officers.

2. Paper or electronic format?

The electronic format limits the risk of loss or destruction, reduces the storage space required and allows rapid access to supporting documents.

It is necessary that the person who produced a document can be identified, and that the electronic document be produced and stored in conditions that guarantee its integrity (Article 1316-1 of the Civil Code).

When storing an accounting document received on paper in electronic format, it is imperative to comply with the conditions set out in the Book of Tax Procedures. Thus, an accounting document must be stored in PDF format (or PDF A/3), the colours reproduced identically and each file must be time-stamped.

On the other hand, documents established or received on computer media must be kept compulsory in electronic form for at least 3 years, during which time the tax administration may exercise a right of recovery. The company is not required to create additional paper archives.

Note: Accounting documents must be stored on a server located on French territory. Otherwise, the company must inform the tax authorities.

II – Various conservation periods

Time limits vary depending on the nature of the documents and legal obligations. The company may also archive documents for longer, unless they contain personal data.

1. Tax and documents

The books, registers, documents or items on which the administration’s rights of communication, investigation and control may be exercised must be kept for a period of 6 years.

This period begins either from the last transaction mentioned in the books or registers, or from the date on which the documents or items were established.

Type of tax	Storage period
Income tax (IR) and corporate tax (IS)	6 years
Industrial and commercial profits (BIC), non-commercial profits (BNC) and agricultural profits (BA) in real regime	6 years
Corporate taxes for sole proprietorships, SARL (farms, professional practice companies)	6 years
Local direct taxes (property taxes, etc.)	6 years
Business property tax (CFE and CVAE)	6 years
Turnover taxes (VAT and similar taxes, tax on insurance contracts, etc.)	6 years

Note: The time limits are extended to 10 years in the event of hidden activity (tax fraud, concealed work, failure to declare, illicit activity, for example).

2. Social documents

Nature of documents	Storage period
Employment contracts, letters of engagement, resignation, disciplinary sanction, dismissal	5 years
Single personnel register	5 years from the employee’s departure
Pay slips	5 years
Documents justifying the recording of employees’ working hours, on-call hours and their compensation	1 year
Documents justifying the recording of working days of employees under a flat-rate agreement	3 years
Documents relating to social security contributions or tax on salaries	3 years + current year
Statements and other documents relating to an accident at work	5 years
Documents from the labour inspection Verification and control of the CHSCT	5 years

3. Accounting and legal documents

Type of document	Storage period
Accounting book and register: journal, general ledger, inventory book, etc. Supporting document: purchase order, delivery or receipt, customer and supplier invoice, etc.	10 years from the end of the financial year
Annual accounts (balance sheet, income statement, annex, etc.)	10 years from the end of the financial year
Articles of association of a company, an Economic Interest Group or an association (if necessary, document amending the articles of association)	5 years from the loss of legal personality (or deletion from the RCS)
Register of registered securities Register of movements of securities Movement order Register of minutes of meetings and board of directors	5 years from the end of their use
Attendance sheet and powers Report of the manager or the board of directors Report of the auditors	Last 3 financial years

4. Civil, commercial and insurance documents

We have included several types of documents in the table below, but the list cannot be complete. Please do not hesitate to contact us if you have any questions about a particular document that is not listed.

Type of document	Storage period
Contract or agreement concluded within the framework of a commercial relationship, commercial correspondence (paper or electronic)	5 years
Bank document (check stub, bank statement, etc.)	5 years
Guarantee for goods or services supplied to the consumer	2 years
Contract concluded electronically with a consumer (from €120)	10 years from delivery or service
Contract for the acquisition or disposal of real estate and land	30 years
Customs declarations	3 years
Lawyer’s file	5 years from the end of the mandate
In matters of insurance contracts: Receipts, due date notices, termination letters, proof of payment	2 years
Insurance contracts	Contract duration + 2 years
Personal injury claim file (invoices, expert reports, medical certificates, etc.)	10 years after the end of compensation

III – Sanctions incurred in the event of non-compliance with these obligations

There is no specific penalty for failure to keep documents, however, the following penalties may be incurred in tax matters:

A fine of €10,000 in the event of refusal to provide certain supporting documents during an audit by the tax authorities;
A fine of up to €50,000 in the event of opposition to the taking of a copy in accordance with Article L.13F of the Book of Tax Procedures.

In addition, the voluntary destruction or concealment of accounting documents constitutes a criminal offence. Consequently, these actions are punishable by a fine of €45,000 and a prison sentence of 3 years for the manager of the company.

We should also point out that, in the absence of clear writings, for files which may be sources of dispute, it may be useful to keep faxes, e-mails, etc. because these documents will be the beginnings of written proof.

And finally, we insist on the fact that the conservation of documents will allow the company or its manager to:

Preserve its rights because it is by means of writings that one most easily proves the reality and the extent of its rights;
Prove that it has fulfilled its obligations, in particular with regard to the tax administration, social security funds or even with regard to a co-contractor;
Prove the date of settlement of a debt.

In any case, we are at your disposal so you can contact us if you need some support or more information!

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L’article Archiving company documents est apparu en premier sur FBA - French Business Advice.

Legal steps for liquidation and dissolution of companies

FBA team — Fri, 15 Nov 2024 19:29:16 +0000

Article of 31/07/2023 updated on 15/11/2024

Sometimes in life, projects and companies might come to an end, and this is where the concepts of liquidation and dissolution come in, allowing you to end things rightfully!

The reasons that could lead to the liquidation of a company are several:

Reaching the end of company: the life of a society is fixed by their legal status. The maximum duration set by law is 99 years. However, it may be shorter. In this case, and unless the partners meet in a general meeting to decide to extend the lifeline of the company, it is automatically dissolved.
Dissolution decided by court order: the dissolution of a company can take place at the request of a partner when the functioning of the company is unwell. This is, for example, the non-performance of its obligations by a partner or the disagreement between partners which paralyzes the well-functioning of the company.
It is the judge who assesses on a case-by-case basis whether the situation constitutes a valid reason for dissolution.
Dissolution for statutory reasons: the articles of association may provide that the company will be dissolved upon the occurrence of a specific event (for example, the death of a partner). A company also disappears in the event of the achievement of the corporate purpose (if the operation for which the company was formed is definitively completed) or the extinction of the corporate purpose (when the activity for which the company was formed has become impossible).
Dissolution decided by the partners: they can, at any time, decide to cease the activity of the company. This is an anticipated voluntary dissolution. The partners must decide on the voluntary dissolution at a general meeting and appoint a joint liquidator. It will carry out the procedures for the liquidation and then the delisting of the company.

The last scenario of dissolution previously mentioned will be further detailed below.

I – Definition of each legal operation

The two concepts (dissolution and liquidation) may seem similar to many business entrepreneurs. Indeed, these two cases are often after one another in time and often confused as they are both essential to close a company.

However, these are two different and extremely important steps in the dissolution of a company. It is important to reach out to a legal and tax professional in order to avoid mistakes that could lead to serious consequences.

1 – Dissolution

Dissolution is distinct from liquidation. Indeed, the liquidation is even the consequence of the dissolution. The purpose of the dissolution is to put an end to the activities of the company. It involves the need to appoint a liquidator to manage the liquidation operations, and to terminate the mandates of the managers.

2 – Liquidation

Liquidation always follows the dissolution process. However, there is an exception, when an EURL whose sole partner is a legal person, the dissolution then operates an universal transfer of assets which makes any liquidation unnecessary.

At this stage, the liquidator takes the strategic decision in place of the governing bodies. He must carry out a complete inventory of the company’s assets and liabilities. He can also dispose of all of the assets of the company, and has the power to break or sign contracts, and to take legal action. He also has a mission to inform the partners about the liquidation procedure.

At the end of the liquidation operations, the liquidator distributes boni or mali (that is to say the final results of the company) between the managers, he is also responsible for requesting the removal of the company from the Trade and Companies Register (RCS).

II – The dissolution procedure

1 – The decision to dissolve

The anticipated decision to dissolve the company must be taken by the partners, under the conditions provided by the articles of association or, in the absence of precision, unanimously. The decision of the partners is the subject of a written act (minutes of the general meeting).

As of the dissolution, the mention “company in liquidation” as well as the name of the liquidator(s) must appear on all deeds and documents issued by the company and intended for third parties.

> The general meeting of dissolution

This assembly must make two decisions:

decide on the early dissolution of the company;
appoint a liquidator and set his powers and obligations.

The minutes of the general meeting must specify in particular:

that the partners decide on the early dissolution of the company;
the place of the registered office of the liquidation;
that the company survives for the purposes of the liquidation and until its termination;
the identity of the appointed liquidator;
the termination of the functions of the managers;
the extent of the powers as well as the obligations of the liquidator.

The liquidator is normally appointed for an indefinite period and his functions end on completion of the liquidation operations.

> Publication of the notice of dissolution

A notice of dissolution must be published in a newspaper through the legal announcements by the legal representatives of the company, within one month from the date of dissolution. The notice must contain the following information:

the company or corporate name;
the legal form of the company, the amount of shares,
the address of the registered office and the registration number of the company (SIRET);
the reason of the dissolution;
the contact details of each liquidator;
limitations on the powers of the liquidator(s);
the registry with which the deeds and documents relating to the liquidation will be filed.

> The statement of change

A request for modification of the registration must be submitted to the one-stop shop for business formalities within the month following the date of dissolution of the company on a standard form (form M2).

> The request for modification of the registration in the trade and companies register

This request is mandatory. For this, the following documents must be filed by the court office:

a copy of the minutes of dissolution (see above);
a statement of change (form M2 – see above);
an attestation of the publication of the notice of anticipated dissolution in the legal announcements journal (see above);
a declaration of non-conviction for the liquidator (only if the liquidator is not the manager of the company);
a copy of the liquidator’s identity card.

Following these operations, the company will not be deregistered. This can only take place following the closing of the liquidation operations.

2 – Liquidation operations

The mission of the liquidator is to complete the business in progress, sell all the assets (in particular the real estate assets), collect receivables and pay all the debts of the company.

The liquidator is required to report to the partners on the accomplishment of his mission, at least once a year in the form of a report.

When the liabilities have been cleared and the assets sold, the liquidator must then establish the liquidation accounts and then ask the partners to decide on the closure of the liquidation operations.

Liquidation accounts result in the recognition of a liquidation bonus or loss. The liquidation surplus corresponds to the positive difference between the net liquidation proceeds and the amount of the contributions. Mali corresponds to a negative difference.

Then, several operations must be performed to bring the liquidation operation to completion. There are:

The closing minutes of the liquidation operations: at the end of the liquidation, the partners of the company must meet to rule on the liquidation accounts.
They must make the following decisions:
- approve the liquidator’s report, the liquidation accounts and the resulting result;
- decide on the treatment of the bonus or the liquidation mali;
- record the closing of the liquidation, terminate the functions of the liquidator and, where applicable, give power to carry out the formalities for the closing of the liquidation operations.

The minutes of this meeting must be registered for tax purposes when a liquidation surplus arises. The bonus is subject to a tax of 2.5% except for single-member simplified joint-stock companies (SASU) and single-member limited liability companies (EURL).

The sharing of the company: it occurs after the closing of the liquidation. It consists in fixing the share of each partner in the active and, possibly, passive values that emerge from the final liquidation account.

The liquidation must be closed within 3 years of the dissolution.
Declaration of results and payment of taxes: within 60 days following the closing of the liquidation of the company, a declaration of results must be sent to the tax authorities. The last taxes and duties to be paid must be paid when due.

3 – Deregistration of the company

This final step can be summarized as followed:

> The publication of the notice of closure of the liquidation operations in the journal of legal announcements

This notice must contain the following information:

the company name or corporate name;
the legal form of the company, the amount of share capital, the address of the registered office;
for each liquidator: title, surname, first name, home address,
company registration number.

> The deregistration declaration

An M4 form must be completed to request deregistration of the company.

> The deregistration request on the one-stop shop for business formalities

The application must include:

a copy of the deed recording the closing of the liquidation operations certified true by the liquidator;
a deregistration declaration (form M4- see above);
a copy of the liquidation accounts (see above) certified true by the liquidator;
the certificate of publication of the notice of closure of liquidation in the journal of legal notices (see above).
a tax certificate that proves that the company is in compliance with its tax obligations and that it has paid its taxes.
A social certificate that proves that the company is up to date with its social declarations.

III – The tax consequences of the liquidation of a company

1 – Declaration and taxation of profits

The cessation of activity entails the immediate taxation:

profits made since the end of the last financial year ended up to the date of transfer or termination;
profits subject to tax deferment (provisions made before termination, capital gains whose taxation has been deferred);
capital gains realized on the occasion of the cessation of activity on the sale of fixed assets.

It is therefore necessary to electronically transmit, within 60 days following the cessation, a final declaration of results for companies subject to the real regime (normal or simplified).

For companies subject to income tax, this tax is temporary: any amount of tax claimed at the time of termination is then deducted from income tax calculated on all income received during the year.

For entrepreneurs subject to the micro-enterprise regime, they must file, within 60 days following the date of cessation, an income tax return no. 2042 and a supplementary return no. 2042-C PRO on which the amount of turnover achieved up to the date of cessation of activity must be reported.

2 – VAT

If the activity was subject to VAT, it is necessary to upload a declaration:

CA 3 (regime real normal) within thirty days of termination;
CA 12 (simplified real regime) within sixty days of termination.

It is mandatory to calculate VAT on all transactions that have not yet been declared on the date of cessation.

The tax for which the company is liable must be paid at the same time as the declaration.

3 – Corporate land contribution (CFE) and Contribution on value added of companies (CVAE)

Regarding the CFE, taxation depends on the date of cessation of activity:

for cessations of activity on December 31^st, the CFE is due for the entire year of cessation of activity;
for cessations of activity during the year, the CFE is due in proportion to the time of activity over the year of cessation of activity (from January 1^st to the day of cessation of activity).

Regarding the CVAE, it’s necessary to subscribe in a dematerialized way, the declaration of added value and salaried employees (form N° 1330-CVAE-SD) and the declaration of liquidation and regularization (form N° 1329-DEF) within sixty days of the termination.

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L’article Legal steps for liquidation and dissolution of companies est apparu en premier sur FBA - French Business Advice.

French regulations on international intra-group transfer prices

FBA team — Wed, 04 Sep 2024 15:33:52 +0000

Legislation on prices transferring between international groups is a complex and important subject in the business world. This legislation aims to prevent predatory pricing practices, where companies within the same group set artificially low or high prices to shift profits to low-tax countries. These practices can result in a loss of tax revenue for the countries concerned.

To combat this, many countries, including France, have put in place regulations to govern transfer pricing and ensure that they are established in a fair and transparent manner. It is therefore essential for international companies to comply with the regulations that we will outline below.

I – Territoriality of corporate tax in France

We briefly present below the French principles of corporation tax territoriality.

1 – Taxation of businesses operated in France

The profits liable to corporate tax in France are determined by taking into account only those made in companies operated in France and, possibly, those whose taxation is attributed to France by an international tax convention relating to double taxation.

Thus, only expenses incurred which relate to an activity carried out in France are likely to be deducted.

Companies whose head office are located outside France are, whatever their nationality, taxable in France due to the profits derived from their operations in France.

The notion of a company operated in France (or outside France) is important because it determines whether or not companies are taxed in France. However, it will be different depending on whether or not an international convention applies.

2 – Concept of business operated in France in the absence of a tax treaty

The notion of business operated in France is not defined by the legislator. According to case law, it means the usual exercise of a commercial activity.

Foreign companies are in principle considered taxable in France:

who operate an establishment in France;
who, without having an establishment in France, nevertheless use the assistance of representatives considered as real employees carrying out an activity in our country on behalf of the foreign company;
or who, without having an establishment or qualified representative in France, carries out operations there forming a complete commercial cycle.

3 – Principles of taxation in France in the presence of a convention

An international tax convention may modify the scope of French tax law. The rules of the convention take precedence, in French law, over a provision of a domestic law.

Bilateral tax treaties only apply to persons who are residents of one or both contracting states. Their purpose is essentially to distribute taxing rights between the two States and to avoid double taxation. This distribution is made by referring mainly to the notions of “residence” and “permanent establishment”.

The principles usually used to tax profits in a state are:

benefit of a permanent establishment => exclusive taxation in the State where the permanent establishment is located, this taxation being calculated in accordance with the legislation of that State;
profits not linked to a permanent establishment => exclusive taxation in the State of residence of the legal entity, the liquidation being carried out in accordance with the legislation of this State.

The rule stated above, however, has exceptions. Thus, real estate incomes are always taxed at the location of the buildings.

II – Determination of transfer prices

1 – Definition of transfer prices

As we have seen above, in matters of international taxation, each entity of the same group is treated independently of its parent, its sisters and its subsidiaries or branches. Transfer pricing can become a preferred tool for tax evasion.

Companies are concerned, not only for sales of goods and merchandise, but also for all intra-group services: sharing of certain common costs between several companies in the group, provision of people or goods, concession fees for patents or trademarks, etc.

OECD documentation on transfer pricing:

The OECD has published a book entitled “Transfer Pricing Principles for Multinational Enterprises and Tax Administrations 2022”.

“Arm’s length prices”: in order to ensure that the tax bases of each country are as fair as possible, to avoid conflicts between different tax administrations and distortions of competition between companies, member countries of the OECD have adopted the principle of “arm’s length pricing” for intra-group transactions. This means that the price charged between dependent companies must be the same as that which would have been charged on the market between two independent companies.

This principle appears in most tax conventions signed by France.

To determine a price consistent with the arm’s length principle, one method must be selected if-possible from the following:

The comparable free market price method => This consists of comparing prices to those charged for identical transactions between independent companies.
The resale price minus method => It consists of retaining the final selling price to the independent customer (outside the group), or determining the arm’s length margin or subtracting this margin from the final selling price to the independent customer in order to obtain the transfer price.
The cost-plus method => The company determines the cost price of the good or service sold or supplied to a related company and adds an arm’s length profit margin, obtained using a comparable to that practiced by the company.
The profit-sharing method => This consists of determining the consolidated result for the group on all operations, involving different related companies, to then share it between these same companies according to relevant criteria in order to obtain an allocation-profits comparable to that which would have been obtained in an arm’s length situation.
The transactional net margin method => Its principle is to determine, based on appropriate data (e.g.: expenses, turnover, value of assets, etc.), the net profit margin that a company achieves within the framework of an intra-group transaction, and to compare it to that which an independent company would carry out for a comparable transaction.

2 – Verification of the conformity of the transfer price with the arm’s length principle

The company must analyze the functions it performs and the risks it assumes (functional analysis), and identify the assets and means used. It must then determine the method and price of intra-group transactions. Finally, it must ensure that the pricing chosen is consistent with the arm’s length price.

The company must choose the most suitable method to remunerate the activity: to avoid any tax risk, the company must ensure that this price is consistent with the arm’s length price.

The company must finally be able to trace the process of determining its transfer prices which it will make available to the administration in the event of an audit (functional analysis, choice of method, pricing, etc.).

Any method used by the company can be considered admissible provided that it is justified, consistent with the functions performed and the risks assumed, and that the remuneration complies with the arm’s length principle. The choice of method and the importance of the supporting documents provided must be adapted to the issues, the use of a sophisticated methodology and the establishment of elaborate documentation may be reserved for re-invoicing of a significant amount.

The company must also search for and select comparable companies; the search takes place at two levels:

Internal => the company concerned, or another company in the same group, carries out an identical or similar transaction;
External => an independent company carries out an identical or similar transaction with another independent company. This information is most easily discovered by consulting a commercial database.

The search and selection of comparable companies requires proceeding in several stages:

examination of the characteristics of the goods or services and search for companies operating in the same sector of activity as the company concerned;
selection of companies that perform the same function as that of the company concerned;
selection of an “independence” indicator. It represents the degree of independence of a company from its shareholders;
examination of the available financial data of the selected companies in order to retain only those with the same profile;
selection, when the sample of comparable companies is made up, of a relevant ratio, taking into account the function and risks to be remunerated as well as the remuneration method chosen to assess arm’s length profitability.

3 – Prior agreement procedures on transfer pricing

French or foreign companies have the possibility of obtaining from the tax administration an agreement on the method of determining transfer prices which will apply to their future intra-group transactions. The objective of the prior agreement procedure is to constitute an instrument of legal certainty.

Indeed, no tax increase can be made when the administration has concluded a prior agreement relating to the method of determining transfer prices, either with the competent authority designated by a bilateral tax convention, or with the taxpayer.

Below are the types of existing agreements:

Bilateral agreement: The bilateral prior agreement is concluded between two States by the competent authorities, within the legal framework of the amicable procedure provided for by tax conventions. Given its bilateral nature, the prior agreement eliminates the risks of double taxation while preserving the tax base of the States parties to the agreement.

Agreements can only be concluded with states with which France has signed a tax convention.

The agreement concerns the method to be used and not the setting of transfer prices as such within the multinational group. Depending on the taxpayer’s request, the agreement may concern a segment of activity, a function, a single product, or even a single type of transaction.
Unilateral agreement: The prior agreement on transfer prices gives companies the possibility of obtaining a formal position from the administration on the method of valuing future transfer prices applied to one or more transactions. This agreement guarantees the plaintiff company that the prices practiced in its intra-group industrial, commercial or financial relations do not enter into the forecast of a transfer of profits.

Unlike a bilateral agreement, the unilateral agreement is not negotiated with the foreign administrative authority concerned.

A unilateral price agreement may be requested in the following cases:

- no prior price agreement procedure exists in the other State concerned;
- transactions concern a large number of countries;
- transactions relate to particular subjects or of limited complexity but are a recurring source of differences of assessment;
- the company is a small or medium-sized enterprise (SME).
  
  No unilateral prior agreement procedure may be initiated for existing transactions with companies located in countries with which no tax treaty has been concluded if they have a privileged tax regime (within the meaning of article 238 A of the CGI).

Simplified agreement procedure for SME: The simplified prior price agreement procedure benefits SME that meet the following cumulative conditions:
- employ fewer than 250 employees;
- either have achieved an annual turnover of less than €50 million during the financial year, or have a balance sheet total of less than €43 million;
- have capital or voting rights not held at 25% or more by a company or by several companies not meeting the above conditions.
  
  For this type of companies, the documentation on its transfer pricing policy is limited to the following documents:

- - the group’s organizational chart;
  - the list of transactions and their method of remuneration between related companies;
  - functional analysis;
  - description and justification of the chosen pricing method;
  - the tax returns of the French and foreign companies concerned.

The SME must also justify by all means that the pricing policy applied complies with the arm’s length principle.

III – The consequences of the agreement and tax obligations

1 – Request for transfer pricing justifications during a tax audit

In certain cases, as part of the audit of a company’s accounts, the administration may request various information on the methods by which the price of transactions between a company and companies located abroad was defined.

When the company responds insufficiently, the administration sends it a formal notice to complete its response within 30 days. In the absence of a response within the deadline, the administration evaluates the tax bases concerned by the request based on the elements available to it. In the absence of precise elements to make adjustments, taxable income is determined by comparison with that of similar businesses operated normally.

The company is also subject to a fixed tax fine of €10,000 for each financial year covered by the initial request.

2 – Documentary and reporting obligations regarding transfer prices

2.1 – Annual transfer pricing declaration

Legal entities established in France must submit a declaration relating to their transfer prices when they satisfy one of the following conditions:

their annual turnover excluding tax or the gross assets appearing on the balance sheet is greater than or equal to €50 million;
they hold at the end of the financial year, directly or indirectly, more than half of the capital or voting rights of a legal entity satisfying one of the conditions mentioned in 1;
or more than half of their capital or voting rights is held at the end of the financial year, directly or indirectly, by a legal entity satisfying one of the conditions mentioned in 1;
or they belong to a group covered by the tax consolidation regime when this group includes at least one legal entity satisfying one of the conditions 1 to 3 mentioned above.

Are however exempt from this declaration:

companies that do not carry out any transactions with related entities established abroad;
companies which carry out transactions with related entities established abroad for an amount less than €100,000 per nature of transaction.

The declaration must be filed within 6 months following the deadline for filing the declaration of results by submitting form 2257-SD electronically. This declaration includes two main chapters:

General information on the group of “associated companies” => In the first frame of page 1 of declaration 2257-SD, the company must identify the main activities of the group as well as the nature and location of the intangible rights exploited. These intangible assets must have a main character for the group and be related to the reporting company. The main character of an intangible asset is assessed with regard to the importance of its contribution to the group’s activity.

The company must, at the end of this first part, provide a general description of the group’s transfer pricing policy and the changes that occurred during the financial year.
Specific information regarding the reporting company => In the second part of the declaration (pages 2 and 3), the reporting company must provide a description of the activity carried out, including the changes that occurred during the financial year. The changes which concern the French company, both in terms of pricing policy and the nature and location of assets must be informed and briefly developed.

This description is supplemented by a summary statement of transactions carried out with other “associated companies”, when the amount of the transactions exceeds €100,000.

2.2 – Documentation to be kept available to the administration

This documentation must be made available to the administration on the date of initiation of a general, one-off or simple accounting audit. It does not replace the justifications relating to each transaction.

The legal entities covered by the documentary obligation regarding transfer pricing are the following:

whose annual turnover excluding taxes or gross assets appearing on the balance sheet is greater than or equal to €150 million (since January 1^st 2024);
or, holding at the end of the financial year, directly or indirectly, more than half of the capital or voting rights of a legal entity satisfying one of the conditions mentioned in 1;
or, of which more than half of the capital or voting rights is held, at the end of the financial year, directly or indirectly, by a legal entity satisfying one of the conditions mentioned in 1;
or, belonging to an integrated group, when it includes at least one legal entity satisfying one of the conditions mentioned above (in 1, 2 or 3).

Objectives of the documentation: It must make it possible to justify the transfer pricing policy practiced in the context of transactions of all kinds carried out with associated companies established or incorporated outside France.

Structure of the documentation: It must be presented in an electronic format, it consists of two parts:

The first part constitutes the main file and includes information on the group of associated companies.
This file has five sections in the following order:
- organizational structure;
- description of the area(s) of the multinational group;
- intangible assets of the multinational group;
- inter-company financial activities of the multinational group;
- financial and tax situation of the multinational group.

The second part constitutes the local file and includes information on the verified company.
It is presented in the form of three sections in the following order:
- entity in France;
- controlled transactions;
- financial informations.

This documentation must be established or updated in such a way as to enable the companies concerned to ensure, from the moment they set their transfer prices, that these prices comply with the arm’s length principle. Correspondingly, comparable studies must favor the most recent information available on the date of invoicing of the transactions. When the conditions for carrying out the activity remain unchanged, the comparable studies can be updated every three years.

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The different categories of tourist accommodation and their regulations

FBA team — Thu, 14 Mar 2024 13:54:11 +0000

Article published on 15/12/2020 and updated on 14/03/2024

Tourism activity is highly developed in France and the number of accommodation categories provided for by law is also important so that there is a regulation adapted to all types of tourist reception.

On the other hand, this quantity of different denominations of accommodation structures creates a disturbance among the creators of companies who launch out in the tourist activity.

Also, we will give below a definition of the main categories of accommodation as well as an overview of the measures taken in terms of alleviating the security conditions with respect to very small structures.

I – Definition of accomodation categories

“Petits hotels”

This category concerns establishments that can accommodate a maximum of 100 people on all levels. Staff are not taken into account in the calculation of the workforce and the rules on security obligations are lightened. The relatively heavy safety and accessibility standards were provided for by a decree of July 24th 2006.

“Très petits hotels”

The safety regulations against the risks of fire and panic in small hotels provided for by the decree of July 24^th 2006 proved to be too heavy for very small structures. A new regulation was drafted on October 29^th 2011 with a view to offering simpler regulations to hotels accommodating less than 20 people and whose lower floor of the highest storey is located less than 8 meters from the ground. The operators of these very small hotels are not required to comply with the requirements set out in the 2006 decree. They can, for example, install simple smoke detectors.

“Chambres d’hôtes” (Gest rooms)

The rental of a guest room necessarily includes the group supply of one night (including the supply of linens) and breakfast. Reception must be provided by the lessor, who lives on the premises.

The rooms and bathrooms must be cleaned daily at no additional cost.

The capacity is limited to 5 rooms and 15 customers at the same time. If the operator rents more than 5 rooms or accommodates more than 15 customers simultaneously, this activity corresponds either to the running of a hotel or to the rental of rooms in private homes. It is then necessary to respect the regulations of establishments open to the public (ERP) and the rules of accessibility for people with disabilities.

It is possible to provide an additional service called “table d’hôtes”. The table d’hôtes is not a restaurant, it is a service that comes in addition to the accommodation, reserved only for the occupants of the guest rooms. The meal must be taken at the family table. It must consist of a single menu.

“Meublés de tourisme”

The “Meublés de tourisme” is a villa, an apartment, a “gîte” or a furnished studio, for the exclusive use of the tenant, offered for rent to a passing clientele who makes a stay characterized by a day rental, weekly or monthly, and who does not take up residence there (Tourism Code-Art D324-1). Like hotels, they are classified by the number of stars increasing according to their comfort fixed by a decree.

The “Meublé de tourisme” is seasonal, that is to say that the lessor must not rent to the same person for a period exceeding 90 days or 12 consecutive weeks.

Classified accommodation must be for the exclusive use of the tenant, without passage of the owner or other tenants, throughout the stay.

The “Meublé de tourisme classé” is defined as follow: “To obtain the classification of a furnished tourist accommodation, you must make a request to the accredited or approved assessing body of your choice (appearing on the lists on the “Atout France” website) using form No. 11819* 03”.

The assessing body visits the accommodation. In the month following this visit, he will give you a visit certificate including the inspection report as well as the proposed decision to classify the furnished accommodation for the category mentioned in the inspection report.

The classification varies from 1 to 5 stars depending on comfort elements such as the surface area of the various rooms, the general layout and the various equipment (electrical, communication, wifi, television, stereo, comfort equipment).

II – A brief overview of security and accessibility conditions

“Petits hotels”

Since 2011, small hotels must meet certain standards and are in principle, co-checked every year.

This concerns:

a) Regular maintenance and checks of installations, in particular automatic doors, electricity, heating and air conditioning, elevators, cooking appliances, extinguishers and fire safety systems, etc.
All technical installations must be checked by a competent technician every 2 years, with the exception of electrical installations and fire detection systems, which must be checked annually.

b) Safety instructions, signage and displays in each room and in the entrance hall.

c) Staff training: Staff must participate twice a year in instruction and training sessions, receive information on fire hazards. He must also receive very precise instructions in order to limit the action of the fire and ensure the evacuation of the public.

d) Surveillance: The on-call service must be provided in a room equipped with either a warning sign or an alarm report. The staff present can move away from it while remaining in the establishment, if they have an alarm transmission to an autonomous alarm receiver.

e) Safety equipment:

With the exception of the sanitary facilities, all rooms must be equipped with 1/2 hour flame arresters fitted with a door closer or E30-C;
The use of network gas or liquefied hydrocarbons is only authorized in the rooms if the distribution is collective;
Automatic fire detectors, appropriate to the risks, must be installed in areas at particular risk (boiler room, kitchen, storage, laundry, etc.);
The stairs must be protected as soon as the establishment has more than one floor on the ground floor;
Two stairs minimum are required for hotels accommodating more than 50 people and having more than one floor on the ground floor, except if the rooms are accessible by the fire brigade ladders and these floors accommodate less than 50 people;
For hotels with only one floor on the ground floor, the staircase may not be protected provided that all rooms are accessible to the fire brigade ladders.

f) Alarm system: The electrical cables used for the alarm system must be independent of other electrical conduits, be away from other electrical devices and not pass through rooms at particular risk or be protected by fire walls of degree 1 hour.

Reduction of security obligations enjoyed by “Très petits hotels”

These establishments benefit from special provisions:

They are exempt from the enclosure of the stairs;
Fire-rated door sets must be generalized;
The establishment must be equipped with a category A fire safety system. Automatic fire detection must be installed in horizontal circulation areas where they exist and in all premises, with the exception of bathrooms. However, when the director of the establishment favors the enclosure of the staircase(s) leading to the rooms, the automatic fire detection remains limited to common horizontal circulation and / or private spaces;
They are exempt from the installation of autonomous housing blocks (BAEH).

Accessibility for disabled people in hotels

All hotels are considered as establishments open to the public (ERP) and therefore subject to the regulations in force concerning accessibility.

“Chambres d’hôtes” (Guest rooms)

The standards to be observed

The regulatory minimum surface area of each room must be 9 m² (excluding toilets), with a ceiling height of at least 2.20 m;
Each room must give access (directly or indirectly) to a bathroom and a toilet and be in compliance with regulations on hygiene, safety and sanitation;
The rooms and bathrooms must be cleaned daily, at no additional cost;
The price is free but the operator is however subject to certain obligations in terms of price display.

Each accommodation, whether it is in an individual dwelling or in a collective dwelling, is equipped with at least one standardized smoke detector. Article R129-13 of the construction code specifies: “The responsibility for the installation and maintenance of the standardized smoke detector referred to in R129-12 lies with the occupant of the accommodation.” However, it lies with the owner for seasonal accommodation…

The operator must of course also take out an insurance contract covering this activity.

Safety and access for people with disabilities

No rule of access to disabled people is required as long as the accommodation capacity (limited to 5 rooms and 15 people at the same time) is not exceeded.

If this is exceeded, the operator of the guest room must comply with the regulations for hotels and establishments open to the public as well as the regulations in force on accessibility for people with disabilities.

“Meublés de tourisme”

There are no specific regulations for this type of accommodation. Housing must meet the minimum standards set by Decree No. 2002-120 of 30 January 2002 relating to the characteristics of decent housing.

As in any home, the premises must be equipped with at least one standardized smoke detector.

In addition, it is of course necessary that the home insurance covers the seasonal rental.

There is no capacity limit. However, buildings or premises used as accommodation which can accommodate more than 15 people are to be considered as establishments open to the public (ERP) and become subject to the regulations concerning accessibility and prevention of fire risks.

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Supporting documents for accounting in France

FBA team — Thu, 15 Jun 2023 16:26:56 +0000

A company’s accounts must be accurate in order for the tax advantage to be accepted by the tax authorities.

In terms of company law, art. L. 123-14 of the Commercial Code provides that “the annual accounts must be regular, sincere and provide a true image of all assets, financial situation and the results of the company”.

In both cases, the reality and sincerity of the accounts can only be accepted if they are supported by supporting documents defined by French law.

I – Definition of supporting documents

An accounting voucher is a document that supports an accounting entry, which must be dated. The supporting document can be a document justifying a single isolated accounting entry or a summary that justifies a set of operations. It can be generated by a third party (a supplier’s invoice for instance) or be drawn by the company (a sales invoice for example).

Art. L123-22 of the Commercial Code further explains that: “The accounting documents are drawn in euros and in French. Accounting and supporting documents must be kept for ten (10) years”.

A means of examination must allow the managers of the company, the accountant, the auditor and the administration in the event of an audit to make the link between an entry in the accounts and its supporting document. We will thus, explore the importance of using a good method of filing all supporting documents.

Mandatory information on a supporting accounting document:

Although the accounting documents have their own characteristics, some mentions are mandatory for all. These must mention:

The date of the operation
The identification of all parties involved
The characteristics and amounts of the transaction
The coding for processing

The relationship with the accountant:

These accounting documents must be sent regularly and on time, to the chartered accountant in order to meet all pre-defined deadlines. Many software exists, which allows you to scan the supporting documents and send them automatically to the accountant throughout the whole operations progress. Most commonly, this type of software is supplied by your accountant.

Failure to produce accounting documents can lead to severe sanctions:

When the tax administration considers that you have a hidden or incomplete accounting, the administrator can reconstitute the taxable profit by its own authority, using two methods:

Making an estimate based on receipts which are in relation to purchases, increased by a margin coefficient
Assessing the income generated by the activity, by various means without taking into account the supporting accounting documents.

If you are in one of those above situations, you won’t be able to refute the method used by the administration.

II – Accounting documents relating to purchases and miscellaneous charges

The accounting must be justified by any document allowing the control of the reality of the expenses. These are usually invoices for purchases and cash vouchers, receipts, pay books, etc. for other costs and charges.

The law says that the accounts must be supported by supporting documents that will allow this control.

Watch out: credit card receipts are not considered supporting documents. Make sure to keep all official invoices.

1. Supporting documents allowing a deduction of taxable profit

Art. 54 of the General Tax Code mentions: “Taxpayers […] are required to present, upon any request from the administration, all accounting documents, inventories, copies of letters, receipts and expenditure documents likely to justify the accuracy of the results stated in their statement. If the accounts are kept in a foreign language, a translation certified by a sworn translator must be presented at any request of the administration.”

However, there are some tolerance measures:

BOI-BIC-DECLA-30-10-20-10 “It is, however, admitted that minor acquisitions of consumable products may not be accompanied by the corresponding invoices”.

It should be noted that this case must remain exceptional and correspond to expenditure of a very low amount.

Traders sourcing directly from producers of agricultural products, or sea fishing craftsmen may not hold invoices.

Traders directly sourcing from markets or farm cultures, without the possibility of obtaining an invoice (in this case, the exit sheet or weight sheet has the value of an accounting document).

Beyond these two very specific situations, each company must be able to provide proof of purchases accounted for and keep any useful document for this purpose.

The particularity concerning restaurant expense reports and invoices for the purchase of gifts intended for customers:

When a manager or an employee invites customers to a business meal, etc. the receipt must display the following:

Date
Total amount of the bill
Number of guest (seen by the number of dish served)
For invoices above €150: Guests’ names, functions, company, all on the back of the invoice
Reason (written on the back)
VAT

It is necessary to provide proof that the expenses incurred for the gifts are consistent with the business relationship maintained with the customer. It is therefore imperative to keep the invoices mentioning the names of the beneficiaries.

1. Supporting documents allowing the recovery of VAT

In addition to the conditions set out above for a supporting document to allow the deduction of the chargeable expense, additional conditions are set out by law to allow a recovery of VAT.

Indeed, an invoice constitutes, for the exercise of the right to deduct VAT, an essential document since it makes it possible to formally justify the existence of a VAT claim to the Treasury.

VAT can only be recoverable if the corresponding expense is incurred for the purposes of transactions giving rise to the right to deduct; and if the amount of VAT is clearly shown on the invoice.

The invoice must specify for each operation carried out:

The date and exact nature of the transaction
The price per piece, excluding taxes and the applicable VAT rate.
The total amount to be paid, the tax rate, the total amount excluding VAT and the corresponding VAT for all the operations invoiced.

Exceptions to formalism in connection to invoices:

In some cases, it is impossible to have an invoice edited by the supplier. It is possible to recover VAT on a simple expense report, if it mentions the amount excluding tax and the amount of VAT. This mainly concerns:

Meal expenses when the amount is less than € 150
Fuel costs for which VAT is recoverable
Highway tolls
Various parking fees, etc.

III – Accounting documents relating to sales

As soon as the transaction is made between two professionals, the invoice is mandatorily issued twice (an original and a duplicate).

This invoice must be issued, either at the time of delivery of the goods in the contracts for the sale of goods, or at the end of the execution of providing services. The buyer is also required to claim it.

For sales of goods to individuals, issuing an invoice is only mandatory in the following cases:

At the customer’s request
For long-distance sales or intra-community deliveries exempt from VAT.

In other cases, the professional generally provides a receipt to the buyer.

For services provided for individuals, it is mandatory to issue an invoice in the following cases:

Prive higher than €25 incl. tax
By client’s request
Some building works

Invoices must disclose a large number of mandatory information which are indicated on our website: MANDATORY INFORMATION TO BE INCLUDED ON AN INVOICE.

All companies are required to keep a copy of each sales invoice (or service note to individuals) in coded-numerical or chronological order. These documents are part of the supporting documents that must be linked to the accounts.

IV – Classification and storage of supporting documents

1. Classification of supporting accounting documents

The general chart of accountants does not specify any classification rules for supporting documents. The company is therefore free to adopt its own classification method. This must be effective so that the company is able, at any time, to quickly access the required accounting document.

There are two ranking methods:

Paper format: It is recommended to use binders according to the accounting journals used by the company. It is important to choose a secure storage location in which the access is not authorized to everyone and where the documents do not present any risk of deterioration (humidity among many others).
Digital format: The documents are digitalized and stored in secure spaces. It is important to guard against the risk of data loss or hacking. It is preferable to keep some original documents in paper.

To link an accounting voucher to its accounting entry, the number assigned by the accounting software to the entry is generally written on the document.

1. Retention period for documents

Supporting documents must be kept in the company’s archives for a minimum of 10 years from the end of the financial year (Art. L123-22 of the Commercial Code):

- Purchase orders and delivery notes issued or received
- Customer/supplier invoices
- Bank documents: statements, check stubs, check remittances, etc.

It is the same for accounting books and all accounting documents recording operations, accounting monitoring elements, inventory management, annual accounts (income statement, balance sheet, annexes, etc.) which must also be kept for 10 years from the end of the financial year.

For commercial contracts concluded between a company and a merchant or an Individual, the retention period is a minimum of 5 years (Art. L110-4 of the Commercial Code).

On the other hand, the retention period of the company’s real estate contracts is a minimum of 30 years (Art. 2272 of the Civil Code).

For tax documents, Art. L102B of the Book of Tax Procedures stipulates that “the books, registers, or documents on which the administration’s rights of communication, investigation and control may be exercised, must be kept for a period of 6 years […]”.

Documents related to personnel management must be kept for 5 years. This includes payslips, Unique Employee Registry, documents in relation to employment contracts, salaries, bonuses, allowances, balances of all accounts and pension plans, declarations of accidents at work.

This period is reduced to 3 years for all documents in relation to social charges and payroll tax, and 1 year for accounting in relation to employee hours, on-call hours and their compensation.

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Comparative table of companies’ legal structures under French law

FBA team — Mon, 15 May 2023 10:36:16 +0000

The tables hereafter shown in this document compare the main legal structures mainly used in France, available to entrepreneurs.

We have included in this table several commercial-type enterprises as well as two cases of non-commercial structures.

The cases for commercial-type companies are:

E.I. (Entreprise Individuelle) – Individual Enterprise;
E.U.R.L. (Entreprise Unipersonnelle à Responsabilité Limitée) – Enterprise with limited liability;
S.A.R.L (Société A Responsabilité Limitée) – Company with limited liability;
S.A. (Société Anonyme) – Private Company;
S.A.S. & S.A.S.U (Société par Actions Simplifiées – Société par Actions Simplifiées Unipersonnelle) – Companies with stock actions simplified;
S.N.C. (Société en Nom Collectif) – Collectif ownership company;
S.C.O.P. (Société Coopérative et Participative) – Cooperative and Participative Company.

The two non-commercial structures are:

Associations, which are useful to philanthropic entrepreneurs or commercial types, with non-competitive activities;
The S.C.I. (Société Civile Immobilière) which are useful for the organization of real estate assets.

The following criteria will be further developed:

Number of partners;
Management style;
Responsibility of partners;
Responsibility of leaders;
Capital amount and contribution release;
Contributions in kind;
Net profit taxation;
Executives’ compensation tax regime;
Social scheme for managers;
Social scheme for partners.

COMMERCIAL COMPANIES

	Individual Entrepreneur	E.U.R.L	S.A.R.L	S.A.	S.A.S and S.A.S.U	S.N.C	S.C.O.P
NUMBER OF PARTNERS	The individual entrepreneur only	One single partner (natural or legal person)	2 partners minimum 100 maximum (physical or legal persons)	-2 partners minimum in unlisted companies -7 partners minimum in listed companies -Partners may be physical or legal persons	Minimum 1 partner-No maximum (physical or legal persons)	Minimum 2 partners no maximum legal (physical or legal persons)	2 partners minimum – no maximum (Scop SAS) 2 partners minimum – maximum 100 (Scop SARL) At least 7 partners (Scop SA)
MANAGEMENT STYLE	The individual entrepreneur only	A manager (mandatory natural person) who can be either the sole shareholder or a third party.	One or more manager(s), who must be natural person(s) (either one of the partners or a third party)	Either a board of directors (3 to 18 members) who must be shareholders. The chairman is appointed by the board of directors from among its members.Or a management board and a supervisory board	A single president, natural person or legal person. The partners freely determine in the articles of association the rules of organization of the company	One or more manager(s), natural or legal person. It can be either one of the partners or a third party	A manager elected by the salaried partners for 4 years (6 years for the Scop SA)
PARTNER’S RESPONSABILITY	Liability of the individual entrepreneur limited to goods used for the professional activity, in terms of professional debts. the main residence is legally unseizable by professional creditors. Automatically benefits from the separation of personal and professional assets.	The partner’s liability is limited to the amount of their contributions, unless they have committed management errors or granted guarantees on a personal basis	The partners’ liability is limited to the amount of their contributions unless they have committed management errors or granted guarantees on a personal basis	The partners’ liability is limited to the amount of their contributions	The partners’ liability is limited to the amount of their contributions	Partners are jointly and severally liable on all of their personal properties	The partners’ liability is limited to the amount of their contributions.
LEADER’S RESPONSABILITY	Civil and criminal liability of the entrepreneur	Civil and criminal liability of the manager	Civil and criminal liability of the manager (s)	Civil and criminal liability of the manager (s)	Civil and criminal liability of the manager (s)	Civil and criminal liability of the manager (s)	Civil and criminal liability of the manager (s)
CAPITAL AMOUNT AND CONTRIBUTION RELEASE	Share capital does not exist	Amount freely fixed by the partner, according to the needs of the company Compulsory cash release of 20% upon incorporation and the balance within 5 years	Amount freely fixed by the partner, according to the needs of the company Compulsory cash release of 20% upon incorporation and the balance within 5 years.	€37.000 minimum Compulsory release of 50% of the cash contributions to the constitution and the balance within 5 years	Amount freely fixed by the partner, according to the needs of the company Compulsory release of 50% of the cash contributions to the constitution and the balance within 5 years	Amount freely fixed by the partner, according to the needs of the company Full release of contributions to the constitution is not compulsory. The balance will be paid at the request of the management	€ 18.500 for Scop SA €30 for Scop Sarl or SAS
CONTRIBUTIONS IN KIND	N/A	Possible: Must be indicated in the articles of association, appointment of an auditor in charge of the assessment but possibility of dispensing with it in certain cases	Possible: Must be indicated in the articles of association, appointment of an auditor in charge of the assessment but possibility of dispensing with it in certain cases	Possible: Must be indicated in the articles of association, appointment of an auditor in charge of the assessment	Possible: Must be indicated in the articles of association, appointment of an auditor in charge of the assessment but possibility of dispensing with it in certain cases	Possible: Must be indicated in the articles of association, appointment of an auditor in charge of the assessment is not compulsory	See SARL, SAS or SA depending on the legal form chosen
NET PROFIT TAXATION	The entrepreneur is taxed directly under income tax, either on a flat-rate basis (micro-enterprise regime) or in real terms (real tax system). The sole proprietor subject to a real tax regime may, however, opt for corporation tax.	The company is not taxed, the sole shareholder is taxed directly for income tax as in a sole proprietorship. The EURL can opt for corporate tax and thus the manager will pay tax on the income on his remuneration and the company will be taxed on the net profit to the corporation tax	The net profits are subject to corporation tax and the remuneration of managers to income tax The company may opt for income tax in the case of family SARL or, under certain conditions, for SARL less than 5 years old	The net profits are subject to corporation tax and the remuneration of managers to income tax The company may opt for income tax under certain conditions, for SA less than 5 years old	The net profits are subject to corporation tax and the remuneration of managers to income tax The company may opt for income tax under certain conditions, for SAS less than 5 years old	The company is not taxable, each partner is taxed on his share of profits for income tax (in the category of industrial and commercial profits) The company can however opt for corporate tax	Profits are subject to corporation tax Exemption from corporation tax for the fraction of profits distributed to employees in respect of the participation and for that set aside as part of the investment provision
EXECUTIVES COMPENSATION TAX REGIME	Income tax in the category corresponding to the activity of the company or, in the event of the option for corporation tax, in that of wages and salaries	Income tax in the category of industrial and commercial profits or non-commercial profits (EURL subject to income tax), or in that of wages and salaries (EURL subject to corporation tax). The single associate manager of EURL in the IR regime can choose the tax regime of the micro-enterprise	Salaries and wages tax regime, except if the company opt for income tax	Salaries and wages for the chairman of the board of directors (for conventional SA)or for the Chairman of the Management Directory Board for other companies Unless the company option for income tax	Salaries and wages tax regime for the president, except if the company opt for income tax.	Income tax in the category of industrial and commercial profits	Tax regime of salaries and wages
SOCIAL SCHEME FOR MANAGERS	Self-employed workers scheme	Self-employed workers scheme when the manager is the sole shareholder Assimilated-employee when the manager is not a partner	SARL submited to corporation tax: Minority or egalitarian manager: assimilated-employee Majority manager: self-employed Option to IR: See SNC regime	SA in classic form: The chairman is considered an employee The other members of the board of directors do not come under any social security scheme because they are not remunerated for this function	The president is assimilated-employee	Self-employed workers scheme	Managers are assimilated to employees in particular with regard to unemployment insurance
SOCIAL REGIME FOR PARTNERS	N/A	Self-employed worker scheme	The partner can be a self-employed worker if he is in the majority, or an employee if he is equal or minority.	Employees’ scheme (if they have an employment contract)	Employees’ scheme (if they have an employment contract)	Self-employed workers scheme	Employees scheme (if they have an employment contract)

NON-COMMERCIAL COMPANIES

	ASSOCIATIONS	SCI
NUMBER OF PARTNERS	2 members minimum no maximum	2 members minimum no maximum
MANAGEMENT STYLE	Freely chosen mode of management. The association is often run by a board of directors, which usually elects an office (president, treasurer and secretary)	One or more managers, partners or not, natural or legal persons
PARTNER’S RESPONSABILITY	Non-executive members are not responsible	Partners are liable on all of their personal properties
LEADER’S RESPONSABILITY	Civil and criminal liability of the manager (s). Liability reduced under certain conditions when the manager performs his duties on a voluntary basis.	Civil and criminal liability of the manager (s)
CAPITAL AMOUNT AND CONTRIBUTION RELEASE	There is no social capital Members can make contributions with the possibility of recovering them when the association is dissolved.	No minimum
CONTRIBUTIONS IN KIND	Each contribution must be recorded in the articles of association, as well as the right of recovery so that the contributor can take advantage of it	Possible: Must be indicated in the articles of association, appointment of an auditor in charge of the assessment is not compulsory
NET PROFIT TAXATION	Associations which make profits, with for-profit purposes, are subject to corporation tax at the standard rate Non-profit associations benefit from a reduced corporate tax rate on their only income from assets Non-profit associations whose revenues ancillary sales do not exceed € 60,000 per year, are tax exempt	The company is not taxable Each partner is taxed on his share of profits for income tax (in the category of property incomes) The company can however opt for corporate tax
EXECUTIVES COMPENSATION TAX REGIME	Tax regime of salaries and wages if remuneration is paid.	The manager can only be an employee if he is not a partner. In the event that the associate manager receives remuneration, this is not deductible from the profit of the SCI.
SOCIAL SCHEME FOR MANAGERS	Managers are assimilated-employees under certain conditions	Non-partner managers are assimilated-employee
SOCIAL REGIME FOR PARTNERS	No working contract possible for members	N/A

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The Individual Entrepreneur: the legal, tax and social status

FBA team — Wed, 15 Mar 2023 17:54:16 +0000

A new unique status of individual entrepreneur came into effect from May 15^th 2022 for any creation of an individual business.

This status makes it possible to distinguish the professional assets from the personal assets with the consequence of preventing him from answering for his debts on all of his assets.

In return, the law is gradually abolishing the status of individual entrepreneur with limited liability (EIRL). Indeed, since February 15^th 2022, it is no longer possible to create an EIRL.

We will see successively:

The legal status of the individual entrepreneur;
Its tax and social systems;
The main legal operations in this type of business.

I – The legal status

1. The two heritages

This system leads to the automatic separation of professional assets and personal assets. However, the new status does not impose on entrepreneurs the formalities that weighed on EIRL, the separation of assets being by right.

Composition of professional assets

These professional assets are made up of the property, rights, obligations and sureties which he holds and which are useful for his independent professional activities which he exercises. These are the goods, rights, obligations and sureties that serve the activity of the individual entrepreneur.

The administration presents a non-exhaustive list of goods belonging to this category:

The goodwill, the artisanal fund, the agricultural fund, all the tangible or intangible assets that constitute them as well as the right of presentation of customers of a liberal professional;
Movable property such as merchandise, equipment and tools, agricultural equipment, as well as means of mobility;
Real estate used for the activity, including the part of the principal residence of the individual entrepreneur used for professional use;
Intangible assets such as data relating to customers, patents, licenses, trademarks, designs and models, and more generally intellectual property rights, the trade name and the sign;
The cash funds, the sums registered in the bank accounts dedicated to this activity.

Composition of personal assets

It is made up of elements of the assets of the individual entrepreneur not included in the professional assets. It includes assets (such as a principal residence not used for professional use) and liabilities (for example, a loan to purchase personal property).

Starting point for limitation of creditors’ pledge

The limitation of the pledge of creditors to the professional assets of the individual entrepreneur (concerning professional claims) applies to claims arising after May 14^th 2022 and from:

Registration in the register to which the entrepreneur belongs for his activity;
The earliest registration date when it belongs to several registers;
The declared date of the start of activity, if this is prior to the date of registration;
The first act he exercises as an individual entrepreneur, when he is not bound by an obligation to register.

1. Exceptions to separation of assets

The individual entrepreneur may, for certain operations, waive the protection of his personal assets.

The waiver must contain certain information. It can only intervene at the request of a professional creditor and after a period of reflection generally set at 7 clear days from the receipt of the waiver request.

The creditor’s right of pledge then covers all professional and personal assets, with the exception of property that is legally exempt or declared exempt.

Concerning the tax authorities

They may seize the main residence of an individual entrepreneur, or any other property declared unseizable, in the event that the entrepreneur has committed fraudulent maneuvers or in the event of any serious and repeated non-compliance with his tax obligations.

With regard to personal tax debts, the separation of assets is not opposable to the tax authorities in respect of tax debts owed on a personal basis, but whose base includes the results of the professional activity (tax on the income or social contributions) or is made up of property useful for the professional activity (property tax on this property).

Note: This measure is inapplicable to the collection of income tax and social security contributions when the individual entrepreneur has opted to be assimilated to an EURL or an EARL and is subject to corporation tax.

Concerning social organizations

When the individual entrepreneur has, through fraudulent maneuvers or following serious and repeated non-compliance with the requirements of social security legislation, made it impossible to collect the contributions and social security contributions due under its activity, the recovery of these sums can be made on all of its property and rights.

Concerning creditors in a personal capacity

They can exercise their general right of pledge on the professional assets within the limit of the amount of the profit made during the last closed financial year to ensure the recovery of their debt when the personal assets are insufficient.

1. Mandatory mentions

For the exercise of his professional activity, the self-employed worker must use a name incorporating his name or a name of use immediately preceded or followed by the words “individual entrepreneur” or the initials “EI”.

This mention must appear on the invoices, order notes, catalog and prices, advertising documents, correspondence and receipts as well as on the website.

II – The fiscal and social regime

The individual entrepreneur is, as before, personally subject to income tax on the profits made. These profits are determined according to the rules specific to the tax category corresponding to the nature of the activity carried out (B.I.C., B.N.C. or B.A.).

However, since the entry into force of this new status, the individual entrepreneur can opt for corporation tax.

1. Option for assimilation to an EURL or an EARL

The individual entrepreneur can opt for the assimilation of his sole proprietorship to an “Entreprise Unipersonnelle à Responsabilité Limitée” company (EURL) or to an “Entreprise Agricole à Responsabilité Limitée” (EARL). This option is irrevocable and automatically entails option for corporate tax liability.

However, a waiver of corporation tax liability is possible until the fifth financial year following that for which the option for assimilation to an EURL (or EARL) was exercised. The sole proprietorship remains assimilated to an EURL or an EARL but will be subject to the regime of partnerships.

The net result for application of corporation tax is determined as follows:

The sums that the entrepreneur allocates to himself in remuneration for his activity are tax treated as remuneration allocated to the partner of an EURL (or an EARL) subject to corporate tax. They are therefore deductible from the result and taxed on income tax like wages;
The deductions made by the entrepreneur, other than his remuneration, are assimilated to dividends and are not deductible for the determination of the result.

1. Social regime for the individual entrepreneur

He is covered by the scheme for self-employed workers (Social security for the self-employed). The individual entrepreneur does not pay himself a “salary” and does not have a payslip.

The social contributions of entrepreneurs subject to a real regime are calculated, in the general case, on the basis of the taxable profit. However, in the event of the option for IS, the social security contributions are calculated on the remuneration allocated and possibly on part of the dividends.

Contributions for micro-entrepreneurs are based on turnover.

In any case, they are not entitled to unemployment insurance for self-employment, but they have the possibility of taking out personal insurance.

III – Legal operations within the sole business

1. The constitution of the sole proprietorship

The sole proprietorship is characterized by its simplicity of constitution. The entrepreneur registers his business with the Chamber of Commerce or Industry (CCI) or the Chamber of Trades and Crafts (CMA) in his region depending on whether his activity is commercial or artisanal, or makes a declaration to Urssaf when the planned activity is liberal.

Note that since January 1st 2023, companies must carry out their formalities for creating, modifying and terminating their activity in a dematerialized way, on the one-stop shop, which replaced the old business formalities centers.

1. Transfer of assets

Transfer of personal assets to the professional assets of the individual entrepreneur (not assimilated to an EURL or an EARL)

This transfer does not constitute an assignment and does not lead to the taxation of the capital gain noted.

On the other hand, during the possible subsequent sale of the property, it will then be necessary to determine two capital gains:

A private capital gain, corresponding to the capital gain realized during the period during which the property was included in the private heritage;
And a professional capital gain, corresponding to the capital gain acquired by the property since its date of entry into the professional asset.

Transfer of the personal assets of the individual entrepreneur to the assets of the individual business assimilated to an EURL or an EARL

The transfer of property useful for the activity does not constitute a transfer for consideration and, therefore, does not give rise to the recognition of a private capital gain immediately taxable in the hands of the entrepreneur.

The transfer of other property constitutes a contribution. The capital gain resulting from this contribution is immediately taxable in the hands of the entrepreneur according to the capital gains regime for individuals and may benefit, where applicable, from the exemptions provided for by this regime.

1. Option for the assimilation of the sole proprietorship to an EURL or an EARL

When the individual entrepreneur opts for the assimilation of his sole proprietorship to an EURL or an EARL, this option carries the consequences of the creation of a separate tax entity:

A transfer of the assets registered in the heritage of the sole proprietorship to that of the company assimilated to an EURL or an EARL, which must be treated for tax purposes in the same way as the contribution of these same assets from the heritage of the company individual to that of an EURL or an EARL;
The termination of the sole proprietorship.

1. Liquidation of sole proprietorship

The liquidation of the sole proprietorship of an individual entrepreneur who has not opted for assimilation to an EURL or an EARL entails the immediate taxation not only of the operating profits made since the end of the last taxable year, but also capital gains on assets resulting from the disposal or termination and any tax-deferred profits, provisions or capital gains whose taxation has been previously deferred.
The liquidation of a sole proprietorship assimilated to a EURL or an EARL entails the same tax consequences as the termination of the business and the cancellation of the shares of an EURL or an EARL:

- * Taxation of results not yet taxed on the date of this termination, including any unrealized capital gains, to corporation tax or income tax;
- * And, when the company is subject to corporate tax, the taxation in the hands of the individual entrepreneur of the “liquidation bonus” in the category of income from movable capital.

All the team of French Business Advice is at your disposal to help you, so do not hesitate to contact us!

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L’article The Individual Entrepreneur: the legal, tax and social status est apparu en premier sur FBA - French Business Advice.

The annual general meeting in the S.A.R.L.

FBA team — Tue, 31 May 2022 08:30:00 +0000

Article of 21/06/2017 updated on 31/05/2022

The partners of French S.A.R.L.s must approve the financial statements by a general meeting which must be held within six months of the closing date of the financial year. Thus, with this article, we will indicate the main steps of the procedure to be followed to carry out this approval.

I – Information to know to prepare properly a general meeting

1 – Mandatory meeting within 6 months

Here is what article L.223-26 of the Commercial Code specifies:
“The approval of the accounts must take place within 6 months of the end of the financial year. If the manager does not meet the partners within this period, the public prosecutor or any interested party may request the president of the commercial court to order the manager, if necessary under penalty, to convene this meeting or to appoint an agent to do it.”

2 – The assembly

The general meeting of shareholders deliberates mainly on:

The approval of the accounts;
The allocation of the result;
The discharge to the manager;
The appointment of the manager;
The remuneration of the management;
The appointment of an external auditor if necessary;
The approval of regulated agreements;
The prior authorization of the manager for certain major transactions provided for by the articles of association (e.g. purchase of commercial premises, bank loan, etc.).

3 – The manager

He prepares the annual accounts and the management report. At the time of convening the meeting, he must also prepare the agenda, the text of the resolutions and a report on the regulated agreements.

4 – Business continuity

The accounts are closed on the assumption that business continuity is assured. It is prudent to check, in particular, the state of the actual indebtedness and its evolution as well as that of the cash in order to see if it will be able to cover this indebtedness during the next financial year. It is also advisable to check the real possibilities of bank financing, the state of the order book, etc.

II – The preparative acts of a general assembly

1 – Documents to check or prepare

The statutes of the SARL: the manager will have to check if they do not contain special rules that derogate from the Commercial Code. If this is the case, it will of course have to take it into account in the procedure of convocation and holding of the assembly;
Document for the appointment of the manager: he must verify that his mandate does not expire. In this case, it will be necessary to have it renewed by the assembly. He will also check whether it is necessary to approve his remuneration;
List of regulated agreements: this is drawn up by the manager or, where applicable, by the auditor. It concerns the conventions:
- Concluded during the closed financial year between, on the one hand, the company and, on the other hand, one of its managers or one of the partners either directly or through an intermediary;
- Concluded with another company whose manager is simultaneously manager or partner of the S.A.R.L.;
- Or having taken effect during a previous financial year and which continued during the financial year in question.

Accounting documents: obviously, the balance sheet, the income statement and the appendix must be drawn up, including the statement of guarantees, endorsements given by the company, and the inventory;
Statutory auditor: it should also be checked whether the company has not reached a threshold or taken a stake that would lead to the obligation to appoint a statutory auditor.

2 – The reports to be drawn up

> The management report

It must mainly exhibit:

The situation of the company during the past financial year;
Its foreseeable evolution;
Significant events occurring between the closing date of the financial year and the date on which it is established;
Its research and development activities;
The list of existing branches;
An objective and exhaustive analysis of the evolution of the business, the results and the financial situation of the company;
Key performance indicators of a financial nature and, where applicable, of a non-financial nature relating to the specific activity of the company when they are necessary for understanding the evolution of the company’s activity;
For companies subject to corporate tax, the report must indicate the amount of dividends paid during the last three financial years.

The management report must be understandable by a non-specialist.

Companies which belong to the category of small businesses (which do not exceed, at the end of the financial year, two of the following three thresholds: €6 million in balance sheet total, €12 million in net turnover and 50 employees) are not required to draw up a management report.

> Other reports

Auditor’s reports: when the S.A.R.L. has an auditor, the latter must draw up a report on the annual accounts;
Manager’s report on regulated agreements: we have discussed its content in chapter II paragraph 1;
Group management report: here is what Article L. 233-16 of the Commercial Code provides: “A S.A.R.L. which exclusively or jointly controls one or more other companies or which exercises significant influence over them is required to establish and publish consolidated accounts as well as a report on the management of the group” (unless it is controlled by a company which includes it in its consolidated and published accounts).

3 – Notice of meeting and information

The partners must be convened by registered letter or by e-mail at least 15 days before the meeting is held.

It will also be advisable to convene, when applicable, the auditor as well as the social and economic committee, if the latter has been set up and if the company employs at least 50 employees.

Documents to be attached to the invitation:

The annual accounts (balance sheet, income statement, appendix);
The management report (except exemption for small companies),
The text of the resolutions proposed by the manager or by the partners;
And, where applicable, the reports of the statutory auditor, the consolidated financial statements and the report on the management of the group.

4 – Particularities concerning E.U.R.L.

Only in an E.U.R.L. of which the sole shareholder is not the manager, these documents are sent by the manager to the sole shareholder at the latest one month before the expiry of the period provided for the approval of the accounts.

III – Holding of the meeting

1 – Participation and quorum

The meeting is chaired by the manager or one of the managers. If the manager is not a partner, the present partner owning or representing the largest number of shares will preside. If two partners owning or representing the same number of shares are accepting, the meeting is chaired by the oldest.

Writing an attendance sheet is not mandatory, but the statutes may provide for it. It can be useful, because it makes it possible to justify obtaining a majority.

2 – Documents to deposit at the office of the meeting (when the meeting of shareholders meets physically)

A copy of the up-to-date statutes;
Copies of the convening letters and acknowledgments of receipt from the partners and, where applicable, from the auditor;
Where applicable, the attendance sheet signed by the shareholders present and the representatives;
The powers of the representatives;
The inventory, the balance sheet, the income statement and the annexes;
The management report;
The report on regulated agreements;
Where applicable, the auditor’s report;
The text of the draft resolutions;
If necessary, written questions from the partners.

3 – Vote

Each shareholder present or regularly represented may, in principle, vote.

In the absence of a statutory clause, the chairman determines, in agreement with the meeting, the method of voting: vote by show of hands, ballot or secret ballot. Voting by correspondence and, more generally, by any means of telecommunication is prohibited for the approval of the annual accounts of an S.A.R.L.

Associates must approve, modify or reject accounts. The approval of the financial statements for a financial year is generally followed by the vote for a discharge given to the manager for the fulfillment of his mandate during the financial year.

Then, the partners decide on the allocation to be given to the results (profits or losses) proposed by the manager.

Apart from the standard agenda, consideration of other matters is often scheduled. It could be:

Setting or reviewing the manager’s remuneration;
The renewal of the manager’s term of office expiring;
The appointment of an auditor;
The approval of a regulated agreement;
The authorization to be given to the manager to conclude an act;
Etc.

4 – Minutes of the meeting

Any deliberation of the shareholders’ meeting is recorded in minutes, the content of which is specified in Article R. 223-24 of the Commercial Code.

The chairman of the meeting may accept or refuse to record in the minutes the observations, protests or particular statements made by certain shareholders when they so request.

5 – Particularities concerning E.U.R.L.

The power to approve the accounts belongs to the sole shareholder. This approval must occur, as for the SARL, within 6 months of the end of the financial year.

Following the approval of the accounts, the partner decides on the allocation of the result; in the event of distributable profits, it allocates dividends, if applicable.

The decisions of the sole shareholder, taken instead of the meeting, must be recorded in a special register: the register of decisions.

Approval of the accounts by deposit at the registry: when the sole shareholder is the sole manager of the company, he has the possibility of depositing in the trade and companies register, within the period of 6 months from the end of the financial year, the inventory and the annual accounts, duly signed. This deposit constitutes approval of the accounts without it being necessary to enter the deposit receipt in the decision register. However, this possibility is not recommended because it has the disadvantage of having to file the inventory, a source of information for third parties.

IV – Formalities after the meeting

1 – Filing of annual accounts

S.A.R.L. must file with the registry of the commercial court within one month of the approval of the accounts, the following documents:

The annual accounts;
The proposal for the allocation of the result submitted to the meeting and the voted allocation resolution;
If applicable, the auditor’s report;
If applicable, the consolidated financial statements, the group management report and the auditor’s report on the consolidated financial statements.

The management report does not have to be filed, but it is kept at the head office at the disposal of any person who requests it.

2 – Confidentiality of social accounts

> Confidentiality of the annual accounts of micro-enterprises

The S.A.R.L. concerned are those whose figures do not exceed, for the last closed financial year, two of the following three thresholds:

€ 350,000 total balance sheet;
€ 700,000 net turnover;
10 employees.

These companies may request that their accounts be kept confidential. In this case, they must attach a declaration of confidentiality to the documents filed with the registry of the commercial court.

> Small business income statement privacy

S.A.R.L. that belong to the category of small businesses can ask the registry of the commercial court that their income statement not be made public.

The companies concerned are those which do not exceed, for the last closed financial year, two of the following three thresholds:

€ 6 million in balance sheet total;
€ 12 million in net sales;
50 employees.

Companies wishing to benefit from this option must accompany the filing of the annual accounts with a declaration of confidentiality.

To conclude, we propose below a schedule of the main operations to be considered for the preparation and holding of an annual general meeting in an S.A.R.L.

V – Schedule of Operations

OPERATIONS	TIME LIMIT
The manager prepares the financial statements for the year ended. He prepares the management report and the text of the resolutions.	Before the convening date.
Convening of the meeting by registered letter or by e-mail. Must be attached to this letter: * Financial States; * The management report; * The text of the resolutions; * The report of regulated agreements; * A form of proxy.	15 days before A.G.M. Unless the statutes provide for a longer period.
The partners can consult the inventory at the head office. They can also write questions to the manager.	Between the date of the convocation and the day of the meeting.
Possibility of requesting an extension of time to the President of the Commercial Court if the A.G.M. cannot be held within six months of the closing date of the accounts.	Imperatively within six months of the closing date of the accounts.
Holding of A.G.M. * Approval of the management report and the annual accounts; * Assignation of profit or loss; * Approval of non-deductible expenses; * Discussion on the other subjects on the agenda.	Within six months of the end of the financial year.
Deposit at the office of the court of commerce of the following documents: * Accounts of the year; * Proposal for profit allocation submitted to the AGM; * Voted assignment resolution; * Possibly: declaration of confidentiality of the annual accounts.	Within one month of the meeting (or two months if electronic filing).
Eventually, payment of the dividend.	No later than nine months after the closing date of the financial year.

All these operations can partially be different if the company is a micro business or if it has an external auditor.

A Chartered Accountant will be at your disposal to give you details of each of these transactions. Feel free to contact us!

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The annual general meeting in the S.A.S. and S.A.S.U.

FBA team — Sun, 15 May 2022 08:00:00 +0000

Article of 30/06/2021 updated on 15/05/2022

The S.A.S. (or S.A.S.U.) is one of the more used social form because of the many attractions it has, the two main ones being:

The flexibility of this type of company;
The possibility for managers to benefit from the social security scheme for employees while holding the majority or all of the capital.

I – Some general remarks

1. Exceptional measures until July 31^st 2022

The law of January 22^nd 2022 introduced adjustments applicable until July 31^st 2022 inclusive.

Thus, the members of the governing bodies can take part in collegial meetings by telephone or audiovisual conference. No clause in the articles of association or internal regulations is necessary.

Furthermore, the decisions of the collegiate bodies may be taken by way of written consultation without a clause in the statutes or internal regulations being necessary.

1. A flexible schedule

Article L. 227-9 al. 2 of the Commercial Code specifies: “The examination of the accounts, their approval or their modification are imperatively the subject of a collective decision under the conditions and deadlines provided for in the articles of association.”

In addition, the holding of a general meeting is not mandatory, the decision can be taken by other means provided for in the articles of association.

The schedule established for “Sociétés Anonymes” companies is not imposed on SAS; the statutes set their own timetable. The following operations may therefore be carried out within the time limits provided for in the articles of association:

Notice, where applicable, to the statutory auditors of regulated agreements entered into during the past financial year;
Establishment by the president (or the body responsible for closing the accounts) of the inventory and the annual accounts;
Convocation of the partners under the formal conditions provided for by the articles of association and sending or making available to them, according to the articles of association, the documents submitted to the meeting;
Convocation of the social and economic committee if the SAS employs at least 50 employees.

II – Operations to be carried out before the meeting

1. Management report

First of all, small businesses are exempt from drawing up a management report. These are companies which, at the end of the last financial year, do not exceed two of the following three thresholds:

€ 6 million in balance sheet total;
€ 12 million in net sales;
50 employees on average during the year.

However, the exemption is not applicable to the following entities:

Credit institutions, finance companies and payment and electronic money institutions;
Insurance companies, retirement institutions, mutual societies, etc;
Companies whose securities are admitted to trading on a regulated market;
Companies appealing to public generosity;
Enterprises whose activity consists in managing equity securities.

Warning! In matters of S.A.S., it is advisable to always be attentive towards the drafting of the statutes. If the articles of association of a small company require that a management report be drawn up without further clarification, the manager must establish it.

This report is in principle drawn up by the president, but the statutes may designate another body. The management report must be written.

The management report is not published at the registry of the commercial court, but it is kept at the registered office at the disposal of any person who requests it.

The main chapters that make up the report are as follows:

Company situation;
Predictable development;
Important events occurring during the financial year or after the closing date of the financial year;
Research and development activities of the company;
List of branches;
Accounting and financial information;
Results of all subsidiaries, equity investments;
Information on payment terms when the accounts are certified by an auditor;
Declaration of extra-financial performance (for certain large companies).

1. Other reports

We only quote the other reports, specifying that they are not mandatory for all S.A.S.:

Report on regulated agreements: the chairman, or the auditor if there is one, presents to the partners a report on the agreements entered into directly or through an intermediary between the company and himself, one of its managers, one of its partners with a fraction of the voting rights greater than 10%;
Report on stock options;
Report on free allocation of shares;
Statutory auditor’s reports.

1. Other operations

Establishment and closing of accounts

At the end of each financial year, the chairman (the managing director or a collegial body, if the statutes so provide) of the S.A.S. must establish the inventory and the annual accounts. These documents, possibly accompanied by the management report, are made available to the statutory auditors (when there are any).

Companies that do not exceed two of the following three thresholds, € 20 million in balance sheet total, € 40 million in net turnover and 250 permanent employees, can adopt a simplified presentation of their income statement.

Verification of the statutes in order to:
- Note the management body empowered to close the accounts and launch the A.G.M procedure;
- Retain the means best suited to consulting partners according to the options retained by the articles of association;
- Know the deadlines and methods of summoning associates;
- Know the procedures for monitoring shareholders’ rights of communication: documents to be sent or made available to them, deadlines to be observed before the meeting;
- Check the possible rules of quorum and the majority conditions according to which the decision must be taken;
- Check the rules of representation;
- Check the conditions for the appointment or renewal of directors’ mandates when some of them expire, or if a dismissal must be considered;
- Etc.

Partners information

Nothing is provided for by law concerning SAS. However, the annual accounts, the text of the resolutions, and, where applicable, the management report, the auditor’s reports as well as the consolidated accounts, the management report of the group and the report of the statutory auditors on the consolidated accounts are part of the minimum information due to the partners.

Information for employee representatives

The articles of association designate the social body with which the social and economic committee (C.S.E.), if the S.A.S. employs at least 50 employees, can exercise its rights. Two of its members can attend the general meeting.

III – The general meeting

There are three methods of consulting associates, at least one of which is provided for in the statutes.

1. Meeting of partners in assembly

Convocation

The chairman (or the management body designated for this purpose by the articles of association) convenes the shareholders’ meeting as well as, where applicable, the auditor and the social and economic committee.

The articles of association determine the methods of convocation:

By simple or registered letter, electronic mail or oral summons;
The notice period.

In any case, the convocation must specify the place, date and time of the meeting of the assembly; it will contain the agenda (approval of the accounts, allocation of earnings, distribution of dividends, regulated agreements, any other question such as the renewal of a term of office as a manager or statutory auditor), the annual accounts, the text of the resolutions.

Where applicable, it will also contain the management report, the auditor’s report, the consolidated accounts, the group’s management report and the auditor’s report on the consolidated accounts.

Participation and vote of associates

Any associate of S.A.S. has the right to participate in collective decisions. It is necessary to control the articles of association of the company in order to verify the terms of participation of certain partners such as bare owners, usufructuaries, etc.

We recommend to establish an attendance sheet as proof even if this is not an obligation.

When the statutes allow it, it is possible to consult the partners remotely. Two methods are possible:

Participation by videoconference;
Postal voting.

1. Written consultation

In case of written consultation (if the statutes allow it), the text of the proposed decisions, a reply form and the documents necessary for informing the partners must be sent to each of them in writing. They must also be addressed to other persons having the right to attend the collective decisions of the SAS.

The decisions taken must be recorded in a report drawn up by the president which must mention:

The date of the decisions;
The text of the proposed decisions;
Documents sent to partners;
The date on which the documents and information were sent to the partners and the deadline given to them to respond;
The identity of the partners who sent a response received by the expiry date of this period and the number of votes held by each of them;
For each proposed decision, the result of the written consultation.

1. Consent of partners in a deed

The partners can give their consent in a private or notarial deed, in paper or electronic form if the articles of association so provide. Decision making in a deed requires the signature of all partners to prove that each has been consulted.

Special case of a S.A.S.U.:
The sole shareholder approves (or rejects) the accounts within 6 months of the end of the financial year, after having possibly taken note of the auditor’s report. He then decides on the allocation of the result and the possible distribution of a dividend in the event of distributable profit.

His decision is listed in a register, under penalty of nullity of decisions at the request of any interested party.

IV – Formalities after the meeting

1. Publication of accounts at the registry of the commercial court

Any commercial company is required to file, within one month of the approval of the annual accounts or within two months in the event of electronic filing, in a single copy, at the clerk of the commercial court:

The annual accounts (balance sheet, profit and loss account and, if applicable, the appendix), where applicable the report of the statutory auditors;
The profit allocation proposal submitted to the collective decision of the partners and the allocation resolution voted on.

The management report does not have to be filed but is kept at the head office and is available to anyone who requests it.

Special case of a S.A.S.U.:
If the partner is a natural person and the president, he can approve the accounts by simply submitting the inventory and the duly signed annual accounts to the registry. This deposit must be made within 6 months of the end of the financial year. The president is then exempted from entering the receipt issued by the clerk of the commercial court in the register of decisions.

2. Confidentiality option on all accounts

All accounts confidentiality option

Micro-enterprises can, if they wish, declare that the annual accounts they file will not be made public to third parties. These are companies that do not exceed, for the last closed financial year and on an annual basis, two of the following three thresholds:

€ 350,000 in total balance sheet;
€ 700,000 in net turnover;
10 employees.

Profit and loss account confidentiality option

Small businesses may not make their income statement public. This option concerns companies which do not exceed for the last closed financial year, and on an annual basis, two of the following three thresholds:

€ 6 million in balance sheet total;
€ 12 million in net sales;
50 permanent employees.

V- The legal consequences of economic difficulties

1. Loss of half of the share capital

Definition of the loss of half of the share capital

It is recognized when the amount of shareholders’ equity becomes, taking into account the cumulative losses recorded in the liabilities of the balance sheet, less than half of the company’s share capital.

Equity is equal to the sum of capital contributions (share capital and issue premiums), revaluation differences, undistributed profits, losses, investment subsidies and regulated provisions.

Compulsory procedure following the finding of this amount of loss
Consultation of the partners on the continuation of the activity or the dissolution

The manager must therefore convene the partners in an ordinary general meeting within 4 months following the approval of the accounts showing the loss.

During this meeting, the partners have the choice between:

- – Deciding on the early dissolution of the company,
- – Or decide to continue the activity while waiting to reconstitute the equity so that it is again greater than half of the share capital.

Formalities to be carried out following the consultation of the partners

When the partners decide to continue the activity despite the losses, an advertisement must be inserted in a journal of legal notices.

Then, the decision taken by the partners must be filed with the registry of the commercial court. The mention of the loss of half of the share capital will appear on the Kbis extract of the company and will be visible by third parties.

When the partners decide on the early dissolution of the company, the steps to follow are those of the dissolution-liquidation procedure.

The consequences of the decision taken by the general meeting
If the partners decide to continue the activity despite the losses

In this case, they must regularize the situation no later than the end of the second financial year following that during which the loss of half of the share capital was recorded.

Regularization can take place by making sufficient profits, by increasing the share capital, by reducing it, or by abandoning the partner’s current account (you can read the comment in the next paragraph on this subject).

When the situation is not regularized at the end of the period provided for, any interested party may apply to the courts for the dissolution of the company. The court may grant a maximum period of 6 months to regularize the situation.

If the partners decide to dissolve the company early

In this case it is an extraordinary decision, it is therefore necessary to respect the conditions required by the statutes for this type of deliberation. This meeting may be held without notice, directly following the ordinary general meeting relating to the loss of half of the share capital.

1. The abandonment of a partner’s current account with (or not) return to better fortune clause

As we saw in the previous paragraph, it is possible to reconstitute the capital, if a partner who has a current account of a sufficient amount in the company, agrees to abandon it.

Consequences of abandoning a partner’s current account

The amount of debt represented by this current account will no longer appear on the liability side of the company’s balance sheet and the financial situation will be improved accordingly.

The result of the company will be increased by the amount of the abandonment of the partner’s current account, which constitutes a taxable product.

The capital will be reinforced and, if the amount lost is sufficient, the total losses can become less than half of the capital.

The partner who makes the abandonment in the partner’s current account loses the claim he had on the company. He will no longer be able to claim reimbursement of the amount he has abandoned.

Better fortune Clause

This clause allows the partner who abandons all or part of his partner’s current account to subsequently obtain reimbursement of the abandoned debt, if the company’s situation improves.

When the claw back clause applies, the reimbursements made constitute an exceptional expense deductible from the company’s results. The profit is therefore reduced by the amount of the reimbursement.

Formalities

The abandonment of an associate current account does not require any formality. On the other hand, the clause of return to better fortune must always be the subject of a written act.

This agreement must be signed by the partner concerned and by the legal representative of the company. It will include:

- – The abandonment of a partner’s current account and its terms (identity of the partner, amount abandoned, etc.);
- – The claw back clause and its terms.

As usual, we are at your disposal if you need further information about this subject, so feel free to contact us!

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L’article The annual general meeting in the S.A.S. and S.A.S.U. est apparu en premier sur FBA - French Business Advice.

How to become a motorhome owner in France when you are a foreigner?

FBA team — Fri, 15 Apr 2022 12:30:48 +0000

=> A proposal for a legal arrangement

It is impossible in France to obtain a registration certificate for a vehicle if you are not domiciled there. Thus, foreign people who wish to buy a motorhome to travel on the European continent systematically encounter this problem.

Thus, the creation of a civil society whose head office is located in France, whose purpose is the purchase of a vehicle in order to lend it free of charge to its partners seems to us to be suitable to achieve this goal.

We will present below the structure of the company as well as the legal procedure.

First of all, we would like to point out that chartered accountants at FBA are able to set up this type of company corresponding to your needs and to offer you solutions for hosting it.

I – Structure of the company

1. The legal nature of the company to be created

A civil society must be created for each foreign person who wishes to acquire a motorhome in order to make it available free of charge to his associates.

This company can be created by contribution in cash with a small capital (100 € for example). It has a minimum of two partners. The financing of the vehicle can be carried out by a bank loan or by contribution in current account.

The vehicles acquired are movable property which is intended to be made available free of charge to the partners of the owner civil society.

1. Civil society activity

The activity must consist of the provision of the motorhome free of charge and granted exclusively for the benefit of its associates. It is very important to strictly define this activity so that the company can never be called a commercial company.

In principle, the free provision of vehicles to associates does not have to be formalized by a written act. However, in order to demonstrate the reality of this situation to the tax authorities, it seems preferable to draw up a loan agreement for use relating to movable property between the civil partnership and its partners, mentioning that this provision is granted to free title.

II – The legal procedure

1. Society creation

We can take care of the entire procedure, however you will need to send us the following documents:

COMPANY NAME: in our experience, it is better if the company name contains the owner’s surname in the title since this helps at foreign check-points.

FOR EACH PARTNERS (two minimum):
- The name (first name and surname) of each partner;
- The maiden name (first name and surname) of the mother of each partner;
- The name (first name and surname) of the father of each partner;
- The home address of each partner.

MANAGER: it can be either or both partners or any other person you wish to appoint.

SHARE CAPITAL: the minimum is 50 euros and the maximum is unlimited.

ADDRESS: you can domicile the company with someone you know living in France or a domiciliation company. We can put you in contact with our partner. The domiciliation company might require additional documents for the domiciliation contract. It is necessary for the company to have a correspondence address that is its registered office in France, the domiciliation contract allows this. Vehicle registration documents will be sent to this address.

It is essential to plan the purchase operation in advance because the procedure for creating the company can last between 8 and 10 weeks to reach its end once all paperwork signed are received.

A copy of each partner’s passport will be systematically requested.

1. End of company

In case of sale of the vehicle, there are three options:

Transfer of the legal structure to another person;
Sale of the vehicle accompanied by the closure of the company (this solution being the most expensive);
To keep the company active for a future purchase.

Don’t hesitate to contact us for any additional questions.

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L’article How to become a motorhome owner in France when you are a foreigner? est apparu en premier sur FBA - French Business Advice.

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