Article- Legal guide for French simplified joint-stock company

There are different ways to create a company in France. The French simplified joint-stock company (Société par Actions Simplifiée) is one of the most popular one. How does it work ? How to decide if it is appropriate for your project ? Here is a legal guide that will help you understand how to create an S.A.S.


A flexible management structure


The French simplified joint-stock company (SAS) is used for small to medium-sized businesses and is one of the most common type of entities in France, because of the flexibility that it offers in the bylaws.

The SAS is a commercial company. The liability of its shareholders is limited to the contributions made (art. L. 227-1 of the Commercial code).

It shall have either one or several shareholders, and its structure may be determined freely by the bylaws. The content of the bylaws is almost free (just a few references are legally needed). The only obligation is that the company must be represented by a President vis-à-vis third parties (art. L. 227-6 of the Commercial code). He can be either an individual or a legal entity.

The capital of a French simplified joint-stock company is divided into shares, with no minimum capital required (art. L.227-1 al. 3 of the Commercial code).

A simplified joint-stock company is managed by a President (Chairman) who represents the company vis-à-vis third parties. If the bylaws provide for it, Director(s), who also have the power to represent the company, can be appointed. Finally, corporate bodies such as: a Board of Directors, a management committee and a supervisory committee can also be envisaged. The bylaws freely define the powers and rules of operation (quorum, majorities, notice periods, etc.) of such corporate bodies.

Decisions on the following issues can only be taken by the shareholders (art. L.227-9 of the Commercial code): approval of financial statements; increase or reduction of capital; capital amortization; mergers; spin-offs; liquidation; appointment of statutory auditors (« commissaires aux comptes »); and amendment of the articles of association.


What documents need to be prepared annually ?


A list of formal documents, which summarize the company’s activity for the past year, need to be prepared annually :
The annual accounts (“comptes annuels”) includes a balance sheet, income statement and an appendix (art. L.123-12 of the Commercial code). If there is a benefit, the President shall also organize the potential payment of dividends.

The annual report (“rapport de gestion”) includes the situation of the company, its evolution, the important events that happened since the last report, the date of realization of the report, the company’s activity with regard to research and development (art. L.232-1 of the Commercial code).
Simplified joint-stock companies (within the meaning of art. L. 123-16 of the Commercial Code) with only one shareholder, a physical person, assuming its presidency, do not have to draft the annual report (art. L.232-1).

Consolidated financial statements shall be applicable in respect of any companies which the company controls, or over which they exert a significant influence (art. L.233-16 of the Commercial code). These statements are accompanied by the report of the auditor on the consolidated financial statements.

The auditor’s report on annual accounts, shall be applicable in respect of any companies consisting of only one shareholder (art. L.232-1 of the Commercial code).


Who shall prepare these documents ?


Depending on the bylaws of the company, company’s President usually prepare these documents.

The auditor, if applicable (Article L 232-1 of the Commercial Code), has also an important role in the SAS organization.

It should be noted that a simplified joint-stock company which exceed, at the end of the financial year, the following thresholds shall be obliged to designate at least one auditor (art. L. 227-9 of the Commercial code):
– out of taxes turnover exceeding € 2 millions;
– amount of the balance sheet exceeding € 1 million;
– average number of the employees exceeding 20 (twenty) during the financial year (art. L.227 -9-1 and R.227-1 of the Commercial code).

In any event, the company must also appoint a statutory auditor if it controls one or several companies or if it is controlled by one or several companies (art. L.233 -16 of the Commercial code.).


When and where do these documents need to be prepared and filed ?


These documents need to be prepared at the end of each financial year, be sent to the auditor (if applicable).

The auditor will prepare a report and send it to the shareholder(s) within six months of the year end closing. The shareholder(s) shall, through an ordinary assembly meeting, approve the annual accounts and statements, after having consulted the auditor’s report (art. L.227-9 of the Commercial code).

The shareholders’ decisions shall be listed in an internal register kept by the company (called “registre” in French) (art. L 227-9 of the Commercial code).

Finally, in the month following approval of the annual accounts by the assembly meeting, all joint-stock companies shall be required to file the documents with the Clerk of the Commercial court (“greffe du tribunal”), in order for these to be appended to the Commercial and Companies Register (“Registre du Commerce et des Sociétés”) (art. L.232-23 of the Commercial code).

Decisions taken in violation of the rules of this section may be annulled upon demand of anyone who has an interest in requesting such annulment (art. L. 227-9 of the Commercial code).



This section gives an example of the way a joint-stock company could be organized.


What powers does the shareholders have ?

The shareholders in a company shall hold assembly meetings to make all the decisions described below. One share equals one voting right.
The shareholders may appoint and remove the President by way of a resolution adopted by an ordinary general meeting.
Plus, upon the proposal of the President, the shareholders appoint the General Director(s) of the company whom will be in charge of assisting the President in carrying out his duties. The terms of the shareholders’ resolution appointing the General Director(s) will define the extent of the General Directors’ powers.


Assembly meetings : when and how to hold them and what decisions are taken ?

The Commercial code requires that the assembly meetings be held following the regular assembly meeting procedures. The procedure described below is a possible way to take decisions in a joint-stock company.

There are usually two types of decisions in a joint-stock company, depending on the importance of these decisions for the future of the company. Consequently, decisions can be ordinary or extraordinary, which will determine specific voting rules.

Extraordinary decisions usually are the decisions regarding an increase or decrease of share capital, a merger, a spin-off, the dissolution of the company, the exclusion of a shareholder, the modification of the incorporated form of the company, the modification of the Bylaws…

These decisions are usually subject to specific voting rules. Concerning extraordinary decisions, bylaws often states that 2/3 majority rule is applicable.

All other decisions are usually considered to be ordinary and therefore the majority rule is applicable. A decision may only be valid if it obtained 51% of the vote expressed during the deliberation.

The President is empowered to call for an assembly or a general meeting, and usually preside it. In the event he fails to do so, a court appointed agent will call for such meeting.

The Auditor may also call for an assembly. He shall be invited to take part in all the decisions making process of the shareholders.

The shareholders’ decision-making process can be of two types, either by way of an assembly or meeting, or by way of a consultation via written correspondence, at the President’s choice :

• Consultation by way of an assembly;
• Consultation by way of written correspondence.

The record of the meeting is the way assembly meetings are materialized. The consultation procedure ends by a record established by the President, within which is indicated the vote of each shareholders on each decision during the meeting.


How to appoint and remove the President ?

The President may be appointed by a resolution adopted during an ordinary assembly meeting of the shareholders. If the President is a legal entity, he shall be represented by the managing director of such entity, whom shall also be personally liable on a civil and criminal level as if he was himself holding the position of President, notwithstanding any joint responsibility of the legal entity which he governs.

The duration of his appointment could be limited or unlimited and may only be terminated by the following reasons :
– its resignation,
– the impossibility to carry out his duties for more than 3 months,
– the age limit provided by the bylaws (i.e. 70 years old),
– its dismissal decided by the shareholders which can occur at any time by way of a resolution adopted by the ordinary assembly meeting and which need not be justified,
– the death of either the natural person or the legal entity of the managing director.


What are the President’s powers ?

In a “SAS”, the President has large general powers. In compliance with the Commercial Code, the bylaws provide that the President will represent the company vis-à-vis third parties. The President can commit the company even for acts he is not authorized to do, unless he proves that third parties know that the President was not authorized to do this act or could not ignore it under the circumstances.

However, the shareholders may limit some of the powers of the President and may subject certain acts to their prior authorization. The President can give a delegation of powers and signature to anyone for specific missions, but not the entirety of its powers.


How to appoint and remove the Director(s) ?

The Director(s) may be appointed by a resolution adopted during an ordinary assembly meeting of the shareholders, only upon a proposal by the President. The Director(s) can only be an individual and not a legal entity.

The rules concerning the duration of his appointment and the termination of its function are the same as the President.


What are the Director(s) powers ?

Like the President, Director(s) have large general powers. In compliance with the Commercial Code, the bylaws provide that the Director may hold the same powers as the President towards third parties.

The President can give a delegation of powers and signature to anyone for specific missions, including the Director, but not the entirety of its powers. Every assignment of powers and signature is revocable at will.

In conclusion, the simplified joint-stock company offers an adaptable operating mode, which allow any entrepreneur to launch into the world of entrepreneurship.


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