Establishing a business in France: avoid the pitfalls with a French lawyer

Establishing a business in France is easy and can be successful if carefully prepared with a French lawyer.

The first consideration will be the choice of the business vehicle.

French lawyers are in position to advise the best corporate structure, which will depend on the investor’s project. France counts more than 10 possibilities of corporate vehicles, with all different advantages and disadvantages.

Note that, contrary to a widespread opinion, it is possible to set up a company very quickly in France (once the major corporate documents are established).An on-site investor (physically present in France) may, thanks to our French lawyers team, set up a French corporation within 24 hours.

The second consideration to be studied with your French lawyer is to choose convenient governance. The possibility will be extremely important as the governance can be structured in very different ways in France. The basic governance is a single CEO choice, but more sophisticated governance is possible, including a co-management, the structuration of the governance with a board of directors / manager, the choice of a supervisory board and a management body, the governance with various side bodies in addition to the CEO / management such as audit committees, strategic committees, etc.

Note that, for some corporations, the CEO / manager can be a corporation, which can be an excellent tool to justify inter-co financial transfers.

A 2014 new regulation simplifies the appointment of a foreign manager of a French company which is an excellent news for foreign investors as, contrary to the past, there is no more need for a foreign individual to get a prefectural authorization to manage a French company.

The third point to be considered with your French lawyer is whether the activity is regulated and whether foreign investment restrictions exist.

Establishing a business in France in certain industry sectors will usually require administrative agreements or specific diplomas. These industry sectors include insurance, banking and credit institutions, portfolio management for third parties, retirement homes, pharmacy, manufacturing, importation, exportation and distribution of pharmaceutical products, and transportation. A French lawyer will review and confirm whether administrative agreements apply.

There are also restrictions on foreign investments in France, which depend on:
– The type of investment.
– The sector concerned.
– The nationality of the investor.

Real estate acquisitions by foreign investors exceeding EUR1.5 million must be declared to the Ministry of Economy.

French lawyers are in position to advise the necessary regulatory requirements. This point shall be dealt with at the early stage of the project to avoid a waste of time at the time of the incorporation. The commercial registrar will indeed double check that all authorizations are granted and will ask for a copy of the license / administrative agreement.

Investors should always keep in mind that corporations must have a bank account in France to operate in the country. Therefore, potential checking may exist at the time of opening the bank account and should be taken into account by your French lawyer once preparing the incorporation memo that will efficiently list all requirements and formalities with all relevant organizations and administrations. Banks may have different requirements than the commercial registrar.

Finally, the French corporate lawyer will always advise, in relation with his French lax lawyers specialists, how to efficiently structure the new activities in France, especially if funds shall be transferred back to the investor’s country (WW HQ for a foreign group).

Dividends are subject to:

– 30% withholding tax on dividends paid to non-residents (subject to the application of tax treaties).
– 75% withholding tax for distributed profits into unco-operative states (tax havens).

Dividends are, however, exempted from withholding tax if, among other conditions, the recipient has been holding 10% or more of the shares of the subsidiary for at least two years (under Directive 90/435/EEC on the taxation of parent companies and subsidiaries (Parent-Subsidiary Directive) as amended).

Delcade French tax lawyers and French corporate lawyers regularly advise international corporations setting up businesses in France, in various corporate areas (chemical, pharmaceutical industry & distribution, aeronautical industry, transportation (air, sea & rail), financial services, media, wine industry, sport, entertainment, telecommunications, health care, hotels to mention the most recent areas of involvement).