INCORPORATION OF A CIVIL COMPANY
A civil company may be formed by two or more individuals or, absent specific contrary statutory provision, legal entities. The incorporation process of a civil company is substantially similar to that of a société anonyme (hereinafter referred to as an “SA”) or a société à responsabilité limitée (hereinafter referred to as an “SARL”).
As is the case with an SA or an SARL, the incorporation of a civil company takes approximately two weeks. As is the case with an SA or an SARL, a civil company comes into existence only after it has been duly registered with the Register of Commerce and Companies.
[a] Preparation of the Articles.
The Articles of Incorporation (statuts) (hereinafter referred to as the “Articles”) of a civil company may contain such provisions as the shareholders desire, but must, in all cases, contain the following.
– Declaration of Juridical Form.
Declaration that the shareholders elect to associate themselves by forming a civil company.
– Name.
Absent specific statutory provision, the name of the civil company may be composed of the names of the shareholders, a description of the activity of the civil company or a combination thereof. In order to avoid possible infringement of, or confusion with the trademarks or corporate names of third parties, it is advisable to verify, at the outset, the availability of the proposed name of the civil company.
– Duration.
Recital of the duration of the civil company, which duration cannot exceed ninety-nine years.
– Registered Office.
Recital of the registered office of the civil company.
– Purpose.
Statement specifying the purpose of the civil company; such statement is of greater importance than in most commercial companies, for it is a means available to the shareholders, who are subject to personal liability for the debts of the civil company, to limit their liability to third parties for acts of the Managing Director(s) which do not fall within the scope of the purpose of the civil company.
– Registered Capital.
Unlike an SA or an SARL, there is normally no minimum registered capital fixed by statute for a civil company. The capital of a civil company is divided into non-negotiable shares; there is normally no minimum par value fixed by statute.
A capital contribution must be made by each shareholder. Contributions may be made in cash, in kind or in the form of services to be rendered (apports en industrie). Where contributions are made in cash, they are normally payable pursuant to provision therefor in the Articles; frequently, the Managing Director(s) is(are) empowered by the Articles to fix the time and modalities of payment of cash contributions. Unlike the case with an SA or an SARL where capital contributions made in kind are subject to prior evaluation by an expert appraiser (commissaire aux apports), the evaluation of contributions to the capital of a civil company made in kind is within the exclusive competence of the shareholders thereof.
Although contributions made in the form of services to be rendered give rise to the issuance of shares (parts d’industrie), they may not constitute a part of the registered capital of the company inasmuch as such contributions are not attachable by creditors. Consequently, the parts d’industrie may not be transferred and, when the shareholder holding same withdraws from the civil company, his shares are cancelled. Absent contrary provision in the Articles, the right of the shareholders holding parts d’industrie to receive distributions of the profits realized by the company are the same as those of the shareholder who made the smallest contribution in cash or in kind. It is to be noted that there is no statutory provision granting voting rights to the holders of the parts d’industrie; it is therefore prudent practice to provide in the Articles for the dividend and voting rights of the shareholders making contributions in the form of services.
– Management.
Provisions relative to the composition, functioning and powers of the management of the civil company.
[b] Leasing or Purchasing a Registered Office.
Inasmuch as mention must be made in the Articles of the location of the registered office of the civil company, it is necessary to execute a lease or purchase agreement relating to premises where the company will maintain such office. Furthermore, inasmuch as proof of the civil company’s lease or purchase of such premises is needed to register the company, such an agreement, as a practical matter, must be made before the civil company is incorporated. When selecting such office, the civil company must bear in mind the land-use restrictions prohibiting the use of certain premises for business purposes. Under certain circumstances, the registered office of the civil company may be established at the residence of its legal representative, or in office premises shared with other companies (C.com., arts. L.123-11-1 and L.123-11).
[c] Signature of the Articles.
The Articles must be in writing and signed “sous seing privé” unless contributions in kind in the form of certain rights to real property are made, in which case, the Articles must be signed before a notaire. Within one month of the signature of the Articles, the civil company must file same with the tax authorities.
[d] Formalities of Publication.
The incorporation of the civil company must be the subject of the appropriate formalities of publication, which formalities are similar to those required for the incorporation of an SA or an SARL. Hereinafter, all such legal formalities will, from time to time, be collectively referred to as “appropriate formalities of publication.” The liability of the initial shareholders for, and the assumption by the civil company of, the obligations entered into in its name by the initial shareholders before the civil company obtained full legal existence are governed by legal provisions similar to those applying to an SA or an SARL