Source: Doing Business in France 2015, Business France
Setting up a Company
The key stages to complete before setting up a subsidiary
- Choosing your premises and founding a head office for your company by signing a domiciliation agreement, a commercial lease or purchasing real estate,
- Choosing your company’s legal status (SAS, SARL, or SA, for example),
- Drafting your corporate statutes (address, directors, area of business, etc.) and signing them (in the presence of a notary if the company owns buildings),
- Where necessary (for company directors outside of the EEA), acquiring a long-term visa and residence permit (trader or skills and expertise worker),
- Choosing a company name (research rights via the National Institute of Intellectual Property, INPI, http://basesmarques.inpi.fr, and the commercial court),
- Raising share capital: opening a bank account in France and depositing your start-up share capital,
- Registering your statute’s within a month of them being adopted with the CFE (free of charge).
Whilst or after setting up the company, you’ll need to submit the following paperwork:
- Registering the company with an insurance centre and taking out civil liability insurance and/or insurance for the premises,
- Joining an employee pension fund (compulsory within three months of registering),
- Paperwork related to recruiting employees must be submitted to the URSSAF by sending a preliminary hiring declaration (DPAE, déclaration préalable à l’embauche).
Registering the company with an insurance centre and taking out civil liability insurance and/or insurance for the premises,
Joining an employee pension fund (compulsory within three months of registering),
Paperwork related to recruiting employees must be submitted to the URSSAF by sending a preliminary hiring declaration (DPAE, déclaration préalable à l’embauche).
The paperwork needed to open a company has been significantly streamlined and the entire process can now be completed online. Whatever the status you choose, you’ll be able to submit the paperwork required to set up your company to the relevant Business Start-Up Centre (CFE, centre de formalités des entreprises). This single point of contact is a centralised system for all your paperwork and will take care of passing on the information to the relevant authorities on your behalf.
It takes a few days to register a company or branch on the Business and Trade Register. The cost for completing all registration paperwork is around €50, in addition to the fees for advertising in legal announcement journals if you decide to set up as a company (approx. €230).
A business structure suit you
|Type of business structure||Definition||Features|
|No commercial activity||Liaison Office||One representative in France, no commercial activities.||
Simple structure (extension of a foreign company in France):
> No commercial activity
> No autonomy.
|Long-term solutions||Branch||Through its representative, an entity of the foreign company that can legally bind the company (i.e. sign sales contracts).||Uncomplicated structure that can conduct commercial activities:
> Can make decisions independently as the branch’s representative in France.
> Transactions legally binding for the foreign company.
|Subsidiary||Company subject to French law that can conduct all types of business.||Autonomous legal entity:
Transactions only legally binding for the subsidiary itself.
A range of different legal forms
The three main legal forms for limited companies allow financial liability to be restricted to the amount of capital contributions. Limited companies can easily be transformed at low tax cost.
The most commonly found business structures are:
- SARL (société à responsabilité limitée, private limited liability)
- SAS (société par action simplifiée, simplified joint-stock company)
- SA (société anonyme, public limited company)
The SARL and SAS structures can be founded by a single associate, while SA structures require seven shareholders. The SA structure is the only one able to make public offerings.
The SAS structure is well-suited to holdings or foreign companies looking to set up wholly-owned subsidiaries. The amount of its share capital is freely set by the shareholders in its statutes.
If you do business in two or more EU member states, you can opt for European Company (SE) status. The head office must be registered in the statutes and correspond to the premises for the company’s central administration. The location of a company’s head office determines its applicable business law. A company with SE status is subject to tax in all member states where its permanent establishments are located.
Real estate to suit you
To get started, you’ll need temporary premises at a low cost. There are a number of options available, including:
- Head office domiciliation in a business or domiciliation centre, which will also grant you access to services such as telephone reception, meeting rooms, a PO box, etc.
- Council hosting services (incubators, workshops and networking, etc.).
- Professional office hire for a fixed period (short-term lease, maximum 24 months).
Longer term solutions:
A commercial lease is the most widespread solution. These contracts are signed for a 9-year period and are renewable by the lessee every three years. The lessee signs up to the company registration registry (excluding self-employed professions) and enjoys legal protection from non-renewal or eviction.
If you’d like to own your own premises, you can choose from a variety of different options, including:
- Freehold purchase: Foreign companies can buy land and commercial/industrial buildings from private or public owners. Transactions are legally protected via legal regulations applicable to real estate acquisition and through the assistance of intermediaries such as notaries. State support for purchasing buildings is available providing some conditions are met.
- Leasing is very common.
- The SCI (société civile immobilière, real estate investment company) is an independent legal body that helps fund premises that will then be made available for companies to run their businesses. One of its advantages is that it protects professional real estate assets and can also result in tax benefits.
Freely negotiated employment contracts
The different types of employment contracts available allow employers to tailor recruitment to their needs. Contractual clauses ensure additional flexibility in working relationships. They must nevertheless comply with the Labour Code and the collective agreement applicable to the company.
Common law employment contracts are permanent contracts (contrat à durée indéterminée or CDI in French). They generally take the form of a written document, and in these cases, the language used must be French. Employees whose mother tongue is a language other than French may request a translation prior to signing the contract. The employment contract must indicate the salary and the employee’s duties as well as the place of work and hours. In principle, the other clauses are freely determined by the parties, who enjoy great freedom regarding the content of their contracts.
Company directors do not receive employment contracts but business mandates. Their title, pay and conditions are freely set out in the company’s statutes. Provided some conditions are met, it is however possible to combine the role of director with a company employment contract for distinct technical duties (such as for SA managing directors, chairmen of SA and SAS companies and SARL minority shareholders).
In exceptional cases, they may use a CDD (contrat à durée déterminée, fixed-term contract) or TT (travail temporaire, temporary work contract) to carry out a specific and temporary role.
CDDs, or fixed-term contracts, may only be used in cases enshrined in law, which include temporary business growth periods.
These contracts must be written up in French and are valid for a maximum 18-month period, renewable once. They grant the employee access to end-of-contract remuneration (10% of the total remuneration paid for the entirety of the contract).
TT, or temporary contracts, involve drawing on temporary employment agencies that provide companies with employees they recruit and pay for these purposes.
All employment contracts are subject to a trial period. Trial periods last from two to a maximum of four months for a CDI, or permanent contract, and are renewable once. These contracts may be terminated immediately, without compensation due.
Simplified online hiring procedures
Hiring procedures have been simplified thanks to the preliminary hiring declaration (déclaration préalable à l’embauche, DPAE). Employers must fill in this form within eight days of the employee’s starting date, and send it to the URSSAF attached to the company’s premises. The declaration can be completed and submitted online. This procedure allows the following steps to be completed via a single portal: registration with the employee’s social security body (unless secondment), subscription to the occupational health service, scheduling the compulsory health check-up (during the trial period) and membership to the unemployment insurance body (Pôle emploi).
In addition to the DPAE, employers must:
- declare the first hired employee to the work inspection body,
- subscribe to the complementary retirement funds within three months of setting up the company,
- complete all paperwork required to employ a foreign employee (excluding European employees).
Terminating a permanent contract
A permanent contract can be terminated in different ways:
Contractual termination: the employer and employee can mutually decide to amicably end the permanent employment contract. This procedure is fairly flexible.
The termination can be carried out for financial reasons or for reasons related to the employee. As in many countries, a reason must be provided for the termination (fair cause) and legal procedures must be followed (reason for termination, number of employees affected by the terminations and company workforce numbers).
Working hours: negotiating within the company
The statutory working week is 35 hours. This is a guideline amount, with extra hours being paid overtime. The 35-hour per week rule does not apply to management.
The overtime an employer may request is negotiated by agreement within the company (the default is 220 hours per year per employee), which means an annual total of 1,827 hours is permitted, meaning over 39 hours per week over 47 weeks. Overtime payment can be replaced by extra holiday if this option is provided for under the collective agreement.
Employees must work no more than 10 hours per day (modifiable by agreement up to 12 hours) and no more than 48 hours per week, with a maximum of an average of 44 hours per week over a 12-week period.
Employees enjoy five weeks’ paid leave per year. An employer may deny permission for leave if the workload does not allow for it. An employee must nevertheless be permitted to take at least four weeks’ leave between 1 May and 31 October. There are on average 10 bank holidays a year, and where applicable, days off for family events (weddings, births, deaths) in addition to paid leave.
Sundays are days off, but with a flexible derogation option.
Companies have a number of solutions available to adapt working hours to financial constraints, with no extra salary costs and by spreading remuneration. The provisions for the way in which working hours are organised and structured are incorporated into a unique framework: a collective agreement allows working hours to be organised in periods of over a week and under a year.
Social security: the key to helping your employees grow
The French social security system takes care of almost all health costs for policyholders and their beneficiaries. The system encompasses four types of insurance: health insurance (sickness, maternity, disability, death), retirement insurance, family services and accidents in the workplace.
Making contributions to the system is a safeguard for the company with respect to its responsibilities in terms of sickness, retirement, training and unemployment. Employers’ social security contributions are significantly reduced for low wages. From 1 January 2015, companies pay no URSSAF fees on the SMIC (minimum wage): the remaining employer contributions are approximately 11% to 13% depending on the employee’s status. In addition, all companies are eligible for the CICE (crédit d’impôt compétitivité emploi, competitiveness and employment tax credits) at a rate of 6% of the payroll under 2.5 times the minimum wage (€3,643.79 gross monthly salary).
For higher wages, on average social contributions account for 42% of the gross salary for the employer’s share, and whatever the amount, close to 21% for the salary share.
These contributions release the employer from their responsibility towards their employees. For example in the event of illness, maternity leave or an accident in the workplace, the employee’s salary is partially covered by social security.
Similarly, by paying in to the company’s professional training fund every month, the employer will see all or part of the professional training costs needed to improve their employees’ skill sets covered.
International mobility for management and foreign employees
International mobility provisions implemented in France aim to encourage head-hunting of highly qualified employees and promote intra-group mobility. Multi-year residence permits were introduced to provide foreign nationals and their families with total legal protection.
The ‘skills and expertise passport’ introduced in February 2016 grants its holders better living and working conditions in France. It replaces the array of different permits that existed for qualified foreign nationals or those with a particular skill (artists, scientists, athletes, etc.). Valid for a four-year period, they significantly reduce the burden of paperwork for foreign nationals in France.
Through a highly effective social security system and a collection of intricate bilateral social security agreements, companies are able to offer their employees excellent working conditions. Your employees can remain part of their home country’s social security system if a social security agreement has been signed between the country in question and France. If no such agreement exists, all employees working in France, irrespective of nationality, age or contract type, must be signed up to the French social security system (principle of territoriality).
All individuals who are tax residents in France are liable to be taxed on all of their earnings whether generated in France or abroad, subject to international tax agreements and some special tax regimes. When foreign source income is also taxed in their home country, double taxation is avoided by applying the provisions enshrined in a number of bilateral tax agreements signed by France and other states.
The expatriate tax regime is particularly well-designed, and allows for expatriation costs in France to be reduced.
The priority for companies seeking to send their employees to France is to plan for the administrative processes required and weigh up the social security consequences. In particular, they should determine the most appropriate migrant status, the most effective social security system and the most beneficial tax regime.