What is French corporate law?
French corporate law governs the creation, operation and dissolution of private legal entities engaged in economic activity. It is primarily codified in Book II of the Commercial Code and Title IX of Book III of the Civil Code. It defines the rules applicable to share capital, governance, shareholder relations, collective decisions, structural operations (capital increases and reductions, mergers, demergers) and director liability.
Corporate practice covers four complementary dimensions. The constitutive dimension concerns entity selection, drafting of bylaws and incorporation formalities. The governance dimension covers the recurring obligations of holding shareholders' meetings, approving financial statements, managing related-party agreements and updating statutory registers. The capital dimension involves transactions affecting the share capital and the composition of the shareholder base. The contentious dimension includes nullity actions against corporate decisions, abuse of majority or minority claims, and director liability actions.
The regulatory environment evolves regularly: PACTE law of 22 May 2019 (raison d'être, mission, simplifications), ordinance of 15 September 2021 (insolvency proceedings), law of 9 March 2023 transposing the EU Mobility Directive (cross-border mergers), successive reforms of business distress law. Legal security requires continuous monitoring.
Incorporation and entity selection
Entity selection is a structural decision that determines, for years to come, taxation, the manager's social security regime, governance modalities, conditions for entry and exit of shareholders, and the ability to accommodate external investors. An ill-suited form is paid for through costly restructurings and tax / legal frictions.
SAS / SASU
Maximum statutory flexibility, suited for capital openings and private equity transactions.
SARL / EURL
Protective statutory framework, family-held structures, self-employed manager regime available.
SA
Classic joint-stock company, board or supervisory structure, market access capable.
SCI / SC
Real estate holdings, wealth transmission, group structuring vehicles.
Selection criteria
Several criteria must be cross-referenced. The number and quality of shareholders points to an SAS (flexibility for founders and investors) or an SARL (family-held context). The manager's social security regime is assimilated employee in an SAS (general scheme coverage but higher contributions) and self-employed in an SARL with majority manager (lower contributions, less complete protection). Taxation may be at the corporate level (default in SA, SAS, SARL) or at the shareholder level on election (transparent partnerships). The prospect of capital openings mandates an SAS or SA, the only forms able to issue complex equity securities (BSA, BSPCE, preference shares).
Shareholder liability is limited to contributions in limited liability entities (SARL, SAS, SA), unlimited and joint and several in SNCs, and proportional to shareholdings in civil-form entities. For activities involving significant risk, the limited liability shield is essential.
Drafting the bylaws
Bylaws must contain mandatory legal mentions (form, name, corporate purpose, registered office, term, share capital, contributions). Beyond these, bespoke drafting allows parties to organise governance (who decides what, by what majority), share transfers (approval, pre-emption, exclusion), shareholder exits (withdrawal clauses, forced redemption), deadlock resolution (buy-or-sell clauses), the composition of corporate organs (board, committees) and the term of director mandates. In an SAS, statutory freedom is virtually total and demands all the more precise drafting.
Cash, in-kind and industry contributions must be properly valued and documented. In-kind contributions exceeding €30,000 (or representing more than half the share capital) in SARLs and SASs require the appointment of an auditor of contributions (articles L. 223-9 and L. 227-1). Omission or undervaluation triggers joint liability of founders and shareholders for the amount attributed to the contribution.
Governance and corporate housekeeping
Day-to-day governance refers to the recurring legal acts required for the company's life: annual meetings, management decisions, related-party agreements, updates to statutory registers, court filings. This practice — often called "corporate secretariat" — is essential to the company's legal security and to the prevention of shareholder disputes.
Shareholders' meetings and collective decisions
The annual meeting approving the financial statements must be held within six months of fiscal year-end (subject to judicial extension). The annual accounts, the management report and, where applicable, the special statutory auditor's report on related-party agreements, must be communicated to shareholders within statutory deadlines (15 days in SARLs, 21 days in SAs). Failure to convene exposes the manager to criminal fines (article L. 242-10) and to the judicial appointment of an ad hoc administrator on the application of any interested party.
Extraordinary decisions (statutory amendment, capital operation, transformation, merger) require enhanced majority conditions: two-thirds of votes in an SA, three-quarters of shares in an SARL, statutorily determined majority in an SAS. Convening, quorum and voting must strictly comply with bylaws and the Commercial Code, on pain of nullity (article L. 235-1).
Related-party agreements
Agreements between the company and its directors or significant shareholders (more than 10% in listed SAs and in SASs), excluding ordinary course transactions on arm's length terms, are related-party agreements. They require prior authorisation by the board (in SAs) or shareholder approval based on a special statutory auditor's report (in SARLs and SASs). Procedural omission does not automatically void the agreement but exposes the director to liability where prejudice to the company is established.
Registers and filings
Companies must maintain several registers: corporate decisions register, attendance register at meetings (SA), register of registered securities, ultimate beneficial owner register (RBE) filed with the commercial court since 2017. Failure to declare or update the RBE is sanctioned by criminal fines up to €7,500 (€37,500 for the legal entity) and exposes the company to rights restrictions. Annual financial statements must be filed with the registry within one month of approval (two months for electronic filing). Failure to file exposes the company to court injunctions under penalty.
Capital operations
Capital operations structure growth, investor exits, the arrival of new partners, or the cleaning-up of a deteriorated financial situation. They require rigorous execution to avoid disputes and protect the rights of existing shareholders.
Capital increases
Capital may be increased in cash (cash contributions), in kind (asset contributions), by capitalisation of reserves or by set-off against a liquid and due claim against the company. Each modality has its constraints: minimum payment-up of capital, intervention of an auditor of contributions for in-kind contributions, respect for or removal of preferential subscription rights (DPS) of existing shareholders by special motivated resolution.
Reserved capital increases for an identified investor (entry of a fund, equity transaction) require removal of the DPS supported by a statutory auditor's report. The issuance price must be justified by reference to economic value to avoid being characterised as a gift or exposing the director to liability.
Capital reductions
Capital reductions may be loss-driven (offsetting accumulated losses) or non-loss driven (share buy-back for cancellation, distribution to shareholders). Non-loss driven reductions open a creditor opposition right of one month from registry filing (article L. 225-205). Share buy-backs for cancellation are governed by articles L. 225-204 et seq. and constitute a tool for wealth structuring or shareholder exits.
"Coup d'accordéon" and recapitalisation
Where shareholders' equity falls below half the share capital, the manager must consult shareholders within four months of approval of the accounts (article L. 225-248) on either anticipated dissolution or regularisation within two years. Regularisation often takes the form of a "coup d'accordéon": capital reduction to absorb losses, followed by an increase to which a new investor may subscribe. The Usinor case law (Cass. com., 17 May 1994) accepts massive dilution of historic shareholders subject to demonstrated economic necessity.
Transformations, mergers, demergers and partial asset contributions
Operations affecting the very structure of the company — transformation, merger, demerger, partial asset contribution — are heavyweight transactions that impose strict formalities and engage director liability.
Transformation
Transformation involves changing the corporate form without creating a new legal entity. The most frequent transformations are SARL → SAS (flexibility, ability to host investors) and SAS → SA (preparation for an IPO or public offering). They require a unanimous or enhanced-majority decision depending on the target form, the intervention of a transformation auditor where the company has no statutory auditor, and amendment of the bylaws to the new form. Transformation does not entail the creation of a new legal entity: contracts, debts and assets remain in place.
Mergers
A merger is the operation by which one or several companies transfer all their assets and liabilities, either to an existing company (merger by absorption) or to a newly formed company (merger by formation). It is governed by articles L. 236-1 et seq. The merger plan must be filed with the registry and published in the BODACC, followed by a one-month creditor opposition period. The exchange ratio must be justified and a merger auditor must be appointed, save in the case of a unanimous shareholder decision. Tax consequences (favourable merger regime, articles 210 A et seq. of the Tax Code) must be anticipated.
Simplified mergers (between a parent and its 100%-owned subsidiary) benefit from a streamlined procedure: no merger auditor report, no approval by the absorbing company's shareholders, reduced creditor opposition period. The EU Mobility Directive (transposed by the law of 9 March 2023) facilitates intra-EU cross-border mergers.
Demergers and partial asset contributions
A demerger transfers the assets and liabilities of a company to several beneficiary companies, with dissolution of the demerged entity. A partial asset contribution (APA) transfers a complete branch of activity to an existing or new company, without dissolution of the contributor. Where the APA is subject to the demerger regime (on election), it benefits from the universal transmission of the branch, simplifying the circulation of contracts and security interests. These operations are frequently used to ring-fence an activity for future divestiture or to restructure a group.
Director liability
Corporate directors face three liability tracks: civil, criminal and tax. Civil liability may be sought by the company (corporate action ut universi by the organs or ut singuli by a shareholder on behalf of the company), by shareholders personally, or by third parties (subject to a "detachable fault").
Management fault covers breaches of statutory or regulatory provisions, violations of the bylaws, and management faults stricto sensu (negligence, imprudence, lack of oversight). In insolvency proceedings, the action for shortfall in assets (article L. 651-2 of the Commercial Code) allows the liquidator to seek the director's condemnation to bear all or part of the asset shortfall.
Criminal liability applies notably to misuse of corporate assets (article L. 242-6 for SAs, L. 241-3 for SARLs), presentation of inaccurate accounts, failure to convene meetings, and failure to declare cessation of payments within statutory deadlines. Tax liability may be engaged on the basis of article L. 267 of the Tax Procedures Book in case of fraudulent manoeuvres or grave and repeated breaches of tax obligations rendering recovery impossible.
Risk prevention involves rigorous documentation of decisions, traceability of preliminary analyses (risk memos, legal opinions, expert reports), subscription of D&O insurance, and — in case of financial distress — early recourse to prevention tools (mandat ad hoc, conciliation) rather than to imposed insolvency proceedings.
Role of corporate counsel
Corporate counsel intervenes at every stage of corporate life. At the incorporation stage, counsel advises on entity selection, drafts the bylaws and founders' agreement, supervises incorporation formalities and anticipates future needs (exit clauses, evolving governance). In day-to-day operations, counsel handles annual corporate housekeeping: convening notices, minutes, related-party agreements, registry filings, RBE updates.
In structural transactions, counsel designs the documentation: framework agreements, contribution treaties, merger plans, capital increases, shareholders' agreements, representations and warranties packages. Counsel negotiates with stakeholders (investors, creditors, exiting shareholders) and coordinates with other advisers (auditors, accountants, banks). In contentious matters, counsel defends the interests of the company, directors or shareholders in nullity actions, abuse of majority or minority claims, liability actions and transfer disputes.
Counsel involvement is particularly useful in case of warning signs: shareholder conflict, loss of confidence in the director, deterioration of accounts (equity below half of share capital), planned arrival of a new investor, planned sale or transmission. The earlier the involvement, the broader the strategic options and the more contained the total cost of legal security.
Why Mac Mahon Avocats
Mac Mahon Avocats is a Paris-based business law boutique located in the 17th arrondissement, whose corporate practice is integrated with restructuring and litigation expertise. This cross-functional approach allows the firm to handle ongoing corporate life (meetings, related-party agreements, capital operations) as well as complex transactions (mergers, capital restructurings, LBO operations) and post-closing disputes (warranty claims, abuse of majority, director liability).
The firm advises French SMEs, mid-caps, startups, foreign investors and private equity funds, with particular attention to the legal security of transactions and the prevention of disputes. Each matter is staffed by a partner, ensuring continuity, confidentiality and direct access to senior expertise.