Online version: February 2021
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The French simplified joint stock company (SAS) corporate form is popular for its flexibility due to the contractual freedom that governs its organization and operation, while offering protection to the shareholders by limiting their liability to the amount of their contributions.
However, this flexibility requires certain precautions in the drafting of its articles of association.
These mandatory provisions are provided for by Articles L. 210-2, L. 225-14, L. 225-16, L. 227-5, L. 227-9 and R. 224-2 of the French Commercial Code. They include the following:
In addition to the mandatory provisions, there are optional provisions provided for by the French Commercial Code (either by general corporate law or by specific provisions applicable to SAS) and provisions to organize the SAS that will result from the contractual freedom of its shareholders (see section 3. below).
The optional provisions identified by the French Commercial Code relate in particular to:
The advantage of including optional provisions relating to the control of the shareholding structure (as indicated above) in the articles of association of the SAS is the benefit of the protection offered by Article L. 227-15 of the French Commercial Code, which provides for the transfer made in violation of these provisions to be null and void.
The great freedom left by law to the shareholders to provide for custom-made provisions adapted to their situation and their agreements requires particular care in their drafting in order to be sufficiently precise and avoid difficulties of interpretation or inconsistencies between certain provisions of the articles of association.
Without being exhaustive and without going into the technicality of certain provisions (for example, provisions relating to the control of the share capital or the exit of shareholders) which require the assistance of an expert in their drafting, here are two examples of provisions which are often a source of conflicts between shareholders:
- Provisions relating to the Chief Executive Officer (Président)
- Provisions relating to the rights of the shareholders
Addition of items or draft resolutions to the agenda of a shareholders’ meeting: contrary to the regime applicable to SA, which provides shareholders with this option (under certain conditions), law applicable to SAS does not provide equivalent rights to the shareholders of a SAS. Where applicable, the articles of association will have to organize this option by specifying the applicable procedure to be followed by the shareholders (time limits, form and content of the request, etc.).
Our team remains available to assist you in drafting or reviewing and improving the articles of association of your SAS.