• Home
  • /
  • News
  • /
  • Main points to keep in mind when drafting Articles of Association of a French...
Focus - March 3, 2021

Main points to keep in mind when drafting Articles of Association of a French société par actions simplifiée (SAS)

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.

1. Mandatory provisions to be included in the Articles of Association of an SAS

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:

  • the corporate form, duration, name, registered office, purpose, amount of share capital, number and form of shares;
  • the conditions for appointing the Chief Executive Officer (Président);
  • the forms and conditions for the decisions to be taken collectively by the shareholders;
  • the appointment of the body to which the members of the works council will exercise their rights; and
  • the identity of all natural or legal persons who have signed (or on whose behalf have been signed) the Articles of Association.
2. The optional provisions of the Articles of Association

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 company’s corporate purpose (raison d’être);
  • the appointment of an Executive Officer (Directeur général) or Deputy Executive Officer (Directeur général délégué) ;
  • the non-transferability of shares for a maximum period of 10 years;
  • prior approval of the shareholders in the event of the sale of shares;
  • the forced transfer or suspension of a shareholder’s non-pecuniary rights;
  • the information of the SAS in the event of a change of control of a corporate shareholder;
  • the terms and conditions of the share transfer price, in the event of absence of prior approval, forced transfer or exclusion.

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.

3. Provisions falling within the contractual freedom of the parties

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, 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)

  • are freely provided for in the Articles of Association. The appointment of the Chief Executive Officer (Président) may be made, for example, by the shareholders, a collegial body, a third party not part of the shareholders, a specific group of shareholders or a specific shareholder. 
  • Concurrent corporate terms: the law relating to SAS is silent on this matter. The Chief Executive Officer (Président) may therefore freely combine his/her term of office with other terms of office held in other SAS’, unless otherwise provided for in the Articles of Association.
  • Termination of functions: the events that lead to the termination of the functions of the Chief Executive Officer (Président), as well as the procedures (competent body, notice periods, etc.) and consequences (possible payment of compensation) must be provided for in the Articles of Association.

- Provisions relating to the rights of the shareholders

  • Initiating notice of meeting of the shareholders’ meetings: the Articles of Association must determine the time limit, the rules and the procedure to convene the shareholders. If the Articles of Association do not allow the shareholders to convene a shareholders’ meeting and reserve this power exclusively to the Chief Executive Officer (Président), difficulties may arise if the shareholders intend to remove the Chief Executive Officer (Président) when the latter is the only one with the power to convene the meeting.
    • Access to documents / shareholders’ right to information: the legal provisions applicable to these matters for joint stock companies (société anonymeSA) are not applicable to the SAS. If the shareholders wish to have rights equivalent to the ones that are existing for SA for such matters, the Articles of Association must specifically provide for it.

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 provide for this option by outlining the specific 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.