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Formation of French Ltd. Company (Sàrl)

Instructions and Procedure

Introduction

The Société à responsablilitè limitée (Sàrl) was formed in France in 1925 according to model of German codes on GmbH. This represents an important advantage of Sàrl in relation to the Limited company (Recq/Hoffmann, the French Sàrl as substitution of GmbH(Ltd.)?, GmbHR 2004, 1070).


Almost all regulations for Sàrl are basically known and picked over from the Act on GmbH. The businessman needs to be acquainted additionally only with specific matters, that mostly represent the advantages.

Application Possibilities

Sàrl is suitable for business activities besides France also in Germany, as well as all other EU countries in the area of trading, handicrafts, industry and services.


Besides this, the Sàrl can be applied just like the German GmbH as the limited partner (personally liable partner) of the limited partnership (LP), which is then designated as Sàrl & Co. LP.

Sàrl is suitable also as the capital company.


For the business start upon non-culpable situation, the Sàrl can be applied within the framework ofrelations of administrationbeing helpful in solving the problems.

Conditions for Formation

Sàrl must have minimum one (Limited company with sole partner - Entreprise unipersonnelle à responsabilité limitée - abbreviated „Eurl”) and maximum 100 partners. The partners can be the natural persons or the legal entities and must not be the tradesmen in compliance with Commercial Code, i.e. the minor persons can also become the partners.


The memorandum of association must be signed by all partners. On contrary to the German legislative, the memorandum of association must include the notary’s statement (exemption: acquisition of real estates). Even the memorandum of association can be submitted in German with simple translation to French (i.e. without notary’s statement).

The company name can indicate the sphere of business, carry the name of one or more partners, or it can be free selected upon observation of rights of third persons.

The executive manager/managers must be natural persons (partner or foreign executive manager).
The executive managers have the same competences as it is in German legislative on GmbH.

No statutory basic capital is specified for Sàrl. The partners can specify the amount of basic capital freely. The monetary investment must be paid at foundation minimum up to the value of 20%, or the investments of partners must be given for disposal. The remaining amount of capital must be paid within five years after formation. In case of material investment, the memorandum of association must be attached with the report of formation auditor, as soon as the total value of material investments exceeds 50% of basic capital or the value of material investment alone exceeds the amount of 7.500 EUR.

Formalities for Formation

Simple procedure of formation: After signature of foundation charter, at first the publishing of formation in the official reports is realized and thereafter the company registration to be recorded in the Companies’ Register. For this purpose, the French registered office address as well as the French bank connection to the opened bank account is required.

The formation lasts in most cases within 1 - 3 days.

Branch Office in Germany

The business activity of Sàrl in Germany is subject to the regulations of §§ 13d, 13e and 13g Commercial Code, so the established branch office must be reported by the executive manager for registration to the Companies’ Register. Public documents from France are recognized without endorsements in contrast to the Limited company.

Administrative Costs and Reporting Duty

Sàrl requires the registered office in France. Domiciliation in Business-Centre is expressly required in compliance with lawful orders. The costs here amount according to the services (mail, telephone services) from 55.00 EUR including VAT.


After the accounting rules were harmonized in EU, no problems occur for skilled tax consultant in „bilingual“ accounting service through EDP.


According to European directives the reporting duty depends on size of a company. In compliance with them, the small company must (GmbH, Limited or Sàrl) submit the annual report, e.g. without the profit-and-loss-statement, at the Companies’ Register. The first commercial year lasts till the end of the future calendar year, i.e. the base year falls out.

Liability of Executive Manager

The executive manager can be liable in breaching the social and legal regulations, breaching the memorandum of association as well as in case of indebtedness against the firm management, company management as well as against third persons. The executive manager is liable against the third person only if the indebtedness occurs outside the company management and if it can be ascribed personally to the executive manager. This is valid inter alia also when the executive manager misled intentionally the third persons regarding the solvency of the company.


The French legislative on insolvency knows only the inability of a company to pay as the reason of insolvency, not as it is in German legislative - the excessive indebtedness. The extensive liability of executive manager as for Limited company is unknown both in German and French social laws.

Further information will be presented by:
Eng.-Economist Dieter Polei, Assessor jur.

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