After two years in second place, France now ranks as the most complex jurisdiction to do business in, according to our latest annual GBCI (Global Business Complexity Index) report. Key drivers of this complexity include a strict regulatory environment and stringent employee protection laws. Here we take a look at some of the factors influencing company incorporation in the region.

Despite its complexity, France is a dynamic market with an investment-friendly business environment, a stable and transparent legal framework, and generous research and development tax incentives.

A highly regulated jurisdiction

While France is highly regulated, it offers investors a guarantee of transparency, continuity and legal certainty.

Formal administrative processes and regulatory requirements are based on EU and Organisation for Economic Co-operation and Development (OECD) regulations, including:

  • UBO declaration: disclosing the ultimate beneficial owner(s) of a company
  • Mandatory Disclosure Rules (MDR): DAC6 reporting obligations regarding certain cross-border arrangements
  • General Data Protection Regulation (GDPR)

In an effort to promote business expansion and attract foreign investment, the French government is exploring ways to improve the country's regulatory environment.

Types of entities

Traditionally, French corporate structures fall into two categories: limited liability companies and unlimited liability companies. There are, however, many entity types in France – the most commonly used are:

  • Simplified joint-stock companies (Société par actions simplifiée, SAS)
  • Limited liability companies (Société à responsabilité limitée, SARL)
  • Public limited companies (Société anonyme, SA)
  • Property investment companies (Société civile immobilière, SCI)

It's important to review your company's strategy to ensure that you choose the best entity for your business in France.

Key considerations for incorporating a company in France

Setting up a business in France can involve multiple steps – here we outline some key considerations to make the journey seamless.

The French equivalent of a limited liability company, the SARL, offers limited liability for all shareholders, not just directors and managers. It is relatively easy to set up, inexpensive and flexible when it comes to financing.

If all documents are in order, a company can be incorporated in about one month. The documents required include: articles of incorporation (in duplicate); a letter of appointment of directors; and a list of the full names, addresses, occupations and nationalities of each shareholder.

There is no minimum share capital or investment.

While there is no nationality or residency requirement, directors can be held liable for the company's non-compliance.

How to open a business bank account in France

Opening a bank account in France can be challenging. Anti-fraud and money laundering regulations and associated Know Your Client (KYC) rules have heightened scrutiny – this means that it can take months to open an account.

When you begin the process of opening an account, the bank will inquire about business activity, turnover, the reasons for opening the account and the purpose of the account. In addition, in certain cases, the bank may inquire about the origin and destination of funds, the estimated value of forthcoming transactions (in order to identify suspicious transactions), and, if available or relevant, major customers and suppliers.

To open an account, the bank will typically require the corporate documents (articles of association and registration extract); a complete and signed organisational chart; and clear identification of each UBO, including key personal details and copies of the directors' passports.

Complexity in managing entities

All accounting in France is subject to local language requirements, which can prove challenging for non-French-speaking businesses. Accounting documents are kept in French, with the Euro as the currency, and French Generally Accepted Accounting Principles (GAAP) are mandatory.

France is one of the world's most complex jurisdictions for HR and payroll. Companies may face many legal changes and updates, and new financial rules are being enacted each year.

The significant complexity and constant evolution of accounting and tax, and HR and payroll regulations, require finding the right strategic partner to ensure compliance, to help you adapt to the language of local regulation and to support your growth strategy.

Language and culture

To ensure a seamless incorporation journey, companies entering the French market must consider local norms and understand cultural differences.

While all business formalities in France are subject to local language requirements, the French government is proposing more services in English to foreign investors on its institutional websites. It has introduced the 'Business France' initiative to promote French businesses abroad and to promote inbound investment by assisting foreign companies interested in establishing operations in France.

Local assistance is critical to navigating the maze of administrative and linguistic complexity.

While France can be a complex jurisdiction for incorporation and entity management, a new pragmatic vision is currently being implemented by the government to promote further investment.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.