Reduction of the minimum number of shareholders in non-public French “Sociétés Anonymes” (Public Limited Corporations).

May 15th, 2016

Law n° 2016-563 of May 10, 2016, amending Decree n° 2015-1127 of September 10, 2015 pertaining to the decrease of the minimum number of shareholders in non-public “sociétés anonymes” (n° 2016-563 of May 10, 2016), published in JO n° 0109 of May 11, 2016 (the “Law”) has reduced the minimum number of shareholders required by law from seven to two.

The Law aims to “reinforce the attractiveness of sociétés anonymes which, due to the stability and foreseeability of their corporate rules, guarantee a better protection than SAS [another widespread corporate form, also known as a “Simplified Joint Stock Company”] for their shareholders, especially minority shareholders”.

Until now, article L225.1 of the French Commercial Code mandated that the share capital of sociétés anonymes be held by no less than 7 shareholders. Failing so, any interested person could petition the Commerce Tribunal to seek the dissolution of the company if this deficiency lasted over one year.

This restrictive rule was neither appropriate for SMEs (whose share capital is usually held by a smaller number of shareholders) nor for larger groups, usually formed around a holding company that owns 100% of its subsidiaries.

In practice though, it was common to have 6 nominee shareholders control a negligible part of the share capital of sociétés anonymes, as an alternative way to comply with Article L225.1 of the Commercial Code.

This obligation also happened to contravene the then-current law simplification trend that resulted, inter alia, in the creation of single-member unipersonal companies. Therefore, and for simplification purposes, the legislature decided to repeal the rule and reduce the shareholder minimum.

This new provision will contribute to lessen the loss of attractiveness of sociétés anonymes compared to other more flexible corporate forms, such as the Simplified Joint Stock companies (”Sociétés par Actions Simplifiées”).

Significantly, however, the 7-shareholders minimum requirement is maintained for publicly traded companies.

May 15, 2016 | Corporate Law