What is Société Anonyme?
Société Anonyme (SA) is a public limited company (PLC) similar to a public traded company in the U.S. The company is created and operated by specific rules and regulations explained in the French Commercial Code Article L-225.
The corporation must consist of a minimum of at least two shareholders, but the maximum number is not outlined by law. However, when a Société Anonyme is incorporated, the minimum number of shareholders increases to seven. Shareholders may be either actual people or legal persons.
The corporation is identified as an independent legal person and is liable to obligation, persecution, and rights. During incorporation, an auditor must be appointed to manage the accounting of the contributions paid at the time of incorporation. It includes the total sum contributed to the share capital by the founding partners.
- Société Anonyme (SA) is a French term that refers to a public limited company (PLC).
- The shareholders of Société Anonyme are liable to the limit of their total contributions. The total value of initial capital must be at least 37,000 euros.
- The partners’ risks are limited, and their assets are protected from creditors.
Understanding Société Anonyme
Société Anonyme may be formed privately or through a public offer of financial stocks. The company is created for a maximum period of 99 years. After registration by the Trade and Company Register, the incorporation of the company becomes legally official. The key legal requirements for a valid Société Anonyme include establishing articles of incorporation, an auditor, and the board of management.
The board of directors is made up of three to nineteen individuals who are not primarily shareholders. They are elected at a general meeting to oversee the implementation of the company’s orientation strategies.
The shareholders are subject to limited liability and are responsible for providing capital to the company. The individual contributions are divided into shares, which means that the partners can only incur losses up to the maximum of their initial contribution.
How a Société Anonyme Works
The operation of a Société Anonyme is based on legal structures laid down in the Company Registration Act. The management structure is determined by the shareholders and registered in the articles of incorporation.
The performance of a Société Anonyme is guided by specific principles. The articles of incorporation must prescribe the regulation on the administration of the company. For example, the board of directors and the audit unit must be in the articles of incorporation. All requirements necessary for the management of the company must be outlined, such as the selection of the company’s auditor.
Société Anonyme is taxed under corporate taxation. However, if the company’s been incorporated for less than five years, the board may choose the income tax provision, which is applicable for five non-renewable years. However, if the company is a publicly-traded company, the income tax alternative is not provided.
Characteristics of a Société Anonyme
The minimum share capital of creating a Société Anonyme is 37,000 euros. The funds must be availed before signing the articles of incorporation. Half of the funds must be released when the company is incorporated and the balance payable within five years.
The corporate mandate of the company must be written down in the articles of incorporation. The purpose of the Société Anonyme may be civil or commercial-oriented. However, the company is not allowed to operate in certain fields, such as medicine.
Advantages of a Société Anonyme
Low shareholder risk
The shareholder’s risk is minimized since it is spread among the partners while their assets are protected against potential creditors. A partner may freely transfer and sell shares to other shareholders within the company after requesting approval of transferability from the board of directors. Such a practice allows the shareholders to benefit from liquidity and easily manage situations like a partner’s death and the transfer to the next of kin.
Ability to raise funds
The company may trade securities to the public and raise significant funds required for expansion. Commercial banks are more willing to provide financial lending to a Société Anonyme listed on a stock exchange, depending on its creditworthiness. Getting listed on a stock exchange makes the company more accessible, hence increasing its ability to raise more capital for expansion or fund its operations.
Disadvantages of a Société Anonyme
The regulations of a public limited company are more stringent with strict stock exchange filing requirements. The corporation needs to employ a professionally qualified secretary and at least two managing directors. Audits are conducted annually and provide assurance to the shareholders.
High capital requirement
The minimum startup capital of a Société Anonyme is higher than the financial requirements of a private company. They incur higher costs from consulting legal and investment professionals.
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