September - 2019


The impact of the simplification law in respect of corporate law on the French Commercial Code

On 10 July 2019, the Parliament passed the law N°2019-744 of 19 July 2019 about the simplification, clarification and update of the corporate law (hereafter the “Law”).

Filed with the Senate on 4 August 2014 and having seen many of its initial provisions being integrated in different legislative texts, including the law of 6 August 2015 for the growth, the activity and the equality of the economic chances, named the “Macron Law”, and the law of 22 May 2019 about the growth and the transformation of the companies, named ‘PACTE Law”, the Law of 19 July 2019 aims to continue the simplification of the companies’ life. More precisely, the objective is to clarify and update the provisions of the French Code de commerce, including those about the going concerns, the commercial companies and the statutory auditors.

About the going concern (“fonds de commerce”):

The law brings two major simplifications. The first one concerns the terms and conditions of the sale of a going concern. Indeed, the first article of the Law repeals article L. 141-1 of the Code de commerce, which imposed to include a certain number of mandatory provisions in every deed of sale of a going concern, under penalty of cancellation of the deed. Now, it is possible to proceed with the sale of a going concern without making such statements on a mandatory basis in the deed of transfer. 

The second simplification concerns the use of the management lease (location-gérance). According to the second article of the Law, the requirement of running the going concern for at least two-years before the management lease (location-gérance), which was mandatory for the the holder of he going concern, is repealed.

About the commercial companies:

First, the Law removes the obligation for the joint-stock companies (sociétés par actions) to convene a general meeting of the shareholders to rule on a capital increase dedicated to the employees every three years (article L 225-129-6 of the French Commercial code modified).

Moreover, the Law indicates that the majority required for the adoption of the decisions of the ordinary and extraordinary general meetings of the shareholders in limited liability companies, whether listed or not, will be determined only regarding the votes by the shareholders present or represented, specifying that the votes expressed do not include those attached to the shares for which the shareholder did not take part in the vote, refrained from voting or made a blank or null and void vote. (Articles L. 225-96, last paragraph, and L 225-98, last paragraph, modified, of the French Commercial Code). In other words, abstentions and blank or null and void votes will not be counted as negative votes any longer. They will be excluded from the count.

Furthermore, Article 29 of the Law provides that the exclusion clauses in the articles of association of the simplified joint-stock companies may now be adopted or modified by a collective decision of the shareholders as provided for in the articles of association (article L. 227-19 modified), whereas the unanimity was previously required. So, the exclusion clauses are now submitted to the same regime as the approval clauses.

Finally, the Law provides that the collective decisions of the shareholders of a limited liability company made in violation of the provisions of Article L. 223-30 of the Code de commerce (relating to the quorum and majority rules) may be cancelled upon request of any interested person (article L. 223-30, new paragraph 7).

About the statutory auditor:

The Law extends the possibility to request the appointment of a statutory auditor, which was, under the PACTE law, reserved to the shareholders representing at least a quarter of the share capital of a limited liability company, a general partnership or a limited partnership, to the shareholders of the limited companies (article L.225-218 modified), to the shareholders of the limited partnerships with shares (article L. 226-6 modified) and simplified joint-stock companies (article L.227-9-1 modified). The Law specifies that the request must be presented by the shareholders or partners representing at list a third (and not a quarter) of the share capital, be motivated and be addressed to the company. Moreover, the law provides that the statutory auditor will be appointed for a three-year term (article L. 221-9 modified).

Entered into force on 21 July 2019, the Law will probably not stop the willingness to simplify and clarify French corporate law.

Law on the simplification of corporate law,business capital,auditors