- Category: Which company type?
Joint stock company
SAS stands for Joint Stock Company. This company type may not be as popular as the SARL, but it still possesses great appeal in the form of its flexibility, and the ability for associates to define the conditions in which they will enter or leave the company in the company by-laws.
- The associates in the SAS
- Financial commitment
- How does the SAS function?
- The tax regime of the SAS
- The tax regime of the directors
- The social regime of the leaders
- Transferring an SAS
- Main advantages and disadvantages of the SAS
The associates in the SAS
An SAS can have 1 associate or more. These can be either “natural persons” or “legal persons”. In other words, they can be either individuals or entities representing several different individuals.
If an SAS only has one associate, then it is called a SASU (Simplified Joint Stock Company).
The associates are free to determine the volume of equity of the company.
Contributions can be made either in cash or bank check, or in kind.
Contributions in industry, which refers to making one’s workforce available to the company, are allowed, but they do not contribute to the formation of equity. Instead, they are made in exchange for inalienable shares.
At least half of the contributions have to be paid when the company is created, and they must have been paid in full after 5 years. An SAS may have variable capital.
The SAS cannot offer financial securities to the public, or allow its shares to be traded on the market. It may, however, make offers of financial securities if they are intended exclusively for qualified investors acting on their own behalf, or for portfolio management companies acting for third parties.
- Liable up to the amount of their contributions.
- Civil liability of the company manager (especially in case of management fault).
- Criminal liability of the entrepreneur.
How does the SAS function?
The partners can freely determine the rules of organization of the company in the by-laws:
- whether to appoint a sole president or an executive body with a president to manage the company,
- whether or not to appoint a non-shareholder
- whether or not to designate a legal person as manager,
- The terms of appointment or dismissal,
- Whether or not to delegate powers to special committees
The first president of the SAS has to be named in the by-laws.
It is possible to appoint a Director General and a Deputy Director General.
Whatever their method of appointment, they must be brought to the attention of the registry of the commercial court. Their appointment must also be published in BODACC (Official bulletin of civil and commercial announcements), and it has to be the subject of a notice in a newspaper specialized in legal announcements.
The shareholders can also freely determine how collective decisions are made in the by-laws: definition of decisions to be taken collectively, conditions of form, quorum and majority, veto right to a particular partner, etc.
They may also provide for an oversight body for the executive officer (s).
Certain decisions must be taken collectively (in general meeting or by any other means): approval of the accounts and distribution of profits, modification of the share capital, merger, division, dissolution of the company, appointment of auditors, transformation of the company in another form of company, review of the agreements concluded between the company and its directors and partners, as well as decisions requiring the unanimous agreement of the partners (approval of the shareholders in case of transfer of shares for example).
The appointment of an auditor in the SAS is only obligatory if one of the following conditions is met:
- At the close of the financial year, the SAS exceeds two of the following thresholds:
- total balance sheet greater than 1 million euros
- turnover exceeding 2 million euros
- average number of permanent employees employed in during the financial year exceeding 20 employees,
- The SAS controls one or more companies,
- The SAS is controlled by one or more companies
- One or more partners representing at least one-tenth of the capital demand the appointment of an auditor, and submit their request to the president of the commercial court.
The tax regime of the SAS
The SAS is subject by law to the corporate tax.
However, it is still possible to opt for the income tax if at least one of the following conditions is met:
- The company has a commercial, craft, agricultural or liberal activity (excluding the management of its own property),
- The company was less than 5 years-old when this option was chosen
- The company has less than 50 employees and has an annual turnover or balance sheet of less than 10 million euros,
- The company is not listed on a regulated market,
- The company has at least 50% of voting rights held by individuals
- The company has at least 34% of voting rights held by the manager
This is only possible however, if all associates unanimously agree.
It can be submitted to the tax office in the first 3 months of the fiscal year in which it is to apply.
This is valid for 5 non-renewable years, unless notice of termination is given, after which it is impossible to return to income tax.
The tax regime of the leader
The Chairman: Income tax in the category of wages and salaries (application of the standard deduction for professional expenses of 10% or deduction of his actual and justified professional expenses).
The social regime of the leader
He is regarded as an Employee. As such, he benefits from the social security and the retirement scheme of employees, but not from unemployment insurance and labor law provisions.
He may, however, combine his functions of manager with a contract of employment relating to separate technical functions, but only if it is possible to establish a relationship of subordination between him and the company.
Transferring an SAS
The founding partners are free to define in the company by-laws the conditions in which associates enter and leave the company: clause of approval applicable in case of transfer to third parties or even between partners, clause of exclusion of a partner, etc.
Disposals of shares are subject to a tax of 0.1% payable by the purchaser, and to the Capital gains tax regime for businesses payable by the seller.
Main advantages and disadvantages of the SAS
Advantages of the SAS
- Contractual flexibility: freedom granted to the partners to determine the rules of operation and transmission of the shares.
- The liability of associates being limited to their contributions.
- The evolutionary structure facilitating the partnership.
- The possibility of forming an SAS with a single associate (and therefore to create a wholly owned subsidiary).
- The possibility of granting share subscription or purchase options to officers and/or employees of the company.
- Credibility for potential partners (bankers, customers, suppliers).
Disadvantages of the SAS
- Expenses and formalism of constitution.
- It being necessary to be very rigorous when writing the company by-laws.
If you want to learn more about the SAS and how it fares against other company types, you should check out this table detailing the differences between each company type.