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1. Legal and financial requirements of both SA and SARL:

1.1 Main characteristics of both companies :

 A SA  and a SARL are both limited liability company ³formed by one or more persons who bear losses only to the extent of their contributions". Whereas the SARL needs only one partner (in which case it is called an EURL), an SA must be formed by seven shareholders and should maintain that number throughout its whole duration.  In a SA one shareholder is however entitled to own all the stock except six shares (i.e., one for each of the other six shareholders). Both SA and SARL are governed by the Company Law of 24 July, 1966 and the decree of 23 March, 1967.

 An SARL is formed by the subscription for the entire amount of the capital and the adoption of by-laws by (i) a minimum of two and a maximum of fifty business associates (associés) or (ii) by only one partner (in which case it is called an EURL). An SARL comes into legal existence upon its registration in the Commercial Register.

 A SA is incorporated by the subscription to the capital and the adoption of by-laws by a minimum of seven bonafide shareholders. The adoption of the by-laws is made subject to specified procedures, publicity requirements, and registration formalities. The formalities of incorporation vary, depending upon whether the corporation is publicly or privately held. A SA comes into legal existence upon its registration with the Commercial Register.

The minimum share capital required for an SARL is FF 50,000 (or 8.000 Euros) whereas the minimum share capital required for an SA is normally FF 250,000 (or 40.000 Euros) except in the case of companies publicly offering their securities in which case the minimum required is FF 1,500,000. Capital for either an SA or an SARL can be formed by contributions in cash or in kind. In the case where contributions are made in cash for an SA, only 50% of the capital must be initially paid up, the balance being payable within five years at the call of the board of directors.  For an SARL, the capital must be fully paid up immediately.

1.2 Advantages of the SARL over the SA

 Management: Management of an SA is slightly more complex in that it necessarily has three levels of decision instead of two (shareholders and managers). Quorum rules for the board of directors imply that at least half of the directors be readily available in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />France to attend board meetings (which is in fact mandatory once a year).

 Audits: Small SARL can avoid the expenses of an auditor.

Limitation of number of officers: An individual can manage any number of SARL whereas subject to exception for affiliated companies, he can only be director of eight S.A. and president of two

Restrictions related to employment contracts: In an SA, a director cannot be given a salaried position even though he receives fees. An employee can be appointed director and keep the benefit of his employment contract if the latter is prior to his appointment and if his work is effective. In any event, only one third of the directors can be salaried employees. In SARL, such limitations to employment contract for managers do not exist.

1.3 Advantages of the SA over the SARL

Liability: Shareholders of an SARL are responsible during five years for the value given to contributions in kind if the value is different from the one evaluated by the "commissaire aux apports".

Borrowings from the company: Shareholders ...

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