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1. Legal and financial requirements of both SA and SARL:<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

1.1 Main characteristics of both companies :

 A SA  and a SARL are both limited liability company ¬≥formed 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 (associ√©s) 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 in an SARL can never borrow from the company nor have it guarantee their commitments and all agreements entered into by shareholders with the company are subject to special rules.

Managers: In an SARL, they cannot be dismissed without cause, whereas Directors, President and general managers of SAs can be dismissed provided it is not in an humiliating manner. Managers of an S.A.R.L. who were deemed to be holding a majority interest therein, cannot benefit from favourable tax social security systems applicable to employees, whereas the president and general managers of an SA can.

1.4 Information to be provided for registration of an SA or an SARL:

Attached as Annexes 2 (for an SA) and 3 (for an SARL) are the lists of information and documents requested for the registration of both companies.

To briefly summarise, please note that in particular the following documents are required for purposes of registering both SA and SARL in the Commercial Register:

4 original copies of the articles of association duly signed by all the partners in an SARL and by all the shareholders in an SA ;

 For an SA, 2 original copies of the minutes of the first Board of directors meeting ;

2 original copies for an SA of the certificate of deposit of funds issued by a bank (only one copy is requested for an SARL) ;

For the directors (SA) and the manager (g√©rant) in an SARL, (i) for an individual a copy of the identity card or of the passport (for a non French individual) is required and (ii) for a legal entity appointed as director or manager, an evidence of the legal entity¬Ļs existence and registration (such as recent certificate of incorporation or certified translated copy of the legal entity¬Ļs articles of association) is required. In addition in both SA and SARL, a declaration of non condemnation and non bankruptcy is required for the individuals and the permanent representative of the legal entities appointed in such company ;

For both SA and SARL, a document evidencing the existence of the registered office (free domiciliation or paid domiciliation i.e. a lease) is required ;

For an SA, 2 original copies of the list of shareholders is required ;

Several information and/or documents are required concerning the statutory auditor appointed in a SA (we remind you that it is not mandatory in small SARL to appint such a statutory auditor).

Lastly, please note that some miscellaneous information such as number of employees or tax regime shall be provided for.

2. Time required for the incorporation of an SA or an SARL:

The time period needed to obtain the certificate of incorporation (extrait K Bis) is approximately two weeks in Paris. This implies we are given all the relevant information and documents (as mentioned in Annexes 2 and 3 hereto attached) and that a bank account has been opened in France and the funds are deposited. As mentioned above, the time period to obtain the extrait K Bis may be longer if the company is not to be registered in Paris.

3. Fees and expenses

The fees and legal expenses for the preparation of the documentation (drafting of articles of association, minutes and various documents) required for the registration of a company and for said registration as well as the fulfilment of the corporate formalities is amounted to approximately  FF 25.000 ex VAT, being specified that this estimation does not include any translation costs (articles of association for instance) 

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