Comprehensive Guide to Opening a Branch or Subsidiary

Expanding your business operations to new markets is an exciting opportunity for growth and increased market presence. France, with its strong economy and strategic location, serves as an ideal destination for businesses looking to establish a branch or subsidiary. However, navigating the legal and administrative requirements can be daunting. This article will provide a detailed overview of the options available and guide you through the step-by-step process of opening a branch or subsidiary in France

Options and Step-by-Step Process

 

1. Understand the Difference between a Liaison Office a Branch and a Subsidiary

Before diving into the details, it’s crucial to understand the distinction between a branch and a subsidiary. A branch represents an extension of the parent company, whereas a subsidiary is a separate legal entity. Both options have unique advantages and considerations. For full details on the choice between Liaison office and Branch please consult our related article HERE

2. Conduct Market Research and Feasibility Analysis

Thorough market research and feasibility analysis are key to determining whether France is the right market for your business expansion. Evaluate factors such as market demand, competition, legal and regulatory environment, and economic indicators to make an informed decision.

3. Choose the Right Legal Structure

When establishing a presence in France, you must choose the appropriate legal structure. The options typically considered are:

a. Branch Office

Setting up a branch office allows for direct representation of the parent company. It operates under the same legal entity and carries the same liabilities.

b. Subsidiaries Legal Forms comparative table

Creating a subsidiary establishes a separate legal entity. It provides more autonomy and limited liability protection but requires additional legal and administrative steps. Hereafter the most common legal forms for a subsidiary

4. Compliance with Legal Requirements

To comply with French laws and regulations, you must follow these steps:

a. Reserve a Business Name

Check the availability of your desired business name and reserve it with the French National Institute of Industrial Property (INPI).

b. Appoint a Representative

Appoint an individual or a legal representative to act on behalf of your business in France.

1. Nationality of the Representative:

a. French National as Representative:

• If your appointed representative is a French national, the process is generally straightforward. You would need to provide the following documents:
  • Proof of identity of the representative (e.g., passport, French ID card)
  • Proof of address of the representative (e.g., utility bill, bank statement)
  • A letter of appointment or power of attorney, specifying the representative’s role and responsibilities within the company.

b. Non-French EU National as Representative:

• If your appointed representative is a national of a European Union (EU) member state other than France, the process is similar to appointing a French national. You would generally need to provide the following documents:
  • Proof of identity of the representative (e.g., passport, national ID card)
  • Proof of address of the representative (e.g., utility bill, bank statement)
  • A letter of appointment or power of attorney, specifying the representative’s role and responsibilities within the company.

c. Non-EU National as Representative:

• If your appointed representative is a non-EU national, additional requirements may apply, such as obtaining a work permit or residency permit in France. The specific process and documents needed would depend on the immigration regulations and requirements applicable to the representative’s nationality. It is advisable to consult with immigration authorities or legal professionals to ensure compliance with immigration procedures.

Representative vs Legal Structure of the Company:

a. Branch Office:

• For a branch office, the representative is usually an employee of the parent company who is delegated to oversee the branch’s operations in France. The appointment is typically documented through an official letter of appointment or power of attorney issued by the parent company.

b. Subsidiary:

• For a subsidiary, the process may involve appointing directors or managers who will have legal representation authority for the company. The appointment would be documented through the Articles of Association, which specify the governance structure and roles within the subsidiary.

c. Articles of Association

Draft and notarize the Articles of Association, outlining the company’s structure, activities, and governance.

1. Name and Registered Office

   • The name of the branch or subsidiary should be stated, along with the indication of its legal form (e.g., “SARL,” “SA,” “SAS”). The registered office address in France should also be specified.

2. Objectives and Activities

   • Clearly define the scope and objectives of the branch or subsidiary’s activities, detailing the nature of the business it will undertake. This section should outline the specific products, services, or operations that the company will engage in.

3. Share Capital (for subsidiaries)

   • Specify the amount of share capital, the currency in which it is denominated, and the breakdown of shares if applicable. It is essential to outline the conditions and procedures for increasing or decreasing the share capital if necessary.

4. Management and Governance

   • Describe the structure and roles of the company’s management, including the appointment, powers, and responsibilities of directors, managers, or executive officers. It should also outline the decision-making processes, such as the convening and conduct of general meetings, board meetings, and shareholder meetings.

5. Financial Provisions

   • Include provisions relating to financial statements, accounting principles, auditing requirements, and the distribution of profits. This section should specify the fiscal year-end and the deadline for preparing and submitting financial statements.

6. Transfer of Shares or Assets (for subsidiaries)

   • Outline the conditions and procedures for the transfer of shares or assets in the subsidiary, including any preemption rights or restrictions on share transfers. It should also address the valuation and purchase terms in case of a share transfer or sale of assets.

7. Dissolution and Liquidation

   • Detail the procedures for dissolving and liquidating the branch or subsidiary, including the appointment of liquidators, the distribution of assets, and the settlement of liabilities. This section should also cover the process for handling any remaining business or contracts during the liquidation phase.

d. Register with the Commercial Court

In France, the process of registering a company, including branches and subsidiaries, has been centralized through a “guichet unique” or a one-stop shop system. The purpose of this system is to simplify and streamline the registration process by consolidating the required procedures into a single point of contact. Here’s an overview of the registration process:

1.Prepare the Required Documentation

– Gather the necessary documentation for the registration process. The specific documents may vary depending on the legal structure and the nature of your business. However, common documents include:
– Articles of Association or Bylaws
– identity for company representatives
– address for the company and representatives
– financial resources or share capital (if applicable)
– Any additional documents required by the specific legal structure

2. Submit the Registration Application

– Submit the registration application and accompanying documents to the relevant “guichet unique” or one-stop shop. This is typically done online through the official portal dedicated to business registration in France.

3. Verification and Processing

– The registration authority will review the application and documents for compliance with legal requirements. This process may involve verifying the accuracy of the information provided and conducting any necessary background checks.

4. Obtaining the Registration Certificate

– Once the application is approved, you will receive a registration certificate or an extract from the French Trade and Companies Register (Registre du Commerce et des Sociétés – RCS). This document serves as official proof of your company’s registration.

5. Fulfill Additional Obligations

– After the registration, there are additional obligations to fulfill, such as:
– Publishing a legal announcement in a designated newspaper (depending on the legal structure and circumstances)
– Registering with relevant authorities for tax purposes, social security, and other mandatory contributions
– Obtaining any necessary permits, licenses, or authorizations specific to your industry or business activities

It’s important to note that the registration process and requirements may vary depending on factors such as the legal structure, nature of the business, and the specific location within France. It is advisable to consult with legal professionals or business advisors who can provide guidance tailored to your specific circumstances and ensure compliance with all applicable regulations.

Please note that this information is provided as a general overview and should not be considered legal advice.

e. Obtain Tax Identification Numbers

Apply for a unique tax identification number from the French tax authorities.

f. VAT Registration

If your business meets the turnover threshold, register for Value Added Tax (VAT) with the French tax authorities.

Financial Considerations

Managing finances effectively is crucial for a successful branch or subsidiary. Consider the following aspects:

a. Capital Requirements

Determine the minimum capital required for your business structure.

a. Branch Office:

• Branch offices in France do not have specific capital requirements. The parent company is responsible for financing the branch’s activities and operations.

b. Subsidiary:

• Société à Responsabilité Limitée (SARL): The minimum share capital requirement for an SARL is €1.
• Société Anonyme (SA): The minimum share capital requirement for an SA is €37,000, with at least 50% of the capital subscribed and paid upon incorporation.
• Société par Actions Simplifiée (SAS): SAS does not have a specific minimum share capital requirement, allowing flexibility in structuring the capital.

b. Banking and Account Setup

Open a bank account with a French financial institution to facilitate day-to-day operations and financial transactions.

Required Documents to Open a Bank Account:

• The exact documentation may vary among banks, but generally, the following documents are commonly required:
  • Proof of company registration (e.g., registration certificate, articles of association)
  • Proof of identity for company representatives (e.g., passport, ID card)
  • Proof of address for the company and representatives (e.g., utility bills, lease agreement)
  • Tax identification number of the company
  • Business plan and financial projections
• Online Banks now proposed extended services, including currency transfers, at competitive conditions

c. Tax Obligations

Familiarize yourself with the French tax system and ensure compliance with corporate income tax, social security contributions, and other relevant taxes.

a. Corporate Income Tax (Impôt sur les Sociétés – IS)

• Both branches and subsidiaries are subject to corporate income tax on their profits. As of the current tax year, the standard corporate income tax rate in France is 26.5% for companies with annual turnover under €250 million and 27.5% for companies with annual turnover over €250 million.

b. Value Added Tax (VAT)

• VAT applies to the sale of goods and services in France. The standard VAT rate is currently 20%, with reduced rates of 10% and 5.5% applicable to certain goods and services.

c. Payroll Taxes

• Companies in France are responsible for paying various payroll taxes, including social security contributions, pension contributions, and health insurance contributions for employees.
• Social Security Contributions: Employers and employees are required to make contributions to the French social security system. The contribution rates are based on the gross salary and are calculated as a percentage. On average, the combined employer and employee social security contribution rates range from approximately 45% to 50% of the gross salary.
• Pension Contributions: Employers and employees also contribute to the French pension system. The pension contribution rates vary depending on the pension scheme and the employee’s age.
• Health Insurance Contributions: Employers and employees make contributions to finance the French healthcare system. The rates vary depending on the income level and are typically calculated as a percentage of the gross salary.

d.Other Taxes

• Local Business Taxes: French companies are subject to local business taxes, including the Cotisation Foncière des Entreprises (CFE) and the Cotisation sur la Valeur Ajoutée des Entreprises (CVAE). The amount of these taxes depends on factors such as the company’s location, size, and activity.
• Property Taxes: Property taxes, such as the Taxe Foncière and Taxe d’Habitation, are imposed on the ownership of real estate in France.
• Specific Industry-Related Taxes: Certain industries or activities may be subject to specific taxes or levies. For example, there are specific taxes for energy consumption, financial transactions, and some regulated sectors.

6. Employment and Labor Regulations

If you plan to hire employees, understand the employment and labor regulations in France

Registering employees for a subsidiary of a foreign company in France involves several steps. Here’s an overview of the process, along with information on registration, payment of contributions, and requirements for personal representatives and meetings based on the size of the company:

1. Registering Employees

   • Register with the French Social Security System: The subsidiary needs to register its employees with the French social security system (Sécurité Sociale). This includes enrolling them for health insurance, pension contributions, and other social security benefits. The registration is typically done through the URSSAF (Unions de Recouvrement des Cotisations de Sécurité Sociale et d’Allocations Familiales).
   • Obtain Work Permits (if applicable): For non-EU employees, work permits or relevant visas may be required. The subsidiary should ensure that employees have the necessary work authorization before starting their employment.

2. Payment of Contributions:

   • Social Security Contributions: Employers are required to pay social security contributions, including health insurance, pension, and other benefits. The contributions are calculated based on the employee’s salary and other factors. Payment is made to the URSSAF.
   • Payroll Taxes: In addition to social security contributions, employers must also withhold and pay various payroll taxes, such as income tax (impôt sur le revenu), social levies (prélèvements sociaux), and unemployment contributions (cotisations chômage). Payment is made to the tax authorities (Direction Générale des Finances Publiques – DGFiP)

For more detailed information and specific procedures, it is advisable to consult official government websites and seek guidance from legal professionals. Here are some relevant websites for registration and payment of contributions:

• Centre de Formalités des Entreprises (CFE): www.cfe.urssaf.fr
• URSSAF: www.urssaf.fr
• Direction Générale des Finances Publiques (DGFiP): www.impots.gouv.fr

Please note that this information is provided as a general overview and should not be considered legal or tax advice.

 

In France, the requirement to have employee delegates, also known as “Instances Représentatives du Personnel” (IRP), is an important aspect of labor law. These representatives act as intermediaries between employees and management, ensuring that employees’ rights and interests are taken into account. Here’s an explanation of the requirements and associated meetings or reporting with management and administration:

Employee Delegates

– Depending on the size of the company, different types of employee delegates may be required:
– Comité Social et Économique (CSE) – Social and Economic Committee: Generally applicable to companies with 11 or more employees.
– Délégués du Personnel (DP) – Staff Delegates: Required in companies with at least 11 employees.
– Comité d’Entreprise (CE) – Works Council: Mandatory for companies with at least 50 employees.
– Délégation Unique du Personnel (DUP) – Single Employee Delegation: Established in companies with 50 to 299 employees.
– Comité d’Hygiène, de Sécurité et des Conditions de Travail (CHSCT) – Health, Safety, and Working Conditions Committee: Obligatory for companies with at least 50 employees.

– Employee delegates are elected by the employees and represent their interests in discussions with management. They have the right to be informed and consulted on various matters, such as working conditions, health and safety, training, and collective agreements.

Union Representation

– Trade unions play a significant role in the representation of employees’ interests. Unions can negotiate collective agreements with employers and represent employees in various discussions and negotiations.
– Employees have the right to join a trade union of their choice, and unions can be present in the workplace to advocate for their members’ rights.

Staff Representative Meetings and Reporting

– Employee delegates or union representatives have regular meetings with management to discuss employee-related matters. The frequency and content of these meetings depend on the type of representation and legal requirements.
– Topics discussed may include working conditions, company policies, collective bargaining agreements, training programs, and social benefits.
– Employee delegates may also have reporting obligations to communicate information discussed in these meetings back to the employees they represent.

Staff Confidentiality and Legal Protection

– Employee delegates are bound by confidentiality regarding certain discussions and information they receive during their representation duties. They must respect the privacy and confidentiality of sensitive matters.
– Those serve as delegates or union representatives are protected by law from any discrimination or retaliation based on their union activities or representation roles.

It is important to note that the specific requirements, rights, and processes for employee representation and union involvement may vary depending on the size of the company and applicable labor laws. It is recommended to consult with legal professionals or labor experts to ensure compliance with the relevant regulations.

Please note that this information is provided as a general overview and should not be considered legal advice.

7. Establish a Local Network

Building a strong local network is crucial for business success in France. Connect with industry associations, chambers of commerce, and business networks to expand your reach, gain market insights, and establish valuable partnerships.

Conclusion

Expanding your business by opening a branch or subsidiary in France offers immense growth potential. By understanding the available options and following the step-by-step process

 

The website sources for opening a subsidiary in France

French National Institute of Industrial Property (INPI)(www.inpi.fr)

INPI is the official organization responsible for intellectual property rights in France. Their website offers information on registering and protecting trademarks, patents, and business names.

Official Journal of French Companies (www.journal-officiel.gouv.fr)

The Official Journal of French Companies (Journal Officiel des Entreprises) is an important resource for legal and administrative information. It publishes announcements, regulations, and legal notices related to companies operating in France.

Direction générale des finances publiques (DGFiP) (www.impots.gouv.fr)

The DGFiP is the French tax authority responsible for administering taxes and providing guidance to businesses. Their website offers comprehensive information on tax obligations, registration procedures, and forms required for taxation purposes.

French Commercial Courts (www.infogreffe.com)

Infogreffe is the online platform of the French Commercial Courts. It provides access to company registration information, forms, and guidelines for registering a branch or subsidiary.

French Ministry of Labor (www.travail-emploi.gouv.fr)

The French Ministry of Labor website offers guidance on employment regulations, labor contracts, and social security obligations for businesses operating in France.

Incentives and Subsidies for Opening a Subsidiary in France

When considering the establishment of a subsidiary in France, it’s essential to be aware of the various incentives and subsidies available at the local, regional, and national levels. These incentives aim to attract foreign investment, stimulate economic growth, and support business development. In this article, we will explore the range of public incentives and subsidies offered in France, providing valuable information for businesses looking to open a subsidiary.

1. National-Level Incentives and Subsidies

a. Research and Development (R&D) Tax Credits: The French government offers R&D tax credits to encourage innovation. These credits allow companies to reduce their tax liability by a percentage of eligible R&D expenses, including personnel costs, subcontracting, and equipment purchases.

b. Investment Tax Credit (CICE): The CICE provides a tax credit to eligible companies based on their total payroll expenses. This credit can be used to offset income tax or, if not fully utilized, can be refunded.

c. Regional Support for Innovation (SRI): Regional authorities in France provide funding and support for innovative projects undertaken by businesses. These funds can be accessed through grants, subsidies, or loans, depending on the specific regional programs.

2. Regional-Level Incentives and Subsidies

a. Regional Investment Funds (FRI): Regional Investment Funds aim to attract and support investment projects that contribute to the region’s economic development. These funds provide financial assistance, grants, or loans to eligible companies that create jobs or invest in specific sectors designated as priorities by the regional authorities.

b. Regional Grants and Subsidies: Many French regions offer grants and subsidies for various business activities, such as job creation, training, and investment in specific sectors like renewable energy, digital technologies, and sustainable development. These grants are often designed to incentivize businesses to establish operations in specific regions.

c. Incubators and Business Accelerators: Several regions in France host incubators and business accelerators that provide support services, mentoring, and funding opportunities for startups and innovative businesses. These programs aim to foster entrepreneurship and facilitate the growth of new businesses.

3. Local-Level Incentives and Subsidies

a. Local Tax Relief: Local municipalities may offer tax relief or exemptions to attract businesses and stimulate economic activity. These tax incentives can include reductions in property taxes, business taxes, or other local levies.

b. Industrial Zones and Free Trade Zones: Some localities in France designate industrial zones or free trade zones that offer various advantages to businesses, such as tax benefits, customs advantages, and simplified administrative procedures.

c. Employment Support: Local employment agencies and organizations may provide subsidies or grants to businesses that hire unemployed individuals, promote workforce integration, or provide vocational training programs.

Opening a subsidiary in France comes with the advantage of accessing a range of public incentives and subsidies at the local, regional, and national levels. These incentives aim to promote investment, innovation, and economic development. By leveraging these opportunities, businesses can benefit from financial support, tax advantages, and access to specialized programs. It is advisable for businesses to research and engage with local economic development agencies, regional authorities, and relevant government bodies to explore the specific incentives and subsidies available in their desired location within France.

Official websites on public incentives and subsidies

Invest in France Agency (www.investinfrance.fr)

The official website of the Invest in France Agency provides comprehensive information on investment opportunities and incentives in France, including national, regional, and local incentives.

Bpifrance (www.bpifrance.fr)

Bpifrance is a French public investment bank that supports businesses at various stages of development. Their website offers information on funding programs, grants, and subsidies available at the national and regional levels.

French Ministry for the Economy and Finance (www.economie.gouv.fr)

The website of the French Ministry for the Economy and Finance provides information on national-level incentives, tax credits, and grants available for businesses in France.

Regional Council Websites

Each region in France has its own council website that provides information on regional incentives, grants, and subsidies. Examples include Île-de-France (www.iledefrance.fr), Auvergne-Rhône-Alpes (www.auvergnerhonealpes.fr), and Occitanie (www.laregion.fr).

Chambres de Commerce et d’Industrie (www.cci.fr)

The network of Chambers of Commerce and Industry (CCI) in France provides information and guidance on local-level incentives, business support programs, and regional economic development initiatives.

Local Economic Development Agencies: Local economic development agencies in different regions and municipalities in France offer information on local incentives, tax benefits, and support programs.

You have plans to start a liaison office, a branch or company  in France and need guidance and insights on the market ?  Our advisors will be delighted to support the design and implementation of your Business Strategy in France and Europe. Please contact us at Ipanovia 

Emmanuel Facovi – Managing Partner