For several years now, the SAS (Société par Actions Simplifiée) has been one of the most popular legal forms for company founders in France.
Despite this dazzling success, transforming your SARL into an SAS is a decision as important as it is complex. There are a number of reasons why a company's shareholders may decide to make the switch.
Legally, the SARL does not allow for more than 100 employees, so a transformation into an SAS may be the best option if the structure is expanding rapidly.
Partners can also convert their SARLs to issue shares and/or bonds on the financial markets.
Finally, another motivation may be fiscal and social, enabling the majority shareholder to acquire employee status without losing control of his capital.
A step-by-step explanation of the essential steps you need to take to transform your SARL into an SAS!
Before any transformation of your SARL into a SAS, an auditor's report must be drawn up.
When changing the legal form of your company, this commissioner will be known as the "commissaire à la transformation". An expert in corporate finance and accounting, this transformation commissioner is attached to the Court of Appeal in the city where the company's head office is located.
He must draw up a report on the company's situation in order to estimate the value of the structure's assets, as well as the various benefits authorized to partners or third parties.
If the SARL already has a statutory auditor, he or she may be appointed for this transformation. If not, the partners must appoint one. There are two possible ways of doing this: either by a unanimous vote of the partners, or by the President of the Commercial Court if they are unable to agree on their choice.
Converting your SARL into an SAS requires patience, given the complex procedures involved.
There are several steps to follow:
Before the conversion decision
First, you must pay up at least half the nominal value of the cash contributions to the company's share capital. Then, if your SARL has a works council, it must be informed and consulted about this decision. Only after these two stages can the transformation commissioner intervene.
If your SARL does not have a CAC, you will need to appoint one either by petition to the Commercial Court, or by agreement of the partners. If the SARL already has a CAC, all he/she has to do is draw up a single report. This report should then be sent to the commercial court clerk's office, ideally eight days before the general meeting convened to transform your company into an SAS.
When the conversion is approved
Whatever the nature of the general meeting, the shareholders of the SARL must unanimously agree with the decision to convert the company into an SAS. Once agreement has been reached, these same partners need to formally approve the conversion. To do this, they need to set the effective date of the conversion, then divide up the shares before drawing up the new articles of association.
Publicity formalities must also be carried out. In detail, this involves registering the minutes of the general meeting with the SIE (Service des Impôts des Entreprises), then publishing a notice of conversion in a legal gazette in the département where the company was formed, and finally filing the file with the registry.
And now your SARL has become an SAS!
A change in status has natural consequences in terms of jurisdiction and taxation.
Legal consequences
The main effect of transforming a SARL into a SAS is to replace a legal structure with a free structure defined by the company's bylaws, and therefore more risky.
So, by switching to a SAS, you put an end to automatic approval. In other words, with a SARL, if a partner leaves the company and another joins, a transfer of shares will have to be drawn up, subject to approval. The SAS, on the other hand, allows you to decide much more freely how a partner joins or leaves the company.
Another point to emphasize is the appointment of a statutory auditor. This may be mandatory if the SAS controls or is controlled by one or more other companies. In addition, the thresholds for compulsory appointment are much lower for a SAS than for a SARL.
Tax consequences
The main consequence of a transformation from SARL to SAS concerns the nature of profits, whether current, deferred or carried forward. If the conversion is accompanied by a change in tax regime, the company will be taxed immediately on all profits mentioned. However, it may be possible to avoid taxation on current and deferred profits if the book values of the assets remain unchanged, or if the new tax regime subjects these same profits to taxation.
Conversely, if you don't change your tax regime, you won't see any impact on current profits, tax deferred surpluses or loss carryforwards.
Please note that when converting a SARL (limited liability company) into an SAS (simplified joint stock company), you will have to pay a registration fee of 125 euros. This cost may be higher, however, if a SARL not subject to corporation tax (Impôt sur les Sociétés) is converted into an SAS subject to corporation tax (Impôt sur les Sociétés).
Finally, the other notable change concerns sales of shares, which will be taxed quite differently. SARLs will be subject to 3% registration duty on the sale of shares, compared with 0.1% for SASs.
Whatever the motivation for a SARL to transform itself into an SAS, it is bound to be justifiable for the good development of your company. However, it is important not to take the conversion procedure lightly, and to strictly adhere to the various steps involved. The legal and tax consequences will have obvious repercussions for your new SAS.
Now that you know all you need to know, all you have to do is get started. Good luck!
Written by our expert Maeva Girardot
October 17, 2017
