To find out about the conditions and formalities involved, ask a corporate lawyer for advice.
Here's a look at the steps involved, and the social and tax consequences.
Similarities between a SAS and a SARL
An SAS is a société par actions simplifiée (simplified joint-stock company), while an SARL is a société à responsabilité limitée (limited liability company). These two legal forms have several similarities, particularly in terms of the formalities involved in their creation:
-
Compulsory drafting of articles of association;
- Publication of a legal notice ;
- Filed with the Clerk of the Commercial Court.
A SAS, like a SARL, can have a single shareholder, making it a société par actions simplifiées unipersonnelle (SASU), or a entreprise unipersonnelle à responsabilité limitée (EURL). The liability of each is also limited to the amount of the contributions, which may be in cash or in kind.
The differences between SAS and SARL
The form of the SAS differs from that of the SARL. The share capital is divided into shares, with the possibility of creating different classes of shares in an SAS. Regulations are more flexible, particularly as regards the drafting of articles of association, governance and decision-making systems.
On the other hand, regulations for SARLs are more rigorous, with the French Commercial Code defining their contours. Capital is divided into shares. The number of associates is limited to a maximum of 100, whereas in a SAS, there is no limit.
Please note:
- In a SAS, the manager is a chairman, who becomes a managing director in a SARL.
The simplified joint-stock company is currently the second most popular legal form. In 2015, 48% of new companies were SASs, an average of one company in two. The remainder were limited liability companies.
However, the freedom with which the articles of association of an SAS are drafted can lead to a lack of legal framework, and encourage managers to transform the company. Some feel that the clauses drafted are not strategic.
Other essential points may also motivate the decision for such a transformation, such as the contribution rate, which amounts to over 70% in SAS.
In effect, the manager has employee status, and benefits from the same social protection as employees affiliated to the general social security scheme. After the change of legal form, he or she becomes a self-employed worker, affiliated to the social security system for the self-employed. As a result, contributions are considerably reduced, at a rate of around 45% deducted from his or her remuneration.
However, if the manager of an SARL is not a partner, or is a minority or equal partner, his or her social status remains that of an employee, subject to the general social security system.
Please note:
- The director of an SAS cannot claim unemployment benefit.
- The manager of an SARL must pay contributions for health insurance, retirement and family allowances.
There are a number of rules governing the conversion of an SAS into a SARL. Firstly, the SAS must not have more than 100 associates, nor be a credit, insurance, capitalization or investment company.
Secondly, Article L225-243 of the French Commercial Code stipulates that conversion is only possible if the company has been in existence for at least two years, provided that the shareholders have drawn up and approved the balance sheets for the first two years.
Decision-making at the EGM
Converting an SAS company into a SARL is a decision that must be approved by an Extraordinary General Meeting (EGM) of shareholders. This decision must be taken in accordance with the procedures for amending the Articles of Association.
At the close of the EGM, minutes will be drawn up and filed with the tax authorities within one month of signature.
Appointing a statutory auditor
Astatutory auditor is not required for the conversion of an SAS into a legal form other than a société anonyme or a société en commandite par actions. Consequently, it is not necessary to appoint one for the conversion to a SARL.
On the other hand, if the SAS already has a statutory auditor, the latter must draw up a report indicating that shareholders' equity is at least equivalent to the share capital.
Amending the Articles of Association
Once the decision to transform the company has been taken, it is essential to revise the articles of association. The following elements need to be reviewed and amended:
- Legal form ;
- Corporate purpose;
- Company name ;
- Head office ;
- Duration of the company ;
- Terms and conditions ;
- Transfer of shares.
Filing with the clerk's office
Other formalities are also required for the transformation of the company, including publication in a legal gazette and in the Bulletin officiel des annonces civiles et commerciales (BODACC), and filing with the clerk of the commercial court.
Prior to the transformation operation, a file must be submitted to the business formalities center. It must include :
- An M2 form, plus an M3 form if several managers are to be appointed;
- A form for non-salaried workers for each manager ;
- The new bylaws ;
- A copy of the minutes of the registered EGM;
- The statutory auditor's report, if applicable;
- A certificate of publication in a legal gazette.
Converting an SAS into a SARL has significant legal consequences. As a reminder, the president of the SAS becomes one or more managing directors.
His or her spouse also becomes a collaborating spouse, which was impossible under his or her previous status. The shares are converted into company shares.
As for the sale of shares, this must be carried out in accordance with an approval procedure. This is mandatory for all new shareholders.
From a tax point of view, the sale of shares is not without consequences. The purchaser is liable for registration fees equivalent to 0.1% of the shares.
Good to know:
The tax cost of transferring shares (SAS) is lower than that of transferring corporate shares (SARL). In order to benefit from the lower rate, the Cour de cassation (French Supreme Court) has recognized that conversion prior to transfer is not an abuse of rights.
The costs involved in converting an SAS into a SARL are not onerous. They relate to the fees of participants such as the lawyer for drafting the minutes of the EGM. The price range is between 500 and 2,000 euros.
To this must be added publication in a legal gazette at a cost of around 300 euros, and a filing fee of 200 euros at the commercial court clerk's office.
Changing the legal form of a company is a complex process, involving several stages. Both SAS and SARL have their advantages and disadvantages.
The reasons for transforming a company generally depend on the interests of the partners. In all cases, it is advisable to seek the advice of an expert in corporate law.
