France

• SARL & SAS: Small and medium size for-profit organizations in France are often "sociétés à responsabilité limitée" or "SARL", or "société par actions simplifiée" or "SAS" (which is a rather recent form of company experiencing great success). In SAS, mandatory rules are quite lightened compared to "SA" and the bylaws can freely organize the functioning of the company. "SAS" are thus often used in joint ventures or for subsidiaries of larger companies.
  • In both "SARLs" and "SASs", shareholders' liability is limited to the amount of their contribution. The law does not impose any minimum capital. This is a legal regime protective of minority shareholders.
• SA: For larger companies with multiple shareholders,"société anonyme" or "SA", is the most appropriate form. Unlike "SARL" or "SAS", "SA" can be listed companies. "SA" must comply with a heavy set of mandatory rules. 

In principle, the "SARL", "SAS" and "SA" are subject to corporate income tax  (the "IS"), but under certain conditions (mainly having been created for less than 5 years, being a small company (less than 50 employees and a turnover inferior to €10 million)), it is possible to opt for these companies to be tax transparent for fiscal years (they then become subject to "IS"). This is a major choice to optimize the taxation of the company.

• SNC: "Société en nom collectif" or "SNC" which is a form of partnership, is less frequently used mostly because its partners are indefinitely and jointly liable for social debts on their personal property. It has the advantage of not imposing any minimum capital for its creation. Unless they elect for being subject to corporate income tax, "SNC" are tax transparent and their results are taxed at the level of their partners.
• Cooperative Corporations & Mutual Corporations: Lastly, France has cooperative corporations ("coopératives") and mutual corporations ("mutuelles"), the latter being often used in banks and insurance businesses.

a. "SA" is the most common form of for-profit organization used by companies seeking financing from investors which will have multiple owners.

b. Social enterprises often use "SA", "SARL" and "SAS" forms, as well as cooperative corporations.

In France, article 1833 of the Civil Code, which applies to all companies, provides that companies are managed in their corporate interest, taking into consideration social and environmental issues relating to their activities.

Companies can also include in their bylaws a fundamental purpose ("raison d'être"), often related to social or environmental issues, that will have to be taken into consideration in the management of the company.

Commercial companies can opt for the quality of "société à mission" (mission-led company), in which case they will have to include in their bylaws a "raison d'être" as well as social and environmental objectives that they undertake to pursue. The management will have to take into consideration these objectives which may, in certain cases, limit the short-term return for shareholders.

In France, social enterprises can be:

1. Commercial companies ("SA", "SARL", "SAS"…), having opted for the quality of "société à mission".
2. Commercial companies ("SA", "SARL", "SAS"…), including sociétés à mission, subject to the social and solidarity economy ("économie sociale et solidaire" or "ESS")  regime.
3. Non-profit entities.
4. "Coopératives".  

1. "Sociétés à mission":

(a) In France, since the Loi PACTE of May 22, 2019, a commercial company can opt for the quality of "société à mission". The pursuit of its societal mission is not in contradiction with the search for profit, though it may limit the short-term return for shareholders.

(b) This form differs from the regular corporate form because their articles of association shall:

• Include a "fundamental purpose" or "raison d'être".
• Include one or more social and environmental objectives that the company shall pursue.
• Include the creation of a mission committee ("comité de mission") separate from the corporate bodies and comprising at least one employee, which shall verify that the company pursues the above-mentioned objectives and draft a yearly report on the performance of said objectives by the company, which is appended to the management report.

Furthermore, a "société à mission" must be registered as such with the commercial court. Finally, an independent expert shall be appointed, whose role is to check that the company truly pursues its objectives and drafts every two years a report on the performance of said objectives.

 (c) The main advantage of opting for "société à mission" is that it gives meaning to the company's project, strengthens its links with its stakeholders and improves the company's brand image. There is no favorable tax regime.

(d) The only restriction lies in the reporting obligations set forth in (b) above.

(e) Opting for the quality of "société à mission" requires, for an existing company, holding an extraordinary general meeting of shareholders and then proceeding with the other formalities with the clerk of the commercial court, which are very straightforward. Newly formed companies shall simply include in their by-laws at the time of incorporation the provisions set forth above.

(f) As of January 31, 2021, around 100 companies had opted for this quality. 

2.  "ESS" commercial companies:  

(a) Since the Loi HAMON relating to the social and solidarity economy of 2014, commercial companies ("SA", "SAS", "SARL" ...)  can be subject to the "ESS" regime.

(b) The main conditions for a commercial company to be subject to the "ESS" regime are as follows:

• The social purpose must consist of supporting people in fragile situations, contributing to the development of social ties, education for citizenship, contributing to sustainable development, energy transition, cultural promotion or international solidarity.
• Democratic governance must be provided for in the bylaws through information and participation of shareholders and employees.
• At least half of the profits must be devoted to the maintenance or the development of the company and its required reserves are not distributable.
• Capital amortization or reduction not motivated by losses are prohibited, unless with a view to ensuring the continuity of the company's activity.

(c) The main advantage of the "ESS" regime for a commercial company is in terms of a positive impact on its reputation. Furthermore, it gives access to specific types of funding:

• specific funding from "BPI France" and the "Caisse des Dépôts et Consignations" as well as "FISO" and "PIA ESS" schemes.
• refundable advances and guarantees.
• support mechanisms implemented by local authorities.
• local support mechanisms.

"ESS" companies, as well as other "ESS" structures (associations, foundations, cooperatives, mutuals), can, in addition, apply for "ESUS" approval, provided that their bylaws impose that the salaries of the best paid persons shall not exceed 7 times the minimum wage.

The main advantages of the "ESUS" approval are (i) that it constitutes a lever allowing to benefit from the financing by solidarity employee savings and (ii) that it gives the right to natural persons investing in companies having obtained this approval to tax reduction schemes (see III [4.] below).

(d) See b) above.

(e) Being subject to the "ESS" regime requires modifications of the bylaws, and straightforward administrative formalities with the trade and company register. Newly formed companies shall simply include in their bylaws at the time of incorporation the provisions set forth above.

(f) The "ESS", including "ESS" commercial companies as well as other ESS entities as a whole, represents more than 13% of private-sector employment.

3. Non-profit entities: (see {5.} bellow).

4. "Coopératives": Two specific types of cooperatives are often used in France for social enterprises: the "SCOP" and the "SCIC".

• "Société coopérative et participative" ("SCOP"):

(b) "SCOPs" are cooperatives, created in the form of "SA", "SARL" or "SAS", where employees own at least 51 % of the share capital. Each member has one vote.

(c) "SCOPs" can benefit from the "ESUS" regime (see {2.} above).

(d) No such restrictions.

(e) Administrative formalities of the "ESUS" approval mentioned above.   

(f) "SCOPs" are increasingly used.

• "Société coopérative d'intérêt collectif" ("SCIC"):

 (b) "SCICs" were created by the law of July 17, 2001. The purpose of the "SCIC" is the production or supply of goods and services of collective interest which are of a social utility character. The particularity of the "SCIC" regime is that its members must fall within at least three different categories: employees, users or customers, local authorities of the territory where the "SCIC" is active, suppliers, volunteers... These different categories (at least 3) of cooperators are grouped together in boards whose weight in decision-making is specified in the bylaws of the "SCIC".

(c) "SCIC" can benefit from the "ESUS" regime (see {2.} above).

(d) No such restrictions.

(e) Administrative formalities of the "ESUS" approval mentioned above.  

(f) The number of "SCIC" creations has developed favorably in recent years.  

The law of July 1, 1901 sets the general framework for the legal regime of the association contract. An association is, in principle, non-profit. As a result, it is normally exempt from paying commercial taxes (CIT, VAT and business tax). Social enterprises can be operated as associations.

a. Unlike associations which are not social enterprises, associations which are social enterprises can benefit from "ESUS" approval (see [4.] above).

b. There is no lesser reporting or faster training process for social not-for-profit organizations compared to others.

c. No

d. More and more associations are involved in the "ESS".

See [4.] above on "SCOP" and "SCIC".

There is no unique reporting for social enterprises. As mentioned in [4.] above, "sociétés à mission" are subject to reporting obligations that do not apply to traditional companies or to other social enterprises:

• The mission committee must deliver a report each year, appended to the management report.
• An independent third-party verifies every two years the performance of the objectives and issues an opinion attached to the report of the mission committee.  

Other types of social enterprise are not subject to specific reporting.

In France, there is not much case law on social enterprise. In particular "sociétés à mission" is a very new concept, and there is no case law thus far.

Since 2019 Loi PACTE, all companies must be managed in their corporate interest, taking into consideration social and environmental issues resulting from their activities.

The EU non-financial reporting directive has been implemented in France since 2017. Companies above a certain size must prepare and disclose non-financial information on the impact of their activities on environmental and other ESG issues. Its revision is expected for 2021.

This reporting obligation only applies to certain legal forms of corporations, namely "SA", "sociétés en commandite par actions" and certain "SNC", but not to "SAS" or "SARL". It also applies, regardless of their legal form, to credit institutions and insurance and reinsurance companies.

In its reporting statement, the company is required to address how it takes into account the environmental and social consequences of its activities, in particular:

• Environmental matters: the consequences on climate change of the company's activities and the use of the goods and services it produces and social commitments in favor of sustainable development, circular economy and the fight against food waste.
• Social matters: collective agreements concluded within the company and their impact on the company's economic performance and employees' working conditions, and actions aimed at combating discrimination, promoting diversity and actions taken in favor of disabled workers.

The law on the duty of vigilance, dated March 27, 2017, applicable to large companies requires them to establish and effectively implement a vigilance plan that includes reasonable due diligence measures to identify risks and prevent serious harm to human rights, fundamental freedoms, human health and safety as well as the environment, resulting from the activities of the company, its subsidiaries and subcontractors or suppliers with whom an established commercial relationship is maintained.

"ESS" companies must have activities in limited fields connected with social business or sustainable development.

"Sociétés à mission" must define social and environmental objectives that they undertake to pursue.

This tends to align with certain ESG criteria.

In August 2015, the French Energy Transition for Green Growth Law was adopted. Article 173 thereof required climate-risk disclosures by French asset managers and insurers, which includes the French subsidiaries of global asset managers and insurance companies.

This legislation was replaced on March 10, 2021 by the provisions of the EU's "sustainability disclosure regulation" which was adopted on November 27, 2019. Pursuant to this new regulation, market participants must publish information on their website or as part of pre-contractual information relating to policies for integrating sustainability risks into investment decisions, due diligence policies on negative impacts on factors of sustainability and explanations of how a financial product takes into account the main negative impacts on sustainability factors.

See I. [11.] above on disclosure regulation.

The "ISR" label, which aims to make socially responsible investment products more visible for savers in France and in Europe, also takes into account ESG issues. It is awarded at the end of a strict process carried out by independent organizations and constitutes a unique benchmark for savers wishing to participate in a more sustainable economy.

There are a number of private funds that take ESG criteria into account when investing, although they are not required to do so.

There is also an increase in impact funds using ESG factors as part of an investment appraisal process.

In France, social enterprises set up as non-profit organizations receive grants.

Social enterprises formed as for-profit companies receive traditional investments.

For-profit impact investments have developed a lot recently in France. Many investors create impact funds that aim to have a measurable social and environmental impact while ensuring a financial return.  

In France, companies that are part of the "ESS" can benefit from certain specific types of funding. The "ESUS" label also gives the right to additional funding (see I. [4.] above).

Yes, "sociétés à mission" can be listed companies. On June 26, 2020, "Danone" was the first listed company to take on the status of "société à mission."

As mentioned in I. [9.] above, certain large publicly traded French companies must publish non-financial information relating to the impact of their activities on ESG issues.

This obligation also applies to certain large not publicly traded companies.

In France, Green bonds have become very common.

Social bonds financing projects having a social impact on the life of communities, for example facilitating access to school, supporting vaccination campaigns or job creation, are also developing.

No.

Crowdfunding is legal in France since 2014. Crowdfunding is used in France to receive donations, borrow money or issue securities.

In general, Social Enterprises are not granted any specific tax exemptions. 

Associations are exempted from commercial taxes (such as CIT, VAT and business tax). Such exemption applies provided (in a nutshell) that the association (i) do not distribute profits to its members, (ii) do not carry-out activities competing with other for-profit Enterprises, and (iii) complies with a certain limit regarding the remuneration of its managers. In any case, associations remain subject to a reduced CIT rate on income derived from their assets.

Associations not fulfilling these conditions are subject to commercial taxes (even though, they may benefit from tax exemptions depending on the sector).

“SCOPs” are exempted from the territorial economic contribution.

Donations made by individuals for the benefit of certain entities acting for public interest are eligible for a tax income reduction. The French tax law details strictly the beneficiary organisms eligible to such tax reduction; it covers mainly associations, foundations, works, endowment funds or public or private organizations, which are carrying out an activity of public utility or of general interest and not for profit.

The income tax reduction is equal to 66 % (or 75% for entities providing free meals, housing and healthcare to people in need) of the amount paid and limited to a maximum of 20% of taxable income.

Donations made by companies are also eligible to a tax reduction (under the "mécénat" regime), which is equal to 60 % of the amount paid, up to 0.5% of their turnover. Eligible organisms to such tax reduction are mainly organizations of public interest and associations recognized of public utility.

Social Enterprises, provided they have been granted the “ESUS” approval, allow individuals contributing cash to their share capital to benefit from the a tax reduction (corresponding to 18% or 25% of the amount contributed), under slightly softened conditions.

This reduction is generally available for contributions made to any SME, but regular SMEs must carry out their activity on a market for less than 7 years as from the FY following the one in which its turnover exceeds €250,000n while for "ESUS" approved entities this delay is extended to 10 years.

When operated under the form of a “cooperation”, Social Enterprises are granted the following tax incentives:

• “SCOPs” could offset their taxable income distributed to employees under employee profit-sharing schemes.
• “SCICs” could offset against their taxable income for CIT purposes income incorporated to legal and statutory reserves.

No, not to our knowledge.

No.

There is some support available from the government for small businesses, especially in the context of COVID-19.

Regarding "ESS" companies, no specific reporting is required.  

Regarding "sociétés à mission", reports are drafted by the mission committee and by an independent third-party body (see I. [4.] above).

The "ESS" French Chamber was created on October 24, 2014 and brings together major players in the "ESS" community.

Its purpose is to help the sector develop, to represent it, and to support French and European public policies in their support of the "ESS".

No.

In France, it usually takes a week to form a company. Formalities can now be made online.

"ESUS" approval gives the right to access specific types of funding (see I. [4.] above).

There are other labels, such as "Lucie" or the quality of "société à mission", but they do not confer any funding or tax benefit.

In recent years, France has become a real center for the creation of startups. Startups and other entrepreneurial businesses can be easily established and thrive.

The procedure for creating a startup is simplified by favorable jurisdictional changes. Furthermore, the creation of startups is encouraged through several tax measures (for example, the tax status of a "young innovative company", as well as a rather favorable research tax credit).

Social enterprises can easily be formed and prosper in France.

Enterprises wishing to benefit from the "ESS" commercial company regime simply have to modify their bylaws.

"Sociétés à mission" must also modify their bylaws (see I. [4.] above).

No.

No.

• Providing tax benefit to "sociétés à mission".
• Allowing social enterprises to have privileged access to public procurement.

As regards the scope of the NFRD and the law on the duty of vigilance (see I. [9.] above), it would be relevant if it were extended to smaller companies.

No.