Setting up an activity in France

Sarl Mektor Consulting

3 Alle Jaqueline Auriol 95360 Montmagny FRANCE

Table of contents

SETTING UP AN ACTIVITY IN FRANCE A.1 DOING BUSINESS IN FRANCE THROUGH CONTRACTUAL PARTNERS A.1.1 INDEPENDENT AGENTS A.1.2 DISTRIBUTORS A.2 DOING BUSINESS IN FRANCE WITH ITS OWN DIRECTLY SET UP STRUCTURE A.2.1 LIAISON OFFICE OR REPRESENTATION OFFICE A.2.2 BRANCH OFFICE A.2.3 SUBSIDIARY A.3 ACQUIRING A FRENCH COMPANY OR PURCHASING BUSINESS ASSETS IN FRANCE TAX CONSIDERATIONS B.1 TAX CONSEQUENCES OF DOING BUSINESS IN FRANCE WITHOUT OWN STRUCTURE

3 3 3 4 4 4 5 5 6 8

AND WITH OWN STRUCTURE 8 B.1.1 NO PERMANENT ESTABLISHMENT IN FRANCE: INDEPENDENT AGENTS AND DISTRIBUTORS, LIAISON OFFICE OR REPRESENTATION OFFICE 8 B.1.2 PERMANENT ESTABLISHMENT IN FRANCE: BRANCH OFFICE, SUBSIDIARY OR ANY COMPANY 8 B.2 FRENCH TAX SYSTEM 9 B.2.1 CORPORATE INCOME TAX 9 B.2.2 CORPORATE INCOME TAX DECLARATION 10

B.2.3 VAT SOCIAL REGULATION C.1 LABOUR CONTRACT C.2 MINIMUM WAGES, WORKING HOURS AND PAID VACATIONS C.3 DISMISSAL C.4 EMPLOYEES REPRESENTATION C.5 RESIDENCE AND WORKING PERMITS APPENDIX MOST COMMONLY USED FORMS OF FRENCH CORPORATIONS

11 13 13 13 14 14 15 16 16

Setting up an activity in France

There are a number of ways to organise an activity in France, and the choice of one of them is usually based on the type of activity chosen, wishing to associate with a local partner or not, the turnover forecast as well as tax and legal considerations. Basically, there are two ways: with or without a structure. A Company may conduct business in France without establishing directly its own structure, i.e. through contractual relationships with partners such as: agents, distributors. But it may also conduct business in France through its own and directly established structure such as: a liaison or representation office, or a branch, or a subsidiary. Finally, a foreign investor may wish to acquire a French company or to purchase business assets in France.

A.1 Doing business in France through contractual partners

Agents differ from distributors if they act on behalf of a company they represent. For example, they do not purchase goods to resell them, but they sell goods on behalf of a company. They also differ from brokers who are just placing in contact two potential partners.

A.1.1 Independent agents

There are usually two types of commercial independent agents: the transparent agent (agent commercial) and the non-transparent agent (commissioner). Their remuneration consists in commissions usually based on the transactions they initiate and conduct. The agent commercial is mandated on a permanent basis to negotiate and eventually to conclude purchasing or sale or rental or services contracts in the name and on behalf of the company he represents. He is acting officially in the name and on behalf of the company towards third parties and clients who know that he is the agent of such or such company. He is not personally liable toward clients. As a consequence : (i) the principal is entitled to know the name of the clients, (ii) when the contract is terminated or not renewed by the principal, the commercial agent is entitled to a compensation for the loss of the clientele he developed for the principal. The commissioner is acting on behalf of a company but in his own name. More often, he is charged to sell or to buy goods according to his principals instruction, but the principal remains unknown from third parties and has no legal relation with clients. Thus the commission agent is personally committed and liable toward third parties. As a consequence : (i) the principal is not entitled to know the name of the clients of the commission agent, (ii) no compensation is usually due at the end of the contract.

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Both agents are independent (meaning not employees) although they are to act in conformity with their principals instructions. However, instructions shall not be excessive and lead to subordination of the agent, as the agent could then be considered as an employed sales representative and the contractual relationship could be submitted to labour law. Remark: a franchisee may be considered as an independent agent where he is not to buy goods to resale them, but is solely mandated to sell such goods on behalf of a company.

A.1.2 Distributors
Distributors are purchasing goods to resell them. Thus, they are acting on their own benefit and are solely bearing the risks of their activity. Their remuneration consists in the commercial margin they realise on the resale of goods. A Company may wish to have a sole distributor (exclusive distribution) and thus grant a distributor an exclusivity to sell goods on a defined territory and for a determined duration. Or it may wish to build a network of agreed distributors and select those of the distributors (selective distribution) who fulfil certain conditions, in order to its image or the notoriety of its products. It is often the case for luxury goods (such as cosmetic products) or for highly technical goods (such as sport shoes). However, this type of distribution must be justified by the need of an adequate distribution network and shall not lead to discrimination. Requirements shall thus be objective and justified. Finally, a company may wish to put at disposal of independent distributors her commercial know-how, her trademark or commercial name and require that the distributor commits to purchase branded goods from such company. Such distributors are called concessionaires or franchises. A concessionaires main obligation is to purchase him the goods and to resell them in conformity with the sales conditions set by the grantor (ex. Car dealers). This is not the case of the franchise who is free to set the resale price even though he is to buy himself the goods in order to resell them. Distribution agreements shall conform to EC competition law and thus not contain prohibitions or clauses that could be considered as a restrictive practice according to article 85 of the EC Treaty. Certain clauses are illicit in this respect (ex. Clauses limiting the right of the distributor to set the resale price). Distribution agreements shall also conform to French law according to which: any company who makes available to a distributor its corporate or trade name or trademark and requires an exclusivity commitment shall provide such distributor with a specific pre-contractual information defined by law, in order to allow the distributor to contract with full knowledge of the commitment he is taking, any obligation to purchase exclusively from a company certain goods is limited to ten years.

A.2 Doing business in France with its own directly set up structure
The choice of a structure will depend on the type of activity a foreign company wishes to conduct in France, as well as on legal and tax considerations. Typically, one distinguishes between a liaison office, a branch or a subsidiary.

A.2.1 Liaison office or representation office

A Company may wish to observe the market and to prepare its installation in France before running commercial operations. In such case, a liaison office that is mainly meant to have a preparatory or auxiliary character compared to the principal activity of the foreign investor is appropriate.

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Is considered as a liaison office for example a fixed place of business solely set up for the sole purpose of having preparatory or auxiliary activities to a commercial activity, such as purchasing goods or merchandise, collecting or supplying information, advertising, storing/ displaying/ delivering goods, or making contacts. Practically, such a bureau distinguishes from a branch in so far as it shall not have any commercial activity and shall thus avoid to conclude any sale or to supply any service. And although it is managed by a representative and may hire employees, it is not a legal entity and holds no assets. Usually, the choice of such a light structure is motivated by tax considerations. Such an office shall be registered with the local commercial registry.

A.2.2 Branch office

A branch office is easier to set up a subsidiary, but this choice of structure is seldom made as the legal disadvantages often outweigh the tax considerations. A branch is not a distinct legal entity from the foreign company, and is considered as a mere department set in a foreign country of such company. As a consequence, no minimum capital is required, and the commercial name as well as the purpose of the French branch is identical to those of the foreign company. The foreign company has unlimited liability for the debts of the branch, and no contract may be concluded between the branch office and the headquarters as they are the same foreign company. The headquarters of the foreign company that need nevertheless to designate a local manager to represent the French branch office makes decisions. Such a branch also needs to be registered with the local commercial registry, and the annual accounts of the foreign company have to be registered by the same register.

A.2.3 Subsidiary
A subsidiary is according to French law a company where another company holds more than 50% of the capital (excluding the share of the capital corresponding to non-voting preferred share). If another company holds a lower share of the capital, French law considers it as a simple shareholding (participation). A subsidiary is a distinct legal entity from the foreign company, and as such it may have a different name as well as a different purpose and a different form. For example: its purpose may be to act as a distributor or as an independent commercial agent for its parent company. French law provides for a wide choice for the legal form of a subsidiary having a commercial activity, i.e. with or without shareholders limited liability, public or not, close or not, tax transparent or not. It also provides for silent partnerships. Note: See chart comparing most commonly used forms of French corporations in the appendix. The most common legal structures adopted are the SARL (French closely held limited liability Corporation) and the SA (French limited liability corporation). SARL may be created with a single shareholder that is also manager (EURL) with a variable share capital (SARL capital variable) or with none of these two particularities (SARL). SA may be created with a simplified form which is particularly adapted where a mother company holds almost all the stock of its subsidiary (SAS) or with a supervisory board (SA directoire) or with an executive board (SA Conseil dadministration).

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Why choose a SARL rather than a SA ? First, the share capital to be paid up in SARL is of 7 6221 Euros and in SARL with variable share capital of 762 Euros, whereas in SA the share capital is minimum of 38 1122 Euros. Then, in SARL, a minority manager may in certain cases be exempted of social contributions, or be an employee of the company and thus entitled to unemployment benefits if he is dismissed. The SARL manager is better protected than a SA manager as he may only be dismissed by vote of minimum half of the shareholders, and could seek damages in case of dismissal for unfounded reasons. On the contrary, a SA manager may be dismissed by of the voting shareholders and his dismissal does not need to be justified by any particular reasons. Finally, the SARL manager is not acting with a supervisory or executive board. His activitys control is limited to the annual general meeting where shareholders are to approve his administration and the annual statement of accounts. A SA offers certain advantages for more important operations. First, its credibility is higher as it is better capitalised and its management is under supervision of an executive board or of a supervisory board as well as under a statutory auditor and finally under the associates meeting. A legal person may be administrator or supervisor by appointing a permanent representative. A SA may issue various types of securities and especially non-voting preferred shares. Finally, shares are freely negotiable and the taxation of a SA shares is more advantageous than that of a SARL shares (1% limited to 3 049 Euros for SA shares and 4,80% for SARL shares).

A.3 Acquiring a French company or purchasing business assets in France

According to French law, a commercial company owns a business called a fonds de commerce meaning a whole composed of tangible assets and intangible assets strictly defined by law. Assets of the so-called fonds de commerce are intangible assets (clientele, right to the commercial lease, trade name and all other intellectual property rights such as brands/ patents etc) and tangible assets (goods, equipment). The company itself holds more than a fonds de commerce, although this should be an essential part of her patrimony. It also may hold valuable contracts or buildings that are not part of the fonds de commerce. It may be astonishing that right to the commercial lease is considered as a valuable intangible asset. Foreign investors need to know that French law protects the holder of a commercial lease who holds with such a lease a negotiable right which might be very valuable, if the lease for example is concerning premises in a good location. As a matter of fact, the commercial lessor shall not terminate the lease but in very precise cases and is then to pay damages to the lessee, such damages being usually fairly high (they may amount to 2 years turnover). Also, the rental fee may only be increased within certain limits and at certain period. Such a lease may always be transferred to the purchaser of the fonds de commerce without the agreement of the lessor. Thus, a foreign company may choose (i) either to acquire the full patrimony of a company through a purchase of its shares (all its assets and known or unknown debts) or (ii) to limit its purchase to the fonds de commerce of a company (part of its assets and no debts, excepted labour and insurance contracts transferred by virtue of law to the purchaser). For a long time, companies have preferred to acquire shares and this for tax reasons. Taxation was much more important in the case of acquisition of assets. However according to the last finance bill, taxation has been significantly reduced and amounts now to the same taxation as if one were to acquire the shares of a SARL (4,80%).

1 2

For S.A.R.L. it is around 358,996.20 Thai Baht (based on quote dated November 19th 2003 For S.A. it is around 1,795,075.20 Thai Baht (based on quote dated November 19th 2003)

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So such a solution may seriously be considered where the purchaser wishes to limit its liability regarding the former management of the company or wishes to acquire a company having financial difficulties. If such is not the case, acquiring shares is more advisable especially if the company is a SA, as taxation is then limited to 1%.

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Tax Considerations

Generally, tax considerations are going to have an important influence in organising an activity in France. In France, the taxation of enterprises is based on a territorial principle. French taxes will apply to profits issued from an enterprise activity in France, or if there is a tax convention to profits taxed in France according to such tax convention. Generally such tax conventions allows France to tax profits derived from the activity of a permanent establishment in France.

B.1 Tax consequences of doing business in France without own structure and with own structure
In most cases, doing business in France without a structure and thus without permanent establishment will allow a foreign investor not to be liable to taxation in France.

B.1.1 No permanent establishment in France: independent agents and distributors, liaison office or representation office
If the agent is an independent agent, and provided certain conditions are fulfilled, such foreign company will not consider the agent as an establishment of the company he is acting for, and thus no tax will be due. The agent will be himself taxed in France for its own activity and income. Likewise, if the agent is a subsidiary from the foreign investor owing to a contract with the parent company, such subsidiary will be liable to pay tax in France on its agent income. This income will generally amount to the commissions paid or due less costs. Thus, the margin performed by the parent company on its sale, even though such sales could take place due to the agents activity, remains taxed in the parent companys country. Regarding distributors, they will not be considered as an establishment of the company of which they are purchasing their products in order to resell them. If a subsidiary acts, as a distributor from its parent company, such subsidiary will be taxed on the margin performed on its activity (resale margin of the goods bought to the parents company). In such case however, the purchasing prices to the parent company should correspond to normal market conditions. Usually, a liaison office if it has a preparatory or auxiliary activity (and thus does not engage in any commercial activity) is neither subject to corporate income tax nor to VAT in France. It is however subject to some other taxes.

B.1.2 Permanent establishment in France: branch office, subsidiary or any company

For French tax purpose, a branch is considered as an independent profit center and as a permanent establishment and thus subject to the same tax obligations as a subsidiary (i.e. taxation in France of profits derived from its activity). Thus, running business through a branch office or through a subsidiary in France should not in principle imply a great difference in French taxes. For example, in both cases, net after tax profits attached to the activity realised by a French branch or by a French subsidiary are deemed repatriated to the foreign company at the end of each tax year. They are thus submitted (as any distribution to non-resident) to a 5 to 25% withholding tax, unless the branch or the subsidiary may establish that no repatriation took place. However, tax conventions may bring about differences in the taxation of a subsidiary and a branch. Moreover, some National State aid, tax exemptions, taxation of intra-group transactions shall not benefit to branches.

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B.2 French Tax System

The French tax system is also particularly complex. Thus we will very briefly sum up the 1000 pages of the Tax General Code and the main taxes applicable to those of the corporations subject to French corporate income tax (and not to income personal tax applicable to fiscal transparent enterprise).

B.2.1 Corporate income tax

Corporate income tax applies to profits issued from business conducted in France as well as to profits taxed in France according to an international tax treaty. It applies by law to say capital companies, such as SA, SARL, and may also apply to other unlimited liabilities companies by election such as SNC. However, foreign companies may be submitted to corporate income tax even though they do not exercise any activity in France (for example on income derived from real assets they own).

B.2.1.1 Corporate income tax base

Corporate income tax is assessed on the yearly net taxable profit. Such net taxable profit corresponds to the yearly book profit amended and adjusted to take into account tax regulations that are sometimes different from the accountancy rules, leading usually to a higher taxable profit than the book profit. For example: reserves and allowances that may be admissible with respect to accountancy rules may not be admitted with respect to tax law. A classical example concerns corporate vehicles. Whereas according to accountancy rules, an allowance for depreciation of the full value of the vehicle is acceptable, tax law limits such an allowance to a maximum of 18 294 Euros VAT included. charges that may be fully deductible with respect to accountancy rules may in part or in whole not be deductible with respect to tax law. Such is the case for example for certain taxes (corporate income tax for example), or for gifts to clients (not deductible for the fraction exceeding 38 Euros per beneficiary).

B.2.1.2 Corporate income tax scope

French corporate income tax is based on a territoriality principle, meaning only those of the profits derived from activities exercised in France are taxed in France. Thus, the foreign activities of a French corporation are not in principle subject to corporate income tax in France (profits are not taxable and charges are not deductible). Reciprocally, if a company is taxed on its worldwide income in another country, such company will be taxed in France for its activities exercised on the French territory. However, tax treaties correct somewhat such principles by setting rules to avoid double taxation.

B.2.1.3 Corporate income tax rate

This most feared tax, which should be an influential factor included in the decision-making of heads of companies, has become rather complicated by virtue of the recent financial laws providing, de facto, 3 company income tax rates: a) A normal rate of 33.33 % to which 2 (!) contributions must be added: - a 3.3% social contribution assessed on the company Corporate Income Tax, is due if : - the Company Income Tax is > 762 245 or the annual turnover is > 7 622 450 ,

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- and less than 75% or the company capital, fully paid up, is owned directly or indirectly by individuals. - an additional contribution of 6% (3% as of 2002) due from all companies, also assessed on the Company corporate Income Tax. b) A special rate of 19%, in the process of elimination since 1997, which concerns only a few isolated cases (patent concessions, licences of exploitation, certain categories of securities issued by Venture Capital Firms...). c) A reduced corporate income tax rate to 25% (fiscal year open in 2001) and 15% (as of 2002), on the first 38 112 of profit, available to certain small- and medium-sized firms (PME) meeting the following principal conditions: - the company annual turnover is < 7 622 450 , - and less than 75% or the company capital, fully paid up, is owned directly or indirectly by individuals. However, in this latter case, note that dividend distribution corresponding to profits taxed at a reduced rate, implies payment of an equalization tax which, at the level of the company, in fact consists of paying the normal rate of Company Income tax! In conclusion, the situation as to the Company Income Tax is as follows:
2001 Regular regime Reduced Eligible "PME" rate 2002 2003 + 1.10% =

33.33% + 1.10% + 2% = 33.33% + 1.10% + 1% 33.33% 36.43% = 35.43% 34.43% 25% + 1.50% = 26.50% 15% + 15.45% 0.45% = 15%

Note: PME are equivalent to SMEs.

Therefore, it is more than ever important for a company to manage its taxation. What follows is universally valid for all professional entities subject to non-trading profits, business profits. What to do b) Take advantage of urban free zones (exemption of corporate income tax up to 60 979 Euros, of business tax.) while taking some precautions. c) Forecast distributions of dividends. To that end, remember that, since January 1, 2000, the order of dividend imputation to profits is left to the initiative of the companies.

B.2.2 Corporate income tax declaration

The French tax system is based on spontaneous declaration of those who are subject to incorporate income tax. Thus, companies are deemed to spontaneously fill the required tax forms and declare their taxable profit either through a tax representative or directly, to the tax office located in the resort of their main business location or to the tax office for non-resident in Paris. Such declaration shall be made in the three months following the end of the accounting year. The corporate income tax calculated by those who are subject to corporate income tax is payable in 4 provisional instalments. Payments delay may be obtained under certain conditions.

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B.2.2.1 Professional Tax

Despite numerous exceptions and exemptions set by law, the professional tax is usually one of the heaviest tax paid by corporations. It is assessed on: the value of productive assets and of wages paid which are fairly high in France especially if one considers the weight of social advantages such as the 35 hours, is due, without exception, even though the corporation is loss making, may reach fairly high level depending on the location of the corporation. charges that may be fully deductible with respect to accountancy rules may in part or in whole not be deductible with respect to tax law. Such is the case for example for certain taxes (corporate income tax for example), or for gifts to clients (not deductible for the fraction exceeding 38 per beneficiary).

B.2.2.2 Professional tax base

Professional tax is assessed on: the rental value of fixed assets used in France by the corporation even though such fixed assets would not be its property (buildings, equipment, machinery and tools), and 18 % of the amount of the gross wages (with a deduction of 45 734 Euros in 2000, 152 449 Euros in 2001 and 914 694 Euros in 2002) or for certain enterprises employing less than 5 salaried personal (especially commercial intermediaries) 10% of the net taxable profit. with a reduction of 16% and a ceiling of 3,5% of the enterprise value-added.

B.2.2.3 Professional tax rate

The rate of such professional tax is set locally and varies depending on the local districts where the enterprise exploits premises. For that reason and to create employment, numerous local districts are granting exemptions for several years to enterprises willing to set up some installations in their resort. Law is also granting a full exemption of such tax for certain duration in certain areas.

B.2.2.4 Professional tax declaration

As for the corporate income tax, professional tax is to be spontaneously and yearly declared by enterprises subject to it in each local district where such an enterprise exploits premises such as shops or warehouses. This constraint, which is difficult to manage for enterprises, is grounded on the fact that a part of the rate of this tax is decided at a local level city and area. Such tax is payable at once. Payments delay may be obtained under certain conditions.

B.2.3 VAT
According to certain people, VAT would not be a financial charge for enterprises, as such tax is born by the final consumer. Enterprises shall deduct from the VAT they recovered the VAT they owe and in case where they have a VAT credit obtain the reimbursement of such credit. Facts are somewhat different as:

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 in the French VAT system as in other countries, corporations are collecting the VAT on behalf of their tax institution and are thus submitted to important administrative obligations, for some expenses, the VAT is not deductible and this cost is born by enterprises (ex. restaurant expenses or car purchase).

B.2.3.1 VAT scope

The fairly complex VAT regulation being based on EC rules and especially on the 6th EC Directive, we will not detail here what be considered as a taxable or non-taxable transaction. However, in principle, any and all purchasing or sale or services transactions between two distinct persons are VAT taxable, but for: exportations, intra EEC transactions, banking and insurance operations (some exceptions).

B.2.3.2 VAT rate

The VAT rate varies from a reduced rate of 5,5% (mainly for food products and books) up to a standard rate of 19,6%.

B.2.3.3 VAT declaration

Two types of VAT declaration regime apply : a standard usually monthly declaration regime according to which the enterprise declares for the preceding month, the detail of VAT collected on related transactions (sale) and of VAT deductible on related transactions (purchase). a simplified declaration regime applicable to small businesses. Such regime allows paying provisional quarterly instalments regularised at the end of the fiscal year.

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Social regulation
C.1 Labour contract
According to French law, a labour relationship is characterised by a link of subordination. Such a definition often causes difficulty to managers who wish to benefit from a labour contract and correlatively from the unemployment benefit granted to employees if their contract is terminated. Managers are not considered as employees but as company representatives, but in certain cases they may cumulate two type of jobs: one as a company representative, the other as an employee of the same company. Thus, if shareholders terminate their mandate, such representatives remain nevertheless employees of the company. To avoid undeclared employment, an employer shall fill a form prior entering any such relationship, and send it to an organism called URSSAF. A labour contract may be concluded for an undetermined duration or in certain cases set by law for a determined duration (for example in case of temporary increases in business or to replace a pregnant or sick employee). The first type of contract may be oral as the pay slip that shall be given to any employee contains according to legal regulations the essential elements of the labour relationships. The second type of contracts requires a written contract. The parties within certain limits freely negotiate provisions of a labour contract. An employer shall not set provisions that are less favourable to the employee than the minimum requirements set by law and the applicable collective agreement (generally improving in favour of employees such requirements). In that respect, employers shall pay attention to minimum wages, working hours, duration of trial period (which shall usually not exceed a certain period ranging from 1 to 6 months depending on the qualification of the employee), location of work (which shall not be drastically changed afterwards without the agreement of the employee if such a possibility is not agreed upon in the labour contract), and so on.

C.2 Minimum wages, working hours and paid vacations

The minimum wage set by law in France for the lowest qualification is of 1 049 Euros per month. Collective agreements may require a higher minimum wage, and most collective agreements set minimum wages for each type of qualification and periodically increase such minimum wages. Thus, the labour contract and especially the description of the mission of the employee that will determine the corresponding qualification of this employee in respect to the collective agreement, is fairly important. Note that a famous principle concerning wages is for the same work, the same wages. So, no unjustified discrimination shall take place particularly with respect to sex. Standard duration of work is presently of 35 hours per week, but for small enterprises hiring less than 20 employees where the duration of work is by exception and up to 2002 of 39 hours per week. An employee is not supposed to work more than 10 hours a day. Extra hours shall not exceed 130 hours per year and 48 hours per week per employee without specific authorisation of the Labour Inspection. Any supplementary hour shall be paid with an increase of 25% and of 50% (for the 48h worked in the week) compared to the normal hourly wage. In addition, in enterprises hiring more than 10 employees, supplementary hours above the 42-hour open a credit of time off for the employee. In certain sectors, systems of flexible hours and shift-working forms are allowed and enterprises are exempted of overpayment and credit time for supplementary hours.

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Paid vacations in France are of five weeks per year, the date of such vacations being set in agreement with the employer. Such employer is free to decide when the employee may take his vacation. However, such employee shall get his vacation between the 1st of June and the 31st of May of the following year. And employers refusal to grant the vacation at the required date by the employee shall not be malicious.

C.3 Dismissal
Law and jurisprudence relating to employees dismissal in France are fairly complex and strictly sanctioned. A dismissal procedure is set by law and by collective agreements. In principle, any employer who wishes to dismiss an employee shall notify such employee that he considers dismissing him and set a preliminary interview where such employee will be able to come assisted by another employee of the enterprise or by an adviser outside the enterprise. The employer will then expose the reasons why he considers dismissing the employee and the employee will be able to voice his arguments. After such interview only, the employer shall have the right to decide whether he dismisses or not such employee, and if such is the case, shall notify the employee his decision to dismiss him along with the grounds of such dismissal. Dismissal may be grounded on economic reasons (as defined by law) or on genuine reasons or on misconduct. In some cases, and in particular where redundancy plans take place, employees representative shall be previously consulted. In case where the employee disagrees about the grounds of his dismissal, labour courts will judge if the dismissal is fair or not. Case law has become very important in the appreciation of what is a fair dismissal and in general, any dismissal or redundancy decision shall be implemented with care and advice. In case of unfair dismissal, a company may be sentenced to pay damages the amount of which will be higher if the enterprise hires more than 10 employees and the employee is salaried for more than 2 years. Damages will in this latter case amount to a minimum of 6 months gross salary for the employee, and usually courts sentence the employer to pay the same amount to the unemployment office.

C.4 Employees representation

Above certain thresholds related to the number of employees, each enterprise shall organise elections to designate employees representatives. The calculation of such thresholds is fairly complex, as some employees are not counted in such thresholds. Principles are that: if a company employs more than 10 persons, an annual election shall be organised to designate dlgus du personnel, i.e. personal delegates. Such an election is also required in each premises of the enterprise where more than 10 employees are working. The number of personal delegates varies from 1 to 9 according to the number of the company employees. Their role is to represent the employees in negotiations with the management over labour issues in the enterprise, and they may report claims to the labour inspection. if a company employs more than 49 persons, an election shall be organised every two years to designate a comit dentreprise i.e. an enterprise labour council. Such an election is also required in each premises of the enterprise where more than 49 employees are working (comit dtablissement). The number of members of such council varies according to the number of the company employees. Also, a union delegate may be designated by one of the representative union to assist to the council meetings with consultative vote. The role of such a council is to give its consultative opinion on major companys decisions (management and organisation) as well as to manage cultural events and welfare programs. Such a council has its own budget paid by the enterprise and set at 0,2% of gross wages for the current year. For such companies, a health and safety committee shall also be elected and consulted on such matters.

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Employee representatives are allocated a credit of hours to manage their task, and benefit from a strong specific legal protection (criminally sanctioned) making their dismissal fairly difficult and ensuring no obstacle will be brought to the exercise of their function.

C.5 Residence and working permits

Regulations in this matter is different for nationals of the EC and assimilated countries (Norway + Iceland) than for members of other states, and different if the employee is detached and remains paid by the foreign company as well as under foreign social security. According to EC principle of free circulation of persons, any EC national is free to live and work in another EC Country. Thus formalities are reduced, and such employees only need to request within three months of their entry in France a E.U. residence / working permit the validity of which ranges from one to five years. For members of other states, the procedure is much more complex. For permanent employees based in France, the employee will have to apply for a long-term visa in its country of origin, and obtain it before coming to France. Medical visit will be required. Once in France, he will have to apply within 8 days for a temporary residence and working permit valid for 3 years. If after 3 years, he is still residing in France, he will be able to apply for a permanent resident card valid for ten years and renewable. For detached employees, a status which is only accepted for executives, and is limited to 18 months (but for very highly qualified who may obtain under certain conditions an annually renewable temporary residence and working card), an application must be made in order to obtain a temporary residence card on one hand, and a temporary working permit on the other hand. Such documents are valid for 9 months and renewable once. Legal entities hiring illegal foreign workers are criminally sanctioned.

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Appendix
Most commonly used forms of French corporations
PARAMETERS SARL
(Closely-held limited liability company)

SA
(limited public liability company)

SNC
(general partnership)

SCA
(equity partnership)

Share capital Number of shareholders Chartered accountant Publicity of Annual statement o accounts required

7 622 , unless variable share capital 1 to 50 No if turnover less than 7 622 450 . Yes

38 112 paid up to 1/4 at incorporation, the remainder in 5 years after the incorporation Minimum 7 Legally required Yes

None

Same as for SA

At least 2 partners No, unless exceptions No

Same as for a SA Yes Yes Unlimited for managing partners

Liability

Limited

Limited

Unlimited Limited for non managing partners

Share transfer

Freely negotiable. The articles of incorporation Double majority may require the required (number of Unanimous consent of approval of shareholders and % of shareholders shareholders in case of share capital) transfer to a non shareholder Private individuals, shareholders or not Private individuals or legal entities, shareholders in certain forms of SA and not in others Private individuals or legal entities shareholders or not

Same as for SA

Managers

Private individuals or legal entities chosen among the managing partners

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Currency Exchange Rate

Update : 1 Effective From : 8:30
Currency Description Bank Note Buying Rates Selling Rates

Date : 19 November 2003 [Unit : Baht per 1 unit of foreign currency]

Buying Rates Sight Bill TT Selling Rates Bill-DD-TT

USD1 USD5 USD50 GBP EUR JPY HKD MYR SGD BND CNY IDR INR KRW PHP TWD AUD NZD CHF DKK NOK SEK CAD AED BHD JOD KWD OMR QAR SAR

USD : 1 USD : 5-20 USD : 50-100 United Kingdom Euro Zone Japan (:100) Hong Kong Malaysia Singapore Brunei China Indonesia (:1000) India Korea Philippines Taiwan Australia New Zealand Switzerland Denmark Norway Sweden Canada United Arab Emirate Bahrain Jordan Kuwait Oman Qatar Saudi Arabia

38.68 39.06 39.51 66.66 47.10 36.14 5.03 Unquote 22.96 22.47 4.11 3.42 0.0279 0.55 0.96 28.29 25.09 30.21 6.13 5.59 5.09 30.01 8.80 71.47 71.72 8.73 8.74

40.06 40.06 40.11 68.41 48.12 37.15 5.20 Unquote 23.56 23.46 5.10 5.35 0.0358 0.78 1.24 29.22 26.10 31.00 6.45 5.87 5.35 30.91 11.22 106.71 104.53 11.33 11.26 39.71 67.39250 47.39500 36.58750 5.10500 Unquote 23.12875 Unquote 4.08285 28.57250 25.15250 30.55750 6.35000 5.76625 5.26375 30.40500 39.81 67.57500 47.50500 36.67375 5.11875 Unquote 23.18500 Unquote 4.13610 28.65000 25.21750 30.63250 6.36750 5.78375 5.27625 30.48000 39.96 68.15250 47.95250 37.10750 5.16625 Unquote 23.43750 Unquote 5.33870 0.92750 0.73250 29.09250 25.59500 30.97750 6.44000 5.85375 5.33875 30.85750 -

Disclaimer : The above rates are subject to change without prior notice. For firm rates, please contact our foreign service counters.

Setting up an activity in France

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