Corporate Law (Exclusion of Partners)

The current situation of partners of limited liability companies carrying on a civil professional purpose (SEL – Société d’Exercice Libéral) is protected by law and the constitutive documents. This is due to the fact that they have to be protected as they are running the business activity. This is particularly the case in the event of exclusion of partners, when a decision is made to exclude a partner from the company.

In this respect, Article R.4381-16 of the French public health Code (Code de la Santé publique) states that a partner practicing within the company can be excluded when (i) he is prohibited from practicing or providing care to covered parties for a period equal to three months or (ii) the said partner contravenes operating rules of the company.

Article R.4381-16 of the French public health Code gives guarantees as to the exclusion decision: no exclusion decision can be taken if the partner was not legally convened and if he has not been in the position to plead his case on specific facts for which he was charged.

However, as to the voting process, Article R.4381-16 of the French public health Code states that the decision of the partners to exclude a partner is taken on the reinforced majority calculated excluding not only the vote of (i) the partners having been sanctioned for the same facts or related facts but also (i) the concerned partner (unanimity of other partners practicing within the company and entitled to vote having as well to be obtained).

The fact that the concerned partner does not take part to the vote is not in line with the ratio decidendi of the Cour de cassation (i.e. com. 9 July 2013) and the challenged provision is deemed not to have been written. Such a provision may as well be considered in breach of the ECHR (European Convention on Human Rights), in this particular case of Article 6 (right of a fair trial) or of Article 13 (right of an effective remedy).

The business activity is also protected in the event of temporary prohibition from practicing or providing care to covered parties (Article R.4381-16). In this perspective, provided that the partner is not excluded, the person concerned keeps his partners’ rights and duties, to the exclusion of the remuneration linked to his professional activity (Article R.4381-17).

This protection is crucial to ensure management stability, legal safety and thus, to foster business activity.

Up to date 17 August 2018

Tax On Dividends (French Law)

The first subparagraph of paragraph I of Article 235 ter ZCA of the French tax code (Code général des impôts), in the form that was derived from Law N° 2015-1786 of December 29, 2015 (the challenged regulation), was declared unconstitutional by the French Constitutional Supreme Court on October 6, 2017. This ruling—often referred to as the tax on dividends—takes effect in all instances that haven’t been definitively decided as of the date it was published (i.e., 8 October 2017). The contested legislation establishes a new tax called “additional contribution to company tax in relation to amounts distributed” that must be paid by organisations subject to company tax. The organisation that distributes revenues owes this contribution. 3% of the money distributed make up the amount owed.

The French Administrative Supreme Court (Conseil d’Etat) sent the matter to the Conseil Constitutionnel based on a QPC (Question Prioritaire de Constitutionalité).

This indicates that Law N° 2015-1786, dated December 29, 2015, was in effect at the time the Conseil Constitutional was convened, but that a portion of it had been contested before the Conseil d’Etat, which had forwarded a concern expressed by the plaintiff, the société de participations financière, to the Conseil Constitutionnel. Whether or not the contested regulation was unconstitutional was the question.

French Constitution

This constitutionality a posteriori conformance includes all of the civil and human rights guaranteed by the French Constitution in addition to being founded on the French Constitution strictly speaking. This is the reason that a lot of laws, regardless of the type of law (such as tax, corporate, business, labour, civil, or administrative), could potentially be challenged.

A further payment to business tax relating to dispersed amounts was the issue brought before the Conseil Constitutionnel. The section of the regulation that was being challenged that was pertinent was the first subparagraph of paragraph I of Article 235 ter ZCA of the French Code général des impôts, which states that “Companies, or French or foreign entities subject to company tax in France, UCITS mentioned in Article L214-1 of the French monetary and financial Code excluded, and those which qualify for the definition of micro, small, and medium companies given in annex I of Commission regulation (UE) n°651/2014 dated.

As a result, an additional tax is imposed on the following items: (i) profits or products that are not set aside or included in the share capital; (ii) any sums or values made available to partners, shareholders, or unit holders that are not withheld from profits; and (iii) unless the contrary is proven, amounts made available to partners (directly or indirectly) in relation to advances, loans, or deposits. (i) remuneration and occult benefits; (ii) non-deductible fraction of remuneration (within the meaning of Article 39 (1°)(1) of the French Code Général des impôts); (iii) expenses and charges which reduction; (iv) sums or values attributable to holders of beneficiary unit or in respect of founder in relation to buybacks of the said units; (v) remunerations and occult benefits; (vi).

Challenged Legislation

The issue at hand was whether or not this additional corporate tax payment violated the constitution. The plaintiff, a business, claimed that there was an unjustified disparity in the transfer of dividends from subsidiaries based on the locations of the respective subsidiaries. If the subsidiary is located in the EU, it is exempt from paying the additional contribution, according to the challenged legislation. The supplementary contribution applies if the subsidiary is based in France or a third nation.

Additionally, the plaintiff claimed that the contested law creates an unjustified disparity in treatment between corporations that distribute dividends received from EU-based subsidiaries and those that distribute dividends deducted from operating earnings.

The plaintiff consequently claimed that the contested rule violates the principle of equality before public burdens (principe d’égalité devant les charges publiques).

Block De Constitutionality

The Conseil Constitutional responded by referencing the “block de constitutionality,” or civil rights that apply in addition to the Constitution. The Declaration des droits de l’homme and du citoyen of 1789, including Articles 6 and 13, served as the basis for the Conseil Constitutional’s ruling.

The law “must be the same for all, if it protects or if it punishes,” according to Article 6. Equal treatment does not, however, preclude the possibility of the law applying different standards in other circumstances. Additionally, there is a public interest exception to the rule against equal treatment. According to case law upheld by the Conseil d’Etat (such as CE Denoyez dated 10 May 1974 (Section) n° 8803288148, Rec. Lebon), this stance is correct.

According to Article 13, a common contribution is necessary for the administrative costs as well as the upkeep of the public force. Each citizen must receive a portion of this contribution according to their ability. The Conseil Constitutional cited a fundamental provision of the Constitution (Article 34) when it said that it is up to the legislation to decide how to evaluate contributory capacities while adhering to constitutional principles and taking into account the characteristics of each tax. In particular, the law must base its evaluation on logical and objective standards based on objectives established by the law itself in order to guarantee respect for equal treatment. However, this evaluation shall not result in a recognised violation of equal treatment before public obligations.

Conseil d’Etat

The Conseil Constitutional also cited case law from the Conseil d’Etat, which stated that profits redistributed by a parent (mother) company from a subsidiary established in an EU member state other than France to which the daughter/mother regime of Directive dated 30 November 2011 applies cannot be subject to Article 235 ter ZCA. Other profits distributed by such a mother company, however, may be subject to the provisions of Article 235 ter ZCA.

However, these businesses are in a similar position with relation to the contribution’s goal, which is to tax all dispersed funds regardless of whence they originated, including those covered by the EU mother-daughter system.

The French parliament sought to make up for the loss of sustainable income caused by the suppression of withholding tax on UCITs by adopting an additional contribution to corporate tax related to disbursed amounts. Thus, it was obvious that the French parliament had a particular objective in mind. According to the Conseil Constitutional, who decided the case, such a goal does not, in and of itself, have a public interest nature that would justify treating mother companies differently from those who redistributing dividends from subsidiaries established in France or in a third country. As a result, the challenged regulation is unconstitutional because it violates the equality principle before the law and the public burdens.

Contract and Capital Markets Law in France: A Comprehensive Overview

In the heart of Europe lies France, a nation with a rich legal heritage and a prominent position in the global capital markets. This article delves into the intricate landscape of Contract and Capital Markets Law in France, shedding light on its key aspects, regulations, and implications for investors, businesses, and legal practitioners. As we explore this fascinating domain, it’s important to note that while every effort has been made to ensure accuracy, consulting legal experts for specific cases is recommended.

Contract Law in France

Contract law in France is governed by the Civil Code (Code civil), which lays the foundation for the principles of freedom of contract and good faith. The Civil Code defines a contract as an agreement by which one or more persons undertake to one or more other persons to perform or refrain from performing a particular act. It emphasises the importance of mutual consent, clear terms, and fairness in contracts.

Capital Markets Law in France

The capital markets in France play a vital role in the country’s economy and are regulated by various authorities, primarily the Autorité des Marchés Financiers (AMF). The AMF oversees the issuance and trading of securities, ensuring transparency, market integrity, and investor protection. The law governing capital markets in France covers a range of financial instruments, including equities, bonds, derivatives, and investment funds.

Key Aspects and Regulations

Disclosure Requirements: French capital market regulations mandate issuers to provide accurate and timely information to investors. This includes financial statements, risk factors, and any material information that could impact investment decisions. This transparency promotes informed investing and safeguards market integrity.

Prospectus Regulation: The Prospectus Regulation sets out the requirements for companies seeking to raise capital through public offerings. A prospectus must be approved by the AMF before securities can be offered to the public. This process ensures that potential investors receive comprehensive information about the issuer and the securities being offered.

Insider Trading and Market Abuse: French law prohibits insider trading and market abuse, aiming to maintain a level playing field for all market participants. Those with privileged information are restricted from trading on that information until it becomes public, preventing unfair advantages and market manipulation.

Takeover Regulations: The AMF regulates takeover bids and mergers to ensure fairness for shareholders and prevent hostile takeovers. Shareholders are granted certain rights and protections, including the right to receive accurate and timely information regarding takeover offers.

Implications for Investors and Businesses

For Investors: Understanding Contract and Capital Markets Law is crucial for investors looking to navigate the French market. Having insight into the regulatory framework ensures that investors can make informed decisions, assess risks, and protect their interests.

For Businesses: Businesses seeking to raise capital in France must adhere to the stringent regulatory requirements. Crafting a clear and comprehensive prospectus, ensuring compliance with insider trading regulations, and respecting takeover regulations are vital steps in building investor confidence and ensuring a smooth market entry.


The intersection of Contract and Capital Markets Law in France forms the backbone of a thriving economic ecosystem. The robust legal framework promotes transparency, fairness, and investor protection, bolstering the confidence of both investors and businesses. While this article provides an informative overview, it’s essential to consult legal experts well-versed in French law for specific legal matters. As France continues to evolve in the global economic landscape, staying informed about its Contract and Capital Markets Law remains a critical aspect of successful investment and business operations.