Business Law

Business Law

Rule of Law: a set of written rules of public interest. This set of law can be a constitution, international laws (EU), statutes, customs. It is a code composed of directives (goals) and regulations.

Who creates the law?

In CLC, as the lower courts have to follow what is done by the higher courts on same cases, the Supreme court are considered as creating the law (bound to the precedent).

In WLC, the lower courts should refer to the higher courts but they can take decision different than the one taken by the Court de Cassation, they refer to the code only (must search for the laws).

In Civil Law

ADRM (alternative dispute resolution mechanism):

• Arbitration: persons try to understand both parties problem and give a decision that will be applied no matter if both party agree on the decision
• Mediation: persons try to understand both parties problem to find the problem and try to give solutions that both party agree on.

Session 1: Acts of Commerce, Merchants and Business Law

Business Law (deal with business and set rules on any type of businesses = broader concept) ≠

Commercial Law (deal with trade with merchant = traditional concept):

Objective criteria: the transaction must be commercial

Subjective criterion: the contract must be made by a merchant

Commercial Act: speculation of a profit and repetition of the act

There are 3 categories:

• Commercial acts by nature:

• Isolated commercial acts:

• Operation related to circulation and transformation of wealth: purchase of something with the view of reselling it and make profit. We can exclude: the consumer’s act, sale of good acquired gratuitously (heritage), act of exploiting the nature (fishing, agriculture), sale of intellectual creation, sale of good made by craftsman
• Financial transactions: stock exchange, insurance contracts
• Intermediate services: real estate, brokering (even isolated or non-professional)
• Maritime operations: maritime transport, ship construction

• Within the framework of a business: as your professional activity + in a repeated manner.

• Commercial acts by form:

• Bill of exchange (always a commercial act)
• Act of commercial companies (legal form of the company that make it a commercial character submitted to commercial acts regarding the law)

• Commercial Acts objectively accessory: commercial or civil acts which are accessory to other commercial acts and activities (accessorium sequitur principale) BUT it is the principal act giving commercial character not the person performing the act

Merchants and Craftsman:

To be considered a merchant you need to be acting on your own behalf. They can be:

• Natural persons: those who are not merchant are craftsmen, farmers or liberal professions (lawyers, notaries, architects, doctors), and the merchants (associates in a partnership)
• Legal persons: companies (≠businesses): commercial companies or civil companies

Who can become a merchant? Requirements:

• Legal capacity
• Authorizations in regulated sectors (pharmacies, labs).
• No criminal record, no bankruptcy
• Incompatibilities

A merchant is:

• Subjected to Commercial Law
• Under commercial court’s jurisdiction
• Specific obligations: registered to the RCS (Trade and company register), accounting obligations, annual accounts

The French Commercial Courts solve problems between:

• Merchants (financial law and competition law)
• Merchants and commercial companies
• Individual and merchants
• Related to commercial act
• Related to bill of exchange
• Failure and bankruptcy

The Registry of the Commercial Court -> where companies are registered

A Merchant is a person with commercial capacity performing commercial transaction in their own name, at their own risk as their usual business, registering with the Trade and Company Register.

A Craftsman is a person with capacity performing activities with manual labor and know-how involved and commercial transaction to a very limited extent as their usual business on their own name and at their own risk registering within a special Register (repertoire des métiers)

Pros and cons of being a merchant:

Broad target public, large scope of activities, Ad Hoc courts, free modalities in evidence submission, arbitration

BUT, investment onerous, cost related to advertisement and accounting, arbitration is costly, matrimonial property regime

Pros and cons of being a craftsman:

Niche target, poor investment, arbitration, no accountancy or advertisement burden

BUT, no chance to grow beyond statutory limits, narrow scope of activity, ad hoc courts when opposing a merchant

He can’t employ more than 9 persons, if more he must comply with the rules of a merchant

Session 2: Introduction to the General Rules of French Company Law

Why choose to establish a company?

• Financial reason: The need for business development requires increased amounts to be committed and bank credit.
• Legal reason: The company has its own legal personality and its own assets, separate from those of its partners.
• Tax reason: while individual businesses and partnerships (corporations of persons) fall within the scope of the income tax (IR-BIC), capital companies are taxed with a corporate tax (IS).

There are:

• Civil companies: personal and unlimited liability of the associates proportional. Riskier for creditor
• Commercial companies: personal and unlimited liability of the associates joint and severe. Riskier for the partners

The company can be commercial by their form or by their object

[pic 1]

The commercial companies can be:

• Partnership (=general partnership or ordinary limited partnerships): Joint and severe liability = consideration of associate with interest, share not transferable if no consent of all partners, death or incapacity of one partner means end of the company, income tax
• Capital companies (=Public limited company, simplified Plc, Limited partnership with a share capital): Liable within the limits of the contribution: no interest in associate consideration, shares freely negotiate, corporate taxation
• Intermediate situation: limited partnership with share capital (partners with unlimited liability and limited partners), Private limited company – Ltd (capital company with features of partnership)

Status of the company regarding the law:

• Contractual: the company is a contract and it creates many company rules
• Institutional: a set of rules that organize a group of people around a specific purpose

Characteristics of companies:

• A plurality of associates: at least two throughout the existence of the company. A one-man company can be saved by distributing shares or making capital increase.

Single member’s companies: allowed in single member Ltd, single member simplified Plc. No general assemblies, sole shareholder take decisions. In case of dissolution:

• Natural person = liquidation
• Legal person (subsidiary of a company) = transfer of assets

•  The contributions: it is a necessity; a lack or fictitious contribution invalidate the company. It transfers ownership, usufruct or enjoyment of his asset. It can be:

• Cash contribution: upon subscription (buy shares can’t be refunded) or payment in the partner’s current account (a loan)
• Contribution in kind: transfer of ownership or free usage. The transfer take place during registration to RCS
• Contribution of service or sweat equity: knowledge, service, work with permanent contribution. Don’t contribute to the capital of the company (can’t take place in Plc)

• The sharing of the gross company profit and losses (up to contribution (in Plc, Ltd), unlimited and joint and severe liability (in partnerships)
• The affectio societatis: exclude any subordination between partners + allow company to be partnership if no written agreement in a business

Session 3: French Company Law: The partnership agreement

Partnership agreements have validity conditions, substantive conditions:

• Consent:

Integrity of the consent: free of defect

Sincerity of consent: sincere desire to join the partnership (not used as a way to conceal another convention (even desired by the parties) or make it a frontage for the action of one single person (ex: tax avoidance).