Halvorsen & Reith

Board composition review in France: requirements and exposure

A board composition review in France starts from a question most foreign parents never revisit after incorporation: which of the country's board models the entity actually runs, and whether the by-laws chosen at incorporation still reflect who actually decides. For a société par actions simplifiée the by-laws can say almost anything about corporate governance; for a société anonyme the choice between a single board and the two-tier structure carries different consequences for who is exposed if something goes wrong. Neither choice is visible from outside the group without reading the constitutional documents themselves.

A German-owned group set up a French SAS five years ago with a board copied from the parent's template. The founder who signed the by-laws has since left, the entity has grown past the point where informal governance was tolerable, and nobody in the group structure can say with confidence who is entitled to bind the French company on a transaction of any size. This is what a board composition review has to settle: what French practice actually requires here, what becomes visible on the public record once it is corrected, and where the boundary of an advisory engagement sits.

What changes in France

Outside France, a board composition review usually means checking a single board against one set of rules. The general version of this review sets out the checks that apply regardless of jurisdiction; what follows here is only what changes for a cross-border structure once the entity is French. The first question is which of two lawful models the entity actually runs. A société anonyme can operate with a unitary board and a separate director general, or with a supervisory board sitting above a management board – the two-tier structure French practice also permits, more commonly associated with German corporate governance but equally available here. A société par actions simplifiée is left almost entirely to its own by-laws: the founders decide the governing body, its name, its powers and how it is removed, and very little is imposed on top of that choice.

The consequence for a review is that there is no single template to check against. The starting point is always the constitutional document actually filed for the entity, not the model the group assumes it adopted, and not the model used for the group's other European subsidiaries. A related question, whether the entity should be redomiciled or continued elsewhere rather than governed as it stands, is addressed separately. Where a group runs the same structure across several jurisdictions, the divergence between France and, say, Germany is itself part of what the review has to record. The equivalent review for a German entity follows a different sequence, because the two-tier model sits close to standard for one legal form there and remains optional here.

The local requirement or test that drives the work

France does not apply a single test to decide whether a board is composed correctly; several tests apply, layered by legal form and by the size of the company. For the société anonyme, the number of board seats is fixed within a minimum and a maximum range, and who may sit on the board, and for how long, follows from the by-laws read against that range rather than from any figure that applies uniformly to every company. Above a certain size, the composition question extends further still: balanced representation between men and women on the board, and in some structures a seat reserved for employee representation, become live once defined thresholds are crossed, and confirming exactly where those thresholds sit for a given entity is a matter for the group's advisers to check against its own figures, not something this page states in the abstract. The by-laws also carry shareholder rights that interact directly with board composition, most obviously who may remove a director and on what notice, and a review that skips that clause has skipped the mechanism that actually controls the board it just mapped.

There is no separate statutory office of company secretary in French practice, and a review that goes looking for one is asking the wrong question. The functions a company secretary would carry out elsewhere – keeping the register, preparing board minutes, tracking filing deadlines – sit with the entity's legal representative and, in practice, with whoever the by-laws designate to keep the corporate books. A review has to identify who inside the French entity performs that function today, because the by-laws rarely say so explicitly and the answer is almost never the person the group assumes.

A related exposure sits close to this question. Where a group asks a third party, rather than one of its own officers, to sit on the French board in exchange for a fee, the arrangement can amount to a licensed activity rather than a freely contractable service; the position becomes fixed once the appointment is filed, and the option of unwinding it without a public record disappears from that point. This firm does not provide or arrange that appointment under any circumstances, for the reason set out later on this page.

The filing, register or forum consequence

Board composition in France is not a private matter once it is formalised. The appointment of directors, and any change to who holds that position, is filed on the commercial register, and the filing becomes part of the public record attached to the company. A group that discovers, mid-review, that an officer was never properly appointed, or that someone has been acting with a director's authority without the formal appointment to match, is not dealing with an internal question only. French practice recognises the position of a de facto director – someone treated as bound by the same duties and exposed to the same liability as an appointed one, purely on the basis of what they actually did – and a review that finds this pattern has found a live regulatory exposure, not a drafting gap.

Once an appointment turns out to have required a licensed capacity that was never obtained, correcting it later does not erase the period during which the entity operated under it; the filing for that period stands on the register, and the fact that the appointment should have been licensed becomes visible to any counterparty, lender or regulator who checks the entity's history rather than only its current position. This is why timing matters more than scope: the earlier the composition is checked against what actually applies, the more of the exposure remains capable of being fixed rather than merely disclosed.

A board that has operated for months under an appointment nobody checked against French requirements is not a hypothetical for most groups; it is the state a review usually finds. The cost of leaving it unresolved is not the review itself – it is the exposure sitting on the register in the meantime.

Review your appointment terms. Write to info@hreithlaw.com with the jurisdiction and the structure.

What this service does not include in France

A board composition review produces a mapped requirement, a comparison against the entity's actual by-laws and register entries, and an assessment of where the current composition creates exposure for the group or for an individual sitting on the board. It does not extend to acting as a director, secretary, nominee shareholder or trustee for the French entity, and it does not extend to sourcing, supplying or arranging for a third party to take up any of those roles. Providing a person to fill a board seat, or arranging for one to be provided, sits inside activity that requires a licence this firm does not hold and does not seek to hold by proxy through an affiliate.

The boundary is not a matter of preference. Providing directors, or arranging for a third party to be provided as one, sits inside regulated activity in a number of jurisdictions including France, and a firm that supplied that service without the licence for it would be creating exactly the exposure this review exists to identify. What a client receives instead is the analysis needed to make the appointment, or to correct it, with full knowledge of what it requires.

Where the review shows that an appointment was made without the capacity it required, the terms of that appointment are the first thing to put in front of someone who can assess what follows from it, before the next filing is due rather than after.

Review your appointment terms. Write to info@hreithlaw.com with the jurisdiction and the structure.

Frequently asked questions

Does board composition review in France change for a foreign-owned company?
The underlying rules do not change because the parent sits abroad, but the review itself has to check something a domestic-only group rarely needs checked: whether the governance copied from the parent's template actually matches what is permitted for the legal form chosen locally.
What does board composition review in France require in practice?
It requires reading the entity's own by-laws and register entries against the rules that apply to its legal form and size, rather than assuming the model used elsewhere in the group applies here. For a société par actions simplifiée that comparison is mostly against the by-laws themselves; for a société anonyme it is also against the fixed rules on board numbers and, above a certain size, on balanced composition.
Who inside the company is responsible for board composition review in France?
Responsibility sits with whoever holds the legal representative function for the entity, most often the chairman or director general depending on the model chosen, and not with a separate company secretary, because no such office exists in French practice. Where the group has assumed otherwise, that assumption is usually the first thing the review corrects.
What evidence should the board keep on board composition review in France?
The by-laws in their current, filed form; the register extract showing who is currently appointed; and a record of when each appointment was made and by what body, since a gap between the by-laws and the register is itself evidence that the composition needs correcting rather than only recording.
What happens if board composition review in France is not addressed?
An unreviewed structure does not stay static. Someone continues to act under an appointment that may not match what was filed, or under no formal appointment at all, and each further transaction is one more event that could later be read against a board that was never properly composed. The exposure accumulates quietly rather than announcing itself.
By Emil Rask