Corporate Governance 2024 Comparisons

Any person wishing to exercise a craft, a commercial or industrial activity or a freelance profession in the Principality of Monaco requires prior authorisation from the Monegasque authorities.

Monegasque nationals may exercise any commercial or industrial activity in Monaco freely, except certain activities subject to particular regulations.

In fact, certain “regulated” activities are subject to specific rules, based on nationality, qualifications, professional experience, financial conditions, approval, etc, which determine the conditions of access. These activities include financial, insurance, legal and accounting services, real estate, construction and healthcare.

In addition, the Monegasque government restricts the granting of authorisations to foreign nationals for any sector with an existing presence in the Principality. Indeed, in order to preserve the Principality’s economic balance, the sectors of activity considered to be sufficiently represented are restricted.

In Monaco, the majority of business organisations are structured as companies with distinct legal personality, but it is also possible to run a business as an individual. This is known as being a “sole trader”.

Monegasque legislation makes a clear distinction between civil companies, which are subject solely to civil laws, and commercial companies, which are subject to both civil and commercial laws. Civil companies are restricted to a specific range of activities classified as civil in nature, while commercial companies have the flexibility to engage in various activities, including those deemed civil.

The regulations pertaining to companies in Monaco are primarily outlined in the Commercial Code.

There are four forms of commercial company.

• General partnership (“Société en nom collectif” or SNC).
• Limited partnership (“Société en commandite”) – there are two types of limited partnerships:
1. “Sociétés en commandite simple” (SCS); and
2. “Sociétés en commandite par actions” (SCA).

As the latter form is rarely represented in the Principality, it will not be covered here.

• Monegasque public limited company (“Société Anonyme monégasque” or SAM).
• Limited liability company (“Société à responsabilité limitée” or SARL).

In addition to the forms mentioned above, Monegasque law also recognises joint ventures. The authors will discuss SNCs, SCSs, SAMs and SARLs below.

SNCs

SNCs are under the obligation to engage in commercial activities and require a minimum of two shareholders (individuals or legal entities). They are all considered traders (they have commercial capacity) and are indefinitely, jointly and severally liable to the full extent of their personal assets for all the company’s debts.

The law does not set any minimum amount for the share capital of an SNCs. It is, therefore, freely determined by the shareholders in the by-laws.

In SNCs, all shareholders are managing partners, unless otherwise stipulated in the by-laws. The shareholders cannot decide to entrust management to a third party.

SCSs

SCSs may pursue either civil or commercial activities and are also constituted by a minimum of two shareholders, comprising:

• general partners, who have a commercial capacity (traders) – they are indefinitely, jointly and severally liable for all the company’s debts; and
• limited partners who do not qualify as traders – they are liable for the company’s debts only up to the amount of their contributions.

The law does not set a minimum amount for the share capital of an SCS. It is, therefore, freely determined by the shareholders in the by-laws.

The general partner is the manager of the company. If there are several general partners, they all manage the company together unless otherwise stipulated in the by-laws.

SAMs

SAMs is are capital companies whose corporate purpose may be either civil or commercial in nature.

A SAM Is comprised of a minimum of two shareholders (individuals or legal entities), whose liability is limited to the amount of their contributions. Since commercial capacity is not required, shareholders may include minors, even if not emancipated, and adults under legal protection.

The minimum share capital is EUR150,000. For certain activities, such as financial activities, the minimum share capital set by the law is higher.

Unlike the above-mentioned companies, SAMs must be incorporated before a Monegasque notary. Other types of company can be incorporated by private deed.

Indeed, for this type of company, a notarial deed drafted by a a Monegasque notary is required to stipulate:

• the by-laws;
• the declaration of subscription and payment of the share capital; and
• authorization for incorporation and approval of the by-laws of SAMs are given by the Monegasque authorities, published in the Principality’s official gazette (Journal de Monaco) and notified to the founders by the notary who drew up the deed.

SARLs

Lastly, SARLs are allowed to engage in commercial activities only.

SARLs require a minimum of two shareholders (individuals or legal entities – commercial capacity is not required). These shareholders are only liable for the company’s losses up to the extent of their contributions.

The minimum share capital for an SARL is EUR15,000.

SARLs are managed by one or more individuals, regardless of whether he/she is a partner or not. A company cannot be appointed as Managing Director of an SARL.

This corporate structure is the most prevalent in the Principality.

Although geographically located in Europe, Monaco is a sovereign, independent state which is not a member of the EU. Monaco has close ties with the EU through various agreements and treaties. For example, the Principality is part of the euro zone and the EU customs territory. However, it does not apply EU law.

Monegasque corporate governance requirements derive from laws and ordinances, as well as from internal rules established by the companies themselves, such as their by-laws.

The Monegasque Commercial Code contains the common set of corporate governance rules and requirements. However, the regulation framework is less detailed than in EU countries.

For this reason, Monegasque companies mainly rely on internal rules, such as by-laws, and internal board regulations, codes of ethics or conduct, which set out specific rules and requirements for corporate governance.

Shares issued by joint-stock companies must be in registered form. Holders, intermediate transferees and subscribers are jointly and severally liable for the amount of the share.

Transfers of companies with publicly traded shares must comply with the rules of the regulated market on which they are listed, in this case France. The issuing company must still be able to identify the owners of its shares, and its information must be made available to the statutory auditors and the Economic Development Department.

The admission of a company’s shares to a regulated market is rare in Monaco, with only two companies involved in 2024, as there is no stock exchange in Monaco.

Business activities in Monaco are profoundly influenced by the recommendations of MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism) a permanent monitoring body of the European Council.

Since 2022, Monaco has conducted an in-depth evaluation of its regulatory framework and practices in view of the fight against money laundering. This assessment has led to significant legal reforms that aimed to increase transparency and the monitoring of business entities. Measures such as the obligation to declare beneficial owners within a timeframe and the strengthening of strict due diligence procedures have been put in place.

Monaco is a pioneer in sustainable business practices, with initiatives that set new benchmarks for environmentally-friendly development. Among other initiatives, companies are invited to sign up to the National Pact for Energy Transition in order to achieve Monaco’s goal of reducing greenhouse gas emissions by 55% by 2030 and becoming carbon neutral by 2050.

In Monaco, the governance and management of a company is typically comprised of several key bodies and functions, each playing a distinct role in overseeing the company’s operations, decision-making processes, and compliance with legal and regulatory requirements. The principal bodies and functions involved in the governance and management of a Monegasque company may include the following.

• Shareholders – they are the owners of the company and have the ultimate authority over significant corporate decisions. They exercise their rights through voting at general meetings. The general meeting of shareholders is the highest decision-making body of a commercial company. For example, annual general meetings are held to approve financial statements, elect directors, appoint auditors and address other matters specified in the company’s by-laws or legal requirements.
• Board of Directors – in companies structured as SAMs, the Board of Directors is responsible for the overall management and strategic direction of the company. The Board consists of appointed individuals who represent the interests of the shareholders. The Board oversees executive management, sets corporate objectives, approves major transactions and ensures compliance with legal and regulatory requirements.
• Executive Management – the day-to-day management of the company is typically delegated to Managing Director(s), who may or may not also be shareholders, depending on the form of the company. In practice, the scope of the Manager’s powers is determined by the by-laws. Some companies may grant the broadest powers to act on behalf of the company within the limits of the corporate purpose. On the contrary, other companies may impose clauses limiting the powers of their managing directors (see 3.2 Decisions Made by Particular Bodies).
• Statutory Auditor – refer to 7.1 Appointment of External Auditors.

These principal bodies and functions work together to establish effective governance structures, to promote transparency and accountability, and to safeguard the interests of shareholders. The specific composition and roles of these bodies may vary depending on the type of company, its size, industry sector, and regulatory requirements.

The powers and types of decisions made by the corporate bodies vary according to the corporate form of the company.

SAM

Board of Directors

The powers/decisions delegated to the Board of Directors are mainly determined by the law and the internal rules.

The Board is responsible for determining the company’s strategic orientations and overseeing their implementation within the limits of corporate interest. To do so, it may be granted by the by-laws the broadest powers, without limitation or reservation, to act on behalf of the company and to carry out all transactions relating to its purpose.

The Board may also delegate such powers as it sees fit to one or more of its Directors or to one or more of its managers, whether or not they are associates, for the day-to-day administration of the company and to carry out the decisions of the Board of Directors.

In particular, the Board of Directors:

• appoints the Chairman and Chief Executive Officer;
• approves agreements with related parties;
• convenes the General Meeting and in particular the Annual General Meeting within six months of the end of the financial year;
• presents reports on the progress of corporate affairs during the aforementioned year; and
• submits financial statements for the previous year.

The powers of the Board of Directors are exercised within the limits of the powers granted by laws passed at the general meeting of shareholders.

The Board of Directors is also required to convene an Extraordinary General Meeting within one month when requested to do so by shareholders representing at least 1/10th of the share capital.

SARLs/SNCs/SCSs

Under Monegasque law, the company’s by-laws set out the conditions under which the commercial company is managed, as well as the decisions that shall be taken collectively by the shareholders at a general meeting.

Managing director(s)

These companies are generally governed by one or more managing directors. If the company has several managing directors, the by-laws may stipulate that they can act together or separately. If there is more than one manager, they are deemed to have separate powers vis-à-vis third parties.

For the SCS, the general partner is also the manager. If there are several general partners, they all manage the company together. However, the by-laws may specify that only one of the general partners should manage the company.

Each managing director may perform all actions necessary or useful to the accomplishment of the corporate purpose, subject to the powers expressly attributed by the shareholders by law or by the company’s by-laws.

In practice, the shareholders may grant them the broadest possible powers, or decide to limit their powers in the by-laws and require prior authorisation from the shareholders for material management decisions. However, such provisions are not enforceable against third parties.

Below is a non-exhaustive list of some typical decisions made by a managing director:

• the day-to-day management of the company, including operational decision making;
• management of the company’s finances, including cash flow management, preparation of budgets and financial statements – they are also responsible for filing accounts and other documents with the Monegasque authorities.
• they are also often responsible for human resources management;
• the managing director ensures that the company complies with all the laws and regulations in force in Monaco;
• convenes and sets the agenda for shareholders’ meetings;
• within six months of the end of the financial year, they closes the accounts and submits them, together with a management report, to the shareholders for approval; and
• submits to the shareholders a report on the execution of contracts and undertakings entered into directly or through an intermediary, between the company and one of its managers or shareholders.

General meetings of the shareholders

Refer to 5. Shareholders for a description of the shareholders’ decision-making processes.

Once again, the procedures for convening, holding and voting are determined by the law and the company’s by-laws.

The applicable decision-making process depends on the nature of the corporate body. Refer to 5.3 Shareholder Meetings for the shareholders’ decision-making processes.

In SAMs, the Board of Directors meet periodically to discuss a predefined agenda. Meetings are called by the Chairman as often as the company’s interest require. Convening, holding and voting processes are freely determined by the by-laws. Decisions are generally taken by the majority of Directors present or represented, with each director present having one vote.

Deliberations are recorded in minutes, which are filed in a special register and signed by the Board Directors.

A copy of the minutes of any Board of Directors meeting is submitted to the statutory auditors within 15 days of the meeting by the Chairman of the meeting.

Monegasque law does not dictate any decision-making process for non-collegiate corporate bodies, although it is recommended that material management decisions are registered in writing.

SAMs

In practice, SAMs are managed by a Board of Directors comprised of a minimum of two and a maximum of eight members, selected from among the shareholders and appointed at the General Meeting. Directors may be individuals or legal entities.

No Director may sit on more than eight boards of commercial companies based in Monaco.

The by-laws may stipulate that shareholders must own a minimum number of shares to guarantee all acts of management.

The Board of Directors is headed by a Chairman.

SARLs/SCSs/SNCs

There is no Board of Directors in this forms of company, the company is solely managed by its manager(s).

The Board of Directors operates as a collegiate body whose members jointly carry out the duties assigned to the Board. In principle, its members do not have any individual powers, except otherwise stipulated by the by-laws.

Nevertheless, the Board of Directors retains the authority to delegate specific responsibilities to individual directors based on their expertise and background.

For SAMs, refer to 4.1 Board Structure and 4.5 Rules/Requirements Concerning Independence of Directors.

SAMs

The first Board Directors are appointed at the first General Meeting convened by the founders of the company. Directors may not be appointed for more than six years. They are eligible for re-election unless otherwise stipulated.

They can also be appointed by the by-laws with the express stipulation that their appointment is not subject to approval by the Annual General Meeting. In this case, they cannot be appointed for more than three years.

Then, during the running of the company, the by-laws stipulate the procedures for appointing and dismissing the directors. In practice, they are appointed at the Annual General Meeting for a three-year term, assuming that the agenda of the general meeting includes this topic.

Outgoing members are eligible for re-election. If one or more seats become vacant between two Annual General Meetings as a result of death or resignation, the Board of Directors can appoint one or more provisional Directors. These appointments are subject to ratification at the next Ordinary General Meeting.

The Chairman of the Board is appointed by the Directors.

Directors may be dismissed ad nutum at the general meeting of shareholders. They may also resign by notifying the company of their decision.

SARLs/SNCs/SCSs

The first manager(s) are appointed in the by-laws. During the running of the company, managers are appointed and dismissed at the general meeting of shareholders.

In the absence of statutory provisions, they are appointed for the duration of the company.

Monegasque law also allows any shareholder to request from the Court of First Instance the dismissal of the managing director for justified reasons.

In SAMs, Board of Directors are legally prohibited from acquiring or retaining a direct or indirect interest in any business or contract entered into with or on behalf of the company, unless authorised to do so at the General Meeting. Each year, a special report is submitted at the Annual General Meeting regarding the execution of contracts or undertakings authorised by it under the terms of the preceding paragraph.

In addition, there are other activities that are incompatible with a board position, for example, being a lawyer, and a public officer.

Corporate officers and directors should always act in the company’s best interest.

They also have several legal duties towards shareholders and third parties including:

• convening ordinary and extraordinary general meetings;
• informing the shareholders and providing them with all the documents they need to vote in full knowledge of the facts; and
• compiling legal publications to ensure that certain corporate actions are enforceable against third parties.

For other legal requirements, refer to 3.2 Decisions Made by Particular Bodies.

Boards of Directors and Managing Directors of a Monegasque company owe their duties primarily to the company itself and to the shareholders. This includes acting in the best interests of the company, exercising care, diligence, and skill, and avoiding conflicts of interest.

A breach of director’s duties may be enforced by:

• the company;
• the shareholders; or
• third parties.

SAMs

Directors are responsible only for the execution of the mandate they have received. In the performance of their duties, they do not incur any personal or joint liability in respect of the company’s commitments.

The liability of directors, like the liability of all shareholders, is limited to the amount of their contributions. However, when, following a judgment declaring the cessation of payments, it appears that the company’s assets are insufficient to meet its liabilities, the court may decide that the company’s debts are to be borne in whole or in part, with or without joint and several liability, by the directors, unless they can prove that they have exercised all due diligence and activity in managing the company.

Personal bankruptcy or disqualification from managing a business or company may also be imposed in the event of conviction.

SARLs/SNCs/SCSs

The managing director(s) are liable to the company and third parties for any misconduct committed in the performance of their duties. As such, they may incur civil and/or criminal liability. Ordinary liability rules will apply.

Civil liability may be incurred if (i) the manager has committed misconduct, and (ii) such misconduct has caused damage (to the company, shareholders or a third party).

There are three types of misconduct that may incur the managing director’s civil liability:

• infringements of legal and regulatory provisions applicable to corporate law;
• violation of the company’s by-laws (eg, disregarding clauses requiring prior approval of associates for certain decisions); and
• mismanagement, such as a managing director accepting orders that they know the company will not be able to fulfil.

The legal representative of a company may be held personally liable by the Monegasque authorities should it be proven that, through fraudulent practices or serious and repeated non-compliance with tax and/or social security obligations, he or she has made it impossible to recover sums owed by the company to these authorities.

The conditions for the remuneration of the Board of Directors and Managing Directors, are governed directly by the company’s by-laws. Generally, they are determined and approved at the general meeting of shareholders.

All companies (except non-trading companies) are required by law to draw up an annual balance sheet, profit and loss account and management report, and to file them with the Monegasque authorities. These financial statements should provide details of the remuneration, fees, and benefits paid to directors and officers, including any salaries, bonuses, stock options, pensions, or other payment arrangements.

However, these accounting documents are not public; they cannot be consulted or communicated by third parties.

The company and its shareholders are legally bound by the articles of association, which constitute the company’s internal regulations. As far as shareholders are concerned, this set of rules, supplemented by the applicable laws of the Monegasque Commercial Code, sets out their specific rights within the company. For example, their right to vote, their right to receive dividends or their right to information on the company’s affairs and management.

This is especially true when there are several classes of shareholders, as is the case with SCSs.

In principle, shareholders are not involved in the day-to-day management of the company, which is delegated to directors. However, shareholders have the right to play an important role in certain decisions, ie, all matters assigned to the general meeting by law and the articles of association. These include, for example, approval of the annual financial statements, appointment and dismissal of directors and auditors, amendment of the articles of association or dissolution of the company.

The articles of association may also stipulate that some specific/important decisions will not be taken by the management but must only be taken by the shareholders. Furthermore, in practice, it is not uncommon for a director to also be a shareholder of the company.

Annual Ordinary General Meeting

At least once a year, within six months of the end of the financial year, an ordinary annual general meeting of shareholders must be convened to vote on the annual and consolidated financial statements, and the distribution of dividends. At this meeting, shareholders might also vote on the appointment of the statutory auditors, on related-party transactions and any decisions other than those reserved for the extraordinary general meeting.

SAMs

The annual general meeting must be attended by a number of shareholders representing at least a quarter of the share capital. If this number is not reached, a new meeting is convened in the form and within the timeframe prescribed by the articles of association, and its deliberations are valid, whatever the value of the capital represented by the shareholders present.

The by-laws determine the number of shares that must be held, either as owner or as proxy, to be admitted to the annual general meeting, and the number of votes each shareholder is entitled to in relation to the number of shares held. Shareholders may group together in such a way as to hold the number of shares required by the articles of association, and delegate one of their number to represent them at the general meeting.

Resolutions are passed by a majority of votes.

SARLs

The by-laws set out the procedures for convening and holding shareholders’ meetings and the majority required to pass resolutions. Unless the articles of association provide for a higher majority, decisions are adopted by associates representing more than half the share capital.

If this majority is not reached, the associates are, unless otherwise stipulated in the articles of association, convened a second time and decisions, with the exception of those relating to the amendment of the articles of association, are then taken by a majority of the votes cast, irrespective of the portion of capital represented.

SNCs and SCSs

In the case of SNCs and SCSs, decisions are taken in accordance with the provisions of the articles of association, and quorum requirements are also to be set by the articles of association.

In application of each shareholder’s right to information, in order to convene the annual general meeting, the manager must keep the annual financial statements and the management report available to shareholders or their representatives at the registered office.

As for any general meeting, whether ordinary or extraordinary, the manager must convene the shareholders and provide them with all the documents they need to vote in full knowledge.

Extraordinary General Meeting

The extraordinary general meeting is mainly empowered to approve amendments to the company’s by-laws, changes in share capital, mergers and demergers, and the early dissolution of the company. The quorums and majorities required for shareholders’ meetings to be valid vary according to the ordinary or extraordinary nature of the decision submitted to the shareholders, the corporate form of the company and the provisions of the by-laws. There may be general meetings “ordinary” by the nature of the decision submitted to the shareholders but held “extraordinarily”.

In general, shareholders’ meetings are held in person at the registered office or at any other location specified in the notice of meeting, but they may also be held remotely or by written consultation if the by-laws so allow.

SAMs

The purpose of an extraordinary general meeting is to decide on any amendment to the by-laws, such as changes to the legal form, changes to the company’s name, and capital increases.

The extraordinary general meeting can only take place if it is attended by a number of shareholders representing half the share capital. If this number has not been reached in the first instance, a second meeting is called within one month of the first.

During this interval, the date of the second meeting is announced weekly in the official gazette (Journal de Monaco), and at least twice, ten days apart, in one of the main newspapers in the Alpes Maritimes region, with an indication of the agenda to be discussed.

This meeting may only take place if a majority of three quarters of the shares are represented, whatever their number, is present.

In the event of a shareholders’ meeting, the directors must provide shareholders with all the documents they need to vote in full knowledge of the facts.

Directors are required to convene an extraordinary general meeting within one month at the request of shareholders representing one tenth of the share capital.

At all meetings, decisions are taken by majority vote.

SARLs

The majority requirements for extraordinary general meetings are the same as for ordinary general meetings. However the articles of association require a higher majority.

SNCs and SCSs

Decisions are adopted in accordance with the provisions of the by-laws, and there is no rule governing quorum requirements.

SARL, SNC and SCS

Decisions to change the nationality of the company, to transform it into a general partnership, a limited partnership or a partnership limited by shares, or to dissolve the company early, are taken unanimously.

Refer to 4.9 Other Bases for Claims/Enforcement Against Directors/Officers.

Refer to 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares.

Each year, within six months of the end of the financial year, the managing partner/manager submits to the shareholders’ meeting for approval, in addition to the inventory, the balance sheet, the profit and loss account, as well as a management report on the past financial year. To this end, he/she convenes the general meeting within six months of the end of the financial year.

Each year, the managing director/manager submits the balance sheet, profit and loss account and a certificate signed by themselves to the Trade and Industry Directory Department (Service du Répertoire du Commerce et de l’Industrie).

If the documents have not been sent by the end of the nine-month period following the end of the financial year, the Trade and Industry Directory Department may serve formal notice on the managing director/manager to send the aforementioned documents within a maximum of 15 days, failing which sanctions may be applied.

Refer to 6.1 Financial Reporting regarding the management report submitted each year.

SAMs

For SAMs, registration with the Trade and Industry Register (Registre du Commerce et de l’Industrie – RCI) follows publication in the official gazette of:

• ministerial decree authorising and approving the company’s articles of association;
• full articles of association; and
• the date on which a copy of the articles of association, the founder’s declaration of capital subscription and payment, and the minutes of the constituent general meeting are filed with the general registry (Greffe général).

In the case of SAMs, entry of amendments to the articles of association in the RCI is subject to approval by ministerial decree and to the following prior publication formalities:

• publication in the official gazette of the ministerial decree authorising modification of the articles of association; and
• publication of the amendment to the articles of association in the official gazette.

SARL, SNC and SCS

For other companies (SARLs, SCSs and SNCs), registration is carried out by the Economic Development Department (Direction du Dévelopement Économique) after transcription of the extract from the company’s deed of incorporation by the general registry and publication in the official gazette, at the company’s expense.

Any changes to the company’s details or those of its directors mentioned when registering with the Trade and Industry Register, as required by law, or any additional information required by law, must be declared to the Register.

For SNCs, SCSs and SARLs, entries in the RCI relating to a change of manager or the appointment of a co-manager, a change in the corporate purpose, the opening of a secondary establishment, or the transfer of the registered office, are subject to prior declaration for Monegasque citizens (unless the activity is regulated) or authorisation for foreigners.

SAMs and SCSs must appoint two external auditors (one principal and one substitute).

The appointment of an auditor is compulsory in all companies when their share capital exceeds EUR150,000 or when, for two consecutive years, two of the following three thresholds are met:

• their balance sheet total exceeds EUR1.5 million);
• sales of more than EUR2.5 million) excluding VAT; and
• the number of employees is greater than 20.

The Statutory Auditors are vested with a permanent general supervisory role, with the broadest powers of investigation concerning the regularity of the company’s operations and accounts. They ensure that shareholders’ meetings are properly attended and monitor the implementation of resolutions approved by shareholders.

The shareholders may appoint one or more statutory auditors.

The Statutory Auditor is appointed at the Annual General Meeting for a renewable term of three years.

Auditors are entrusted with a general and permanent supervisory mission, with the most extensive powers of investigation, covering the regularity of the company’s transactions and accounts, and compliance with the legal and statutory provisions governing its operation.

They may only be dismissed for serious misconduct in the performance of their duties.

Statutory auditors attend shareholders’ meetings, whatever their nature or purpose, but do not have the right to vote in this capacity.

They are liable to the company only for their personal misconduct, determined according to the rules of the mandate. If there are two statutory auditors, they may be sued individually or jointly and severally in accordance with the rules of ordinary law.

Refer to 4.4 Appointment and Removal of Directors/Officers, 4.5 Rules/Requirements Concerning Independence of Directors and 4.6 Legal Duties of Directors/Officers.