Corporate Governance 2024 Comparisons

Commercial companies are governed in Senegal by the Uniform Act on Commercial Companies and Economic Interest Groups, published on 30 January 2014 (AUSCGIE). The most commonly used commercial forms are, in order, the société à responsabilité limitée (SARL), the société anonyme (SA) and the société par actions simplifiée (SAS).

The SARL

This company is the simplest of commercial companies, in which the liability of the shareholders is limited to contributions. The SARL may be established by one natural or legal person, or between two or more natural or legal persons. It does not require any minimum share capital for its creation, and its capital is divided into shares.

It is often characterised by a fairly strong intuitu personae, which is why transfers of shares are often governed by specific authorisation rules given by the non-transferring shareholder. The SARL is managed by one or more natural persons, associated or not.

In addition, the SARL is not required to appoint an auditor unless it meets two of the following conditions at the end of the financial year:

• a balance sheet total exceeding XOF125 million;
• an annual turnover exceeding XOF250 million; and/or
• a permanent staff of more than 50 persons.

The shareholders of the SARL meet in a general meeting, either ordinary (each year for the approval of the accounts of the closed financial year) or extraordinary (for any modification of the articles of association).

The SARL is a corporate form adapted to greenfield projects, commercial activities and services. It is also suitable for young entrepreneurs with few resources, due to its low formation cost.

The SA

The SA under the AUSCGIE may be held by a single shareholder. The founder(s) must choose unequivocally in the articles of association for the management and administration between:

• an SA with a board of directors (from one shareholder); or
• an SA with a managing director (up to three shareholders).

The minimum share capital of an SA is XOF10 million. It must be fully subscribed by the shareholders and may be paid up by at least one quarter upon incorporation.

The founders of an SA must appoint a statutory auditor, and an alternative, chosen from among experts who are members of the National Order of Chartered Accountants and Chartered Accountants of Senegal.

The SA with a board of directors

The board of directors is composed of a minimum of three persons and a maximum of 12 members, shareholders or not. The articles of association may require each director to own a number of shares of the company over which they preside. It is possible to appoint corporate directors, who appoint a permanent representative to the board.

The board appoints the chairman of the board of directors from among the natural persons who are members of the board, as well as the chief executive officer of the company, who may be one third of the board. It may also be decided to appoint a chairman and chief executive officer who will combine both functions.

The board of directors determines the orientations of the company’s activity and ensures their implementation. It controls and verifies the proper functioning of the company and settles matters regarding the company through its deliberations. The chairman of the board of directors presides over board meetings and general meetings. They must ensure that the board assumes control of the management of the company entrusted to the chief executive officer.

The chief executive officer is responsible for the general management of the company. They represent it in its relations with third parties. On the proposal of the chief executive officer or the chairman and chief executive officer, the board of directors may appoint one or more individuals to assist the chief executive officer, or the chairman and chief executive officer, as deputy chief executive officer.

The SA with a managing director (administrateur general)

The managing director assumes, under their responsibility, the administration and general management of the company. They represent it in its relations with third parties, and convene and chair the general meetings of shareholders. The managing director is vested with the broadest powers to act in all circumstances on behalf of the company and exercises them within the limits of the corporate purpose, and subject to those expressly attributed to shareholders’ meetings by the AUSCGIE and, where applicable, the articles of association.

On the proposal of the managing director, the general meeting may mandate one or more deputy managing director(s) to assist the director, as well as to decide other powers delegated to the deputy managing director.

The SA is a suitable form of company for the establishment of joint ventures, for companies with significant investments to make and for companies engaged in regulated banking or financial activities.

The SAS

Recently introduced in the AUSCGIE in 2014, the SAS is defined as a company set up by one or more shareholders whose articles of association freely provide for the organisation and operation of the company, subject to certain mandatory rules (competence of the shareholders’ general meeting to approve the accounts or amend the articles of association, for example).

The liability of the shareholders is limited to the contributions and there is no minimum share capital to create an SAS. When created by a single shareholder, it is called a single-person simplified joint-stock company (SASU).

The company is represented by a chairman, appointed under the conditions provided for in the articles of association. The chairman is vested with the broadest powers to act on behalf of the company within the limits of the corporate purpose.

The articles of association freely determine the decisions that must be taken collectively by the shareholders in the forms and conditions they stipulate. Decisions taken in violation of the statutory clauses are null and void.

The appointment of one or more auditors is optional unless the SAS meets two of the following conditions at the end of the financial year:

• a balance sheet total exceeding XOF125 million;
• an annual turnover exceeding XOF250 million; and/or
• a permanent workforce of more than 50 people.

An SAS that controls or is controlled by one or more companies is also required to appoint at least one auditor.

This form of commercial company is appropriate for companies whose shareholders have different profiles: investors and project leaders, equity companies and companies operating in the field of services and new technologies.

In Senegal, company law is subject to the Organization for the Harmonization of Business Law in Africa (OHADA) law and more specifically to the Uniform Act on Commercial Companies and Economic Interest Groups (AUSCGIE). The articles of association and the shareholders’ agreement are also sources of corporate governance.

Companies making a public offering of their shares in one or more contracting states or whose shares are listed on the stock exchange of one or more contracting states are required to have a board of directors. The boards of directors of the companies must be composed of at least three members and at most 15 members when a company’s shares are admitted to the stock exchange.

However, in the event of a merger involving one or more companies whose shares are admitted to the stock exchange of one or more “State Parties”, the number of 15 may be exceeded up to the total number of directors in office for more than six months in the merged companies, but may not exceed 20. No new directors may be appointed, nor may directors who have died or ceased to hold office be replaced, until the number of directors has been reduced to 15 when the shares of the company are admitted to the stock exchange of one or more of the State Parties. If a company admitted to the stock exchange of one or more State Parties is delisted from that stock exchange, the number of directors shall be reduced to 12 as soon as possible.

Within the various limits set out above, the number of directors is freely determined in the articles of association.

The board of directors of the company is obliged to have an audit committee (comité d’audit). The audit committee is composed exclusively of directors who are not employees of the company and who do not hold a position as chairman and chief executive officer, chief executive officer or deputy chief executive officer within the company. The board of directors ensures the competence of the directors it appoints to the audit committee.

The main tasks of the audit committee are to:

• review the accounts and ensure the relevance and consistency of the accounting methods used to prepare the company’s consolidated and parent-company financial statements;
• monitor the process of preparing financial information;
• monitor the effectiveness of internal control and risk management systems;
• issue an opinion on the auditors proposed for appointment by the General Meeting; and
• report regularly to the board of directors on the performance of its duties and inform it without delay of any difficulties encountered.

The Ministerial Order of 2 September 2022 specifying the modalities of identification, declaration, conservation and control of information on beneficial owners imposes on legal persons and legal arrangements (ie, trusts and fiduciaries):

• an obligation to identify beneficial owners and to keep a register of beneficial owners; and
• an obligation to declare to the tax authorities information on beneficial owners.

It is mandatory to file declarations with the tax authorities:

• on the creation of the taxable person;
• on the anniversary of its incorporation for those not subject to income tax; and
• within 15 days of an event making it necessary to modify the information on the beneficial owners (eg, transfer of shares, death, etc).

A platform has been deployed to enable taxpayers to comply with their obligations: eservices.dgid.sn/formulairecontribuable.

Any failure to comply with the above provisions is effectively sanctioned by a fine of XOF1 million due as many times as there are documents or information requested and not produced, or omitted, incomplete or inaccurate.

There are no regulations on environmental, social and governance (ESG) issues in OHADA law. These provisions will, for example, be provided for by the board of directors or by the internal regulations on a case-by-case basis for companies that can draw on international regulations in this area. In specific sectors such as extractive industries, the most recent legislations impose transparency obligations with regard to revenues paid to the state.

In general, in commercial companies:

• towards third parties, the management body, officers and board shall have, within the time limits set forth in the AUSCGIE for each type of company, full powers to bind the company without having to produce a special power of attorney, and any limitation of their legal powers by the articles of association shall be unenforceable against bona fide third parties; and
• the company shall be bound by acts of its management body, officers and board that are not within the company purpose, unless it can prove that the third party was aware that the act was unrelated to that purpose or could not ignore it given the circumstances, and the mere publication of the articles of association is not enough to prove it.

In an SARL

The company is managed by one or more managers (gérants) who must be natural persons. Managers may or may not be shareholders of the company. The managers are appointed by the shareholders in the articles of association or by a decision of the general meeting. In the absence of specific provisions in the articles of association, the manager(s) is/are appointed for four years and is/are re-electable. There is no requirement of nationality or residence for managers.

In an SA

The articles of association must specify under which of the following management structures the company will be managed:

• a board of directors and a single chairman and general manager (président-directeur général), who must be a director of the company and a natural person; or
• a board of directors with a chairman of the board and a general manager (directeur général), who must be a natural person, who may or may not be a director of the company and who may be assisted by one or more assistant general managers.

In both of the above cases, directors may or may not be shareholders of the company, unless provided for in the articles of association. The board must have at least three and no more than 12 directors.

Companies having fewer than three shareholders may choose not to constitute a board of directors and instead to appoint a general manager (administrateur general, who may or may not be a shareholder of the company) who will be responsible for the administration and direction of the company.

In an SAS

Towards third parties, the SAS is represented by a president, who may be a natural or legal person and who may or may not be a shareholder of the company. The articles of association may provide for the conditions under which one or more individuals other than the president, with the title of general manager or deputy general manager, may exercise the powers entrusted to them by these articles. The provisions of the articles of association, and the decisions of legal representatives restricting the powers of the president, the general manager or deputy general manager, shall not be enforceable against third parties.

It is also possible to set up a board of directors.

In an SARL

In relations between the shareholders and in the absence of determination of their powers by the articles of association, the manager may carry out all acts of management in the interest of the company. Where there is more than one manager, they shall hold separately the powers provided for in the articles, except for the right of each of them to object to any transaction before it is concluded. Opposition by one manager to the acts of another manager is without effect with regard to third parties, unless it is established that those third parties have knowledge of it.

In an SA

SA with a board of directors

The board of directors determines the orientations of the company’s activity and ensures their implementation. Subject to the powers expressly attributed to the shareholders’ meetings and within the limits of the company’s purpose, it deals with any issue concerning the proper operation of the company and through its deliberations settles matters that concern it.

The board of directors carries out any such controls and verifications as it deems appropriate. The board of directors may entrust one or more of its members with special mandates for one or more specific purposes.

The chairman of the board of directors chairs the meetings of the board of directors and the general meetings. The chairman must ensure that the board of directors assumes the control of the management of the company entrusted to the general manager.

At any time, the chairman of the board of directors may carry out the verifications the chairman deems appropriate and may obtain from the general manager, who is obliged to comply, all the documents the chairman deems useful for the accomplishment of that purpose.

The general manager is responsible for the general management of the company. They represent the company in its relations with third parties.

SA with a general director

The managing director is responsible for the administration and general management of the company. They represent the company in its relations with third parties, and convene and chair the shareholders’ meetings. The managing director shall be vested with the broadest powers to act in all circumstances in the name of the company and shall exercise them within the limits of the corporate purpose and subject to those powers expressly conferred on shareholders’ meetings by the AUSCGIE and, where applicable, by the articles of association.

Meetings in the SA

Extraordinary general meeting

The extraordinary general meeting is the only body empowered to modify the statutes in all their provisions. The extraordinary general meeting is also competent to:

• authorise mergers, demergers, transformations and partial contributions of assets;
• transfer the registered office to any other city of the contracting state where it is located or to the territory of another state; and
• dissolve the company early or extend its term (see 5.3 Shareholder Meetings).

Special meeting

The special meeting brings together the holders of shares of a given category. The special meeting approves or disapproves the decisions of the general meetings when these decisions modify the rights of its members.

Ordinary general meeting

The ordinary general meeting takes all decisions other than those expressly reserved for extraordinary general meetings and those reserved for special meetings (see 5.2 Role of Shareholders in Company Management).

In an SAS

The SAS is a company set up by one or more shareholders and whose articles of association freely provide for the organisation and operation of the company. The company is represented with respect to third parties by a president appointed under the conditions provided for by the articles of association. The president is vested with the broadest powers to act in all circumstances on behalf of the company, within the limits of the corporate purpose. The articles of association may provide for the conditions under which one or more persons other than the president, bearing the title of chief executive officer or deputy chief executive officer, may exercise the powers conferred on the president by these articles.

The articles of association shall determine the decisions which must be taken collectively by the shareholders in the forms and under the conditions which they stipulate. However, the powers vested in the extraordinary and ordinary general meetings of joint-stock companies, in matters of increase, amortisation or reduction of capital, merger, demerger, partial contribution of assets, dissolution, transformation into a company of another form, appointment of auditors, and annual accounts and profits, are, under the conditions stipulated by the articles of association, exercised collectively by the shareholders.

Decisions are taken by general meetings, which may be ordinary or extraordinary, and which decide according to the majority and quorum rules set out in the AUSCGIE or in the articles of association for the SAS. These rules differ according to the corporate form (see 5.3 Shareholder Meetings for the majority and the type of decision). The general meetings are convened by the corporate representatives according to a formalism prescribed by the AUSCGIE.

The shareholders are convened at least 15 days before the meeting by hand-delivered letter against a receipt or by registered letter with a request for acknowledgement of a receipt, fax or email. The notice of meeting indicates the date, place and agenda of the meeting. The meeting cannot deliberate on a question that is not registered on its agenda.

These decisions of the shareholders must be recorded in the minutes, which indicate the date and the place of the meeting, the names and first names of the shareholders present, the agenda, the documents and reports submitted for discussion, a summary of the debates, the texts of the resolutions put to the vote and the results of the votes.

An SA may be managed by a board of directors consisting of at least three and not more than 12 members, who may or may not be shareholders. The articles of association may require that each director own a number of shares in the company for which they make determinations. This provision shall not apply in the case of employees appointed as directors. Every director must, on the day of their appointment or during their term of office, hold the number of shares required by the articles of association.

In the case of an infringement, the director shall resign from their office within three months of their appointment or, if the infringement occurs during their term of office, within three months of the date of the transfer of shares giving rise to the infringement. At the end of this period, the director shall be deemed to have resigned from their mandate and must return the remuneration received, in whatever form, without the validity of the deliberations in which they took part being called into question.

The auditors shall exercise a supervisory role and shall disclose any violations in their report to the annual general meeting. The first directors shall be appointed by the articles of association or, where appropriate, by the constituent general meeting.

During the life of the company, the directors shall be appointed by the ordinary general meeting. However, in the event of a merger, the extraordinary general meeting may appoint new directors.

Any appointment made in violation of the provisions of these articles shall be null and void. The term of office of the directors shall be freely determined by the articles of association, but may not exceed six years in the case of appointment during the life of the company and two years in the case of appointment by the articles of association or by the constituent general meeting.

The board of directors determines the orientations of the company’s activities and ensures their implementation. The board of directors has a chairman. The board may entrust one or more of its members with special mandates for one or more specific purposes.

The choice of directors is freely determined by the shareholders. There is no longer a quota rule to be respected between the number of shareholder and non-shareholder directors, as was the case with the pre-2014 AUSCGIE. However, the articles of association may require that each director own a number of shares of the company for which they make determinations. In practice, the composition of the board of directors often mirrors the composition of the company’s shareholding.

The directors or officers are appointed by the articles of association at the time of the company’s incorporation, or during the company’s life, by the general meeting. The terms of appointment, re-election, replacement and dismissal are freely determined by the articles of association. The directors may be re-elected unless the articles of association state otherwise. In an SA, the duration of office of the president and managing director is aligned with that of the directors. The termination of the functions of the directors must be published in the commercial register.

Two mechanisms are provided for by the AUSCGIE to prevent conflicts of interest between the company and its directors.

The Rules of Non-cumulation of the Functions of Legal Representatives (in an SA)

For directors (in an SA with a board of directors)

Subject to certain reservations, a natural person, a director in their own name or a permanent representative of a legal entity director may not simultaneously belong to more than five boards of directors of SA companies which have their registered office in the territory of the same state party.

Any natural person who, upon taking up a new term of office, finds themself in breach of this rule must, within three months of their appointment, resign from one of their terms of office.

For the president and managing director

No person may simultaneously hold more than three offices as president and managing director of an SA which has its registered office in the territory of the same party state.

Likewise, the function of president and managing director may not be held concurrently with more than two functions of general director or general manager of an SA which has its registered office in the territory of the same contracting state. Any natural person who, upon taking up a new term of office, finds themself in breach of this rule must, within three months of their appointment, resign from one of their offices.

For the general director

No person may simultaneously hold more than three offices as a general director of corporations which have their headquarters in the territory of the same state party. Similarly, the office of general director may not be held concurrently with more than two offices of president and general manager or general manager of an SA which has its registered office in the territory of the same state party. A director who, upon taking up a new term of office, is in violation of this rule must, within three months of their appointment, resign from one of their offices.

The Procedure for Regulated Agreements (in an SARL, an SA and an SAS)

According to Article 438 of the AUSCGIE, the following agreements must be subject to prior authorisation by the board of directors of an SA:

• any agreement between the SA and one of its directors, general managers or assistant general managers;
• any agreement between a company and a shareholder who holds 10% or more of the company’s capital;
• any agreement in which a director, general manager, deputy general manager or shareholder with a holding of 10% or more of the company’s capital is indirectly interested or in which they deal with the company through an intermediary; and
• any agreement between a company and a business or legal entity, if one of the directors, the general manager, the assistant general manager or a shareholder holding a stake equal to or greater than 10% of the company’s capital is an owner of the business or an indefinitely liable shareholder, manager, director, general manager, assistant general manager, general manager, assistant general manager or other corporate officer of the contracting legal entity.

Similar provisions are provided for the SARL and the SA; regulated agreements must be approved by the ordinary general meeting (Articles 350 and 853-14 of the AUSCGIE).

There are no specific provisions in the law regarding the principal legal duties of the directors and officers of a company. However, Article 480 Section 2 of the AUSCGIE provides that the chairman must ensure that the board of directors assumes control of the management of the company entrusted to the general manager. Thus, the chairman and the board of directors each have a role.

In an SARL

The managers shall be liable, individually or jointly and severally, as the case may be, to the company or to third parties, either for infringements of the legal or regulatory provisions applicable to private limited companies, or for breaches of the articles of association, or for faults committed in their management.

If several managers have co-operated in the same acts, the competent court determines the contributory share of each of them in the remedy of the damage (Article 330 of the AUSCGIE).

In an SA

The directors shall be individually or jointly and severally liable to the company or to third parties, either for infringements of the legal or regulatory provisions applicable to an SA, or for violations of the provisions of the articles of association, or for faults committed under their management.

Where several directors have co-operated in the same acts, the competent court shall determine the contributory share of each of them in the remedy of the damage (Article 740 of the AUSCGIE).

In an SAS

The rules governing the liability of the members of the board of directors of sociétés anonymes are applicable to the chairman and the officers of the société par actions simplifiée (Article 853-10 of the AUSCGIE).

Liability Actions

Two types of actions are provided for by the AUSCGIE.

The individual action

Pursuant to Articles 161 et seq of the AUSCGIE, third parties or shareholders may take individual action to hold a corporate officer liable for misconduct in the performance of their duties, without prejudice to the company’s potential liability. If several corporate officers have participated in the same acts, they are jointly and severally liable to third parties.

This individual action is an action for damages suffered by a third party or by a shareholder, where the latter suffers a loss distinct from the loss suffered by the company, as a result of a fault committed individually or collectively by the corporate officers or directors in the exercise of their duties.

This action is brought by the person who suffers the damage.

The corporate action (action sociale) – Articles 165 et seq of the AUSCGIE

A corporate action is an action for compensation for the damage suffered by the company as a result of a fault committed by corporate officer(s) in the performance of their duties. The corporate action filed against one or several corporate officers can be initiated either by the company itself (through the other officers who are not involved), or by one or several shareholders in the case of failure of the competent bodies. The corporate action is reserved only to the shareholders holding shares on the day it is implemented and who retain the status of shareholder during the whole duration of the procedure.

In the case of an SARL, Article 331 of the AUSCGIE provides that several shareholders may only claim compensation for the damage suffered by the company if they represent one quarter of the shareholders and one quarter of the company shares. These two conditions are cumulative. However, in the case of an SA, the shareholders can only exercise the corporate action if they represent at least one twentieth of the share capital (Article 741 of the AUSCGIE).

Grounds for Liability

A breach of directors’ duties would give rise to their liability. Similar provisions govern the rules pertaining to the liability of corporate officers and directors in the different types of companies that have been described: SARL, SA and SAS. A distinction must be made between civil and criminal liability.

Civil liability of the manager of an SARL and the directors of an SA

The liabilities are similar for the manager of an SARL and the directors of an SA. They are liable, individually or jointly and severally, as the case may be, to the company or to third parties, either for breaches of the laws or regulations applicable to companies, or for breaches of the articles of association, or for misconduct in their management. If several managers or directors have co-operated in the same acts, the competent court shall determine the contribution of each of them to the compensation for the damage.

In addition to the action for compensation for the damage suffered personally, the shareholders representing one quarter of the shareholders and one quarter of the shares may, either individually or by grouping together, proceed with the social action for liability against the manager or director(s). No clause in the articles of association may make the exercise of the corporate action subject to the prior notice or authorisation of the meeting or entail a waiver in advance of the exercise of this action.

No decision of the meeting may have the effect of extinguishing an action for liability against the managers for misconduct committed in the performance of their duties. Any decision to the contrary is null and void.

Civil liability of the chief executive officer of an SA

The same rules of individual and social responsibility apply to the chief executive officer.

Civil liability of the directors of an SA

Directors are individually or jointly and severally liable to the company or to third parties, either for breaches of the laws or regulations applicable to an SA, or for breaches of the provisions of the articles of association, or for misconduct in their management.

Civil liability of the president/chairman of an SAS

The same rules of individual and social responsibility as those mentioned for the manager and the chief executive officer apply to the president.

Criminal liability

The AUSCGIE contains criminal provisions in the event of offences committed by corporate officers:

• the incorporation of companies;
• the management, administration and direction of the company;
• general meetings;
• changes in the capital of an SA, capital reductions;
• company control;
• dissolution of companies;
• liquidation of companies; and
• in the event of a public offering for savings.

Law No 2018-13 of 27 April 2018 describes the penalties incurred for the offences referred to in the AUSCGIE.

Other bases for claims or enforcement against directors or officers for breaches of corporate governance requirements that exist in Senegal are as follows.

The Management Expertise

Pursuant to Article 159 of the AUSCGIE, one or more shareholders representing at least one tenth of the share capital may, either individually or by grouping together in any form whatsoever, request the competent court of the registered office, ruling within a short period of time, to appoint one or more experts to present a report on one or more management operations.

The Provisional Administration

When the normal functioning of the company is made impossible, either because of the management, executive or administrative bodies, or because of the shareholders, the competent court, ruling within a short period of time, may decide to appoint a provisional administrator for the purpose of temporarily managing the company’s affairs (Article 160-1 of the AUSCGIE).

Since, according to the general law of civil liability, the potential liability of directors is likely to be implemented as soon as it can be established that they have committed errors in the performance of their duties and that these have had harmful consequences for the company, the shareholders or third parties, the liability of a director or officer can only be limited by proving that the damage results either from a force majeure or from a fault of the victim or a third party.

Any clause to the contrary in the articles of association is deemed to be unwritten.

Article 325 of the AUSCGIE

In an SARL, the duties of a manager may be performed free of charge or with remuneration, under the conditions laid down in the articles of association or in a collective decision of shareholders. The manager, when a shareholder, shall not take part in the vote on the deliberation relating to their remuneration and their votes shall not be taken into account for the calculation of the majority. Any deliberation taken in violation of Article 325 of the AUSCGIE shall be void. The determination of the remuneration is not subject to the regime of related-party agreements.

In an SA, the ordinary general meeting may allocate to the directors, as remuneration for their activities, a fixed annual sum that it determines at its own discretion (commonly called “jeton de présence” in French).

Unless otherwise provided for in the articles of association, the board of directors is free to allocate the compensation among its members. The board of directors may also allocate to its members exceptional remuneration for the missions and mandates entrusted to them, or authorise the reimbursement of travel expenses and expenses incurred in the interest of the company, subject to the provisions concerning regulated agreements.

A director may enter into an employment contract with the company if that contract corresponds to actual employment. Apart from sums received under an employment contract, the directors may not receive, in respect of their duties, any other remuneration, permanent or otherwise, than that provided for by the board of directors (Articles 430, 431 and 432 of the AUSCGIE).

The chief executive officer may be bound to the company by a contract of employment. The terms and amount of the remuneration of the chairman and managing director are fixed by the board of directors. Where necessary, the benefits in kind granted to them shall be fixed in the same manner as their remuneration. The chief executive officer may not receive any other remuneration from the company (Article 466 of the AUSCGIE).

In an SAS, the remuneration and benefits of the chairman and of the potential other directors are determined by the articles of association and the shareholders.

No public disclosure obligations in relation to the remuneration, fees or benefits payable to directors and officers for companies have been identified, except for publicly traded companies. Indeed, Article 831-2 of the AUSCGIE requires the disclosure of the report prepared by the chairman of the board of directors containing, in addition to the composition of the board of directors and its operating conditions, the compensation allocated to the corporate officers.

Regarding other disclosures, pursuant to Article 432 of the AUSCGIE, the exceptional remuneration of directors for missions and mandates entrusted to them, or the reimbursement of travel expenses and expenses incurred in the interest of the company, must be the subject of a special report by the auditor to the general meeting.

A shareholder is a natural or legal person who makes a contribution (in kind, cash or industry) to the company. In return, the company delivers shares (Articles 7 and 51 of the AUSCGIE).

The status of shareholder is regulated by Articles 7 to 9 of the AUSCGIE. Those persons who cannot be a shareholder are:

• any natural or legal person who is subject to a prohibition, incapacity or incompatibility provided for by a legal or regulatory provision; and
• minors and incapable adults in companies where they would be liable for the company’s debts beyond their contributions.

Company shares are called “actions” (in French) in joint-stock companies and “parts sociales” in other companies (Articles 7 and 51 of the AUSCGIE).

The contribution made by the shareholders determines their rights and obligations within the company:

• a right on the profits made by the company;
• a right on the net assets of the company at the time of their distribution, dissolution or at the time of a reduction of the company’s capital of information and intervention in the social affairs of the company;
• an obligation to contribute to the losses in certain forms of company; and
• the right to participate in the vote of shareholders’ collective decisions.

The rights and obligations of the shareholders are proportional to their contribution.

In addition, according to Article 54 of the AUSCGIE, clauses that attribute to a shareholder all of the profit made by the company or exempt them from all of the losses, as well as those that exclude a shareholder entirely from the profit or make them responsible for all of the losses, are deemed unwritten.

Disagreement between shareholders constitutes a cause for dissolution of commercial companies within the meaning of Article 200 of the AUSCGIE.

In limited liability companies, the shareholders are only liable for the company’s debts up to the amount of their contributions. The limited liability companies are:

• the SARL;
• the SAS; and
• the SA.

In the case of debts in such a company, the liability of the shareholder is limited to the loss of the total amount of their contributions in share capital and their contributions in the shareholders’ current account.

Shareholders who hold management positions within the company may also be liable, individually or jointly, to the company or third parties, either for breaches of the law or the articles of association (civil or criminal liability), or for faults committed in their management.

The shareholders have a certain right of control over the management of the company, which differs according to the type of company.

In an SARL

Any non-managing shareholder can, twice a year, ask the manager, in writing, questions about any fact that could jeopardise the continuity of the business. The manager must then provide answers within 15 days, in writing, to the questions asked by the shareholder. Within the same time limit, they must send a copy of the questions and their answers to the auditor, if there is one (Article 157 of the AUSCGIE).

In an SA and an SAS

Any shareholder who does not have managerial status may, twice a year, ask questions, in writing, of the chairman of the board of directors, the chief executive officer or the managing director, as the case may be, on any fact likely to jeopardise the continuity of the business. The chairman of the board of directors, the chief executive officer or the chief executive officer (as the case may be) must then reply, in writing, within 15 days, to the questions asked by the shareholder. Within the same period, they must send a copy of the questions and their answers to the auditor (Article 158 of the AUSCGIE).

The shareholder is also able to direct the actions of the corporate officers, thanks to:

• the holding of ordinary general meetings, during which the corporate documents are controlled and approved (summary financial statements, management reports, the auditor’s report, the auditor’s special report on regulated agreements if any, inventories, draft resolutions);
• individual action (see 4.8 Consequences and Enforcement of Breach of Directors’ Duties); and
• corporate action (see 4.8 Consequences and Enforcement of Breach of Directors’ Duties).

All shareholders have the right to participate in the voting of collective decisions (Article 125 of the AUSCGIE). There are two kinds of collective decisions: ordinary decisions and extraordinary decisions (Article 132 of the AUSCGIE). These decisions can be taken within the framework of general meetings or by written consultation (Article 133 of the AUSCGIE). All the deliberations of the shareholders are noted by a minute (Article 134 of the AUSCGIE).

The manager is in charge of convening the general meeting. In the event of their failure to do so, the auditor may substitute for the manager. Failing this, the shareholders may request the convening of the meeting in court.

The methods of convening the meeting are set out in the articles of association. The ordinary general meeting congregates at least once a year (within six months of the end of the financial year). An extension of the deadline may be requested from the president of the competent court ruling on a petition. The purpose of the ordinary general meeting is:

• to approve the summary financial statements, the management report and the inventory (Article 140 of the AUSCGIE for the SA, SARL and SAS) – to this end, the aforementioned documents are communicated at least 15 days before the meeting by the company directors;
• to decide on the allocation of the result (Article 142 of the AUSCGIE); and
• to determine the allocations to optional reserves, the share of profits to be distributed, and the amount of any retained earnings (Article 144 of the AUSCGIE).

In an SARL and an SA, the decisions are made by a majority of the votes present and represented.

The extraordinary general meeting takes extraordinary collective decisions, ie, decisions to amend the articles of association. It decides by a majority of three-quarters of the capital in an SARL and two-thirds in an SA.

However, unanimity is required in the case of:

• an increase of the shareholders’ commitments;
• transformation into an SAS; and
• transfer of the registered office to a state other than a state party of the AUSCGIE.

In the event of a loss of half of the share capital, an extraordinary general meeting must be convened within four months of the general meeting which recorded this loss, on pain of penal sanctions or request by any interested party for dissolution of the company.

In an SAS, the rules of majority and quorum are set by the articles of association.

The bases of claim that exist for shareholders against the company or directors are as follows:

• against the company – the shareholders do not have a liability claim against the company; and
• against the directors – see 5.2 Role of Shareholders in Company Management (social action, individual action, alert procedure).

As far as is known, there are no disclosure or other obligations on shareholders in publicly traded companies.

There are disclosure obligations regarding beneficial owners of companies generally (see 2.1 Hot Topics in Corporate Governance).

Pursuant to Article 137 of the AUSCGIE, at the close of each fiscal year, the manager or the board of directors or the managing director, as the case may be, shall prepare and close the financial statements in accordance with the provisions of the Uniform Act on the Organisation and Harmonisation of Companies’ Accounting.

As required by the revised Article 140 of the AUSCGIE, for an SA, an SAS and, where applicable, an SARL, the annual summary financial statements and the management report shall be sent to the auditors at least 45 days before the date of the ordinary general meeting.

These documents are presented to the general meeting of the company approving the financial statements, which must be held within six months of the end of the financial year.

Pursuant to Article 138 of the AUSCGIE, the manager, the board of directors or the managing director, as the case may be, draws up a management report in which they describe the situation of the company during the past financial year, its foreseeable evolution, the important events that occurred between the closing date of the financial year and the date on which it is drawn up and, in particular, the prospects for the continuation of the activity, the evolution of the cash-flow situation and the financing plan.

This report is therefore financial, but the AUSCGIE allows for the creation of committees, composed of directors, within the board and under the direction of a director, to deal with particular aspects of the life of the company (Article 437).

Thus, according to Article 437 Section 2: “It [the board of directors] may decide to create committees composed of directors to study the questions that it or its chairman submits to them for advice. It shall determine the composition and powers of the committees, which shall carry out their activities under its responsibility.”

The AUSCGIE also provides for the mandatory presence of audit committees in companies issuing stock to the public, in order to ensure better corporate governance. The audit committee shall report regularly to the board of directors on the performance of its duties and shall inform it without delay of any difficulties encountered (Article 829-1).

In addition, agreements entered into directly or through an intermediary between the company and one of its managers, directors or shareholders are the subject of a special report by the auditor at the general meeting.

Commercial companies are required to make filings with the companies registry of the registered office for the following:

• the appointment or termination of the functions of company executives (Article 124 of the AUSCGIE);
• a draft merger or demerger (filed in the Trade and Personal Property Credit Register of the registered office of the companies concerned at least one month before the date of the first general meeting called to decide on the operation) (Article 194 of the AUSCGIE);
• the dissolution of the company, by filing in the Trade and Personal Property Credit Register the deeds or minutes deciding upon or recording the dissolution and by amending the entry in the Trade and Personal Property Credit Register (Article 202 of the AUSCGIE);
• liquidation of the company by the deposit of the final accounts drawn up by the liquidator, with either the decision of the meeting of shareholders ruling on these liquidation accounts, the discharge of the liquidator’s management and the discharge of their mandate, or, failing this, the court decision referred to in the preceding article in order to obtain the striking-off of the company from the Trade and Personal Property Credit Register (Articles 219 and 220 of the AUSCGIE);
• approval of the company’s accounts by filing the summary financial statements, ie, the balance sheet, the profit-and-loss account, the financial table of resources and uses and the annexed statement of the past financial year within one month of their approval by the competent body (Article 269 of the AUSCGIE);
• transferable securities (for their enforceability against third parties); or
• transfer of shares (for the enforcement of their rights against third parties) (Articles 319 and 763-1 of the AUSCGIE).

The filings relating to the incorporation or the modification of the company (merger, liquidation of a company) as well as the pledges or the collective procedure are publicly available upon request to the companies registry. However, specific documents such as financial statements are not available. Failure to make these filings entails the unenforceability of the modifications/actions carried out.

In the SA, the appointment of an auditor is mandatory. It takes place during the constitutive general meeting (for the first appointment). An SA making a public appeal for savings is required to appoint at least two auditors and two deputies. An SA that does not make a public offering is required to appoint one auditor and one substitute.

As regards the other corporate forms, this appointment is optional, except where the company exceeds certain thresholds (see 1.1 Forms of Corporate/Business Organisations).

The auditor’s duties include:

• evaluating the contributions in kind realised at the time of the constitution of an SARL or an SA;
• drafting the summary financial statements;
• presenting the agreements between the company and its shareholders or its directors to the general meeting or the board of directors; and
• making requests to the company’s directors on all facts likely to compromise the continuity of the operation that they have noted during the examination of the documents which are communicated to them, or of which they have knowledge in the exercise of their duties.

The auditor is responsible, with respect to the company and third parties, for the harmful consequences of the faults and negligence they may commit in the performance of their duties (insufficient investigation or certification of an inaccurate balance sheet, for example).

The Management Report (Article 138 of the AUSCGIE)

The manager, the board of directors or the managing director, as the case may be, is required to prepare a management report in which they describe the situation of the company during the past financial year, as well as its future situation. This management report is submitted for the approval of the shareholders at the annual general meeting.

Agreements Between the Company’s Directors and the Company

In an SA with a board of directors (Article 438 of the AUSCGIE), and an SA with a managing director (Article 502 of the AUSCGIE), the regulated agreements are subject to the authorisation of the members of the board of directors and to the approval of the general meeting ruling on the summary financial statements. For an SARL (Article 350 of the AUSCGIE) and an SAS (Article 853-14 of the AUSCGIE), these agreements are subject to approval by the general meeting.

Prohibited Agreements

The managers of an SARL (Article 356 of the AUSCGIE) and the directors of an SA (Article 450 of the AUSCGIE) are prohibited from contracting loans from the company in any form whatsoever, from being granted an overdraft on a current account or otherwise, as well as from being guaranteed or endorsed by the company in respect of their commitments to third parties. These acts are null and void.