Corporate Governance 2025 Comparisons

In France, most business organisations are incorporated in the form of companies with distinct legal personality.

French law distinguishes between civil companies, governed by civil laws exclusively, and commercial companies, governed by civil and commercial laws. Civil companies may operate only a limited list of activities, which are deemed civil by nature (eg, agriculture, liberal activities, real estate), while commercial companies may operate any type of activities, including civil activities.

There are three main differences between civil companies and commercial companies:

• civil companies may not conduct commercial or industrial activities – their purpose is therefore limited;
• shareholders’ liability is never limited in civil companies, whereas it is limited in most commercial companies; and
• most civil companies are tax-transparent – ie, profits of the company are taxed at the shareholders’ level and subject to income tax, whereas most commercial companies are subject to corporate tax.

These differences explain that civil companies are far less common than commercial companies, and limited to specific uses. For this reason, they will be excluded from this study.

The corporate forms applicable to commercial companies are numerous and can be classified into two categories: limited liability companies and unlimited liability companies. Unlimited liability companies are rare and used for extremely specific transactions, so they will be also excluded from this study.

Among limited liability companies, the most common corporate forms are:

• public limited companies (sociétés anonymes or SA), used for large companies, most listed companies being incorporated in the form of SA;
• simplified joint stock companies (sociétés par actions simplifiées or SAS), a rather new corporate form but largely used thanks to its high flexibility; and
• limited liability partnership (sociétés à responsabilité limitée or SARL), primarily used for small businesses, as shares of SARL are not freely tradable.

Corporate governance requirements are derived from laws and regulations, recommendations and internal rules set forth by companies themselves.

Laws and Regulations

The French Commercial Code (Code de commerce) and, to a lesser extent, the French Monetary and Financial Code (Code monétaire et financier) contain the majority of corporate governance rules and requirements.

European Union directives and regulations, such as the Shareholder Rights Directive II of 17 May 2017, or the Directive on improving the gender balance among directors of listed companies dated 23 November 2022, also comprise a set of corporate governance requirements applicable to French companies. Requirements issued from EU directives shall be incorporated into French law in order to be enforceable, whereas requirements issued from EU regulations are directly applicable to French companies.

Recommendations

Listed companies are subject to additional recommendations issued by corporate governance codes to which they must refer (or explain why they decided not to), such as the AFEP-MEDEF Code, intended for large, listed companies, and the Middlenext Code, intended for small and medium-sized listed companies.

They must also take into consideration recommendations issued by the Haut Comité au Gouvernement d’Entreprise (HCGE) – a special committee appointed to follow the implementation of the AFEP-MEDEF Code and interpret its recommendations – the French Financial Markets Authority (AMF) and the Haut Comité Juridique de la Place financière de Paris (HCJP).

To a lesser extent, listed companies may also take into account the voting policies issued by proxy advisers (Proxinvest, ISS), as they are followed by a majority of investors and give a guidance on satisfactory governance policies for investors.

Internal Rules

Finally, companies may adopt internal rules, such as by-laws, board internal regulations, codes of ethics or of conduct, which set forth specific corporate governance rules and requirements.

Listed companies are subject to additional mandatory corporate governance requirements and recommendations.

First of all, only three corporate forms are authorised to trade their shares on a regulated market: SA, Societas Europaea (SE) and partnerships limited by shares (société en commandite par actions or SCA).

Listed companies are subject to other mandatory corporate governance requirements.

• Composition of the board of directors (conseil d’administration) – the composition of listed companies’ boards of directors (or supervisory boards) is highly regulated. Listed companies are subject to gender balance requirements (the proportion of directors of each gender must be at least 40%) and requirements related to the appointment of directors representing employees and employee shareholders (please refer to 4.3 Board Composition Requirements/Recommendations).
• Audit committee – listed companies are required to set up an audit committee whose purpose is to provide technical and critical support to management in monitoring the company’s accounting and financial policy (please refer to 4.1 Board Structure).
• Compensation of corporate officers (“say-on-pay”) – listed companies must comply with the “say-on-pay” requirements for the determination and payment of corporate officers’ and directors’ compensation. The “say-on-pay” proceedings require a double shareholders’ approval on compensations: the shareholders shall vote on the compensation policy determined by the board of directors (ex-ante vote) and on the amounts payable to corporate officers and directors upon implementation of the approved compensation policy (ex-post vote).
• Enhanced governance information – listed companies must include, in their management reports, additional corporate governance and ESG information as well as all relevant information on factors that are likely to have an impact in the event of a tender offer. Listed companies must also publish relevant information regarding related-party agreements.

Listed companies are also subject to various recommendations, including:

• appointment of independent directors – (please refer to 4.5 Rules/Requirements Concerning Independence of Directors);
• set up of specialised committees – (please refer to 4.1 Board Structure); and
• limitation of allowances – listed companies shall be prudent with allowances granted to directors and/or officers and subject these allowances to performance criteria and limit their overall amount.

Recommendations applicable to listed companies mostly derive from corporate governance codes. Although these codes are deemed to be non-binding (soft law), listed companies choosing not to follow their recommendations must publicly explain why and justify their choice to the market (comply-or-explain principle). In addition, companies choosing not to follow recommendations issued by the AMF may be named in the AMF corporate governance report for not complying with its recommendation.

Green Shareholder Activism and “Say-on-Climate”

Shareholder activism is increasingly focusing on ESG and climate-related issues. Since 2020, activist investors have started to request issuers operating in high-impact sectors (energy, building industry) to consult their shareholders on their climate strategy, on the say-on-pay model. If most motions proposals submitted in 2020 and 2021 were rejected by the board of directors or disapproved at the general meeting, issuers took into account this new issue and included related consultative resolutions at the 2023 general meetings. In this context, the HCJP published a report in December 2022, and the AMF a press release in March 2023, encouraging listed companies to submit “say-on-climate” resolutions for shareholders’ approval every year. A proposal to introduce a “say-on-climate” statutory regime including new obligations for listed companies with a view to improve their climate strategy was made as part of the discussions on the Green Industry Act in 2023, but was in the end rejected by the French legislature.

Expansion of Multiple Voting Rights Shares

French corporate law has long abandoned the rule “1 share = 1 vote” by allowing the issuance of shares with multiple voting rights. However, their use was still restricted for listed companies until the Attractivité Act of June 2024. Before, listed companies could only issue shares with double voting rights to long-term shareholders: other forms of multiple voting rights were prohibited.

In line with the EU Listing Act, the French legislature has allowed the issuance of multiple voting rights through preferred shares during the initial public offering of a company on a French regulated market or multilateral trading facility. This law has established mandatory safeguards – which may be supplemented by the by-laws – such as:

• limitation of the voting ratio to 25:1 for shares listed on a multilateral trading facility – no such restriction applies to shares listed on regulated markets;
• neutralisation of multiple voting rights for certain resolutions, such as approval of the annual accounts, appointment of the auditors, amendments to the by-laws not related to share capital increases, approval of related-party agreements, and say-on-pay; and
• conversion of the preferred shares into ordinary shares in the event of an insolvency proceeding of the company, a transfer of ownership or after ten years (which may be extended by a maximum of five years), resulting in the loss of multiple voting rights, except if the ordinary shares resulting from such conversion meet the standard conditions for double voting rights (ie, fully paid-up, registered shares held by the same shareholder for at least two years), it being specified that the period during which the preferred shares were held in registered form prior to conversion is taken into account.

Transposition of the Directive “Women on Boards”

Article 5 of the “DDADUE” Act published in the Journal Officiel of 23 April 2024, empowers the government to transpose the “Women on boards” Directive (EU Directive of 23 November 2022, on a better gender balance among directors of listed companies). For the record, under the Copé-Zimmerman Act of 27 January 2011, the board of directors must be composed of at least 40% of each gender. The transposition Ordinance of 15 October 2024 includes, in the calculation basis for the gender diversity obligation, the employee shareholder representatives and the employee representatives sitting on these boards for all companies, whether listed or not, with at least 250 employees and either a turnover or a balance sheet total exceeding EUR50 million. This will enter into force on 30 June 2026 for companies falling under the “Women on Boards” Directive and on 1 January 2027 for others.

Progressive Entry Into Force of the Rixain Act

Since March 2022, companies with at least 1,000 employees for three consecutive fiscal years have been required to publish data on gender inequalities among executive managers and governing bodies. By March 2026, these companies must ensure at least 30% representation of each gender among executive managers and governing bodies, increasing to 40% by March 2029. A two-year grace period will be granted for compliance, after which financial penalties may apply.

Extra-Financial Reporting and CSRD Directive

Please refer to 2.2 ESG Considerations.

Network and Information Security 2 (NIS 2) Directive

The NIS 2 Directive is a strengthened version of the NIS 1 Directive, the first version of which was designed to control data protection for companies operating in so-called “essential” sectors (such as energy, water, health and transport) in the face of the cyber threat. Despite the obligation to transpose the NIS 2 Directive by 17 October 2024, many European countries – including France where the text was adopted by the Sénat in March 2025 and transmitted to the Assemblée Nationale – are still in the process of implementation.

The NIS 2 Directive imposes two major governance obligations: make management bodies responsible for managing risks to networks and IT systems and implement a training policy on security issues for members of management and staff.

In other words, management bodies will need to be increasingly involved in cyber risk management. They will also be held accountable if they fail to meet their obligations.

ESG and Strategy

The board of directors is entrusted with the definition of the strategy of the company. In doing so, the board is legally bound to take into account social and environmental issues.

Year after year, corporate governance codes increase their recommendations towards a better consideration of climate and environment protection-related issues, with the recommendations to create an ESG committee, in charge of investigating ESG matters or the enhanced training of directors or the increase of ESG performance criteria as part of executives’ compensation schemes.

Also, pressure to increase climate strategy reporting to shareholders is in constant evolution (please refer to 2.1 Hot Topics in Corporate Governance).

Corporate Duty of Care

Since 2017, the largest French companies have been subject to due diligence obligations to identify any risks and prevent any violations of human rights and fundamental freedoms, or severe abuses of human health and safety and of the environment, resulting from their activities as well as those of their subsidiaries, suppliers and subcontractors. These companies must establish a vigilance plan and a report on its effective implementation, to be included in the annual report.

The European Union has recently adopted the Corporate Sustainability Due Diligence Directive (CSDDD), published on 5 July 2024, providing for similar due diligence obligations applicable to EU limited liability companies of substantial size and economic power or with business in defined high-impact sectors. Following the adoption of the “Stop the Clock” Directive in April 2025, the transposition deadline for the CSDDD has been postponed. The CSDDD will now enter into force in two phases, with the first wave starting on 26 July 2028 for the largest companies, and the second on 26 July 2029 for a broader range of businesses, including certain non-EU companies.

Raison d’être and Mission-Driven Companies

In 2019, the Pacte Act introduced two optional tools into French corporate law designed for companies intending to redirect their focus on their role in society, beyond their economic performance: the concept of raison d’être (core purpose), as well as the status of mission-driven company.

The raison d’être determines the orientation of a company’s business and defines its identity and vocation, beyond its commercial purpose. Therefore, a company adopting a raison d’être makes the choice to define the ethical standards according to which its activities will be conducted. Companies adopting a raison d’être are free to define it more or less precisely. One can observe that there is a great deal of variation in the level of precision and relevance of the chosen raison d’être, which has an impact on the effectiveness of this tool in terms of creating new ethical standards: the more generic the raison d’être, the less likely it is to clarify the standards binding the company.

The Pacte Act also allows French companies complying with stricter requirements to be labelled as mission-driven companies. This status may be granted to companies choosing to adopt – in addition to a raison d’être – strong commitments towards environmental, ethical and/or social concerns. These commitments are submitted to the general meeting of shareholders and included in the by-laws. Compliance with these commitments is assessed regularly by a mission committee, comprising at least one employee and usually representatives of other stakeholders. Failure to comply with the mission or the commitments not only entails the withdrawal of the status, but could also lead to liability claims against the directors and the company.

Extra-Financial Reporting and CSRD Directive

French listed companies and other large companies are subject to extra-financial reporting obligations in the form of a non-financial performance declaration (DPEF). These requirements will be drastically extended starting in 2024 with the entry into force of the Corporate Sustainability Reporting Directive (CSRD) of 14 December 2022, transposed within French law by the Ordinance dated 6 December 2023. CSRD provides for the substitution of a new extended reporting on sustainability, in order to include information on environmental, social and governance issues. The reporting requirements will by based on a double materiality principle: sustainability matters that affect the company as well as the impacts of the company on sustainability matters.

Information contained in this new sustainability report (to be included in the annual management report) will be certified by authorised auditors or independent third-party organisations. In addition, shareholders holding at least 5% of the capital or voting rights may request the appointment of another auditor or independent third-party organisation to draft a separate report on part of, or all sustainability information.

Following the adoption of the “Stop the Clock” Directive in April 2025, the timetable for the application of the CSRD has been adjusted. Large listed companies with more than 500 employees, already subject to the CSRD, must report on the 2025 financial year, with reports published in 2026. Other large companies and parent companies of large groups, not covered by the first wave, will be required to report on the 2027 financial year, with publication in 2028. Listed small and medium-sized enterprises, excluding micro-enterprises, will be required to report on the 2028 financial year, with publication in 2029. In order to guide companies, the ESMA, the European Commission, and the Haute Autorité de l’Audit have respectively published recommendations, Q&A and guidelines.

There are three main functions involved in the governance and management of French companies:

• deliberative functions;
• supervisory functions; and
• management functions.

Deliberative Functions

Deliberative functions are always delegated to the shareholders of the company. Depending on the corporate form, shareholders’ decisions are mandatorily adopted in general meetings (eg, SA) or may result, if the company’s by-laws allow it, from their unanimous consent expressed in a written act (eg, SAS, SARL).

Supervisory Functions

In elaborate forms of companies, specific bodies are responsible for supervising management, whereas in other forms of companies, management control is left to the shareholders.

In SA with a one-tier board system, the board of directors is a hybrid corporate body as it is in charge of supervisory functions over corporate officers, as well as certain management functions (please see below). Most supervisory functions are assigned to the supervisory board.

In other corporate forms (SAS, SARL), supervisory functions are performed, in a more limited way, directly by the shareholders and no dedicated corporate body is provided by law. However, the shareholders may decide, in SAS, to create specific corporate bodies and entrust them with supervisory powers.

Management Functions

Management functions include the definition and implementation of the company’s strategy and the representation of the company towards third parties. Depending on the corporate form of the company, management functions are exercised by individuals or collegiate bodies.

SA may be structured pursuant to a one-tier board or a two-tier board system, at the shareholders’ discretion. This choice must be registered in the by-laws.

In SA with a one-tier board system, the management functions are split between the board of directors, whose members are appointed by the shareholders, the chairman of the board of directors, appointed by the board among the directors, and the CEO (directeur général), also appointed by the board of directors. The board of directors may also decide to name a single person to act as chairman and CEO (président-directeur général). The board of directors, upon request of the CEO, may appoint one or more deputy CEOs to assist the CEO and delegate management powers to them.

In SA with a two-tier board system, the management functions are entrusted to the executive board (directoire), appointed by the supervisory board. Members of the executive board are not allowed to be part of the supervisory board.

In SAS, the law entrusts the chairman (président) with all management functions. The chairman may be a natural or a legal person. The shareholders are free to provide for additional corporate bodies in the by-laws, entrusted with limited management functions.

SARL are managed by one or more managing directors (gérants). The managing directors are natural persons.

The powers and types of decisions made by the corporate bodies differ depending on the corporate form of the company.

Please refer to 5.2 Role of Shareholders in Company Management for a description of the shareholders’ decision-making powers.

SA

In one-tier board systems, the board of directors is competent to determine the strategic orientations of the company’s business and ensure their implementation within the limits of the company’s interest and taking into consideration social and environmental issues. In particular, the board of directors:

• appoints the chairman and the CEO and defines their compensation schemes;
• examines and approves the annual financial statements;
• drafts management reports for the shareholders;
• convenes the general meeting of shareholders and sets forth its agenda; and
• approves related-party agreements.

The powers of the board of directors shall be exercised within the limits of the corporate scope of the company and the power granted by law to the general meeting of shareholders.

The CEO, and the deputy CEOs, if any, are in charge of the day-to-day management of the company, within the limits of the corporate object of the company and the board of directors’ and the general meeting’s powers. Vis-à-vis third parties, the CEO has the broadest powers to represent the company and act on its behalf, even those exceeding the corporate scope and the limitations of powers that may result from the by-laws. However, those limits may only be enforced towards third parties if it is proven that they had knowledge of such limitations.

In two-tier board systems, the supervisory board is responsible for the supervision of the management and the preservation of the company’s long-term interest. Therefore, the supervisory board:

• appoints the members of the management board and defines their compensation schemes;
• controls the annual financial statements;
• reviews the management reports; and
• approves related-party agreements.

Unlike the board of directors, the supervisory board is not entitled to make management decisions.

The executive board is in charge of the strategy of the company and its day-to-day management, within the limits of the general meeting’s powers. The chairman of the executive board has broadest powers to represent the company towards third parties.

SAS

The chairman of the SAS is the only mandatory management body of the company, and is therefore entrusted with the broadest powers to manage the company within the limits of the shareholders’ powers and represent it towards third parties.

The shareholders may set other corporate bodies to assist or supervise the chairman. Internally, the chairman’s powers shall be limited by specific powers granted to these corporate bodies. The shareholders may also decide to limit the chairman’s powers in the by-laws and require prior authorisation from the shareholders for material decisions. Those limits may, however, be enforced towards third parties only if it is proven that they had knowledge of such limitations.

SARL

In the SARL, each of the managing directors has the broadest powers to manage the company within the limits of the corporate scope and shareholders’ powers. The same rules regarding third parties apply to the managing directors.

The role and powers of the shareholders are described in 5.2 Role of Shareholders in Company Management.

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

Collegiate management and/or supervisory bodies meet periodically on a pre-defined agenda. Meetings are called by the chairman and the convening process is freely determined in the by-laws or other internal rules, if any. For the adoption of defined decisions, such as the approval of annual or interim accounts, the statutory auditors (if any) must be given notice of the meeting. In companies with at least 50 employees, members of the social and economic committee (comité social et économique) may also attend the meetings in an advisory capacity.

In SA, the board of directors may also implement specialised committees whose role is to issue opinions on matters submitted by the board and falling into their competence area. In this case, the board of directors will be convened after the relevant committee and will make decisions based on the committee’s opinion.

Decisions are made by a vote of the general meeting, which may be held physically, via videoconference, or by postal vote. In this regard, the majority and quorum rules are defined by law or the internal documentation of the company. By exception, and if so provided for in the by-laws, decisions may result from the unanimous consent of the shareholders, expressed in a written act. Decisions are registered in minutes – drafted by an external secretary or by a member of the corporate body – executed by the chairman of the meeting and usually at least one other member of the body.

Recent reforms introduced by the Attractivité Act and its implementing decree have further modernised corporate governance practices by facilitating remote decision-making.

Subject to by-law authorisation, shareholder meetings (excluding those of listed companies and the annual ordinary shareholder meeting convened to approve the financial statements in SARL) and board meetings may now be held entirely via telecommunication. In any case, shareholders of SA and SCA may attend, by such means, physically held meetings. By-laws may also allow written consultation – which may be conducted electronically – and postal voting for shareholders and board decisions (provided no board member objects). New requirements also apply to the transmission, recording and consultation of general meetings for listed companies as further detailed in 5.3 Shareholder Meetings – Extraordinary General Meetings.

French 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. In addition, the by-laws or other internal rules may enforce voluntary decision-making process.

SA

As mentioned in 3.1 Bodies or Functions Involved in Governance and Management, SA may be structured pursuant to a one-tier board or a two-tier board system.

Given the relative scarcity of the two-tier board system, 4.1 Board Structure to 4.11 Disclosure of Payments to Directors/Officers will only deal with one-tier board SA.

SA boards of directors are composed between three and eighteen directors, including the chairman of the board. The shareholders appoint the directors, which may be natural or legal persons. In the latter case, they must appoint a permanent representative to the board.

Regulations and recommendations apply to the selection of directors:

• diversity rules require boards of directors of companies having more than 250 employees to have a proportion of directors representing each gender at the board of at least 40%;
• larger companies must appoint directors representing the employees or shareholders’ employees; and
• corporate governance codes recommend that a sizable proportion of directors are independent.

The board of directors may set up specialised committees (audit committee, compensation committee, ESG committee, etc), whose role is to issue opinions on matters submitted by the board in order to improve the effectiveness of the board. Specialised committees have consultative powers only and are not a substitute for the board. Audit committees are mandatory for companies whose shares are admitted to trading on a regulated market.

The shareholders may also appoint censors to the board of directors, with an advisory role only.

SAS

In SAS, the structure of the board – if the shareholders decided to voluntarily set up such collegiate body – is freely set in the by-laws or internal rules adopted by the shareholders, if any.

SARL

There is no board of directors in SARL, as the management is exclusively performed by its manager(s).

The board of directors is a collegiate body. As a principle, the directors collectively exercise the functions assigned to the board and they do not have any individual powers, except for the chairman of the board.

However, the board of directors may grant specific assignments to individual directors, in order to improve the corporate governance of the company and facilitate the board’s mission.

Directors may be assigned, given their skills and experience, to one or more specialised committees to help assess specific matters (please refer to 4.1 Board Structure).

Also, the board of directors may appoint a lead director chosen from among the independent directors to play a mediating role between the board of directors and the shareholders and improve shareholder dialogue. Lead directors are strongly recommended by the AFEP-MEDEF Code in a controlled listed company.

The chairman of the board has a distinct role: they are in charge of organising and directing the work of the board of directors and reporting to the general meeting. The chairman ensures the proper functioning of the company’s bodies and that the directors are able to fulfil their duties.

Various regulations and recommendations apply to the selection of directors and the composition of the board.

• Number of directors – the board of directors shall be composed of at least three and at most 18 directors, including the chairman. Within these limits, the number of directors is determined by the by-laws.
• Natural or legal person – directors may be natural or legal persons, except for the chairman who must be a natural person.
• Share ownership – it is not mandatory for directors to hold shares of the company, but the by-laws may provide otherwise.
• Diversity – boards of directors of companies having more than 250 employees shall comprise a proportion of directors representing each gender at the board of at least 40%, or, if the board is composed of eight or less directors, the difference between the representatives of each gender shall not exceed two.
• Age limit – in accordance with the French Commercial Code, not more than a third of the directors may be aged over 70, but the by-laws may provide for a stricter age limit.
• Multiple directorships – directors may not hold more than five directorships in public limited companies, it being understood that directorships in affiliated companies are excluded for the calculation of the directorships.
• Representation of employees – in large companies, employees are entitled to appoint directors representing the employees to the board of directors.
• Representation of employee shareholders – in large companies where more than 3% of the share capital is held by employees, the shareholders shall appoint directors representing the employee shareholders.
• Independence – corporate governance codes recommend that, in listed companies, a sizable proportion of directors should be independent (please refer to 4.5 Rules/Requirements Concerning Independence of Directors).

SA

Directors are appointed and may be dismissed at any time, without cause (ad nutum) by the general meeting of shareholders. Given that the agenda of the general meeting is set by the board of directors, shareholders are allowed to vote on the appointment and dismissal of one or more directors even if these decisions were not registered in the agenda. When a seat at the board of directors becomes vacant, the board is entitled to provisionally appoint a new director to fill the vacancy, subject to ratification by the next general meeting.

The chairman of the board, whether they assume the CEO position or not, is appointed by and among the directors of the board and must be a natural person. The chairman may be dismissed at any time, without cause by the board of directors. If the chairman is dismissed from their role as director by the shareholders, the chairman is automatically dismissed from the chairman and, as the case may be, CEO position.

If the chairman does not assume the CEO’s position, the CEO is appointed by the board of directors. Deputy CEOs may also be appointed by the board of directors upon proposal from the CEO. The CEO and deputy CEOs must be natural persons. The CEO and deputy CEOs may be dismissed at any time by the board of directors. The CEO and deputy CEOs may however claim damages if dismissed without cause (juste motif).

The appointment of directors must also comply with the aforementioned legal requirements (please refer to 4.3 Board Composition Requirements/Recommendations).

SAS

The chairman is appointed and dismissed in accordance with the by-laws or internal rules of the company. In case the by-laws do not provide any details regarding the conditions of dismissal, the chairman may be dismissed at any time, without cause.

SARL

The managing directors of the SARL are appointed and dismissed by the general meeting of shareholders at any time but, in the absence of cause, may claim damages.

There are no requirements concerning the independence of directors in non-listed companies.

With respect to companies whose securities are admitted to trading on a regulated market, the French Commercial Code indirectly requires the appointment of independent directors, since the audit committee must include at least one director deemed independent according to criteria specified and made public by the board of directors.

Also, the corporate governance codes recommend that a sizeable proportion of directors be independent. Hence, the AFEP-MEDEF Code recommends that 50% of directors be independent in not-controlled companies, and 33% in controlled companies.

The corporate governance codes set up a list of criteria for the assessment of the independence of directors. The board of directors shall use those criteria to determine which directors are independent, it being understood that even if all criteria are not met, the board remains free to deem a director independent if it is otherwise justified.

Corporate officers and directors must act in accordance with the best corporate interest of the company, with the additional requirement provided by the Pacte Act enacted in 2019 to “take into consideration” social and environmental issues when making their decisions.

The scope of directors’ duties expanded with the publication of the Corporate Sustainability Due Diligence Directive on 5 July 2024, requiring companies to mitigate their negative impact on human rights and the environment, including at the procurement, production and distribution levels, even though France has already had a similar framework since 2017.

Directors and officers must act in accordance with the best interest of the company, which generally overlaps with that of the shareholders, but it is not systematic. In this respect, directors and the board are becoming increasingly pivotal in the implementation of new ethics standards in corporate strategy, with new or renewed interests to be taken into consideration (employees, other stakeholders, etc) when assessing the situation vis-à-vis the corporate interest of the company they manage.

According to the circumstances, a breach of directors’ or officers’ duties may be enforced by the following parties:

• the company, by an ut universi action brought through its legal representative. The action can also be brought by a shareholder when the company is held liable for breaches committed by its legal representative. In such case, it would be an ut singuli action;
• the shareholders can enforce, for themselves, a breach of directors’ duties in case they suffered a distinct harm from the company; and
• third parties can also hold a director personally liable in case of a fault separate from their functions, which fault is defined by case law as (i) particularly serious, (ii) intentionally committed and (iii) incompatible with the normal exercise of corporate functions.

It is important to point out that unless one of the directors is solely responsible, directors’ liability is collective, and may be joint and several, given the collegial nature of the board. Lastly, the recognition of directors’ liability under French law is not that common.

In France, directors and officers can be held liable for criminal and civil charges.

They would be liable for any criminal infringement such as misappropriation of corporate assets, distribution of fictitious dividends or publication of inaccurate annual accounts.

Directors and officers can also be civilly liable if they commit breach of laws and regulations applicable to the company (breach of the by-laws or other internal regulations). In addition, mismanagement by directors and officers can be a cause for liability if they act contrary to the corporate interest of the company. Mismanagement ranges from negligence to fraud.

Directors and officers can also face administrative and tax liability; for example, in a case where they infringe the AMF securities law-related regulations, the authority is able to impose financial sanctions. In the same way, fraudulent acts or breaches of tax obligations can lead to financial sanctions.

Director and officer liability cannot be restricted or limited on a contractual basis. However, it can be excluded in case the directors and officers demonstrate they acted with a legitimate lack of awareness of a wrongful act or if they show they were in opposition to the decision at stake.

Usually, the company offers insurance to the directors and officers that covers specific defence and investigation costs or damages.

SA

In SA, the regime of directors’ and officers’ compensation approval process differs depending on whether the company is listed.

In non-listed SA, the general meeting of shareholders must approve the aggregate amount of the compensation to be paid to the board of directors, as a whole. Then, the allocation of this amount between the directors is decided by the board of directors itself. The board also has exclusive authority to set forth the CEO’s compensation scheme and authorise any payment made to it, without any prior approval required from the shareholders.

CEO’s compensation schemes generally include a fixed and a variable portion, the latter being paid upon achievement of targets set by the board.

A listed SA must comply with the say-on-pay procedure (please refer to 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares). Under this regulation, the directors’ and officers’ compensation schemes are subject to a double approval process from the shareholders:

• the shareholders’ general meeting shall approve the compensation policy for the upcoming fiscal year, setting forth the principle and structure of the relevant compensation schemes (ex-ante vote). Any amount paid – or payable – to the directors and/or officers in violation of the approved compensation policy must be void; and
• each year, the shareholders’ general meeting shall approve all payments made to directors and officers or amounts owed to them pursuant to the pre-approved compensation policy (ex-post vote). Payment of variable and extraordinary compensation elements shall be subject to the approval of the ex-post vote.

A rejection of the ex-ante vote or of the ex-post vote by the shareholders entails severe consequences:

• if the compensation policy is rejected, the previously approved principles and criteria shall continue to apply or, in the absence of any previously approved policy, the compensation scheme shall be determined in accordance with the compensation attributed for the previous financial year or, if none, in accordance with existing practice within the company; and
• if the compensation paid – or payable – to the directors and/or officers is rejected, the relevant officer shall be deprived of any variable and exceptional compensation due for the relevant fiscal year.

Compensation schemes of listed companies’ officers are also subject to various rules and recommendations, including from corporate governance codes (with for instance increasing recommendation to consider ESG criteria for variable compensation).

SAS

In SAS, the conditions for the compensation of the chairman and members of the board (if any) are set in the by-laws.

SARL

The compensation of the managing directors of the SARL is approved by the shareholders.

Listed companies must disclose any such compensation in a complete and transparent manner in their Universal Registration Document. This disclosure must provide the total compensation, fixed, variable and exceptional, and benefits of any kind attributed or paid to all corporate officers in the last year.

The company and its shareholders are legally bound by the by-laws, which constitute the main company’s internal regulation. As far as shareholders are concerned, this set of rules, mainly driven by applicable laws of the French Commercial Code, states their specific rights within the company. For instance, their right to vote, their right to receive dividends or their right to information about business and management matters.

In SAS, the importance of the by-laws is even more significant since the relationship between the company and its shareholders mainly relies on them, the SAS corporate form being little regulated by law provisions.

Public disclosure of shareholder information varies depending on the type of company. While SARL are required to disclose shareholder allocations in their by-laws, which can be accessed through public platforms, sociétés par actions – such as SAS and SA – do not have a public register of shareholders. Instead, share ownership is recorded internally in share transfer registries maintained by the company. However, for listed companies, the situation differs significantly. Shareholders exceeding certain thresholds must disclose their holdings to both the company and the French Financial Markets Authority (AMF), which then makes this information publicly available.

Shareholders’ Involvement

As a general principle, shareholders are not meant to be in charge of the day-to-day management of the company, which is delegated to the corporate officers.

That being said, shareholders are entitled to have an important role in the making of certain decisions – ie, all matters attributed to the general meeting by law and the by-laws. For example, the approval of the annual accounts, the appointment and removal of corporate officers and statutory auditors, the amendment of the by-laws or the dissolution of the company.

Besides this “typical” involvement, shareholders now play a more important role as they are increasingly solicited on the management of the company’s activity and administration. For example, shareholders are now consulted on the remuneration of executives (say-on-pay) and can also be consulted on the company’s action and influence on climate issues (say-on-climate).

No Interference in the Exercise of Executive Functions

Shareholders are not meant to have a direct role in the everyday management of the company, this being reserved to the executive officers who have broad powers to represent the company towards third parties. Therefore, shareholders must refrain from interfering in the executive officer’s area of responsibility, otherwise courts may consider such behaviour as a de facto exercise of executive functions and consider the shareholder as a de facto officer (dirigeant de fait) accountable like any legal officer (dirigeant de droit).

Ordinary General Meetings

At least once a year, within six months of the end of the financial year, an annual ordinary general meeting of shareholders must be convened in order to vote on the annual accounts and consolidated accounts, the distribution of dividends and, in listed companies, the compensation of the board members and the executive officers (please refer to 1.3 Corporate Governance Requirements for Companies with Publicly Traded Shares).

Under the annual ordinary general meeting, shareholders usually also vote on the appointment or removal of board members, the appointment of the statutory auditors, the related-party transactions and any decisions other than those reserved to the extraordinary general meeting of shareholders.

Extraordinary General Meetings

The extraordinary general meeting is competent to approve amendments to the company’s by-laws, any changes to the share capital, mergers and spin-offs and the early dissolution of the company.

Shareholders’ general meetings are convened by the board or any person designated in the by-laws to do so. Notice for holding meetings must be given at least 15 days in advance in SA and SARL. However, listed companies or companies whose shares are not all held in registered form are required, at least 35 days before the meeting, to publish a notice of the meeting in the Bulletin of Mandatory Legal Announcements (Bulletin des annonces légales obligatoires). The notice of the meeting must contain certain mandatory information.

The quorums and majorities required for the validity of meetings vary depending on 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.

In SA for instance, adopting an ordinary decision requires a quorum of at least one-fifth of the voting shares on first convocation, no quorum is required on second convocation, and a simple majority of the voting shares of the shareholders present or represented.

The adoption of extraordinary decisions requires a quorum of at least a quarter of the voting shares on first convocation, one-fifth on second convocation, and a two-thirds majority of the voting shares of the shareholders present or represented.

However, it should be noted that increasing the shareholders’ commitments towards the company requires a unanimous decision of all the shareholders.

In general, shareholder meetings are held physically at the registered office or any location specified in the notice of the meeting but can also be held remotely or by written consultation if the by-laws provide for it. Under the Attractivité Act, shareholder meetings of companies listed on a regulated market are required to be broadcast live, unless technical difficulties prevent or severely disrupt such transmission. Furthermore, these companies must ensure that a recording of the meeting is made available for later consultation and, where applicable, disclose whether the recording encompasses the entire meeting.

Executive officers and/or directors who violate applicable laws and regulations, the by-laws or who are otherwise at fault in their management are individually or jointly liable towards the company. In this case, one or more shareholders may bring a legal action against the executive officers and directors for damages suffered by the company (action ut singuli). The resulting damages will be paid to the company.

In addition, if the shareholders have suffered personal losses separate from those suffered by the company, executive officers and directors will also be liable to those shareholders (please refer to 4.9 Other Bases for Claims/Enforcement Against Directors/Officers).

Following the Transparency Directive providing for the harmonisation of transparency requirements across the European Union, French securities laws impose certain strict filing and disclosure requirements to which prospective shareholders in publicly traded companies should pay particular attention. 

Such reporting obligations fall primarily within the mandatory disclosure of major shareholdings. The French Commercial Code thus requires the disclosure within four trading days to the issuer and to the AMF of any holding of shares or voting rights when the percentage of such shares or voting rights reaches, exceeds or falls below the following thresholds (whether through open market purchases, negotiated transactions or otherwise): 5%, 10%, 15%, 20%, 25%, 30%, one-third, 50%, two-thirds, 90% or 95%. The AMF then publishes this information. Issuers’ by-laws may also impose additional disclosure requirements – even below the 5% statutory threshold – for thresholds of not less than 0.5%.

In addition, upon crossing the thresholds of 10%, 15%, 20% and 25% of the capital or voting rights, the relevant shareholder must also inform the company and the AMF, within five trading days, of its objectives for the following six-month period in a statement of intent (déclaration d’intention). In the event of a change in intent within the six-month period following the statement of intent that was originally filed, a new statement must be issued promptly to the company and the AMF and made public under the same conditions. The six-month period is reset with this new statement.

Legal Reporting

Companies are required to file various documents relating to their accounts for the previous financial year with the registrar of the commercial court. This filing must be made within one month of the approval of the annual accounts by the annual ordinary general meeting, or two months if the filing is made by electronic means.

The filing covers the following documents:

• the annual accounts;
• the management report, in the case of a listed company. For all other companies, the management report does not have to be filed but a copy must be delivered, at the company’s registered office, to any person upon request;
• the auditors’ report on the annual accounts;
• the proposal for the allocation of profits submitted to the annual general meeting and the relevant resolution on the allocation adopted by the annual general meeting; and
• the consolidated accounts, the group management report and the auditors’ report on the consolidated accounts, in the case of a company required to prepare such accounts.

Specific Complementary Filings for Listed Companies

Listed companies are also required to publish and file with the AMF:

• an annual financial report within four months of the end of the financial year; and
• a half-year financial report within three months of the end of the first half of the financial year.

In addition, listed companies have the option of publishing quarterly or interim financial information at their discretion. If they choose to publish such financial information, the AMF recommends that the publication be presented with a commentary designed to clarify the relevant financial information and thus enable investors to better understand the company’s situation.

Corporate Governance Report

SA and SCA are required to draw up a report on their corporate governance, which is attached to the management report. For listed companies, this report is usually incorporated in the Universal Registration Document.

Corporate Governance Codes

The corporate governance report of listed companies is required to specify, among other things, the corporate governance code applied by the company. In France, the most widely used corporate governance code is the AFEP-MEDEF Code. If the company chooses not to comply with a specific provision of the corporate governance code, it must explain how it departs from it and why, in accordance with the comply-or-explain principle (please refer to 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares). Companies can also choose to refer to the corporate governance code drawn up by Middlenext, which is intended for medium-sized companies listed in Paris.

In France, companies are registered with the Registre du Commerce et des Sociétés (RCS) through the single window for business formalities (guichet unique des formalités d’entreprises), which submits the information to the competent commercial court clerk (greffier du tribunal de commerce). Any updates to the constitutive documents during the life of the company must be filed with the relevant companies’ registry. These updates and their related corporate documents are publicly available and include amendments to the by-laws, changes to executive officers and board composition, transfers of the registered office, changes to the share capital and statutory auditors.

The financial reports mentioned in 6.1 Financial Reporting are also required to be filed with the companies’ registry. However, micro-enterprises and small companies, as defined in the French Commercial Code, may request confidentiality for their annual accounts from the registry. Following the increase in thresholds by a decree of 28 February 2024, more small businesses will be eligible for this option, reducing administrative burdens and protecting sensitive information.

The registry’s clerk has supervisory powers and conducts several checks to ensure compliance with regulations and authenticity of supporting documents. If necessary, the clerk can reject filings or, in some cases, order the company’s removal from the registry.

In case of failure to comply with the filing obligations, companies, or their officers in the event the failure constitutes a fault separate to their functions, may be exposed to civil and criminal fines.

The appointment of an external auditor by the shareholders’ ordinary general meeting becomes mandatory if, at the end of the financial year, the company exceeds at least two of the following thresholds (these thresholds have been modified by Decree – 28 February 2024 – transposing a delegated Directive of 17 October 2023) as follows:

• a balance sheet total of EUR5 million;
• net turnover of EUR10 million; and
• 50 employees.

Auditors are subject to certain requirements regarding their independence, which prohibit them from having any personal, financial or professional relationships that are incompatible with the functions of an auditor.

In addition, any commercial activity or paid employment of the auditor for the benefit of the company whose accounts they audit is prohibited in order to preserve the auditor’s independence.

Besides the duty of diligence a director must respect, listed companies are required to describe their internal control and risk management procedures in their annual report. They are also legally required to set up an audit committee composed of board members, which must at least include one independent member with specific expertise in financial or accounting matters.

The audit committee is responsible for monitoring the effectiveness of the internal control and risk management systems and of the internal audit of procedures relating to the preparation and processing of financial and non-financial accounting information.

In addition, the audit committee regularly meets with the heads of internal audit and risk control and gives an opinion on the organisation of their departments.