Key points
- The choice of legal form strongly influences a company’s ability to attract investors.
- The SAS (simplified joint-stock company) offers great flexibility in its articles of association and makes it easy to issue shares or convertible bonds, but, save for exceptions, it cannot make a public offering of financial securities.
- The SA (public limited company) requires a minimum share capital of €37,000 and can make a public offering of securities, which makes it suited to large funding rounds.
- The SARL (private limited company) suits SMEs thanks to its simplicity, but its restrictions on share transfers hold back the entry of new investors.
- In all three forms, the shareholders’ liability is limited to the amount of their contributions.
Raising funds is a crucial goal for any company that wants to accelerate its growth and achieve its ambitions. However, the choice of legal form plays a major role in attracting investors. Each form of company has its own advantages and drawbacks when it comes to financing. This article looks at the options available so that you can choose the structure best suited to your project.
Simplified joint-stock company (SAS)
The société par actions simplifiée, known by the acronym SAS (simplified joint-stock company), is a very popular legal form in France, particularly among start-ups and innovative entrepreneurs. Thanks to the great flexibility of its articles of association, it allows the rights and obligations of shareholders to be structured freely.
The main strengths of the SAS lie in how easily it can open its capital to new investors. It is simple to issue new shares or financial instruments such as convertible bonds, which can become powerful levers for increasing the share capital. On the other hand, the SAS cannot make a public offering of financial securities, outside the exceptions provided for by Article L. 227-2 of the French Commercial Code (Code de commerce) (in French). Business angels also appreciate this form because it is not required to appoint a statutory auditor, unless certain thresholds are exceeded.
Advantages of the SAS
- Flexible articles of association: The articles can be drafted to meet each company’s specific needs precisely.
- Attractive to investors: Easy issuance of a variety of securities to raise funds.
- Limited liability: Shareholders are liable only up to the amount of their contributions.
In return, the SAS may involve additional costs for drafting the articles of association and for administrative management. However, these costs are generally justified by the advantages it offers in terms of fundraising and governance.
Public limited company (SA)
The société anonyme, or SA (public limited company), is a traditional structure often chosen by large companies and those considering a stock market listing. This legal form requires a minimum share capital of €37,000 and the appointment of a board of directors, or of a management board with a supervisory board.
This requirement results in more complex governance, but also governance that is more reassuring for institutional investors. The SA enjoys a prestigious and serious image, which can ease negotiations during large funding rounds.
Strengths of the SA
- Greater credibility: A form valued by large investors for its solidity.
- Significant fundraising: Ability to carry out public issues of financial securities.
- Strict governance: Promotes transparency and a balance of powers.
However, setting up and running an SA involves heavy and costly administrative formalities. In addition, the relative rigidity of its operating rules may put off some start-ups focused on agility and speed of decision-making.
Private limited company (SARL)
The société à responsabilité limitée, or SARL (private limited company), remains attractive for small and medium-sized enterprises thanks to how simple it is to set up and run. The liability of the shareholders is limited to the amount of their contributions, which offers welcome protection.
This form is particularly suited to projects with few shareholders that favour stable and well-protected management. The restrictions on the transfer of shares can be seen as protective, although they also hold back the entry of new investors.
Benefits of the SARL
- Simplified management: Clear operating rules, less demanding than those of the SA.
- Protection of shareholders: Liability limited to the contributions made.
- Ideal for SMEs: Suits modest structures seeking stability and protection.
The SARL nevertheless has notable limits when it comes to raising substantial funds. The constraints on the entry of new investors and the ban on public offerings of securities (only registered bonds may be issued, subject to conditions, under Article L. 223-11 of the French Commercial Code (in French)) can hinder the rapid growth of an ambitious company.
SAS vs SA vs SARL: comparison for fundraising in France
A comparison table is a useful way to see more concretely the differences between these three types of company:
| Criteria | SAS | SA | SARL |
|---|---|---|---|
| Minimum share capital | None | €37,000 | None |
| Number of shareholders | Min. 1 | Min. 2 | Min. 1 |
| Governance | Flexible | Formal (board of directors, or management board and supervisory board) | Simplified |
| Public issue of securities | Prohibited, save for exceptions (Article L. 227-2) | Possible (prospectus, unless exempt) | Prohibited (registered bonds possible, subject to conditions) |
What investors prefer
Understanding what investors are looking for is crucial to choosing the right legal form. In general, business angels favour the SAS because it offers a flexible structure that can adapt to different forms of financial participation. Institutional investors, on the other hand, often prefer the SA because of the rigour and credibility inherent in this form.
Venture capital funds, for their part, mainly look for opportunities with a high potential return on investment. The choice of company will then depend on the company’s maturity, the founders’ strategic vision and the specific requirements of the prospective investors.
The choice of legal form is a decisive step towards successful fundraising. The fit between the legal form and the financing objectives is essential to maximise the chances of success. An SAS can offer the flexibility a dynamic start-up needs, while an SA will provide the formal structure required for major stock market transactions. For more modest projects, the SARL will remain a viable and reassuring option.
Remember to consult a fundraising lawyer to tailor the articles of association to your company’s particular needs and to attract the investors best suited to your entrepreneurial venture.
