COMMERCIAL CODE

With the participation of Louis VOGEL, Professor at the University of Paris II and, for the Book VI on Businesses in

difficulty, of Françoise PEROCHON, Professor at the University of Montpellier I

BOOK I

Commerce in generalArticles L110-1 to

L146-4

TITLE I

The commercial actArticles L110-1 to

L110-4

Article L110-1

The law provides that commercial instruments are:

1° All purchases of chattels in order to resell this, either in kind or after having worked and developed this;

2° All purchases of real property in order to resell this, unless the purchaser has acted in order to construct one or

more buildings and to sell these en bloc or site-by-site;

3° All intermediate operations for the purchase, subscription or sale of buildings, business or shares of property

companies;

4° All chattels rental undertakings;

5° All manufacturing, commission and land or water transport undertakings;

6° All supply, agency, business office, auction house and public entertainment undertakings;

7° All exchange, banking or brokerage operations;

8° All public banking operations;

9° All obligations between dealers, merchants and bankers;

10° Bills of exchange between all persons.

Article L110-2

The law also deems commercial instruments to be:

1° All construction undertakings and all purchases, sales and resales of ships for inland and foreign-going

navigation;

2° All sea shipments;

3° All purchases and sales of ship's tackle, apparatus and foodstuffs;

4° All chartering or chartering and bottomry loans;

5° All insurances and other contracts relating to maritime trade;

6° All agreements and conventions on crew wages and rents;

7° All engagements of seamen for the service of commercial ships.

Article L110-3

With regard to traders, commercial instruments may be proven by any means unless the law specifies otherwise.

Article L110-4

I.- Obligations deriving from trade between traders or between traders and non-traders shall be prescribed after ten

years unless they are subject to special shorter periods of prescription.

II.- All claims for payment shall be prescribed:

1° For food supplied to seamen on the captain's orders, one year after delivery;

2° For the supply of materials and other items needed for the construction, equipment or supply of the ship, one

year after these foodstuffs are provided;

3° For built structures, one year after the acceptance of the structures.

III.- Claims for payment of the wages of officers, seamen and other crewmembers shall be prescribed after five

years in accordance with Article 2277 of the Civil Code.

TITLE II

TradersArticles L121-1 to

L128-6

CHAPTER I

Definition and statusArticles L121-1 to

L121-3

SECTION I

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Capacity of traderArticles L121-1 to

L121-3

Article L121-1

Traders are those who carry out commercial instruments and who make this their usual profession.

Article L121-2

Minors, even when declared of full age and capacity, may not be traders.

Article L121-3

Spouses of traders shall be deemed to be traders only if they carry out a separate commercial activity from that of

their spouse.

SECTION II

Spouses of craftspeople and traders working in the family-owned undertaking

CHAPTER II

Foreign tradersArticles L122-1 to

L122-4

Article L122-1

(Order No. 2004-279 of 25 March 2004 Art. 1 1 Official Journal of 27 March 2004)

A foreign national shall not be engaged in a commercial, industrial or handicraft occupation in France in a manner

which requires his registration or inclusion in the register of companies or the trade register without the prior consent of

the Prefect of the Department in which he envisages conducting his business initially.

Article L122-2

Any breach of the requirements of Article L.122-1 and of those in the implementing decree specified in Article

L.122-4 shall be punished by a prison sentence of six months and a fine of 25 000 F. In cases of recidivism, the

penalties shall be doubled. The court may also order the closure of the establishment.

Article L122-3

(Order No. 2004-279 of 25 March 2004 Art. 1 2 Official Journal of 27 March 2004)

I. - The provisions of Articles L. 122-1 and L. 122-2 do not apply to the citizens of a European Community member

state, a European Economic Area member state or a member state of the Organisation for Economic Cooperation and

Development acting on their own behalf or on behalf of either another citizen of such a State or a company incorporated

pursuant to the legislation of such a State and having its registered office, its principal administrative establishment or its

principal place of business in such a State.

II. - However, when a foreign national or a company referred to in I creates an agency, a branch or a subsidiary on

French soil or provides services there, the benefit of I shall be granted only if:

1. The foreign national is established in a European Community member state, a European Economic Area member

state or a member state of the Organisation for Economic Cooperation and Development;

2. The company, if it has only its registered office in the European Community, a European Economic Area member

state or a member state of the Organisation for Economic Cooperation and Development, conducts a business which

has an effective and continuous link with the economy of such a State.

Article L122-4

A Conseil d'Etat decree shall fix the conditions for implementing this chapter.

CHAPTER III

General obligations of tradersArticles L123-1 to

L123-28

SECTION I

Commercial and companies registerArticles L123-1 to

L123-11

Subsection 1

Persons required to registerArticles L123-1 to

L123-5-1

Article L123-1

I.- A commercial and companies register shall be kept in which the following shall be registered as a result of their

declaration:

1° Natural persons with the capacity of trader, even if they are required to register in the trades register;

2° Companies and economic interest groups which have their registered office in a French department and which

have a legal personality in accordance with Article 1842 of the Civil Code or with Article L.251-4;

3° Commercial companies whose registered office is situated outside a French department and which have an

establishment in one of these departments;

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4° French public establishments of an industrial or commercial nature;

5° Other legal persons whose registration is specified by the acts and regulations;

6° Commercial delegations or commercial agents of foreign States, authorities or public establishments established

in a French department.

II.- The registrations and instruments or documents filed as specified by a Conseil d'Etat decree shall appear in the

Article L123-2

No-one may be registered in the register if they do not meet the conditions required in order to carry out their

activity. Legal persons must also have complied with the formalities specified by the legislation and regulations in force

relating thereto.

Article L123-3

If a trader who is a natural person fails to request registration by the specified deadline, the judge hearing the case

shall, either automatically or at the request of the procureur de la République or any person proving that they have an

interest in this, make an order requiring the trader to request registration.

In accordance with the same conditions, the judge may order any person registered in the commercial and

companies register, who has not requested these by the specified deadlines, to make the additional entries or

corrections which must be made in the register, to make the entries or corrections needed in the event of incorrect or

incomplete declarations or to deregister.

The clerk of a court delivering a decision requiring a person to register must notify this decision to the clerk of the

Tribunal de commerce whose jurisdiction covers the registered office or main establishment of the interested party. The

clerk of the Tribunal de commerce receiving the decision shall refer this to the judge responsible for overseeing the

Article L123-4

(Law No 2000-916 of 19 September 2000 Article 3 Official Gazette of 22 September 2000 effective 1 January 2002)

(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003)

If any person ordered to request a registration, a supplementary or amending entry, or a striking-off in the trade

on which the order made by the judge entrusted with supervision of the list directing him to complete one of those

formalities becoming final, a fine of €3,750 euros shall be imposed on that person.

The court may, moreover, deprive the person concerned of the right to vote in, and to stand in, elections to the

commercial courts, the chambers of commerce and industry and the industrial tribunals for a period of up to five years.

The court orders that the registration, the notations or the striking-off that must be recorded in the companies

Article L123-5

The act of giving, in bad faith, incorrect or incomplete information with a view to registration, removal of the

registration or additional entries or corrections in the commercial and companies register shall be punished by a fine of

30 000 F and a prison sentence of six months.

The provisions of the second and third paragraphs of Article L.123-4 shall apply in the cases specified in this article.

Article L123-5-1

(inserted by Act No 420 of 15 May 2001, Article 123 II, Official Gazette of 16 May 2001)

At the request of any interested party or the procureur de la République, the president of the court, ruling in

interlocutory proceedings, may enjoin, subject to a penalty, the manager of any legal person to file the documents and

instruments with the commercial and companies register which this legal person is required to do by the acts or

regulations.

The president may, in accordance with the same conditions and to this same end, appoint a representative

responsible for fulfilling these formalities.

Subsection 2

Keeping of the register and effects attached to registrationArticles L123-6 to

L123-9-1

Article L123-6

The commercial and companies register shall be kept by the clerk of each Tribunal de commerce. It shall be

overseen by the president of the court or a judge entrusted with this responsibility who shall be competent for all

disputes between the person under obligation and the clerk.

Article L123-7

The registration of a natural person shall involve the presumption of the capacity of trader. However, this

presumption shall not be binding on third parties and administrations which provide proof to the contrary. Third parties

and administrations shall not be permitted to rely on this presumption if they know that the liable person is not a trader.

Article L123-8

The person obliged to register who has not requested this by the expiration of a period of fifteen days from the start

of their activity may not rely on, until registration, the capacity of trader with regard to both third parties and public

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administrations. However, this person may not invoke their failure to register in order to avoid the responsibilities and

obligations inherent in this capacity.

Without prejudice to the application of Article L.144-7, registered traders who assign their business or hand over the

operation of this, particularly in the form of real estate management, may not plead the cessation of their commercial

activity in order to avoid claims for damages to which they shall be subject due to the obligations contracted by their

successors in the operation of the business until the day when the corresponding additional entry or removal of the

registration has been carried out.

Article L123-9

Persons obliged to register may not, in carrying out their activity, raise in respect of third parties or public

administrations, which may, however, rely on these, the acts and instruments subject to entry unless the latter have

been published in the register.

In addition, persons obliged to file instruments or documents in the annex to the register may not raise these against

third parties or administrations unless the corresponding formality has been carried out. However, third parties or

administrations may rely on these instruments or documents.

The provisions of the above paragraphs shall apply to the acts or instruments subject to entry or filing even if they

are covered by another legal publication. Third parties and administrations which personally knew about these acts or

instruments may not, however, rely on these.

Article L123-9-1

(inserted by Law No. 2003-721 of 1 August 2003 Article 2 (I) Official Gazette of 5 August 2003)

The court registrar or the body referred to in the last paragraph of Article 2 of Law No. 94-126 of 11 February 1994

relating to individual initiative and enterprise shall deliver a receipt, free of charge, for the submission of an application to

create a business to any person subject to registration, as soon as that person has submitted a duly completed

application for registration. The said receipt allows the necessary formalities to be completed with the public bodies and

the private bodies entrusted with rendering a public service, under the personal responsibility of the natural person

having tradesman status or who is acting on behalf of the company being formed. It bears the legend:"Registration

pending". The implementing provisions for the present Article are defined in a Conseil d'Etat decree.

Subsection 3

Place of domicile of registered personsArticles L123-10 to

L123-11

Article L123-10

(inserted by Law No. 2003-721 of 1 August 2003 Article 6 (I) (1) Official Gazette of 5 August 2003)

Natural persons applying for registration in the companies register or the trade register must declare their business

address and substantiate possession thereof.

Natural persons may declare the address of their place of residence and conduct their business there, barring any

legislative provision or contractual stipulation to the contrary.

Natural persons who do not have business premises may declare their place of residence, solely for the purpose of

providing a business address. Such a declaration does not give rise to any change of use or to application of the

commercial lease regulations.

NB: Law No. 2003-721 of 1 August 2003 Article 6 II: These provisions apply to businesses listed in the companies

Article L123-11

(Law No 2003-721 of 1 August 2003 Article 6 (I) (2) Official Gazette of 5 August 2003)

Any legal entity applying for registration in the companies register must substantiate possession of the premises

which will house its registered office, alone or with others, or, if the registered office is to be located abroad, the agency,

branch or representation established on French soil.

A company is allowed to have its registered address in premises occupied by several businesses under the

conditions determined in a Conseil d'Etat decree. That decree also stipulates the equipment or services that are required

to justify the reality of the registered office of the company domiciled there.

NB: Law No. 2003-721 of 1 August 2003 Article 6 II: These provisions apply to businesses registered in the

companies register or the trade register on the date of promulgation of Law No. 2003-721 of 1 August 2003.

SECTION II

Accounts of tradersArticles L123-12 to

L123-28

Subsection 1

Financial liabilities applicable to all tradersArticles L123-12 to

L123-24

Article L123-12

All natural or legal persons with the capacity of trader shall enter in their accounts the movements affecting the

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assets of their undertaking. These movements shall be recorded chronologically.

These persons must check, by means of a stocktake at least once every twelve months, the existence and value of

the assets and liabilities of the undertaking.

They must prepare annual accounts at the end of the financial year in view of the entries made in the accounts and

the stocktake. These annual accounts shall consist of the balance sheet, profit and loss account and an annex which

shall form an inseparable whole.

Article L123-13

The balance sheet shall describe individually the assets and liabilities of the undertaking and shall clearly show the

equity capital.

The profit and loss account shall summarise the income and expenditure for the financial year without taking into

account their date of receipt or payment. It shall show, according to the difference after deducting the depreciation and

provisions, the profit or loss for the financial year. The income and expenditure, classed by category, shall be presented

in the form of either tables or lists.

The amount of the undertaking's commitments in terms of pensions, supplemental pensions, compensation and

allowances due to retirement or similar advantages of its staff members or partners and its managing agents shall be

indicated in the annex. In addition, undertakings may decide to enter in the balance sheet, in the form of a provision, the

amount corresponding to all or part of these commitments.

The annex shall supplement and comment on the information given in the balance sheet and the profit and loss

account.

Article L123-14

The annual accounts shall be honest and truthful and shall ensure a fair representation of the assets, financial

situation and results of the undertaking.

When the application of an accounting requirement is not sufficient to ensure the fair representation indicated in this

article, additional information must be provided in the annex.

If, in an exceptional case, the application of an accounting requirement proves to be unsuitable in order to ensure a

fair representation of the assets, financial situation or results, an exception must be made to this. This exception shall

be indicated in the annex and duly reasoned, with an indication of its effect on the assets, financial situation and results

of the undertaking.

Article L123-15

The balance sheet, profit and loss account and annex shall include as many headings and items as are needed to

ensure a fair representation of the assets, financial situation and results of the undertaking. Each item in the balance

sheet and profit and loss account shall contain the figure relating to the corresponding item for the previous financial

year.

The classification of the elements of the balance sheet and profit and loss account, the elements forming the equity

capital and the texts to be included in the annex shall be fixed by decree.

Article L123-16

Traders, whether natural or legal persons, may, in accordance with the conditions fixed by a decree, adopt a

simplified presentation of their annual accounts when these do not exceed, at the end of the financial year, the figures

fixed by decree for two of the following criteria: the total of their balance sheet, the net amount of their turnover or the

average number of permanent employees during the financial year. They shall lose this option when this condition is not

met for two successive financial years.

Article L123-17

Unless an exceptional change occurs in the trader's situation, whether a natural or legal person, the presentation of

the annual accounts and the valuation methods used may not be altered from one financial year to the next. If

alterations occur, these shall be described and justified in the annex.

Article L123-18

On its date of entry into the capital assets, property acquired for money consideration shall be recorded at its cost of

acquisition, property acquired free of charge shall be recorded at its market value and property produced shall be

recorded at its cost of production.

For fixed assets, the values used in the stocktake shall, if applicable, take account of the depreciation plans. If the

value of a fixed asset falls below its net book value, the latter shall be reduced to the stocktake value at the end of the

financial year, whether or not the depreciation is final.

Wasting assets shall be valued either at its weighted average cost of acquisition or production or by considering that

the first item out is the first item in.

The asset appreciation noted between the stocktake value of an item and its entry value shall not be entered in the

accounts. If this results from a revaluation of all the tangible and capital assets, the revaluation difference between the

current value and the net book value may not be used to offset losses. It shall be clearly entered on the liabilities side of

the balance sheet.

Article L123-19

The assets and liabilities shall be valued separately.

No offsetting may be applied between the assets and liabilities items of the balance sheet or between the income

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COMMERCIAL CODE

and expenditure items of the profit and loss account.

The opening balance sheet for a financial year shall correspond to the closing balance sheet for the previous

financial year.

Article L123-20

The annual accounts must respect the precautionary principle. In order for these accounts to be prepared, traders,

whether natural or legal persons, shall be presumed to be continuing their activities.

Even in the absence or insufficiency of any profit, the necessary depreciation and provisions must be established.

The risks and losses occurring during the financial year or during a previous financial year shall be taken into

account, even if they are identified between the end date of the financial year and that of the preparation of the

accounts.

Article L123-21

Only the profits made by the end date of a financial year may be entered in the annual accounts. The profit made

on a partially executed transaction, accepted by the other contracting party, may be entered, after the stocktake, when

its completion is certain and when it is possible, using the projected accounting documents, to value the overall profit of

the transaction with sufficient safety.

Article L123-22

(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003) The accounting documents are expressed in euros and drafted in the French language. The accounting documents and supporting documentation are kept for ten years.

The accounting documents relating to the recording of transactions and the inventory are prepared and maintained

without blanks or alterations of any kind in conditions determined in a Conseil d'Etat decree.

Article L123-23

Duly kept accounts may be accepted in the courts in order to act as proof between traders in respect of commercial

instruments.

If the accounts have not been duly kept, they may not be invoked by their author for the latter's benefit.

The communication of accounting documents may be ordered in the courts only in cases of succession, joint

ownership and partition of a company and in the event of administrative order or court-ordered winding-up.

Article L123-24

(Law No 2003-7 of 3 January 2003 Article 50 (II) Official Gazette of 4 January 2003) All traders are required to open a current account with a bank or the post office.

Subsection 2

Financial liabilities applicable to certain traders who are natural personsArticles L123-25 to

L123-28

Article L123-25

As an exception to the provisions of the first and third paragraphs of Article L.123-12, natural persons placed

voluntarily or ipso jure under the effective simplified taxation system may record claims and debts only at the end of the

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BOOK I

Commerce in generalArticles L110-1 to

L146-4

TITLE I

The commercial actArticles L110-1 to

L110-4

Article L110-1

The law provides that commercial instruments are:

1° All purchases of chattels in order to resell this, either in kind or after having worked and developed this;

2° All purchases of real property in order to resell this, unless the purchaser has acted in order to construct one or

3° All intermediate operations for the purchase, subscription or sale of buildings, business or shares of property

4° All chattels rental undertakings;

5° All manufacturing, commission and land or water transport undertakings;

6° All supply, agency, business office, auction house and public entertainment undertakings;

7° All exchange, banking or brokerage operations;

8° All public banking operations;

9° All obligations between dealers, merchants and bankers;

10° Bills of exchange between all persons.

Article L110-2

The law also deems commercial instruments to be:

1° All construction undertakings and all purchases, sales and resales of ships for inland and foreign-going

2° All sea shipments;

3° All purchases and sales of ship's tackle, apparatus and foodstuffs;

4° All chartering or chartering and bottomry loans;

5° All insurances and other contracts relating to maritime trade;

6° All agreements and conventions on crew wages and rents;

7° All engagements of seamen for the service of commercial ships.

Article L110-3

Article L110-4

II.- All claims for payment shall be prescribed:

1° For food supplied to seamen on the captain's orders, one year after delivery;

2° For the supply of materials and other items needed for the construction, equipment or supply of the ship, one

3° For built structures, one year after the acceptance of the structures.

TITLE II

TradersArticles L121-1 to

L128-6

CHAPTER I

Definition and statusArticles L121-1 to

L121-3

SECTION I

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Capacity of traderArticles L121-1 to

L121-3

Article L121-1

Article L121-2

Article L121-3

SECTION II

CHAPTER II

Foreign tradersArticles L122-1 to

L122-4

Article L122-1

Article L122-2

Article L122-3

1. The foreign national is established in a European Community member state, a European Economic Area member

2. The company, if it has only its registered office in the European Community, a European Economic Area member

Article L122-4

CHAPTER III

General obligations of tradersArticles L123-1 to

L123-28

SECTION I

L123-11

Subsection 1

Persons required to registerArticles L123-1 to

L123-5-1

Article L123-1

1° Natural persons with the capacity of trader, even if they are required to register in the trades register;

2° Companies and economic interest groups which have their registered office in a French department and which

3° Commercial companies whose registered office is situated outside a French department and which have an

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4° French public establishments of an industrial or commercial nature;

5° Other legal persons whose registration is specified by the acts and regulations;

6° Commercial delegations or commercial agents of foreign States, authorities or public establishments established

Article L123-2

Article L123-3

Article L123-4