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Foreign companies, how to expand your business activities in France

29.12.2016

By Joyce Pitcher, Founder, Pitcher Avocat


Foreign companies aiming to expand their business activities in France and Europe are quite often hesitating regarding the legal constraints, the type of structure to use and the contracts to conclude.
The legal structure of implementation will mostly depend on the commercial decisions made by the company as regards to its perspectives of development in France and Europe.
It may be therefore useful for the company to explore the market before actually expanding its business activities or establishing itself in France.


Exploring the French market

If the company is not familiar with the market and wants to know if its products or services could be sold in France and the type of clients to target, such company may use various ways to explore the market.

Liaison Office

French law allows foreign companies to register a “Bureau de liaison” in France. This “bureau” shall not have any commercial activity, its only purpose being to promote the company’s activity, to analyze the market, make new contacts, in view of the futureexpansion.
The foreign company remains liable for the bureau’s activities, since it has no independence. The bureau is not entitled to sign any contract on behalf of the company.
This bureau can be represented either by an employee of the foreign company, or the legal representative, or a French employee. It is essential to obtain the appropriate visa for the company’s representative located in France.

Intermediaries

The foreign company may also want to explore the market by starting to sell its products or services, relying on people already knowing the market. In such case, using an intermediary may be a good opportunity. The intermediaries are paid on a commission basis, depending on the sales made on behalf of the principal, which allows the company to lower the risk when trying to enter a new market.

The most common used intermediary contracts are the following:

  • Agency: the agent is an independent professional whose mission is to negotiate and/or conclude contracts on behalf of the principal. It is really important to take into account the fact that European regulations are very protective of the agent. Therefore, in case of termination of the contract for instance, the agent is entitled to compensation, usually equivalent to two years commissions (except in the event of breach of contract by the agent). Introducer agreement: the introducer’s mission is to introduce the principal with potential clients. The target clients are determined in advance based on various criteria, determined in the contract. The intermediary is not entitled to negotiate or conclude contracts with the clients on behalf of the principal
  • Unlike the agent, the introducer is not entitled to any compensation upon termination of the contract.

The contracts will be concluded between the intermediary and the foreign company. It should be noted that, even if the parties elect the application of a foreign law to the contract, French mandatory provisions might still apply.

 

Entering the French market


When the foreign company has explored the French market and decides to expand its business activities on this market, various options are available. The agency and introducer agreements explained above can also be used, in addition to the following possibilities.

Distribution agreements

If the foreign company does not want to establish a branch or subsidiary in France, a distribution agreement can be a good opportunity to sell the pro ducts or services. The distribution contract will be entered into between the foreign company and the distributor.
Unlike the agent and the introducer, the distributor buys the products from the supplier and sells them to the final client.
The type of distribution agreement should be determined depending on the company’s activity and the distribution mode of the products or services.

  • The most common types of distribution agreements are the following:
  • exclusive distribution,
  • selective distribution (the distributors are selected based on various criteria), franchise, concession...

It should be noted that distribution law is highly regulated in the European Union and foreign companies should thus make sure that their contracts comply with EU laws and regulations.

Establishing a branch or subsidiary

The foreign company may also want to sell the products or services through a branch or subsidiary established in France. Both have to be registered and are subject to Frencht ax law. The branch can have commercial activities, unlike the liaison office, but has no legal capacity and is dep endent from the foreign company.
However, the subsidiary is owned in majority by the foreign company, but has legal capacity. Depending on the perspective of the foreign companies, it would be in most cases advised to start with the registration of a branch before incorporating a subsidiary. Considering the above, many possibilities are offered to foreign companies aiming to expand their business activities in France.