bgi law magazine 2010

How to do business and Hold assets around tHe world

GrouP international law MaGaZine

It is becoming increasingly important to have a global vision of the world of business, to be able to compare tax systems, company set-ups and enter-prise structures, aspects that also guarantee the legal security and heritage of our clients and fulfil our requirements regarding profitability, whilst also ensuring greater economy in terms of labour costs, taxation and in-

corporation expenses. In this respect, this new issue, the third in the series, aims to provide a simple and brief summary of some of the practical aspects regarding these matters in the legislation of the different countries where BGI is represented. Gil Stern once declared, Both optimists and pessimists contribute to our socie-ty. The optimist invents the airplane and the pessimist the parachute ... We, in our capacity as jurists, lawyers and legal and tax advisors, must work on both sides, given that both are required, especially now in view of the current parlous state of the world economy. In this respect, we have combined the text with beautiful images representing the countries in question, thus helping to alleviate the ever tiresome and compli-cated explanations of our lawyers ... and yet, dear friends..., I hope this publica-tion is both interesting and of use to you. I extend my warmest regards to you all.

Letter from the President

Juan Luis BaLmaseda de ahumada Y dieZBGi PResidenT

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4BGI 07

Austria 08

Bulgaria 26

Cyprus 36

Czech Republic 46

England & Wales 56

France 64

Germany 78

Greece 86

Gibraltar 96

Hungary 104

Morocco 116

Portugal 134

Romania 146

Russia 154

Spain 166

Ukraine 182

Uruguay 192

DISEO Y MAQUETACIN TEBALE ([email protected])

Contents

albufeira au. i.d. hallertau athens barCelOna buCarest budapest buenOs aires burgas CasablanCa gibraltar KharKOv Kiev lrida limassOl lisbOn lOndOn luxembOurg

madrid marbella marraKeCh milan mOntevideO mOsCOw muniCh OpOrtO paris praga sOfia tanger vienna vigO

Think globally, win locally

In 1996, two established and prestigious law firms Balms Abogados and Black Graf & Co (as it then was), solicitors in London, joined forces to establish Balms Group International (BGI), an international Organiza-tion of Independent Law Firms. Balms Abogados have offices in Mar-bella, Madrid, Vigo, Bucharest, Sofia, Burgas, Tangier, Marrakech and

Casablanca. All BGI members are medium-size law firms (5-30 lawyers) equally prestigious and well-known in their respective countries. Currently, the foun-der members also have partners in Argentina, Austria, Bulgaria, Cyprus, Czech Republic, France, Germany, Greece, Hungary, Mxico, Morocco, Portugal, Ro-mania, Russia, Ukraine, United Estates (Miami). At this moment, we are con-sidering the applications from other candidates to join BGI from Italy, Croatia, Panama, Guatemala, Dubai and China.

BGI is a group of individual partnerled firms, or as we refer to ourselves, a group, a Legal Boutique. BGI is far removed from the big law firms providing, in many cases, an impersonal and mass service. Furthermore, our fees are excep-tionally reasonable, as we do not have the overheads and complicated structures that many of top 10 firms have.

BGI members demonstrate a common corporate image, which is not just a logo, but more importantly the same group spirit and philosophy where, regar-dless of our independence, there is a homogenous spirit that makes us stand out from the crowd and it is the difference that makes us stand out from the crowd that makes the differences. All members pledge to demonstrate their com-mitment and to assist each other. With a global network of offices and a strong commitment to each other BGI is, as we like to say, a Legal Boutique.

BGI benefits from a World Secretariat, located in Spain, from which the network is managed.

We have our own website (www.bgi-law.com), corporate marketing, brochu-res, and periodical publications, such as our newsletter, BGI News, issued half-yearly, Balms Group International Law Magazine, also issued half-yearly and Balms Group International Law Magazine , issued annually.

In order to review our performance, develop new understandings of Law and improve services to our clients, we organise two conferences each year within the network, the Annual BGI International Conference, which is usually is held in May, and the Biannual BGI Conference which is held in the autumn.

Our aim is to offer the very best of legal services and tax advice to our clients in those places where we have offices, and our target is to have offices in those countries where our clients may seek our services and support.

Juan Luis BaLmaseda de ahumadaBgi PResidenT

BGI is a group of individual

partnerled firms, or as we

refer to ourselves, a group,

a Legal Boutique. BGI is

far removed from the big law

firms providing, in many ca-

ses, an impersonal and mass

service. Furthermore, our

fees are exceptionally reaso-

nable, as we do not have the

overheads and complicated

structures that many of top

10 firms have.

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232322 232322

232322 2323

272727

29292929

32 3333

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CyprusHow to do business and Hold assets around tHe world

1. Available Corporate EntitiesThe main corporate entity used in Cyprus is the Limited Company by Shares, this corporate structure is divided into two sub-categories:the Private Limited Company and the Public Limited Company.

A Private Limited Company is a company which by its Articles of Association:

a. Restricts the right of transfer of shares and b. Restricts the maximum number of shareholders to fifty and c. Prohibits an invitation to the public to subscribe for shares.

There is no minimum share capital for a Private Limited Company as opposed to a Public Limited Company, where there is a requirement of an issued share capital of at least 25,630.

In addition to the above, Cyprus Companies

Law Cap.113 provides for a Limited Com-pany by Guarantee. The essential differen-ce compared with a Limited Company by shares is that the company does not have a share capital. The liability of the members of the company is limited to the maximum amount they have guaranteed, as opposed to a company limited by shares where the liability of the members/shareholders is limited to the number of shares they have subscribed for.

Pursuant to the Partnership Law Cap. 116, another corporate structure which can be registered and operate under Cyprus law is the Limited Liability Partnership. In such a structure there is a need for at least one General Partner who has unlimited liability and any number of limited partners whose liability is limited to the amount of their contribution to the partnership. Because of the requirement to have at least one un-limited liability partner this structure is not often used for business purposes.

2. Establishment of a Company in CyprusCyprus Companies are incorporated by lawyers. It is not possible to incorporate a company in Cyprus without going through a lawyer who will draft and sign the Memoran-dum and Articles of Association.

It is possible for a person wishing to acqui-re a Cyprus Company to buy a ready made company. These are companies who have already been established and the shares of such companies are transferred to the new buyer/shareholder. At the same time the new directors and secretary are appointed in accordance with the requirements of the new shareholder.

It is now possible to have a one man com-pany in Cyprus. This means that a company can be incorporated with a single person being the sole shareholder, director and se-cretary of the Company.As from 1st October 2004, the Council of Ministers has approved complete freedom

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of direct investment from non-residents, in Cyprus.Consequently, non-residents who wish to esta-blish a company in Cyprus, or acquire shares in existing Cyprus companies, or otherwise to invest in or from Cyprus, no longer require approval by the Central Bank of Cyprus. Such applications should now be addressed directly to the Department of Registrar of Companies and Official Receiver.The same applies for direct and portfolio in-vestments by natural or legal persons from EU member states. Investors from the EU wishing to register a company in Cyprus or acquire shares in existing Cypriot legal entities should apply directly to the Registrar of Companies.

3. Necessary Information and Documen-tation required for IncorporationThe following information and material is re-quired for the relevant approval and formation of a company:(a) The proposed name of the company, which has to be approved by the Registrar of Compa-nies. Our office keeps available several appro-ved names for speedy cases. A list of presently available names can be provided on request.

(b) The amount of the authorised capital of the company

(c) The amount of the issued and paid up capi-tal of the company

(d) The main objectives and business of the company

(e) Full name, profession, address and natio-nality of each shareholder and their respective

shareholding. One beneficial owner of all the shares is permissible. If full anonymity and confidentiality is desired, nominee sharehol-ders may be used who will hold the shares in trust for the beneficial owner.

(f) Full names, professions, nationality and addresses of the directors and secretary of the company. All or any of the directors may be non-Cypriots. Cypriots (corporations or indi-viduals) may also be directors or secretary of the company.

4. Anonymity ServicesCyprus is fully compliant with the European regulation for the prevention of terrorism and money laundering. Lawyers who incorporate companies for clients need to go through the normal Know Your Client procedures.

During the KYC procedure the Ultimate Bene-ficial Owner (UBO) should be disclosed to the lawyer. The Ultimate Beneficial Owner is the natural person or persons who ultimately are the beneficial owners of the Cyprus Company.

When opening bank accounts in Cyprus for a Cyprus company, again the UBO needs to be disclosed to the Bank.

Provided the above are complied with, it is possi-ble to provide full anonymity services in relation

There is no minimum share capi-Tal for a privaTe limiTed com-pany as opposed To a public lim-iTed company, where There is a requiremenT of an issued share capiTal of aT leasT 25,630

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to corporate structures. This is achieved by the service provider, through its associates, acting as registered shareholders, directors and secretaries of Cyprus companies on behalf of the UBO.

For the protection of the UBO, the registered shareholder makes a declaration of trust, sta-ting that it holds the shares on behalf of the UBO. In addition he signs a blank instrument of transfer giving authority to the UBO to com-plete the instrument of transfer and transfer the shares into his name, or any other name.

This method ensures that anybody searching the Companies Registrar for information will only see the nominee shareholder and direc-tor, thus providing anonymity to the UBO.

There is no requirement to notify any other authorities of the identity of the UBO.

The Service Provider has a duty of confidence towards the client and never discloses informa-tion about the UBO without a court order.

The Bank also has a duty of confidence and ne-ver discloses any information about the UBO to any third party without a court order.

5. Advantages of using Cyprus CompaniesThere is no distinction between local and offshore companies. The offshore regime was abolished in Cyprus in 2004, when Cyprus be-came a member of the European Union.

Cyprus has one of the lowest, if not the lowest, corporate tax rate, which stands at 10%.

Dividends for Cyprus residents are taxed at

15%, but dividends to non-residents have no withholding tax whatsoever. The dividends paid to non-residents may remain in Cyprus without any tax implications.

In addition there is no withholding tax on ro-yalty payments to non-resident recipients when the right or asset giving rise to the royalty is used outside Cyprus, no withholding tax on payments of interest to non-resident recipients, no corporation tax on profits of the Cypriot companys permanent establishment abroad, no capital gains tax on the profits from the sale of the Cypriot companys foreign immovable property and no capital gains tax on profits from the disposal of securities.

When selling the shares of a Cyprus company there is no tax on the money received, provided the company has no immovable property in Cyprus. If there is immovable property situated in Cyprus, a calculation will be made of the va-lue of the immovable property in relation to the total sale price of the shares and capital gains tax of 20% will be levied on that part of the sale pri-ce that relates to the immovable property.

This makes the use of a Cyprus company as the holding company of a business structure a parti-cularly attractive proposition.

There is no disTincTion beTween local and offshore companies. The offshore regime was abol-ished in cyprus in 2004, when cy-prus became a member of The eu-ropean union. cyprus has one of The lowesT corporaTe Tax raTe, which sTands aT 10%

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In addition Cyprus is a signatory to arrange-ments under the Treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Trea-ty, in principle, enables tax paid in one country to be offset against the tax payable in another, in this way preventing double taxation.

Another important factor is the grant of an exemption or tax at a reduced rate on certain receipts such as interest, royalties, dividends, ca-pital gains and others that are connected with a transaction carried out between parties associa-ted with a Double Taxation Prevention Treaty.

When certain income is taxable under the Cyprus Income Tax legislation, but there is an exemption (reduced tax) under any Taxa-tion Treaty, the income is taxed, if at all, but only according to the provisions of the Taxa-tion Treaty.

austria, bulgaria, belarus, belgium, canada, china, denmark, egypt, france, germany, greece, hungary, india, ireland, italy, Kuwait, malta, mauritius, norway, poland, romania, russia, singapore, south africa, sweden, syria, Thailand, united Kingdom, united states, *federal republic of yugoslavia, *slovenia,**slovakia, **czech republic, ***azerbaijan, ***armenia, ***Kyrkyzstan, ***moldova, ***Tajikistan, ***uzbekistan,***ukraine

* Old treaty between Cyprus and Yugoslavia

** Old treaty between Cyprus and Czech Republic

*** Old treaty between Cyprus and USSR

SomE of thE CouNtrIES thAt CypruS hAS DoublE tAxAtIoN trEAtIES wIth ArE:

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6. AccountsPursuant to Companies Law Cap.113 a Cyprus company must maintain accounts in accordance with International Accounting Standards. Every company needs to have an auditor who will perform an annual audit of the accounts.

The accounting period in Cyprus is from 1/1 to 31/12 of every year. An Income Tax return must be filed with the tax au-thorities by 31/12 of every year for the previous year.

The accounts of the Company must be filed with the Companies Registrar together with the Annual Return of the Company.

The Annual Return is filed every year with the Companies Registrar specifying any al-terations in the structure of the company

i.e change of shareholders, directors and secretary. Even if there are no changes, the Annual Return still needs to be filed.

DisclaimerThe information set out above is believed to be correct as at 1st October 2009.

As with all matters having legal consequen-ces, however, advice should be obtained in relation to any proposed transaction or course of conduct as circumstances differ and points which are particular to an in individual set of circumstances may affect the advice given. Except where Costas Tsiri-des & Co L.L.C. has given specific advice, neither it nor any of its members accepts responsibility for the dissemination of the above article, nor for the reliance placed on the information contained in it by any per-son, firm or corporation.

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CzechRepublic

How to Do business AnD HoLD Assets ARounD tHe woRLD

Pursuant to survey Doing Business 2010 car-ried out by the Organisation for Economic Co-operation and Development (OECD) among 183 countries, the Czech Republic was ranked 74th in the overall category Ease of Doing Business summarizing the following categories and the ranks attained by the Czech Republic therein:

Starting a business: 113thDealing with construction permits: 76thEmploying workers: 25thRegistering property: 62ndGetting credit: 43rdProtecting investors: 93rdPaying taxes: 121stTrading across borders: 53rdEnforcing contracts: 82ndClosing a business: 116th

In the following lines, we take the liberty to provide you with a concise overview of ba-sic principles and information in relation to doing business in the Czech Republic

and draw your attention to main issues and problematic areas connected with the afore-mentioned matter.

Setting up BusinessIf a person intends to start a business in the Czech Republic, there are two prospec-tive options how to carry on business ac-tivity: either as a natural person (on a self-employed basis) or by establishment of a legal entity. There are two significant acts relating to starting a business within the territory of the Czech Republic:

For the purpose of pursuing business activi-ty in the Czech Republic as a natural person (as well as a legal entity), you must obtain a trade license. Applying for a trade license is a relatively simple process. If the required documents and the application form are in order, the entire process of registration takes 3 days. Next step consists in selection of the trade(s) that corresponds most to the pur-sued business activities. There are three dif-ferent kinds of trades with specific require-ments: free trades - no specific qualification is required; craft trades - apprenticeship or otherwise defined courses of vocational ed-ucation and training are required; regulated trades - besides appropriate qualifications there are additional requirements defined in various regulations. The trade license registration stamp is worth 1.000 CZK re-gardless of how many various trades are to

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1) Act No. 455/1991 Coll., the Trade Licensing Act regulates a range of spe-cific duties of entrepreneurs relating to their trades and regulates in detail the course of official proceedings on declaring a trade or applying for a li-cense and issuing trade licenses;2) Act No. 513/1991 Coll., the Com-mercial Code provides an elementary

legal framework for establishment of companies, pursuing entrepreneur-ship and contractual relationships.

be registered at once. After the trade license registration is completed, the entrepreneur must be registered at the tax office, the social office and health insurance.Should the business be carried on in larger ex-tent, it is recommendable to establish a legal entity (company). A company is established upon the signing of a memorandum of asso-ciation or a founders deed by its founder(s) and incorporated (comes into existence) by registering in the Commercial Register kept by the respective Registry Court. The ap-plication form in respect of registration is to be equipped with a stamp worth CZK 5.000 (approximately EUR 200). There are four dif-ferent legal forms of companies: general com-mercial partnership (v.o.s.), limited partner-ship (k.s.), limited liability company (s.r.o.) and joint-stock company (a.s.). The most common legal entities are a limited liability company and a joint-stock company. A limited liability company is used particularly for small and medium-sized businesses. It may be established either by (i) a founders deed by one entity (whether an individual or a legal entity) or (ii) by a memorandum of association concluded by a group of entities or individu-als up to 50. Nonetheless, a limited liability company with one shareholder cannot estab-lish or become the sole shareholder of another limited liability company. One individual may be a sole shareholder of not more than three limited liability companies. The minimum reg-istered capital is CZK 200.000 (approximately EUR 8.000). Corporate governance is simpler than that of a joint-stock company. A limited liability company does not have a board of directors. Its statutory body is formed by one or more managing directors. The law does

not require the limited liability company to establish a supervisory board, however, a su-pervisory board may be established provided that the founders deed or memorandum of association stipulates so. Shareholders of a limited liability company are jointly and sever-ally liable for companys obligations only up to the unpaid aggregate of their investment con-tributions according to the entry in the Com-mercial Register. A joint-stock company is used for large compa-nies. It is established by a founders deed by one shareholder, being a legal entity, or by a memorandum of association by more than one shareholder (whether individuals or le-gal entities). Both the founders deed and the memorandum of association must be executed in the form of a notarial deed. Bearer shares are freely transferable, whereas transferability of registered shares may be restricted, but not excluded, by articles of association. Minimum registered capital is CZK 2.000.000 (approxi-mately EUR 80.000) or CZK 20.000.000 (ap-proximately EUR 800.000) if the company is founded through a public offer of shares. The statutory body of a joint-stock company is the board of directors. Each joint-stock company must establish a supervisory board. Sharehold-ers of a joint-stock company are not liable for companys obligations. Foreign legal entities are allowed to conduct business activities under the same conditions and to the same extent as Czech entrepreneurs. They may become founders or co-founders of a company, or may join an existing Czech company. Foreign companies may operate in the Czech Republic, either by establishing a branch office registered in the Czech Republic or by establishing a Czech company. A branch

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office of a foreign company is not a Czech legal entity but functions as the representative of a foreign company and incurs obligations on the foreign companys behalf. A foreigner being a natural person and intending to pursue a busi-ness activity in the Czech Republic, which is a trade pursuant to the Trade Licensing Act, is authorized to pursue such activity only upon a duly issued trade license.

Accounting and Tax SystemOnce the company is incorporated and/or the trade license obtained, the person may carry on a business activity. The transactions and rel-evant events appertaining to the respective busi-ness are to be recorded, classified, summarized and interpreted in accordance with the Act No. 563/1991 Coll., on Accounting, laying down basic rules and regulations thereof. The Act on Accounting also defines the basic requirements for preparing and publishing annual reports and the conditions when a mandatory statutory au-dit of financial statements. All accounting units as defined by the law are required to keep their accounts in accordance with Czech Accounting Standards. The elementary principles of book-keeping in the Czech Republic have been har-monized with the European Union standards and regulations.The system of taxation of the Czech Repub-lic resembles the systems of taxation of other European countries. Generally, taxes can be divided into direct taxes, related to the level of income of the subject, and indirect taxes, re-lated to consumption or the purchase of goods and services. The system of taxation in the Czech Republic consists of the following taxes: value added tax (VAT), income taxes, real es-tate tax, road tax, estate tax, inheritance and

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gift tax, real estate transfer tax, energy taxes, custom duties and excise duty. Each type of tax is defined in a specific piece of legislation such as in the Act No. 586/1991 Coll., on Income Tax, or the Act No. 235/2004 Coll., on Value Added Tax. The Czech income tax rate for in-dividuals income is flat and amounts to 15 %. The corporate tax rate is 19 %. There is a re-duced tax rate for certain income (for instance a tax of 15 % is imposed on dividends paid by Czech corporations, whereas the dividends paid between two Czech companies are tax ex-empt). As regards VAT, two rates apply: 20 % for most of goods and services and 10 % for specified goods and services such as food and beverages (other than alcohol), books, special healthcare products and social housing.An individual (natural person) pays tax on his income as a wage earner or as a self-employed

person. Tax for an individual who meets the criteria of a permanent resident of the Czech Republic is calculated on his income earned inside the Republic and abroad. A foreign resi-dent who is employed in the Czech Republic pays tax only on income earned in the Repub-lic. An employer is obliged to deduct, imme-diately on a monthly basis, the requisite tax from employees salaries. The tax year in the Czech Republic is the calendar year ending on December 31. The annual tax return must be submitted by the end of March of the follow-ing year, whereas if you are represented by an authorized Czech tax advisor, you may make an application to submit the tax return by the end June. Tax losses may be carried forward for up to five years and utilized against taxable profit arising in any of these years.Health insurance and social security in the

Czech Republic is one of the highest in the European Union. The overall rate of health and social insurance premiums in the Czech Republic is 45 % for employees and 42,7 % for self-employed individuals.The Czech Republic is part of the EU customs union which means that the import of goods into the Czech Republic is subject to the same rules as import to any other EU country. In case of trade with non-EU countries custom duty arises on the customs value of the im-ported goods. The calculation of individual custom duty is complex and depends on indi-vidual circumstances.

Employment LawCarrying on a business activity may entail also an employment of workers. The area of em-ployment is regulated particularly by the Act-

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No. 262/2006 Coll., the Labour Code, which is being constantly updated to include relevant EU legislation. There is also legislation cover-ing wages, health and safety, social security, working time and many other aspects of em-ployment. An employment relationship is con-stituted by an employment contract between employer and employee. The standard working week is 40 hours, and a compulsory rest period of at least half an hour must be granted for an-yone who works at least six hours in one day. Employees may work overtime, a maximum of eight hours in one week and 150 hours in a year, or 417 hours in a year if voluntary. Pay for standard weekend work must be increased by at least 10 %, and for overtime by at least 25 %. The statutory minimum paid holiday is 4 weeks. Longer holiday entitlements may be agreed in collective agreement or in individual

employment contract. The minimum monthly wage is CZK 8,000 (approximately EUR 320). Employment may be terminated in the Czech Republic by the employer or the employee in several manners:

The employment relationship between an em-ployer and employee is established solely by means of an employment contract. Mandatory particulars to be specified in an employment contract are as follows: the kind of work; the place of performance of the work; the starting date. An employment contract must be con-cluded in writing and the employee must re-ceive a copy thereof. The parties to an employ-ment contract may agree upon a probationary period, however, not longer than 3 months.

The Labour Code also defines situations in which the performance of dependent work may be based on labour relations other than that of employment relationship. These rela-tions are established by agreements concerning work performed in outside the employment relationship. So-called work performance

- by agreement concluded between the em-ployer and the employee as of a fixed date; - by notice in writing presented by the employer (giving a reason provided for by law is required) or by the employee (no rea-son needs to be given); - by immediate termination by employer due to the specific reasons on the side of employee; - termination during the probationary pe-riod by either the employer and the em-ployee (no reason needs to be given); - upon the employees death.

agreements are designed to enable employers to attain their business goals in cases where it does not seem to be practical to recruit employees on the basis of full-time unlimited employment contracts. Such auxiliary labour relations are not subject to such strict limitations and conditions as in case of employment relationship.Citizens of member states of the European Union and of the states constituting the Eu-ropean Economic Area (EEA) and citizens of Switzerland do not need a work permit for employment purposes in the Czech Republic. Citizens of these countries have equal legal status as citizens of the Czech Republic. Nev-ertheless, the employer is obliged to notify the employment office and keep a record of their employment. In other cases, a regular work permit is to be obtained.

Investment in the Czech RepublicThe Czech Republic offers incentives and business support through various schemes. These schemes are available to new and exist-ing foreign and domestic investors.Depending on the specific scheme, the incen-tives may be as follows:

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- tax incentives (corporate tax relief for up to five years for new companies, partial tax relief for up to five years for existing cer-tain companies);- job creation grants (financial support for creation of new jobs);- financial support for the training and re-training of new employees;- site support transfer of public land for a favourable price.

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Incentives are available individually or collective-ly and are intended to have maximum impact in the early stages of projects. In the Czech Repub-lic there is a business development agency of the Czech government, Czech Invest. Its services and programmes contribute to attracting foreign in-vestment and developing domestic companies.

ThE SySTEm of TaxaTion of ThE CzECh REPubliC RESEmblES ThE SySTEmS of TaxaTion of oThER EuRoPEan CounTRiES. GEnERally, TaxES Can bE DiviDED inTo DiRECT TaxES, RElaTED To ThE lEvEl of inComE of ThE SubjECT, anD inDi-RECT TaxES, RElaTED To ConSumP-Tion oR ThE PuRChaSE of GooDS anD SERviCES

PARTNERSJUDr. Vladimr Jaek, Ph.D.,LL.M.JUDr. Zdenka M. Nocarov, Ph. D.

ASSOCIATESMgr. Zuzana ChlovJUDr. Tom Temn, Ph.D.JUDr. Zdenka Velichov, MAESJUDr. Josef RerichaJUDr. Pavel JustMgr. Viktor FojtMgr. Alena MalachovMgr. Michal HessVojtech DobrkovskLenka BridovPetr HradilKristna VondrckovVeronika Kovrov

Nocarov Jasek & PartNersPraHaMain office v Jirchrch 148/4 cZ - 110 00 Prague 1

Phone: + 420 224 232 578/+ 420 224 233 706Fax: + 420 224 232 578/+ 420 224 233 706

e-mail: [email protected]: www.njp.cz

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EnglandWales&

How to do business and Hold assets around tHe world

1. Alternative available corporate identitiesBritain has for many years offered the opportu-nity to incorporate businesses and asset hold-ing entities in a number of different, flexible ways. Incorporation of most companies is achievable with the minimum of formality.

A number of corporate identities are availa-ble throughout the EU, such as the societas europaea and the EEIG, but since these are not unique to England and Wales, they are not dealt with in this article. Similarly, there are a number of different types of entity, such as companies limited by

guarantee, limited partnerships, open ended investment companies, community interest companies and of course trusts, which tend to be used in special circumstances, that can be utilised for the purpose of running busi-nesses and for investment purposes.

The more usual entities are the private limited company (Ltd), the public limited company (PLC) and a relatively recent in-troduction, the limited liability partnership (LLP). Overseas companies may also regis-ter a branch/place of business in the UK.

Private limited companiesThe vast majority of registered companies are

private companies in July 2009, there was a total of approximately 2.6 million companies on the register maintained by the Registrar of Companies in Britain, of which only a little over 10,000 were public companies.

Public limited companiesPublic companies are more strictly regu-lated. They must have a minimum allotted share capital of, currently, 50,000. Some, but not all, public companies are quoted (i.e. their shares are traded) on the London Stock Exchange or one of the alternative markets. Those companies are therefore subject to ad-ditional regulation by the Financial Services Authority/London Stock Exchange.

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Limited liability partnershipLimited liability partnerships combine the ad-vantage of limited liability with the advantage of the members being taxed as if they were a partnership. They are attractive to the profes-sions, such as lawyers and accountants, many of whom have converted their partnerships into limited liability partnerships. They are also often used as vehicles for joint ventures between independent businesses.

2. Establishment of a corporationIt is possible to buy a ready-made, new, private company from incorporation agents, who main-tain a stock of companies, just like any other commodity. New directors and a company secre-tary, if required, are then appointed and changes made to the constitutional documents may be made if necessary. The transaction can be com-pleted over the telephone in a day.The cost of acquiring the company is approxi-mately 100 and there will be further relatively modest charges for dealing with the changes mentioned above.Alternatively a private limited company or an LLP can be formed in accordance with the par-

ticular requirements of the promoter. Forma-tion by this means can take up to two weeks. The fee payable to the Registrar of Companies is 20. Alternatively, if sameday formation is required, the fee is 50. Fees will also be pay-able to the lawyer for setting up the company, dependent on the amount of work required.

To form a private limited company, the follow-ing documents must be filed with the Regis-trar of Companies:- Application to register, which contains, among other things, details of share capital, directors and registered office address- Memorandum of Association- Articles of Association (the constitutional document)- Fee 20/50.

The documents required for formation of public companies and LLPs are similar, except that a public company has to demonstrate that it has a minimum allotted share capital of 50,000. Once it has done that, the Registrar of Companies will issue a certificate authoris-ing the public company to commence business and borrow money.

3. Uses of a corporationCorporate structures are used in business and investment largely because of the wish to limit liability of the owners to the amount of the paid-up share capital of the company. While it is possible to use nominees as directors or shareholders in England, generally speaking it is not possible to trade through or own a com-pany with complete anonymity.Apart from the advantage of limited liability, corporations are often used to facilitate joint

It Is PossIbLe to buy a ready-made, new, PrIvate comPany from In-corPoratIon agents, who maIn-taIn a stock of comPanIes, just LIke any other commodIty. new dIrectors and a comPany secre-tary, If requIred, are then aP-PoInted and changes made to the constItutIonaL documents may be made If necessary. the transactIon can be comPLeted over the teLePhone In a day

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ventures between different businesses/investors and as special purpose vehicles for the acquisi-tion, holding and disposal of assets, usually real estate. A company can be structured so as to re-flect the different interests of joint venturers in a specific project or a series of projects. Special purpose vehicle companies investing in land or buildings can be advantageous in limiting the owners liability to the particular property owned by the company, in dealing with funding and in a possible saving in tax it may be more economical to dispose of a property by way of selling the shares in the company, rather than selling the property itself.As has been mentioned, formation of a com-pany in England is inexpensive and quick. The formal requirements are not difficult to meet. For example, an English private company can be a one man company only one director and one shareholder are required and they can be the same person.

A further advantage of an English company is that while it is necessary every year to file an an-nual return, giving details of officers and share-holders, the accounting requirements for small and medium-sized businesses are less onerous than for large corporations. A small business is one which satisfies two of the three following requirements: an annual turnover of not more than 5.6 million, assets of not more than 2.8 million and not more than 50 employees. A medium-sized business is one which satisfies two of the following three requirements: an annual turnover of not more than 22.8 million, assets of not more than 11.4 million and not more than 250 employees.

The London Stock Exchange and subsidiary

markets are in the forefront of capital and debt raising opportunities for public companies throughout the world. It is for that reason that the largest corporations seek a listing on the London Stock Exchange.

On the other hand, particularly in the case of the smaller family-owned private company, it is possible to use a company for business purposes and/or to hold investments and, at the same time, to take advantage of certain tax reliefs which are open to individuals. More informa-tion on this is given below.

4. Taxation of corporations and state assistanceFor the tax year applicable to corporations ending 31st March 2010, the standard corpo-ration tax rate is 28%. The small companies rate (where profits for the year are less than 300,000) the rate is 21%.Investors, whether British or from overseas, are treated by the UK tax authorities in the same way when it comes to levying tax on divi-dends paid by a company to its shareholders. A foreign investor may be subject to further

corPorate structures are used In busIness and Investment LargeLy because of the wIsh to LImIt LIabILIty of the owners to the amount of the PaId-uP share caPItaL of the comPany. whILe It Is PossIbLe to use nomInees as dI-rectors or sharehoLders In eng-Land, generaLLy sPeakIng It Is not PossIbLe to trade through or own a comPany wIth com-PLete anonymIty

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tax in his own country on UK dividends. On the other hand, tax may be alleviated if there is a Double Tax Treaty between the UK and the relevant country.No special arrangements are made for foreign in-vestors by way of grants or subsidies. Depending on the circumstances, English companies may be entitled to write off certain capital expenditure against profits (up to 100% for certain expendi-ture on plant and machinery). There are also var-ious governmentbacked schemes to assist small companies in procuring working capital.It is usually more advantageous, from a tax point of view when disposing of a business, to sell the shares in the company owning the business, rath-er than for the company to sell its business. This is because the tax payable on a capital gain by a company can be as high as 40%, whereas there

tax payable by an individual on the gain made in disposing of his shares is 18% and there may be available entrepreneurs relief, where the first 1million of gain is taxed at 10%. Better still, for-eign investors may, depending on their circum-stances, be able to escape any capital gains tax in the UK altogether (although they may be subject to tax in their own countries).

5. Courts and Commercial Dispute Resolution English law is often chosen as the governing law in contractual arrangements in interna-tional transactions and the English courts and arbitration system are popular in the worlds business community for determining disputes and differences. This is because they have ac-quired a reputation for speed, efficiency and

economy in dealing with commercial disputes and the law and legal system have adapted to meet the needs of business. For the larger claims there are specialist courts. Access to the courts in England is open to eve-ryone and while it is possible for a litigant to represent himself, it is advisable and usual for cases to be presented on a clients behalf by a qualified lawyer.

Arbitration in the UK is also highly regarded by business people the world over. The ad-vantages of arbitration over pursuing disputes through the courts are that the arbitration process is usually faster than the courts and proceedings are confidential to the parties in-volved, thereby avoiding publicity.Mediation has become a growth area in dispute resolution and is encouraged by the courts. It enables the parties to a dispute to settle their differences through an informal process, guided and assisted by an experienced, usually (but not necessarily) legally qualified media-tor. Mediation is non-binding and while this may, at first sight, appear to be a weakness in its usefulness, it can be an advantage, because it enables the parties to see the relative weak-

commerce over the Internet started sLowLy aPProxImateLy 30 years ago, but has now reached the stage where It affects us aLL In our daILy LIves, whether we are buyIng an aIrLIne tIcket or or-derIng grocerIes. for many corPoratIons, ecommerce rePresents an ImPortant Part of theIr busIness. Indeed, some busInesses onLy oPerate through the Internet and wIth consequent Lower over-heads, are abLe to offer goods and servIces at Lower PrIces than conventIonaL busInesses

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nesses and strengths of their own and their op-ponents cases at an early stage and this often encourages parties to compromise their claims and save the expense, worry and frustration of what can be protracted litigation.

6. Corporations and EcommerceCommerce over the internet started slowly ap-proximately 30 years ago, but has now reached the stage where it affects us all in our daily lives, whether we are buying an airline ticket or order-ing groceries. For many corporations, ecom-merce represents an important part of their business. Indeed, some businesses only operate through the internet and with consequent lower overheads, are able to offer goods and services at lower prices than conventional businesses.The law often struggles to keep pace with the problems that can arise in ecommerce, simply because there is no ecommerce law as such and there are territorial/jurisdictional considerations. For example, what law governs a contract made in cyberspace to supply goods between businesses located in the UK and Malaysia and which courts are to have jurisdiction to deal with any disputes? Unless the parties have specified the law and legal system, there can be difficulties. In the absence of

any indication as to which law and which jurisdic-tion is to apply the UK courts will apply rules to determine whether they have jurisdiction, based on such matters as the location of the parties and the laws which have the greatest connection with the subject-matter of the dispute.It is evident that corporations trading through the internet require legal advice to secure their trading relationships, to ensure compliance with the laws of different jurisdictions and to protect their intellectual property rights to an even great-er extent than conventional trading.

7. ConclusionEngland was one of the first countries to rec-ognise the corporation as a trading or invest-ment entity, separate from the people owning the undertaking and as such we enjoy a wealth of experience in setting up and using corpora-tions for these purposes. In addition, we have a wide variety of different types of companies and similar entities, from the single person private company to the large public corpora-tion, flexible enough to meet every require-ment. English law recognises that greater liberality is appropriate for the small private company, which is thus subject to less formal-

ity in its establishment and operation than larger companies. This makes England an at-tractive location for those who wish to trade or hold investments through the medium of a corporation. At the other end of the scale, London, as a world centre for finance, makes the UK the home of some of the worlds larg-est corporations as well.

DisclaimerThe information set out above is believed to be correct as at 1st October 2009. As with all matters having legal consequences, however, advice should be obtained in relation to any proposed transaction or course of conduct as circumstances differ and points which are particular to an in individual set of circum-stances may affect the advice given. Except where Black Graf LLP has given specific ad-vice, neither it nor any of its members accepts responsibility for the dissemination of the above article, nor for the reliance placed on the information contained in it by any person, firm or corporation.

Derek AAronsBlAck GrAf llP-lonDon

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FranceHow to Do business AnD HoLD Assets ARounD tHe woRLD

1. Various Formsa. Incorporated CompanyIn France, incorporated companies hold the advantage of limiting financial risks for their investors to the amount of their capi-tal contribution.The price of this advantage a high level of imposed formalism has been considerably reduced over the years. Thus, incorporated companies benefit from great freedom as regards their statutes and, since January 1st 2009, are no longer subject to an obligation to retain a minimum share capital.Moreover, French corporate law takes on board progress in telecommunication tech-nology, so that meetings of the board of directors or oversight committee (subject to any contrary provision in the statutes and excepting certain decisions such as the annual settlement of accounts) can be held without the physical presence of their members thanks to videoconference and telecommunications systems.The most common forms of company are the

socit responsabilit limite (private limited company hereinafter SARL), the socit par action simplifie (simplified company hereinafter SAS), and the socit anonyme (public limited company hereinafter SA).While the SARL is considered akin to a part-nership (considering the personal nature gov-erning any transfer of its shares), the SAS and the SA are companies. In practice however, this difference has a tendency to blur, as the SAS and the SARL share a number of com-mon characteristics: no minimum share capi-tal, can be incorporated and owned by a single shareholder, nomination of an auditor neces-sary only in certain cases. In fact, the SARL and the SAS distinguish themselves more and more from the SA, which, with its minimum number of shareholders and rigid rules of op-eration, remains the sole form of institution allowed to issue publicly-traded shares.

b. Other Structuresi. Other Forms of BusinessEssentially, the socit en nom collectif (gen-

eral partnership SNC), socit civile (civil law partnership), and Groupement dIntrt Economique (economic interest grouping GIE) are the other forms of business vehicle available. They are less often used as they pro-vide for greater liability (possibly joint liability) for their members in case of financial setbacks. However, the absence of a minimum capital requirement, great operational flexibility, and tax transparency of these structures affords them an undeniable appeal as subsidiaries.As an example, the socit de participation (undeclared partnership) is often used in the construction business or in the fields of enter-tainment and publishing. It is a structure that is simple to implement (no registration with the Commerce and Companies Registry) and that provides no legal publicity obligation.

ii. Socit Europenne (European Company SE)The European company allows investors wish-ing to operate in various countries of the Eu-ropean Union to benefit from a single set of

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rules and a unified system of financial manage-ment and disclosure. With a minimum capital of 120,000, the location of its head office is set by its statutes and must correspond to the location of its central administration. The head offices location determines the companys gov-erning law. The company is then registered in the country of its head office and is subject to taxation by all member States in which it main-tains stable establishments.

iii. Temporary or Minor VenturesTo conduct business in the French market, it is not always necessary to set up a company. As such, it is possible to operate through a simple branch office.

- LIAISoN oFFICEA liaison or representation office only allows non-commercial activities to be carried out: mar-ket exploration, marketing, storage, or any other form of ancillary or preliminary activity. A liaison office does not constitute a stable establishment under tax law and is thus not subject to corporate taxation or to sales taxes. However, it is subject to certain local taxes and any salary-based taxation due to the employees working there.

- CoMMERCIAL REpRESENTATIvE oR AGENTThe commercial representative is an employee of a foreign corporation carrying out commer-cial operations in France. He may be treated as an employee, a traveling salesman, an agent, or a sales representative (vRp). The vRp is a salaried commercial middleman who visits the clients of one or more businesses within a given territory. The vRp is granted great autonomy; his legal status is set by law.

As an alternative, the trade agent, is a person or company that acts, as an independent con-tractor, in the capacity of agent for a foreign business. The agent is charged with negotiat-ing and eventually concluding contracts of sale, purchase, leasing, or service for and on behalf of its principal (without participating in these contracts on his own behalf).As with the vRp, the trade agent enjoys a protec-tion in case of termination of the contract with his principal. Thus, in the absence of default, he may claim compensation for the damages suf-fered, which is generally established as equivalent to two yearscommission.

- BRANCH oFFICEA branch office enables a foreign business to set up a first foothold in order to conduct commer-cial operations. Managed by a legal representative, it functions as an agency, attached to the head of-fice, without any special formalities for decision making. It may conduct any industrial and com-mercial activities, but it does not have any legal autonomy and its parent company may be held responsible for all of its actions.A stable establishment within the meaning of taxation law, the branch office is subject to corporate law and to sales tax. Its transforma-tion into a subsidiary must respect the formali-

The mOST COmmOn fOrmS Of COm-pany are The SOCIT reSpOn-SabIlIT lImITe (prIvaTe lImITed COmpany hereInafTer Sarl), The SOCIT par aCTIOn SImplI-fIe (SImplIfIed COmpany here-InafTer SaS), and The SOCIT anOnyme (publIC lImITed COmpa-ny hereInafTer Sa)

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ties provided for business assets transfers and is subject to taxation.

2. Incorporating a CompanyIn France, the time required to incorporate a company is amongst the shortest in the world. The administrative formalities for company crea-tion have been considerably simplified; the entire process can be conducted online.

a. a One-Stop Service to Incorporate Companies: the CfeAll incorporation formalities are conducted through a one-stop service: the Centre de Formal-it des Entreprises (Business Formality Centre CFE). This service forwards to the appropriate administrative services, on behalf of the business, all items of the file required for incorporation, amendment or winding-up:- The office of the Commercial Court which, upon receiving the file, delivers a receipt of incor-poration filing and, afterward, the Kbis excerpt for registration of the company;- The National Statistics and Economical Stud-ies Institute (INSEE) that assigns the ApE code corresponding to the companys activity, the SIREN (the companys identification number) and SIRET (establishment number) numbers re-quired to hire employees;- The Taxation Centre and the social security ad-ministration (URSSAF).The CFE provides a print-out of the registration (downloadable Mo form) and the list of docu-ments to provide. Registration of the company takes a few days and the cost of the administrative formalities for incorporation is approximately 85, to which must be added the cost of publish-ing an announcement in a legal notice journal (approximately 300).

It must be noted that some formalities are not dealt with by the CFE, such as:- Any requests for approval, licence, and registra-tion to be obtained, as the case may be, from the governing bodies of regulated professions (e.g.real estate agent, etc.);- Formalities with the National Intellectual property Institute in order to protect trade names or trademarks;- Disclosure of .fr internet domain names to the French Internet Naming Cooperative As-sociation (AFNIC);- Subscription to an employees pension fund (mandatory within 3 months following regis-tration).

Finally, any formalities as regards the hiring of employees must be fulfilled with URSSAF by sending the Uniform Hiring Declarations.

b. registering a liaison OfficeIn principle, registration for a liaison office is not required. However, it becomes mandatory should the office maintain its own premises or should it hire many employees in France. The documents to provide are, notably, those related to the rep-resentative (identity, declaration of no criminal conviction, specific visas for expatriates, prefec-ture declaration or commercial visa, as the case may be, etc.), two copies of the foreign companys

In franCe, The TIme requIred TO InCOrpOraTe a COmpany IS amOngST The ShOrTeST In The wOrld. The admInISTraTIve fOr-malITIeS fOr COmpany CreaTIOn have been COnSIderably SImplI-fIed; The enTIre prOCeSS Can be COnduCTed OnlIne

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statutes (translated into French) as well as a title to use to the premises (lease or ownership, as the case may be).

c. foreign Company representativeEmployers whose business does not maintain an establishment in France and wish to hire em-ployees subject to French employment law are responsible for the social security contributions of these employees. However, they have the op-tion of designating, by written agreement, a social security agent residing in France to fulfill on their behalf their declaration and financial obligations as regards social security. In such cases, the decla-ration to URSSAF uses the Eo form.

d. registering a branch OfficeRegistering a branch office is a mandatory formal-ity, fulfilled through filing of the aforementioned Mo form, accompanied by the following ancil-lary documents:- Two (2) copies of the parent companys statutes

(2 originals and 2 French official translations);- proof of effective establishment;- Certification of registration in the public compa-nies registry of the home country;- Documents pertaining to the person having authority to bind the company: ID and sworn attestation of lack of criminal conviction, visa or prefectures declaration (in case of manager from outside the E.U.) and documents attesting the requisite qualifications if the activity is regulated.

3. Benefits of Creating a Subsidiary Even though as a matter of course the investors choice depends on his strategy, the creation of a subsidiary (an autonomous company governed by French law and being a distinct legal person) can offset the costs of incorporation with some obvious advantages:- It allows the effective separation between the assets of the subsidiary and of the parent com-pany, thus avoiding any unlimited liability for the foreign company as regards the debts of its

French establishment;- The subsidiary may eventually apply for public funding during its set-up or its expansion;- The subsidiary can implement agreements for technical or commercial royalties, commissions, management fees, etc.

4. A System Favourable to International Mobility of EmployeesFrench law offers an increasingly welcoming set-ting for the employees of foreign firms wishing to operate in France. As examples, the skills and talents work permit has been broadened to include managers, while a new employee on as-signment work permit was created for employees traveling within the same group of companies. It must be kept in mind that residents of the Euro-pean Union (excepting Bulgarian and Romanian citizens), the European Economic Area, and the Swiss Confederation are free to travel and work in France without a visa.on the social security side, numerous interna-tional agreements as well as E.U. regulations pro-vide for an exemption from French social secu-rity contributions, as residents of signatory states remain affiliated to the social security systems of their home country.

frOm The mOmenT ThaT a fOreIgn COmpany COnduCTS a prOfIT-gener-aTIng aCTIvITy In franCe, TheSe prOfITS are Taxed In franCe. ThIS rule applIeS regardleSS Of The buSIneSS vehICle uSed, be IT a SubSIdIary, branCh OffICe, Or STable eSTablIShmenT

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As regards income tax, the Economy Moderni-zation Act of the 4th of August 2008 has imple-mented a new scheme that is highly advantageous to foreign managers working in France: they ben-efit from income tax exemption as regards their income derived from their activity in France (im-patriation bonus).

5. Corporate TaxationFrom the moment that a foreign company con-ducts a profit-generating activity in France, these profits are taxed in France. This rule applies re-gardless of the business vehicle used, be it a sub-sidiary, branch office, or stable establishment.In the case of a branch office or stable estab-lishment that does not have a distinct legal per-sonality, the income from activities in France is appraised from the foreign companys accounts. The notion of stable establishment is defined in every taxation convention as a permanent business facility or a dependent agent. Thus, a foreign company that sends one of its employ-ees to France to canvass the French market does not risk being deemed to maintain a stable es-tablishment in France. However, should this employee begin to sign contracts in France for and on behalf of the foreign company, the latter

shall be deemed to maintain in France a stable establishment subject to taxation on profits de-rived from such activity in France.

The income subject to corporation tax is calcu-lated as total income minus applicable deduc-tions. Applicable deductions are those related to the activity conducted, notably such as:- Depreciation of tangible and intangible assets (excepting goodwill);- Reserves;- Rent for equipment and real property;- Salaries and social security contributions;- purchases of goods and energy expenditure;- Marketing costs;- Financing costs;- Etc.Apart from temporary additional contributions, tax on profits applies at the following rates:- Standard rate: 33.33%- Small businesses are taxed at the rate of 15% for the portion of their profits below 38,120 and at the standard rate for any surplus;- Reduced rate of 15% for income from indus-trial property (royalties and capital gains on transfer) as regards patents, patentable inven-tions, and manufacturing processes;

- Capital gains for transfers of shares are to-tally exempted, excepting a fees contribution equal to 5% of the net profit from capital gains which is added to the taxable income at the standard rate.A social security contribution of 3.3% applies to businesses whose profit, taxable at the stand-ard rate, is higher than 2,289,000. It is calcu-lated on the relevant corporation tax, minus 763,000.Losses can be carried forward without time limitation, and may also be carried back.Investors are helped by numerous tax incen-tives, such as a R&D tax credit, believed to be one of the most attractive in the world. Industri-al, commercial, or farming concerns that incur R&D expenditure can obtain a tax credit appli-cable to their payable corporation tax. Should there be no tax payable, the R&D tax credit is reimbursed after three (3) years. Growing small and medium businesses and young in-novating businesses can obtain an immediate reimbursement of their tax credit.Newly created businesses within certain areas may, under certain circumstances, be admissi-ble to a temporary, graduated exemption from corporation tax.

6. Settlement of Commercial DisputesIn France, the settlement of commercial litigation is of course under the jurisdiction of the states courts, although they do not have a monopoly on the matter. Indeed, arbitration is a common tool in such matters, especially in cases with an international dimension.More specifically, Section L 721-3 of the Com-merce Code provides: The Commercial Courts have jurisdiction over:1 Disputes pertaining to agreements between commercial parties, between financial institu-tions, or between any of the above;2 Disputes pertaining to commercial compa-nies and partnerships;3 Disputes pertaining to commercial acts be-tween any persons.However, the parties may, at the time that they enter into a contract, agree to submit the above-mentioned dispute to arbitration.The Commercial Courts also have jurisdiction in insolvency and bankruptcy proceedings.As of January 1st 2009, there were 141 Com-mercial Courts, composed of elected judges.In principle, the court of the defendants resi-dence or head office has jurisdiction. How-

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ever, commercial parties can stipulate in their agreements a departure from the general rules of territorial or material jurisdiction.A lawsuit before the Commercial Court is com-menced by writ of summon, by a joint motion, or even by the parties presenting themselves before the judge voluntarily. A writ of sum-mon is a process delivered by bailiff, through which the plaintiff summons the defendant before the judge.In urgent matters, summary proceedings and ex parte motions before the Commercial Court are also possible, where the plaintiff will submit his case directly and exclusively to the Courts president sitting in chambers.Summary proceedings are contested proceed-ings whose object is to rapidly obtain a provi-sional injunction.proceedings on ex parte motions are conducted without the defendant. They ask the president to order certain provisional injunction orders. Such orders can only be issued in specific cases provided by law (as an example, nominating an auditor on the occasion of a capital increase). More generally, these proceedings can be used at any time that the circumstances require a

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protective measure without informing the per-son concerned.Summary and ex parte motion proceedings have in common their provisional nature.A writ of summary summons is the usual way of bringing a matter before the judge having jurisdiction over summary matters. The con-tents and delivery of this writ is similar to an ordinary summons. However, the plaintiff may have the writ served on the defendant within a reasonable delay before the hearing, as op-posed to the habitual 15-days notice in ordi-nary proceedings.When a case requires expedition, the plain-tiff may summon the defendant to appear at a given hour, even on holidays and on week-ends. This procedure is called a from hour to hour summary summons. To employ this procedure, the plaintiff must present a motion to obtain the authorization of the judge for summary matters.The ex parte motion is a written procedure by which a party requests a judge, in this case the Commercial Courts president or his dep-uty, to order a measure, without the opposite party being called to the hearing. The motion must provide its reasons and bear a detailed indication of the documents upon which the request is based.proceedings before the Commercial Court have the particularity of being oral (as opposed to civil proceedings), in that the parties do not have to present their claims in writing.More complex matters are assigned to a report-ing judge for a preliminary hearing.Following the pleadings, a judgment is pro-nounced, being either read during a public

hearing or being made available to the parties at the office of the Court.As with any decision rendered in first in-stance, a judgment of the Commercial Court may be appealed before the commercial di-vision of the Court of Appeal. In addition, French law expressly recognizes arbitration in matters of commercial dispute resolution (both domestic and international). pursuant to Section L 721-3 of the Commercial Code, an arbitration clause (a clause through which the parties to a contract undertake to submit to arbitration any dispute that arises between themselves) is valid to resolve disputes that would otherwise be subject to the jurisdic-tion of the Commercial Courts.

7. e-Trade and Corporate Lawonline commerce, as defined in Section 14 of the Trust in online Economy Act of the 21st June 2004 (n 2004-75), can in principle be freely conducted throughout French territory (Section 16), with the exception of certain spe-cific activities (such as gambling). In addition, the Act provides that persons located in an E.U. member state other than France are sub-ject to a certain number of regulations includ-ing the provisions governing prohibition or authorization of unsolicited email marketing. In addition, Section 17 of the Act provides that online commerce is subject to the laws of the member State within which the person conducting such commerce resides, subject to an agreement to the contrary between that per-son and his client. However, this rule may not prevent a French consumer from enjoying the protection of French public policy laws, such

as the law guaranteeing consumers rights.The Act to promote Competition in Favour of Consumers (3rd January 2008) has amended certain dispositions of the Consumers Code in order to adapt it to the growth of online sales. These amendments have been in force since June 1st 2008:- Improved information regarding consumers rights to cancel;- obligation for businesses to give a delivery deadline;- prohibition on businesses from surcharging the communications media through which consumers can track their orders, exercise their rights to cancel, or trigger a warranty;- Clarification that reimbursement to a consum-er who has invoked his right to cancel includes the costs of original shipping and handling;- Reimbursement of consumers through a real payment method.on March 1st 2002, the December 22 2000 regulation replaced the Brussels Convention to define the rules governing judicial jurisdic-tion, recognition and execution of judgments in commercial and civil matters.As such, in disputes between a consumer and a business, when the contract has been made with a goods or service provider that by any means, directs his business towards the mem-ber State within which the consumer resides, Sections 15 and 16 of the regulation provide that the consumers lawsuit can be brought ei-ther before the courts of the member State in which the business is located or those of the consumers residence.

EriC PariSOT LawyEr aVEnS-PariS

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SARL/EURL SA with board of directors (usual form)* SAS

Incorporation and operation are simple Structured for delegation and oversight, public offer and listing on registered securities exchange are possible

Freedom in adapting the statutes for shareholders relations, orga-nization and transfers of capital

One or more manager, obligatorily a natural person (may be a shareholder or not)

Single CEO (both chairman of the board and general manager) or 2 persons (1 chairman of the board and 1 general manager), a maximum of 5 deputy general managers, 3 to 18 members on the board of directors

At least one president (natural or legal person statutes may provide that the SAS is to be represented by another person), provision for corporate governance body is possible

Main Advantages

Management

Status of Management A minority manager may hold a concurrent employment contract under certain conditions (work distinct from the corporate mandate, link of subordination). Minority managers are treated as employees, while majority managers are treated as independent workers

The president may hold a concurrent employment contract if conditions are met (work distinct from the corporate mandate, link of subordination). Presidents remuneration is treated as salary for fiscal and social security purposes (as other employees)

As a SA

Appointment and Dismissal of Managers

Majority decision by shareholders totalling at least 50% of shares. May claim damages for unfair dismissal

Set by board of directors Freely set by statutes

Minimum Capital No minimum. Amount is set by statutes. Capital must be paid up to at least 1/5 and any balance paid up within 5 years

37,000. Capital must be paid up to at least one-half at incorporation and any balance paid up within 5 years

No minimum. Amount is set by statutes. Public trading is prohibited. Capital must be paid up to at least one-half at incorporation and any balance paid up within 5 years

Contribution Contribution in industry allowed:a shareholder makes his work, his activity, and his professional expertise available to the company. Does not constitute a part of the companys assets, but allows the attribution of shares (hence sharing in any profit and participating in collective decisions)

Contribution in industry prohibited. Contribution in industry allowed

Shareholders 1 to 100 natural or legal persons. Meeting at least once per year to approve the annual financial statements

At least 7 shareholders, including at least 1 natural person. Meeting at least once per year to approve the annual financial statements

At least 1 shareholder (legal or natural person). Only some decisions are taken in general meeting: approbation of financial statements, mergers, alteration to capital, wind-up

Meeting Quorum

Minority Veto

Liability of Shareholders

Transfer of Shares

Auditor

Taxation

Extraordinary General Meeting: 25% of shares upon first convocation and 20% upon second convocation

Annual General Meeting: 20% of voting shares upon first convocation and none upon second convocation.Extraordinary General Meeting: 25% of shares upon first convocation and 20% upon second convocation

Freely set by statutes

Annual General Meeting: 50% +1 of shares upon first convocation and relative majority upon second convocation. Extraordinary General Meeting: 33% +1 of votes

Annual General Meeting: 50% of votesExtraordinary General Meeting: one-third of votes

Freely set by statutes

Limited to contribution (excepting civil or criminal liability)

3% registration fees (limited to 5,000) for shares.For SARL shares, an equal allowance for each share equivalent to 23,000 divided by total amount of shares

Auditor mandatory if two out of the 3 following thresholds are met: revenue before tax >3.1 M, balance sheet >1.55 M, 50+ employees

Auditor mandatory Auditor mandatory for SAS owning or owned by other companies or if two out of the 3 following thresholds are met: revenue before tax >2 M, balance sheet >1 M, 20+ employees

Corporate tax or option for income tax in certain cases

Corporate tax or option for income tax in(if less than 5 years of existence)

Corporate tax or option for income tax in (if less than 5 years of existence)

CoMpArATIVE TABLE oF MAIn ForMS oF InCorporATED CoMpAnIES In FrAnCE

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GermanyHow to do business and Hold assets around tHe world

I. Forms of Business OrganisationsInternationalization means the geographi-cal decentralization of business operations in international markets. With the increas-ing globalization of all business operations, internationalization is becoming increasingly important to promote sales through greater market proximity, reduce wage and associated labour costs, avoid import restrictions, lever-age transportation advantages and obtain sup-port under investment promotion measures. Just what concrete forms global operations should take depends on each companys situ-ation and its strategy. Each legal form which is chosen when a company is established has advantages as well as disadvantages in terms of the rights and duties for the founder(s) and in particular with regard to liability.

In Germany, a distinction is made between three legal forms, namely Einzelunterneh-men (sole proprietorships), Personenges-ellschaften (partnerships) and Kapitalges-ellschaften (companies).

1. Preliminary StagesFirst, it is possible to cooperate with an inde-pendent commercial agent. If business is to be conducted locally, maintaining only a repre-sentative office may suffice.

If a foreign company is registered in its home country, this company may apply for the reg-istration of an independent branch in the commercial register if business operations have exceeded the scope of a representative office. An independent branch is a part of an enterprise which is geographically separate from the head office and whose manager is authorized to independently transact and conduct business of the same type as in the head office. Business is thus transacted perma-nently and independently within the country, the branch being suitably organized in terms of equipment and personnel, meaning that it is authorized to issue its own invoices and has its own account and separate business assets. The manager of the foreign company must file the application for the registration of the in-

dependent branch in the commercial register himself. Additionally, the registration of a trade or business is required.

If the foreign company is not registered in the commercial register in its home coun-try, the branch still has the possibility to register in the commercial register. Registra-tion is mandatory if a turnover of around 250,000.00 per year or more is achieved from the purchase and sale of goods or a turnover of around 150,000.00 per year or more is achieved for services provided. The costs for registration in the commer-cial register amount to around 450.00.

2. Einzelunternehmen Sole ProprietorshipsSole proprietorship is the legal form most fre-quently used in Germany. This legal form is especially well suited for small and medium-sized enterprises. If the sole proprietor is a Kaufmann (merchant), the addition eingetra-gener Kaufmann (e.K.) (registered merchant) must be added to the firm name.

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A sole proprietor has all the rights vested in the enterprise but is also subject to all the obligations. The proprietor himself must pro-vide the equity capital and he bears the risk of its loss himself.

The advantages of a sole proprietorship obvi-ously include the possibilities to make decisions independently, quickly and freely. The disadvan-tage is the unlimited liability which includes not only the business assets but also the proprietors private assets.

3. Personengesellschaften (Partnerships)An essential feature of a partnership is that sev-eral partners share the rights and obligations. The capital must be contributed by several per-sons amongst whom liability and responsibility are divided.

(a) oHG offene Handelsgesellschaft(General Partnership)For a general partnership, at least two persons are required who run the commercial business of a fully qualified merchant together. No regu-lations exist for an oHG with respect to the amount of contributions and the capital.

All partners of an oHG are subject to unlim-ited, direct, and joint and several liability. This makes the company highly creditworthy.

(b) GbR Gesellschaft brgerlichen Rechts(Civil-Law Partnership)A civil-law partnership is an association under German Civil Law consisting of at least two partners who mutually agree in a partnership agreement to promote the achievement of a common goal. If the partnership runs a com-

mercial business, it becomes an oHG.A civil-law partnership has partial legal capac-ity. It can thus be party in legal proceedings and owner of a piece of property.

Here, too, all partners are liable jointly and sev-erally. Neither minimum capital nor entry in the commercial register is required.

(c) KG Kommanditgesellschaft(Limited Partnership)The purpose of a limited partnership is to run a commercial business under a common firm name. A KG has two types of partners, gen-eral partners and limited partners. The general partner is liable fully, directly and jointly and severally. The limited partners are subject to limited liability since they can be held liable only up to the amount of their limited part-ners share. Their rights are limited to the control and thus the inspection of all books and balance sheets. In the event of extraordinary business transac-tions, they may raise objections and have the right to give notice of termination.

(d) GmbH & Co. KG (Corporate Partnership)In a GmbH & Co. KG, the sole general part-ner of the limited partnership is a GmbH (a company with limited liability). The limitation of liability is a distinct advantage here. The GmbH as the fully liable partner is liable only up to the amount of the companys assets. The limited partners can be held liable only up to the amount of their capital contribution.

(e) Private Limited (Ltd.)European freedom of establishment also enables founders in Germany to choose this

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British legal form of enterprise. A minimum capital of one pound sterling is sufficient and liability is limited.

The disadvantage is that a registered office in Great Britain is required. Moreover, an annual balance sheet in English must be filed with the central commercial register in the UK.

In addition, there is the legal form of a silent partnership which will not be dealt with here.

4. Kapitalgesellschaften (Companies)A Kapitalgesellschaft is a company having its own legal personality and is thus a legal entity. With companies, the focus is always on the capi-tal brought in. Companies are formed by regis-tration in the commercial register and they are represented by their corporate bodies, namely the management board and the supervisory board. The shareholders are not liable with their private property. The sole exception here is the general partner of a KGaA. Types of companies are the joint-stock company (AG), the company with limited liability (GmbH) and the partner-ship partly limited by shares (KGaA).

(a) AG Aktiengesellschaft (Joint-Stock Company)The capital of a joint-stock company is divid-ed up into shares. Each shareholder is thus the owner of a stake in the company but has no power of management or representation. Shareholders of a joint-stock company are li-able only with their contribution, meaning the value of the share they hold.

A minimum share capital of 50,000.00 is re-quired for the formation of a joint-stock compa-

ny and whether establishment of the company is based on cash or non-cash capital contributions is immaterial. The articles of association of an AG must be notarized and the company must be registered in the commercial register.

The shareholders have the right to be provided with information at a general meeting of share-holders and they have voting rights at the meet-ing in proportion to the number of shares they hold. If the company is dissolved, the sharehold-ers are entitled to a share of the company assets, but only after all other creditors have been satis-fied. The obligations of shareholders are limited to their capital contributions up to the amount of the value of their shares and the liability through possession of the shares.

Large enterprises frequently use this legal form.

(b) GmbH Gesellschaft mit beschrnkter Haftung (Company with Limited Liability)A company with limited liability can be estab-lished for any legal purpose. The number of per-sons is of no consequence here. It is thus possible to establish a one-man-GmbH. The shareholders are liable only up to the amount of their con-tribution. The GmbH must have a minimum share capital of 25,000.00. A notarized compa-ny agreement is required and the company must be registered in the commercial register. The costs for the establishment of a GmbH amount to around 1,500.00 to 2,000.00.

(c) Unternehmergesellschaft - haftungsbeschrnkt (Entrepreneurial Company with Limited Liability)This so-called Mini-GmbH is a sub-form of the normal GmbH. The essential difference is the share capital of a Mini-GmbH which is a mini-

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mum of 1.00. Contributions in kind are not admissible. The application for registration in the commercial register cannot be filed until the full amount of the share capital has been paid in. The Mini-GmbH is a legal entity.

In legal relations and business transactions, the expression Unternehmergesellschaft (haf-tungsbeschrnkt) must be added to the com-panys name (also permitted: UG (haftungs-beschrnkt)). This informs potential business partners that liability is limited.

One quarter of the profits generated must be put aside by a Mini-GmbH each year. This re-quirement to form a reserve has been provided by the legislator so that in this way the amount of the share capital of a normal GmbH is achieved. Once this is achieved, the Unterneh-mergesellschaft (haftungsbeschrnkt) can be converted into a GmbH.

To establish a company with a maximum of three shareholders, a model protocol may be

used. This includes the articles of association, the list of shareholders, and the appointment of the managing director, all of which must be recorded by a notary. As a rule, however, the costs for notarization are in the lower double-digit range.

II. ResidenceOnly the most important principles concerning residence in the Federal Republic of Germany can be discussed below:

Citizens of the European Union are not re-quired to hold a residence permit or perma-nent residence permit. They are only required to register with the registration authorities.Furthermore, they receive a certification ex officio concerning their right of residence. Freedom of establishment also includes the right to set up ones own business in Germany. When setting up a commercial establishment in Germany, EU citizens can pursue their busi-ness activities under the same conditions as na-tional residents. If it is a trade or business for

which a permit is required, they must obtain an appropriate permit. In addition, the open-ing of a trade or business must be registered with the community concerned.

Citizens of states which belonged to the EU pri-or to May 1, 2004 as well as citizens of the new EU member states Malta and Cyprus enjoy full freedom of establishment and the right of free movement of workers. Freedom to provide serv-ices means that every EU citizen may offer his services in Germany for awhile independently without having an establishment here.

With respect to the candidate states in central and east Europe (such as Bulgaria and Ruma-nia), certain transitional periods still apply re-garding the free movement of workers and the freedom to provide services.

III. Taxes1. Income TaxEven if only a small agency office (see above) is opened in which merely orders are accepted,

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this is deemed a so-called permanent establish-ment for tax law purposes. A tax return must be filed for such a permanent establishment. The problem of double taxation for one and the same income is solved by the double taxa-tion conventions in force between Germany and the foreign states in question.

2. Value-Added TaxIf goods are imported from a non-EU-country, import VAT (19%) is payable in addition to the EU customs tariff. If the goods are sold in Germany, this is deemed sales within the coun-try which is subject to taxation with the conse-quence that 19%, or the reduced rate of 7%, of VAT must be added to the invoice amount and be paid to the tax authority. However, prepaid taxes can be deducted. The entrepreneur may receive a refund from the tax authorities for

the import VAT paid. The situation is differ-ent for movements of goods within the Euro-pean Union. As a rule, this is free of VAT in the country of origin if the parties concerned

use the VAT identification number of their re-spective EU country.

3. Trade TaxEvery business enterprise is subject to trade tax. This tax is calculated on income from trade or business and the amount of tax is also co-determined by the community concerned through a multiplier (a so-called rate of assess-ment). This varies from community to commu-nity. However, there is a tax-exempt amount of 24,500.00 per annum, except for companies.

4. Capital Gains TaxThe capital gains tax is a form of levying income tax. It is payable on income from capital assets. In 2009, this tax amounted to 20% for profit shares (dividends) and 40% for interest on capital investments, plus the solidarity surcharge.

5. Corporation TaxCorporation tax is levied on the income of corporations, associations of persons and

funds or estates which have their management or their registered seat within the country. Le-gal entities such as companies (joint-stock com-panies/AG, companies with limited liability/GmbH, and entrepreneurial companies with limited liability/Mini-GmbH) are subject to corporation tax.

The corporation tax is calculated on the basis of the companys taxable income. The current tax rate is 15%, plus a solidarity surcharge of 5.5%, i.e. a total rate of 15.825%.

As has been shown, investments in the Fed-eral Republic of Germany are practicable and make good business sense both from a legal standpoint and in terms of tax law. The guar-anteed rule of law in this country as well as swift handling of legal and tax law matters by authorities and courts ensures for the investors a high degree of safety for their investments.

DR. PRyMUSALA & COLLEAGUES

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GreeceHow to do business and Hold assets around tHe world

A. Alternative corporate structures available in GreeceGreek legislation contains provisions for vari-ous types of companies, so that a potential in-vestor has a choice and can select to suit his particular needs and economic intentions.

The companies can be classified on the ba-sis of several criteria. The main types of an enterprise can be categorised as personal and capital companies as follows:

a. Personal Companies- General Partnership (Omorythmos Eteria OE)

A General Partnership can be established by two or more parties, physical persons or legal entities. All the partners are jointly and several liab

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