The Société par Actions Simplifiée (SAS) has become a highly attractive vehicle for restructuring operations such as mergers and demergers. Thanks to its flexible bylaws and compatibility with advanced corporate finance, the SAS is increasingly chosen for reorganizations, group restructurings, or cross-border transactions.
The legal framework was significantly updated by Ordinance n° 2023-393 of 24 May 2023, which transposed Directive (EU) 2019/2121. This reform modernized the French regime for mergers and demergers across all commercial companies, explicitly including the SAS.
This article explores the principles, procedures, and consequences of mergers and demergers involving an SAS.
1. General Principles: The SAS and Its Capacity to Merge or Split
French law grants the SAS wide legal capacity to take part in mergers and demergers, whether domestic or cross-border. This flexibility makes it a powerful tool for restructuring, though certain exceptions remain—most notably the impossibility of contributing to the creation of a European Company (SE).
1.1 Broad Legal Capacity
The SAS can freely participate in mergers and demergers, whether as:
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the absorbing company or the absorbed company in a merger,
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the splitting company or the beneficiary in a demerger.
These operations may involve companies of any legal form (Article L. 236-2 C. com.), except where specific sectoral regulations apply (e.g. banking or insurance).
The SAS can also take part in cross-border mergers or demergers, under Articles L. 236-31 and following of the Commercial Code, as amended by the 2023 reform.
1.2 Exception for the European Company (SE)
SAS companies cannot participate in a merger creating a European Company (SE). That type of transaction is reserved for other corporate forms, notably the SA.
Mergers and demergers offer powerful growth opportunities, but the legal framework is complex. Our experts guide you through every stage to secure compliance and strategic success.
2. A Modernized Legal Regime: The 2023 Reform
The 2023 reform reshaped the legal framework for mergers and demergers, aligning the SAS more clearly with the rules that apply to other commercial companies. While a common regime now applies across the board, special provisions continue to govern operations involving only joint-stock companies, with certain SA rules expressly extended to the SAS.
2.1 Common and Specific Provisions
Since 1 July 2023, the general merger and demerger regime applies to all commercial companies, SAS included. Special rules apply where only joint-stock companies are involved (Articles L. 236-8 to L. 238-17 C. com.).
When the operation involves mixed forms (e.g., SAS with an SARL), certain rules on shareholder meetings (L. 236-9) do not apply.
2.2 Carrying Over SA Rules
Before the reform, SAS mergers were regulated by analogy with the SA regime. The 2023 ordinance confirmed and clarified this approach: several rules designed for SAs now apply expressly to SAS mergers, with adaptations for SAS governance (Article L. 227-1, para. 3).
3. Shareholder Approval: What Majority Is Needed?
Because mergers and demergers fundamentally reshape a company’s structure, they cannot proceed without shareholder approval. In an SAS, the bylaws usually determine the required majority, but the law imposes stricter thresholds in certain cases—especially for cross-border mergers and for companies being absorbed into an SAS, where unanimity remains the safeguard for minority rights.
3.1 General Rule: Freedom in the Bylaws
Article L. 227-9 of the Commercial Code states that merger and demerger decisions belong to the shareholders. However, the bylaws may freely set the majority conditions. By default, the rule is the same as for amendments to the bylaws — unless the bylaws provide otherwise.
3.2 Cross-Border Mergers: Qualified Majority
Cross-border mergers involving an SAS require a qualified majority: between two-thirds and 90% of votes of shareholders present or represented, as defined in the bylaws (Article L. 236-38).
If the bylaws are silent, they must first be amended to establish the required majority.
3.3 Domestic Mergers: The Absorbed Company and Unanimity
In the landmark Cassado decision (2006), the French Supreme Court ruled that unanimity is required from the shareholders of a company absorbed by an SAS.
The reasoning is simple: joining an SAS may expose minority shareholders to governance rules that are highly customized in the bylaws. Unanimity ensures that no shareholder is forced into such a framework without consent.
4. The Procedure: Project, Reports, and Consultations
Mergers and demergers in an SAS must follow a structured process that ensures transparency and protects stakeholders. From the preparation of a joint project to the drafting of reports and shareholder consultations, each stage is designed to provide clarity and oversight—though simplified rules apply when the operation involves wholly owned or near-wholly owned subsidiaries.
4.1 Drafting the Merger or Demerger Plan
A joint project must be prepared by the participating companies and filed with the registry (Article L. 236-6). In an SAS, the project is signed by the president or other officers designated in the bylaws.
4.2 Reports by Directors and Auditors
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A directors’ report must be made available to shareholders, unless unanimously waived.
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A merger auditor’s report (or contribution auditor in case of asset transfers) is also required, unless unanimously waived (Article L. 236-10).
In simplified cases — such as absorption of a wholly owned subsidiary (100%) or 90% subsidiary — reporting and meeting requirements are significantly reduced (Articles L. 236-11 and L. 236-12).
5. Treatment of Special Categories of Securities during SAS Mergers and Demergers
Mergers and demergers affect not only shareholders but also other categories of security holders. French law protects the rights of investors such as holders of preference shares, bondholders, and those with convertible or hybrid securities. Depending on the type of instrument, their approval—or at least their consultation—may be required before the operation can take effect.
5.1 Preference Shares
If the absorbed company has issued preference shares, these must be exchanged for securities with equivalent rights. If not, a special meeting of preference shareholders must approve the merger (Article L. 228-17).
5.2 Bondholders and Holders of Hybrid Securities
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Bondholders of the absorbed company must be consulted.
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Bondholders of the absorbing company do not need to be consulted, though their representative may oppose (Article L. 236-16).
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Holders of securities giving access to capital (e.g. convertible bonds) are consulted only if the issuance contract requires it (Article L. 228-101).
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6. Legal Effects of a Merger or Demerger of SAS
A merger or demerger does more than reshuffle a company’s structure—it produces immediate and automatic legal consequences. Assets and liabilities are transferred by operation of law, shareholders receive new securities, and contracts, employees, and debts move seamlessly to the beneficiary company. These far-reaching effects explain why the procedure is strictly regulated.
6.1 Transfer of Assets and Liabilities
The absorbed or split company is dissolved without liquidation. Its entire estate is automatically transferred to the beneficiary company (Article L. 236-31). The operation takes effect on the date fixed in the merger agreement.
6.2 Allocation of Shares
Shareholders of the absorbed company receive shares in the absorbing company. They may also receive a cash adjustment (soulte), capped at 10% of the nominal value of the shares issued.
6.3 Other Effects
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Employment contracts: automatically transferred to the beneficiary (Labour Code, Article L. 1224-1).
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Creditors: become creditors of the beneficiary company, with a right to oppose (Article L. 236-15).
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Commercial leases: automatically transferred, with the landlord’s right to object (Article L. 145-16).
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Corporate offices: directors of dissolved companies see their mandates terminated.
7. Demergers and Partial Asset Contributions Involving a SAS
Beyond mergers, the SAS can also be involved in demergers and partial asset contributions. While demergers are governed by the same framework as mergers, partial asset transfers may follow two different regimes: either treated as part of a structured reorganization requiring shareholder approval, or handled as ordinary contributions in kind under the authority of the directors—unless the bylaws say otherwise.
7.1 Demergers
Demerger operations follow the same rules as mergers (Articles L. 236-18 to L. 236-26), covering procedure, decision-making, and effects.
7.2 Partial Asset Contributions
Two possible frameworks apply:
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If the contribution forms part of a structured demerger project, shareholder approval is required and the rules of demergers apply.
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If it is a simple transfer of assets, the transaction is treated as a contribution in kind, generally within the competence of directors unless the bylaws provide otherwise (Article L. 227-9, para. 1).
8. Special Situations
Not all mergers and demergers involving an SAS follow the standard procedure. French law provides simplified rules when the transaction concerns wholly-owned or nearly wholly-owned subsidiaries, reducing the need for shareholder approval. Conversely, certain sensitive clauses in the bylaws—such as inalienability or exclusion provisions—may justify stricter requirements, including unanimity, to safeguard existing governance balances.
8.1 Simplification for Wholly-Owned Subsidiaries
When an SAS absorbs a 100% subsidiary, no shareholder resolution is needed, unless shareholders representing at least 5% of the capital request it (Article L. 236-11).
The same applies to 90% subsidiaries, except for the absorbed company, which must still decide (Article L. 236-12).
8.2 Inalienability and Exclusion Clauses
Some sensitive bylaw clauses (e.g. inalienability, exclusion of shareholders) may justify requiring unanimity before new shareholders enter via a merger. This protects existing governance arrangements from being undermined.
Conclusion
The SAS today benefits from a modernized and flexible legal framework for mergers and demergers, both domestic and cross-border. Its adaptability makes it a preferred structure for restructuring operations.
But this flexibility also requires careful drafting of the bylaws. Shareholders must define not only the majority rules for approval, but also the conditions under which new shareholders can enter the company through mergers or demergers.
The principle of unanimity remains influential in certain sensitive cases — particularly where minority shareholder rights may be affected. Over time, however, as the SAS becomes even more common, practices may evolve toward more balanced solutions.
The 2023 reform modernized SAS merger law, opening new strategic possibilities. Our legal team ensures your operations align with regulations while protecting shareholder rights.
