How to expand your business across borders. Monaco

Transcription

1 How to expand your business across borders Monaco PART I: CONTRACTUAL - NO OFFICE IN THE TARGET COUNTRY A. Direct sale: As Monaco is not a member State of the European Union, the free movement of goods is not applicable. Any foreign entity wishing to carry out activities in Monaco needs prior authorization from the government otherwise it would incur criminal punishment. Therefore, direct sales should not be the result of an authorized local activity. A.1. Without written agreement - general terms 1. What are the formalities a foreign seller must complete in your jurisdiction in order to make sure that its terms and conditions of sale are binding and enforceable towards local purchasers? Are these conditions enforceable towards non commercial parties? We strongly advise to have the terms and conditions duly initialled and signed. Under Monegasque Law, any obligation of a value exceeding requires a deed in order to be enforceable towards non commercial parties. As regards commercial parties, the undertakings may be evidenced by any mean including correspondence, accepted invoices or the parties accounts. A.2. With a written agreement 2. What are the clauses a foreign seller should integrate in a written sale agreement (or his general terms and conditions) and the reasons why? (a) Retention of title: Is this provided for in your jurisdiction? What are the conditions to make it enforceable towards local purchasers and third parties? Under Monegasque Law the seller can retain his title until full payment of the purchase price according to a written clause duly accepted by the purchaser. In case of insolvency proceedings, retention of title is not enforceable against the other creditors, except when a final judgement cancelled the sale before the beginning of the insolvency procedure. (b) Interest and penalty clause: Are these clauses enforceable in your jurisdiction? Can they be reduced or annulled? What are the consequences if this clause is not integrated in the agreement? What is the legal rate in your jurisdiction? These clauses are enforceable in Monaco. Penalty clauses may be reduced by the Courts, only when the main obligation was partially performed. If there is no provision relating to interests and penalty, legal interests shall be due from the unsuccessful summon made to the debtor and, in addition, the Courts may award damages to the creditor.

2 The legal interest rate in Monaco is determined by Sovereign Ordinance and varies from time to time. Since September 1 st, 2015, the legal rate amounts to 1% per year (Sovereign Ordinance n 5.444). (c) Applicable law and competent jurisdiction: Are these clauses enforceable in your jurisdiction? What are the consequences if this clause is not integrated in the agreement? These clauses are enforceable in Monaco except when they violate provisions which are of public order such as the application of Monegasque Law to real estate located in Monaco. If a competence clause is not integrated in the agreement, the Code of civil procedure gives jurisdiction to Monegasque Courts in a number of cases notably: When the defendant is a Monegasque national, When the defendant or any of the defendants (if there are several defendants) is domiciled in the Principality of Monaco, When the dispute relates to real estate located in Monaco, When the dispute relates to obligations which where entered into in Monaco or have to be performed in Monaco, When the dispute relates to obligations entered into abroad towards a Monegasque individual or legal entity. B. Commercial intermediaries 3. What types of commercial intermediaries do exist in your jurisdiction? Commercial agents Salaried sales representatives Distributors 4. What legislation does apply in your jurisdiction with regard to the above mentioned types of distribution agreements? Any foreigner wishing to carry out activities as commercial agent must obtain an authorization from the government. Commercial agents must be then registered in a specific register held by the Companies Register. The registration is valid for a 5 years period renewable. The status of salaried sales representatives is governed by Law n 762 of May 26 th, 1964 as amended, which provides for the application of employment Law. Distribution agreements are governed by the general provisions of the civil and commercial codes relating to contracts. PART II: BRANCH - OFFICE IN THE TARGET COUNTRY BUT NO LEGAL PERSON 5. What are in your jurisdiction the differences between starting up a branch and starting up of a company (subsidiary)? A branch is not an independent legal entity: the foreign company opening a branch remains liable for all the debts and obligations resulting from its local activity. A subsidiary is an independent legal entity having capitalistic links with another company. 2

3 6. What formalities must be fulfilled for opening a branch? Opening a branch in the Principality of Monaco is subject to the prior authorisation of the government. For such purpose, an application file, containing various documents concerning the foreign company and indicating the name of the person who will represent the foreign company in this branch, must be provided to the relevant administrative office. Subject to possible suspension of the instruction of the file, the answer of the government must be given within 3 months from the day the administrative office acknowledges receipt of the complete application file. 7. Why would you rather advise a foreign seller to set up a branch and not a company in your country, or vice versa? Setting up formalities are quite similar for both structures. Opening a branch could be more interesting at the time of the closing of the structure as it does not imply a liquidation process. The main advantage of the local company is the segragation of assets and liabilities. 8. Is a branch authorized to act before the court, to engage people? The branch is not a legal person therefore it is the foreign company which acts before the court and engages people. 9. What is the liability of the legal representative of the branch? The legal representative of the branch can be either an employee of the company or a director of the company. When he is an employee of the company, the employer remains liable for his wrongdoings, unless if they are not connected with the performance of his employment contract. When he is a director of the company, his liability is that of a company manager. 10. Is there an automatic liability of the head office for the operations or acts of the branch? As the branch is not a separate legal entity, the head office (the legal entity) is liable for all operations and acts of the branch. 11. Which language will the documents be in? All documents to be provided to the authorities must be drafted in French or, when provided in a foreign language, accompanied with their translation in French. There is no legal requirement concerning the language used in other documents (e.g. contracts) as far as the persons concerned understand the language which is used. 12. What are the accounting requirements for a branch? A branch has to establish yearly accounts. 3

4 PART III: SUBSIDIARY - LEGAL PERSON (SEPARATE LEGAL LOCAL ENTITY) IN THE TARGET COUNTRY 13. What are the advantages of establishing a subsidiary compared to establishing a branch? A subsidiary is a separate legal entity; therefore, the mother company is not liable toward contractors and employees of the subsidiary. 14. Can you present the main characteristics of the company forms existing under your jurisdiction in the following schedule? COMPANY FORM SAM (Société Anonyme Monégasque) SARL (Société à Responsabilité Limitée) Limited liability yes yes Free transferability of the shares Fixed or variable capital Shares are generally freely transferable between shareholders, to the spouse and descendants, subject to the provisions of the articles of association which may provide for the prior approval of the Board of directors or the shareholders and/or pre-emption rights of the shareholders. No prior authorisation of the government is required. fixed Shares are generally freely transferable between shareholders and to the spouse and descendants, subject to the provisions of the articles of association. Any transfer of shares to a third party is in addition subject to the prior authorisation of the government. fixed Minimum capital 150,000 15,000 Number of founders Notarial deed yes no COMPANY FORM SNC (Société en Nom Collectif) SCS (Société en Commandite Simple) SCP (Société Civile Particulière - non trading company) Liability The liability is unlimited and joint. Sleeping partners are liable. The liability is unlimited and joint. For active partners, the liability is unlimited and joint Free transferability of the shares Shares are generally freely transferable between Shares are generally freely transferable among each category of Shares are generally freely transferable between shareholders and to the 4

5 shareholders, subject to the provisions of the articles of association. Any transfer of shares to a third party is in addition subject to the prior authorisation of the government. shareholders, subject to the provisions of the articles of association. Any transfer of shares to a third party is in addition subject to the prior authorisation of the government. spouse and descendants, subject to the provisions of the articles of association. No prior authorisation of the government is required. Fixed or variable capital Fixed Fixed Fixed Minimum capital 15,000 15,000 no Number of founders Notarial deed no no no 15. Which of the company forms is used most frequently in your jurisdiction? SARL for commercial activities. SCP for civil activities. 16. Which company form is used more frequently in case of small or family business? SARL. 17. What are the main formalities a foreign company has to comply with in order to establish a subsidiary (filial/filiale)? The setting up of a subsidiary will be subject to the prior authorisation of the government. An application file must be sent to the relevant administrative office, containing a list of documents such as the articles of association of the company to be created, personal information concerning the purported shareholders and information concerning the mother company. Subject to possible suspension of the instruction of the file, the answer of the government must be given within 3 months from the day the administrative office acknowledges receipt of the complete application file. 18. What are the costs of establishing a subsidiary in your jurisdiction? In addition to the counsel s fees, there are Registration fees amounting to 1% of the share capital and costs of approximately How long does it take to establish a subsidiary in the Principality of Monaco? It takes approximately three months after receipt of all documents required by the authorities. 20. Is there any specific legislation with regards to the liabilities of the founders and the directors of the most used company form? Founders: no specific legislation. Directors: civil liability by reason of: o mismanagement; 5

6 o breach of the provisions of the articles of association; o infringement to specific laws and regulations. criminal liability by reason of: o abuse of trust; o accounting omissions or absence of presentation of yearly accounts; o presentation of untrue or inaccurate yearly accounts; o joint criminal offenses with the company. joint tax liability with the company by reason of fraudulent acts. 21. What are the main taxes for which a Monegasque company is liable? 21.1 Corporation tax: There is no direct tax on companies apart from the tax on profits (Ordinance n 3.152). Not the legal form of the company but the nature of the activities and location of transactions determines liability for tax. Companies making more than 25% of their turnover outside the Principality, and companies whose activities consist of earning revenues from patents and literary or artistic property rights are subject to a corporate income tax of 33.33% on profits (ISB). Under certain conditions, capital gains from asset sales as part of business activities may be exempt if they are re-invested in the firm. Firms created in the Principality and falling within the scope of corporate income tax that carry on a genuinely new business are exempt from said tax for a period of two years and subsequently benefit from a favourable regime for the three following years Value added tax (VAT) As the French and Monegasque territories form a customs union, French customs regulations apply directly in the Principality of Monaco, which is also incorporated into European customs territory. Value Added Tax (VAT) is levied on the same basis and at the same rate as in France: 20% for deliveries of goods and for supplies of services (on 1 st June, 2016 since 1 st January, 2014). PART IV - MISCELLANEOUS A. Real estate A.1. Purchase of a real estate 22. Who do you turn to in order to close a valid purchase agreement? The preliminary binding contract may be made by private deed. Therefore, the assistance of a lawyer at this stage is strongly recommended. The purchase deed is a notarized deed. 23. What are the costs related to the purchase agreement? Generally, when a real estate agent acts for the purchaser and/or the seller, he is entitled to a commission which amount has to be agreed in writing. As regards the purchase, registration fees amount to: 4.5% when the purchaser is an individual or a civil partnership incorporated in Monaco, with shareholders being exclusively individuals acting for their own account; 6

7 7.5% in any other case. Notary fees amount to 1.5% of the purchase price. 24. Is there in your jurisdiction legislation that can slow down the purchase process (e.g. environmental legislation requiring preliminary soil examinations)? Pre-emption rights: Law n 580 provides for a pre-emption right of the State concerning real estate assets, rights, and businesses when the tax administration considers that the price is not sufficient. The State may hence offer to pay to the owners the price increased of 10%. Law n relating to housing premises built before September 1 st, 1947 provides for a pre-emption right in favour of the Minister of State in case of sale of such premises; and if not exercised, a pre-emption right in favour of the tenant. Law n 490 relating to commercial, industrial and artisan leases provides for a pre-emption right in favour of the tenant, subject to some conditions. Town planning regulations: currently Sovereign Ordinance n of September 13 th, 2013, as last amended by Sovereign Ordinance n of May 19 th, A.2. Rent a real estate 25. Is there imperative law in your jurisdiction with regard to the rent of offices, industrial real estate or commercial real estate? Can you give a summary of the major stipulations of these regulations? Law n 490 of November 24 th, 1948, as amended by Law n of July 15 th, 2004, provides for a set of rules applicable to commercial, industrial and artisan leases. Leases enter within the scope of such law when their duration is of at least 3 years. Such law mainly provides for: the right to renewal of the lease; financial compensation in case of termination of the lease by the landlord; the right of repossession of the landlord: without compensation to the tenant, if the landlord intends to use the premises as dwelling place for himself or his ascendants, descendants and spouses of the latter. in view of transforming or rebuilding the building. the possibility to adjust the rent when it does not correspond any longer to the rental value; a pre-emption right of the landlord in case of sale of all or part of the business including the lease, subject to some restrictions; the right for the tenant to bring his business to a commercial company; a pre-emption right of the tenant in case of sale of the premises by the landlord, subject to some restrictions. 26. Are there any formalities to fulfil in order to enforce the lease agreement towards third parties? No formality is required to render lease agreements enforceable against third parties. However, it has to be noted that lease agreements must be registered with the tax administration within 3 months from their date. A.3. Environmental issues 7

8 27. For what types of activities is an environmental permit required? There is no environmental permit as such in the Principality of Monaco. However, a specific commission called Commission Technique d Hygiène, de Sécurité et de Protection de l Environnement (Technical Commission for Health, Safety and Environmental Protection: Ordinance n of June 9 th, 2009, as amended by Ordinance n of January 15 th, 2014) is active during the building works, fitting out, alteration works, opening and operating of: any building, establishment or premise for industrial, commercial, artisanal, professional, administrative, charitable or cultural use; any parking structure; any warehouse containing dangerous materials; any premise opened to the public; any building being more than 50 meters high; any equipment or process which could entail nuisance, pollution or damages. 28. Can you describe briefly this procedure? How much time will this procedure normally take? Individuals duly empowered by the commission visit the premises, together with the operator of the premises, who has to put at the commission s disposal any document required to perform the control. Further to such visit, minutes of the visit are notified to the operator by bailiff or by registered letter with acknowledgment of receipt. A.4. Employment 29. Are there specific regulations with regard to outsourcing of employees? Currently, having an establishment in Monaco implies having an activity there and such activity cannot be carried out abroad by employees located abroad. Temporary workers There is no specific law or regulation in Monaco regarding temporary workers. Nevertheless, such type of employment is commonly used in Monaco. Temporary workers must obtain a work permit like others workers. Secondment The duration of the secondment is limited to one year and may be exceptionally renewed, with a specific authorization from the Labour office. Subleasing of employees The subleasing of employees is admitted when there is no profit for the lessor. Teleworking The Law n of July 4 th, 2016 regulates the teleworking. An Agreement on Teleworking was reached with France (Amendment n 6 to the Convention of February 28 th, 1952 on social security). Discussions with a view to reach a similar agreement between the Principality and Italy have also been undertaken. 30. Applicable legislation according to the type of employment (differences between employment by local company or by head office for the local branch) 8

9 There is no difference between both types of employment. 31. Legal engagement and dismissal requirements and formalities The Law n 629 of July 17 th, 1957, as last amended by Law n of December 26 th, 1985 regulates hiring and dismissal in the Principality. The Law n 729 of March 16 th, 1963, as amended by Law of December 23 rd, 2002 regulates the employment agreement. Monegasque Law provides for priorities regarding hiring (Monegasque nationals, then children and spouses of Monegasque nationals, then individuals residing in Monaco and finally individuals residing in neighbouring towns). In order to hire an individual, the legal entity must first send an employment offer to the employment Service and must interview, as the case may be, any individual having a priority right introduced by the employment service during the 4 clear days following the receipt of the employment offer. The legal entity may refuse to hire the persons introduced by the employment service upon due justification and then suggest its own candidate, who has to be approved by the Employment service. A work permit is delivered for a determined position and a determined employer. No written employment contract is required. Employees hired for an undetermined duration may be dismissed at any time. The employer is not compelled to disclose a reason for dismissing an employee. In such case, the holding of a preliminary meeting with the employee is required. Legal indemnities ( indemnités de licenciement ) have to be paid to the employee. Their calculation is provided for by the law, with a maximum amount of 6 months salary. When the employer decides to dismiss an employee for cause, which is often the case, such cause has to be valid and the legal indemnities ( indemnités de congédiement ) are generally lower than the indemnities indicated above. Their calculation is provided for by the law. 32. Social security regulations Both employer and employee pay social contributions in order to cover the following risks : illness, family, unemployment and retirement. Employees social contributions are deducted from the monthly salary prior to its payment to the employees. 9