If you are looking for a legal framework to create your business, the Economic Interest Grouping (EIG) is not the solution. However, if you have already started your commercial activity, such a legal structure can allow you to develop it with other entrepreneurs, without having to partner. Explanations.
Merger, group, and GIE: three very different concepts
A merger is a process of merging companies, at least one of which disappears. In a group of companies, many come together under the direction of one of them, but each company legally persists. Within an EIG, several individuals (natural or legal) create a common structure to develop their activities while maintaining their independence.
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Purpose of the EIG
It can be a civil or commercial social purpose. It all depends on the nature of the economic movement of its members and its social name. However, a grouping with a commercial character does not grant merchant status to the members of the EIG. Similarly, registration in the Trade and Companies Register (RCS) does not affect the status of the individuals (natural or legal) that compose it.
In general, the law considers that an EIG grouping commercial companies or making purchases and then making sales will have a commercial purpose. And the civil nature of the EIG generally applies to combinations of companies in the agricultural or artisanal sector. Liberal professions can also create an EIG or participate in it to pool resources.
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Principles of establishing an EIG
The grouping has a significant contractual character as it allows each member to maintain their independence to manage and develop their own activities. The Commercial Code does not define specific rules for its creation, whether regarding its members or the capital, which is not essential. This is possible since the members of an EIG do not have limited liability and are therefore indefinitely and jointly responsible. The members of the group hold shares. Their transfer is carried out freely, under the conditions provided in the founding contract. Shares can be constituted by contributions in cash, in kind, or in services.
Operation and management of the GIE
Without share capital, the GIE manages an association. In the case of capital formation, the law has not defined a minimum amount. The members who manage the EIG are appointed as “administrators” whose rights and mandates, mode of appointment, social name, internal regulations, etc. are defined in the founding contract at the time of creation or subsequently at the members’ assembly. There can be one or more administrators depending on the size of the group and the wishes of the members.
In the general assembly, unless the founding contract establishes different rules, decisions are made unanimously, with the principle that each member has one vote. The contract relating to the creation of the EIG may provide specific rules for the distribution of votes between third parties and among members regarding the rules governing the majority of decisions.
In terms of management, its control must be entrusted to natural persons. The founding contract of the grouping can complement the control procedures. From 100 employees or more at the end of the financial year, auditors must be appointed by the members’ assembly of the grouping.
For an EIG, profits must be declared for income tax or corporate tax under your regime.
Advantages and disadvantages of the GIE
Compared to a business, the legal form of GIE does not require as many formalities during its creation, unlike commercial companies. Registration in the Trade and Companies Register of the Commercial Court is sufficient. It is not necessary to publish a constitution advertisement in a legal advertising journal. The publication in BODACC by the head of the court registry will serve as proof. Following this formality in the RCS, the group acquires its legal personality, like a business.
Participation in the grouping allows the continuation of the economic movement of its members in complete independence and autonomy. Any entrepreneur operating within a business or a simple sole proprietorship can develop their economic activity or that of their partner. The grouping allows for the pooling of resources for the benefit of distinct natural or legal persons.
It is not necessary to establish share capital. Participation in the EIG can take the form of a contribution from each member, as in the case of an association. The operation of a grouping is flexible: the founding contract freely defines the operating rules that must comply with the Commercial Code.
As for the disadvantages, this legal form has that of a partnership: members of the EIG do not have limited liability, so the trust relationship between these individuals is central. And the GIE is not a business that operates its own enterprise.
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