France Desk

France and Germany: close partners, different legal cultures

France is one of Germany's most important trading partners and investors, and French groups are present in Germany in industry, energy, retail, insurance, banking, luxury goods, technology and services. Within the EU, the legal framework is largely harmonised: French companies enjoy freedom of establishment, judgments circulate under the Brussels Ia Regulation, personal data flows freely and products follow the same EU rules.

Yet French executives regularly encounter German specificities that differ from French practice: the GmbH instead of the SAS, works councils with genuine co-determination rights, supervisory boards with employee representatives at larger companies, the role of the notary in share transfers, and a stricter review of standard business terms. Our France desk explains these differences and how to work with them in practice, whether for a first investment, an acquisition or the reorganisation of an established German group.

This page is part of our international clients practice. It describes the legal framework and how we work, without claims about individual team members' backgrounds.

Comparing French and German company law

French groups typically set up a German limited liability company (GmbH). It is the closest equivalent to the French SARL and SAS, but governance differs. In a GmbH, the shareholders' meeting is the supreme body and can instruct the managing directors (Geschäftsführer) on business matters, while the managing directors represent the company externally with unlimited authority that cannot be restricted vis-à-vis third parties.

There is no equivalent to the president of an SAS with largely contractual governance; the articles of association of a GmbH must be notarised, and changes require a notarised shareholder resolution and registration. Share capital must be at least EUR 25,000. Transfers of GmbH shares require a notarial deed (§ 15 GmbHG), which affects the timing and form of acquisitions and intra-group reorganisations.

The German stock corporation (AG) has a two-tier structure with a management board and a supervisory board, comparable to the French SA with directoire and conseil de surveillance; the management board is not bound by instructions. The European company (SE) is an option for French groups that want a uniform structure across Europe, and the SE's employee participation regime is negotiated rather than imposed by German co-determination law. See our page on corporate governance of the GmbH, AG and SE.

Notarial practice and documents

French investors are used to notaries in real estate matters, but in Germany the notary also plays a central role in company law: formation of a GmbH, amendments to its articles, share transfers and many register filings require notarial deeds or certification. Notarial deeds are generally drawn up in German; a deed in another language is possible if the notary is proficient in it, and otherwise an interpreter and translation are needed. Powers of attorney from France usually require an apostille. Notarial fees follow a statutory fee schedule based on the transaction value. Planning signing logistics, including the reading-out of documents, avoids last-minute delays in transactions.

Group law and liability

German law contains specific rules on groups of companies. A domination and profit transfer agreement allows the parent to give instructions to an AG or GmbH and creates a tax group for corporate income and trade tax, but obliges the parent to compensate annual losses of the subsidiary. Without such an agreement, the parent must not cause the subsidiary to act to its detriment without compensation. Managing directors remain personally liable for observing capital maintenance rules and for filing for insolvency in time. French concepts such as the intérêt social and group cash management have German counterparts but different limits, which matter for cash pooling and upstream guarantees.

Works councils and co-determination compared

French managers are familiar with employee representation through the social and economic committee (CSE), which has extensive information and consultation rights. German works councils go further in some respects: they have genuine co-determination rights, meaning that the employer cannot act without their agreement or a decision of a conciliation committee, on matters such as working time, overtime, remuneration principles, technical monitoring devices and health protection (§ 87 BetrVG). For operational changes such as closures or relocations in undertakings with more than 20 employees entitled to vote, the employer must attempt a reconciliation of interests and agree a social plan (§ 111 BetrVG). See our page on works councils.

Board-level co-determination is a further difference. A German GmbH or AG with more than 500 employees must have a supervisory board with one third employee representatives, and above 2,000 employees half of the supervisory board seats go to employee representatives, with the chair having a casting vote. French groups should consider these thresholds when growing their German workforce or reorganising group structures, because employees of subsidiaries can be attributed to German holding companies.

The employee representatives on a German supervisory board include trade union representatives in larger companies, and the supervisory board appoints and dismisses the management board of an AG, which gives employee representatives real influence on governance. European works councils established under French law may cover German establishments too. See our page on board-level co-determination.

Investment screening for French acquirers

As EU investors, French acquirers are generally outside the cross-sectoral investment screening regime, which applies to acquirers from outside the EU. However, the sector-specific review for defence and certain IT security companies applies to all foreign acquirers, including those from other EU Member States, where the acquirer reaches 10% of the voting rights in a German company in these sectors (§ 60 AWV). Indirect acquisitions through non-EU holding structures and cases of abusive structures can also be reviewed. French defence and aerospace groups acquiring German targets should plan for this procedure. See our page on foreign investment control.

Cross-border mergers, divisions and conversions

Since the implementation of the EU Mobility Directive in 2023, German law provides a comprehensive framework for cross-border mergers, divisions and conversions within the EU and EEA (§§ 305 ff. UmwG). A French SAS can merge with a German GmbH, a German company can convert into a French company form and vice versa, and divisions can create new companies in another Member State.

The procedure involves a draft terms document, reports for shareholders and employees, publication, a register court review including an abuse check, and protection for dissenting shareholders and creditors, who can claim security within three months. Employee participation negotiations under the German implementing act can determine the overall timetable, particularly where a co-determined German company is involved and the existing level of participation must be protected.

Cross-border reorganisations require coordination of French and German notaries, registers and tax advisers. Tax neutrality depends on the assets remaining attributable to a German permanent establishment, and German exit taxation can apply where assets leave Germany's taxing jurisdiction. See our insight on cross-border conversions under the UmRUG and our page on corporate and transaction tax.

Franco-German contracts

Commercial contracts between French and German parties often raise the question of governing law. Under the Rome I Regulation, the parties can choose freely; without a choice, a sales contract is governed by the law of the seller's habitual residence. Both legal systems are civil law systems with similar structures, but the details differ. German law reviews standard business terms strictly even between businesses under §§ 305 to 310 BGB, so French general conditions of sale may not be fully effective under German law.

French rules on the abrupt termination of established commercial relationships have no exact German equivalent, although German courts require reasonable notice for terminating long-term relationships and apply the commercial agent's goodwill indemnity by analogy to integrated distributors. The UN Convention on Contracts for the International Sale of Goods applies to sales between French and German companies unless excluded, since both states are contracting parties.

Clear choice of law and jurisdiction clauses, adapted limitation of liability clauses and a consistent approach to the battle of the forms are therefore essential. Data protection rules are harmonised by the GDPR, so personal data can flow freely between French and German group companies, although German supervisory authorities and the works councils' rights over employee monitoring systems create additional requirements for group-wide HR tools. Payment terms are subject to EU late payment rules in both countries, with Germany allowing longer terms only where expressly agreed and not grossly unfair to the creditor. See our page on commercial contracts and standard terms.

Franco-German disputes and enforcement

Judgments between France and Germany circulate under the Brussels Ia Regulation without any special procedure, and jurisdiction clauses are generally respected under Article 25. German civil proceedings are relatively fast and inexpensive, and since 1 April 2025, Commercial Courts at Higher Regional Courts can hear business disputes from EUR 500,000 entirely in English where the states have provided for this.

Arbitration is common in larger Franco-German contracts, with Paris, Geneva and German seats all in use; the ICC Rules and the DIS Rules are frequently chosen. Interim measures, such as asset attachments, are available from German courts in support of proceedings elsewhere, and the European Account Preservation Order allows creditors to freeze bank accounts across Member States in cross-border cases. See our pages on commercial litigation and international arbitration.

Insolvency of a German subsidiary

If a German subsidiary of a French group becomes insolvent, the EU Insolvency Regulation determines jurisdiction based on the centre of main interests, which is presumed to be at the registered office. German managing directors must file for insolvency within three weeks of illiquidity and six weeks of over-indebtedness, and they can be personally liable for payments made after the company became insolvent. German law offers self-administration and the StaRUG restructuring framework as alternatives to regular insolvency proceedings. Parent company guarantees, comfort letters and intra-group loans should be reviewed early, because shareholder loans are subordinated in insolvency. See our page on restructuring and insolvency.

Tax, employment and mobility

The double tax treaty between France and Germany allocates taxing rights for companies and cross-border workers, including special rules for frontier workers in the border regions. Within the EU, dividends from a German subsidiary to a French parent with a qualifying holding can be exempt from withholding tax under the Parent-Subsidiary Directive, subject to German anti-abuse rules.

Secondments of employees between France and Germany require compliance with posting rules, A1 certificates for social security and German minimum working conditions. Employment contracts for staff working in Germany should follow German law, which applies mandatorily regardless of a French choice of law under Article 8 of the Rome I Regulation.

French executives appointed as managing directors of German subsidiaries should note their personal duties and liability under German law, including the duty to file for insolvency without delay in a crisis, and should check D&O coverage. Service agreements of managing directors are not employment contracts for the purposes of dismissal protection, but they are subject to German contract law and notice rules.

Energy, infrastructure and regulated sectors

French utilities, infrastructure investors and energy companies are active in German renewables, grids, heat and mobility. These sectors are regulated by the Energy Industry Act, the Renewable Energy Sources Act and the Heat Planning Act, and they involve municipal partners, concession procedures and Federal Network Agency decisions. The German approach to grid connection, network charges and support schemes differs from French practice, and the support regime for renewables is being reformed. Our France desk works with our energy and infrastructure practice on these matters; see our page on energy and infrastructure.

How our France desk helps

Our France desk advises French companies and investors on their German operations: setting up and governing German subsidiaries, works council and co-determination matters, restructurings, commercial contracts and distribution, and data protection. We act on acquisitions, joint ventures and cross-border reorganisations, including mergers and conversions between French and German companies, and on investment screening and merger control. We coordinate with French counsel and advisers on both sides of the Rhine and represent clients in German courts and in arbitration. We also advise German companies on their business in France together with French counsel. To discuss your plans, please contact us. This page provides general information, not legal advice.