Blockchain and the simplification of legal services for companies in France (I)

France is progressing in the process of
digitalization of the business world with the
adoption of, among others, blockchain technology.

Post title

France is progressing in the process of digitalization of the business world with the adoption of, among others, blockchain technology. What are its real implications on the legal corporate services?

In the series of consequently published articles, Verne Legal is going to present four examples of its real application: the dematerialisation of the company registers (I), the protection of intellectual property rights (II), the dematerialization of data rooms (III) and blockchain as a mean of legal evidence (IV).

Blockchain in two words: security and immediacy

Lately it has been very common to hear about blockchain and its benefits. However, what exactly is this emerging technology and why is it so revolutionary in terms of security ?

According to Blockchain France, “Blockchain is a technology for storing and transmitting information, transparent, secure, and operating without a central review body ” [1].

In other words, it is a database which records transactions by grouping them into “blocks”, which traces their history and that is resistant to any modifications. These events, classified in the chronological order, are shared by different users without being copied each time and without the need of any intermediaries. This sharing mechanism allows everyone to verify and authenticate each operation that is added block by block to the chain. Thus, no modification is possible and the chain, and therefore the database, becomes immutable. And all of this, almost instantly in the fractions of a second.

Undoubtedly, blockchain’s inalterability is very interesting for the legal field.

But in practice, how could one apply the blockchain technology to enhance the legal services for SMEs, mid-caps companies or international groups?

In this article we present the first example of possible use of blockchain in the business law industry: dematerialised company registers.

Blockchain and dematerialised company registers

Since 2017, French regulations have gradually been opening up the possibility of dematerialising the legal registers kept by companies of all forms. By registers, we refer to any records linked to the life of the company, such as the registers of securities movements, the registers of various company decisive bodies (such as the Board of Directors) or the official employee register (mandatory in any organization having employees).

Firstly, France has legalised the blockchain registration of issuing and sale of financial securities, such as the company’s shares (not listed companies). Since then, a register of securities movements of a company, until then obligatorily kept in a paper form, could be dematerialized. Thus, thanks to the blockchain technology, the registers could have an incomparably safer digital form.

Such securisation of the registers and the simplification of their maintenance represent a considerable advance for SMEs, especially for start-ups.

As a matter of fact, a registration in the register constitutes a proof of a share ownership in a joint stock company, such as the French “SAS”. Keeping of records is in fact required by the provisions of the French Commercial Code (Code du commerce) [2] and the French Monetary and Financial Code (Code monétaire et financier) [3].  French commercial courts remind on regular basis that the production of a single order for the movement of securities is not sufficient to presume the legitimate ownership of shares [4]. Thus, with the transaction anchored in the blockchain, investments in French companies are perfectly secure.

The dematerialization of company registers through blockchain technology can also reassure smaller investors: no more danger of their investment in the capital of fast-growing start-ups to be drowned, or even to be lost (yes, it does happen!), following yet another urgent fundraising round.

The last stage of the dematerialisation of registers in France was completed in November 2019, with the dematerialisation of the registers of proceedings. Now, most corporate registers and other documents they record can be kept in a digital form.

Therefore, at this point in time, French companies can establish and store the following corporate documents in an electronic form:

  • the minutes of assemblies and the written consultations of partners (or the sole partner when authorized) of a simplified joint stock company (SAS), an anonymous company (SA), a limited liability company (SARL), a company in collective name (SNC), and ordinary limited partnership (SCS) or limited by shares, as well as the register on which they are consigned;
  • the attendance registers of the governing body meetings, for example of the Board of Directors and of the supervisory board of a SA company, of its President etc, as well as the minutes of the deliberations of these bodies and the register in which they are kept;
  • the registers of collective decisions of the partners of civil companies (for example companies owning real estates as SCI) as well as the minutes of the assemblies and written consultations of partners which are kept there, and the mention of the decisions of the partners resulting from an act related to this register.

 

In addition, the documents uploaded and stored in the dematerialised register may themselves have an electronic form – namely – be authenticated by an electronic signature.   

Furthermore, to fulfill the legal obligations, the electronic signature of documents, when they are drafted or certified, must at least meet the requirements of the advanced electronic signature (unlike the “simple” or “qualified” signature), as provided in the article 26 of the French regulation known as “eIDAS”.

These latest upheavals demonstrate that France is seeking to dematerialise, to an extent of possible, the registers and the documents kept by French companies.

In the next article we will present the second application of the blockchain in the field of business law: Blockchain and the protection of intellectual property rights.

Ewa Kaluzinska                        Nicolas Renault                         Iga Kurowska
Verne Legal, Partner                 Verne Legal, Lawyer                Verne Legal, Partner

Verne Legal provides a customized legal and tax advisory service to both French and foreign companies. It advises clients in running their business in France, offering strategic assistance enriched by multicultural sensitivity. For more information on the tax law in France, we invite you to download “Doing business in France” e-book and to contact our team at info@vernelegal.com.

[1] https://blockchainfrance.net/decouvre-la-blockchain/c- is-what-the-blockchain/
[2] Article L. 228-1 of the French Commercial Code
[3] 
Articles L 211-16 and L 211-17 of the French Monetary and Financial Code
[4] Court of Appeal of Paris, January 11,2018 (n° 16/10056)

Contact form

Contact-en

* Required fields