Canada Business Limited Partnership (CBS): What You Need to Know
Verified 19 December 2023 - Directorate for Legal and Administrative Information (Prime Minister)
FCC is a complex and uncommon social form. It presents itself as an ingenious merger between the limited partnership (SCS) and the public limited company (SA), thus offering investors the opportunity to participate in the development of the company while limiting their liability.
The limited partnership (SCA) is a business business that stands out for its modus operandi.
The FCC understands 2 types of partners :
- General partners : “active” partners who manage the business, they have the merchant status.
- Sponsoring Partners : "Passive" partners who finance the business and oversee its management. They are investors, they have the shareholder status. They are prohibited from interfering in the outside management of the business (e.g. signing a supplier contract). On the other hand, they participate in the internal life of the business through the general meetings and the Supervisory Board.
A FAS must have at least 4 partners, of which 1 general partner and 3 general partners. Partners, both sponsored and sponsored, can be individuals physical (individuals) or persons moral (businesses).
FYI
The FCC may exercise any type of activity, with the exception of certain regulated sectors (tobacco throughput, insurance, regulated professions).
The main advantage of this social form is to be able to carry out a offer of securities to the public (in order to obtain outside capital) while reserving the direction and management of the business to a small select group (the general partners).
In addition, the great freedom it offers to organize the status of managers also ensures that better protection than that granted to the directors of public limited liability companies (SA).
Please note
You are considering create a SCA ? We explain how build a step-by-step business.
Formation of share capital
The share capital of a FCC must be at least €37,000 (or €225,000 if the business is quoted on a regulated market). The capital may consist of contributions in cash (money) and contributions in nature (goods: equipment, vehicles, buildings, goodwill, patents...).
Please note
The share capital of the FCC is divided into " shares distributed to the limited partners on the basis of their contribution.
The shares of general partners do not contribute to the formation of that capital. However, general partners can subscribe to shares themselves, and so accumulate the qualities of general partners and sponsors.
Release of contributions
From the time of creation, at least half of the cash contribution must be freed, i.e. paid into an account at the disposal of the business. The other half must be released within 5 years that follow registration.
Assessment of contributions in kind by a commissioner for contributions is mandatory when 2 conditions the following are combined:
- A contribution in kind has a value greater than €30,000,
- And the total value of the contributions represents more than half of the equity capital.
Financial liability of members
The financial responsibility of the partners depends on their status:
- General partners : their responsibility is indefinite and joint and several. In other words, the creditors the FCC can sue each general partner (or even one of them) on his or her personal assets to pay the full amount of a debt.
- Sponsoring Partners : their responsibility is limited in the amount of their contribution to the capital, they may not be sued on their personal assets.
Assuming that the partners accumulate quality of general partners and sponsors, they will remain indefinitely and jointly and severally liable for the debts of the business (the social liability) in their capacity as general partners.
Manager(s)
Each SCA has one or more managers designated in the articles of association when it was set up. They may be general partners or third party.
In the course of social life, new managers may be appointed by the general partners. Unless otherwise provided in the Statutes, unanimity is required.
The manager has the greatest powers to act in all circumstances on behalf of the company (e.g. subscribing to professional insurance, sending of invitations to meetings, payment of social security contributions, etc.).
In its dealings with third parties, the business is bound by the actions of the manager even if they do not fall within the object of the company (unless there is evidence that the third party knew that the act went beyond that object or that it could not be ignored in the circumstances).
However, the articles of association may make any act of the manager, from a certain amount for example, subject to prior authorization by the supervisory board or the general meeting.
Please note
The statutes must provide for a age limit for the exercise of the function of manager. When the manager reaches the age limit, he is considered to resign. Where no provision is made in the statutes, the limit shall be 65 years.
Supervisory Board
The FCC also has a supervisory board whose mission is to continuous management control business. It is composed of at least 3 limited partners (limited partners cannot be members).
The Supervisory Board shall ensure that accounting and financial information is checked for regularity and accuracy. In this capacity, it shall submit annually to the General Assembly a relationship in which it reports, in particular, irregularities and inaccuracies detected in the accounts for the financial year.
Please note
The members of the Supervisory Board must also obey an age limit. If the statutes do not contain any clause on the matter, the number of members of the supervisory board has reached the age of 70 years cannot be superior one third of the members of this council in office.
The members of the Supervisory Board shall not be directors and do not incur liability because of the management's actions and their results. In fact, they cannot be prosecuted for lack of management.
Only failure or negligence in the execution of their mandate and duty of control are likely to jeopardize their liability. This is also the case when they fail to disclose to the general meeting an offense committed by the managers of which they have had knowledge.
Specifically, an individual partner or the business itself may bring legal proceedings and claim damages against them to compensate for the damage caused.
FYI
Any decision involving a amendment of the statutes requires a sponsor approval meeting in extraordinary meeting and the general partner agreement which, unless otherwise provided in the statutes, must be unanimous.
Taxation of profits
The FCC falls within the scope of thebusiness tax (IS). As such, it carries out an annual income statement no 2065, within 3 months of the end of the financial year. However, if the financial year is closed on 31 December or if no financial year is closed in a year, the declaration shall be made at the latest on 2e working day following 1er May.
The amount of business tax (IS) is calculated from the results of the last completed fiscal year. The tax rate is 25% on the totality of that tax result.
Please note
One reduced rate 15% shall apply to small and medium-sized companies which have a duty-free turnover not exceeding €10 000 000 and whose capital is fully paid up and held for at least 75% by natural persons. This rate applies to the share of profits up to €42,500. Beyond that, the tax rate is 25%.
Taxation of managers
Manager
The remuneration which the manager receives in respect of his office shall be imposed on theincome tax (IR) in the category of salaries and wages.
A reduction of 10% or a deduction of the amount of the actual expenses (accommodation, meals, travel,...) of the director is made before the application of the tax.
Member of the Supervisory Board
The remuneration received by the members of the Supervisory Board shall consist in the payment of a lump sum fixed by the ordinary general meeting to be shared by the members.
This remuneration shall be imposed on theincome tax (IR), in the category of income from movable capital.
Taxation of members
It is necessary to distinguish the taxation of members general partners and sponsors.
General Partner
The general partner shall be remunerated by a share of the profits set out in the articles of association, which shall take account of the risks associated with his joint and several and indefinite liability. In the case of industrial input (know-how, skills), an additional share is allocated to it.
The income received by the general partners is taxed atincome tax (IR) in the category of Industrial and Commercial Benefits (BIC).
Partner Sponsor
Associates receive dividends that fall into the category of income from movable capital.
Dividends are automatically taxed at the flat-rate levy (PFU) of 30% of which 12.8% in respect of income tax and 17.2% social security contributions. Members may opt for taxation at the tax scale in income.
The manager's social security scheme differs depending on whether he is a member sponsored or not.
General partner
The general partner is subject to the Self-employed persons (SFTs), as does the majority manager of SARL.
Non-sponsored manager
The unsponsored manager is assimilated employee and benefit from the social protection provided for by the general social security scheme.
The unassociated and unpaid manager is not covered by any compulsory social security scheme.
The shares general partners and the shares limited partners operate under a different regime.
General partner shares
The transfer of the shares of the general partners requires the unanimous agreement of the general partners and sponsors.
Nevertheless, the articles of association may provide that the majority in number and in capital of the limited partners, together with the consent of all the limited partners, will be sufficient in the event that the limited partner transfers only part of its shares.
The transfer of shares must be established in writing (instrument under private or notarial signature) and entails an amendment to the statutes to be published in the SCR: titleContent.
Sponsors' Actions
In principle, the sale of limited partners' shares is freeHowever, the law does not provide for any approval procedure.
However, the statutes of the business may include a approval clause. This makes it possible to subject share disposals to the agreement of the members, unanimously or by a majority of them.
This clause shall be waived in the case of succession, liquidation of the matrimonial property regime or assignment either to a spouse or to an ascendant or descendant.
Please note
The transfer of shares shall give rise to the payment of a registration fee. The amount of this tax is 0.1% of the transfer price.
SCA | |||
|---|---|---|---|
Number of partners | Minimum 4 (1 general partner and 3 general partners) | Minimum 2 (1 general partner and 1 general partner) | 2 minimum (or 7 if listed on the stock exchange) |
Governance | Manager(s) + Supervisory Board | Manager(s) + Supervisory Board (optional) | Chairman + Board of Directors or Executive Board |
Share capital | €37,000 | Free | €37,000 |
Release of cash contributions | At least 1/2 from creation | No obligation | At least 1/2 from creation |
Taxation of profits | Business tax (IS). Possible option for IR |
| Business tax (IS). Possible option for IR |
Social security of the director |
| Self-employed person (SST) | Assimilated employee |
Corporate securities | Shares + Shares | Shares | Actions |
Transmission of securities |
| Unanimity of the partners | Free (possible approval clause) |
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Specific scheme for the FCC
Transfer of shares, agreement of shareholders
Disposal of shares, authorization clause
Businesses subject to business tax (IS)