Economic Interest Grouping (EIG): What you need to know

Interest of the EIG

The Economic Interest Grouping (EIG) allows companies toworking together where they have common interests, while retaining their independence. In other words, the EIG allows them to group together to to facilitate or develop their economic activity by pooling resources and expertise.

Thus, EIG can be used to:

• Joint commercial action : sales promotion, commodity purchasing groups, advertising campaigns, market research, representation abroad, etc.
• Studies : scientific research, design offices, engineering, prototype development, etc.
• The creation of common services : IT, accounting, transport, depots, canteens, technical assistance
• Creation of independent merchant group shops.

Characteristics of the EIG

The EIG must have as its object the extension of the economic activity of its members. In other words, the activities of the EIG must be directly related to those of its members.

For example, supporting its members in financial difficulties is a good way for an EIG to facilitate their economic activity. However, if several companies are considering promoting a new activity, they will have to resort to a business, not an EIG.

Likewise, the EIG shall not replace its members to carry on their economic activity. Each member shall to maintain complete independence in the conduct of its business (outside the particular areas where the need for joint action through the EIG has been recognized).

The EIG cannot itself lead to a search for profitBut he is not forbidden to do so. In other words, if the aim of the EIG is not to make a profit for itself, the EIG may set aside the results of its activities for the purpose of achieving its social purpose.

EIG members

The Economic Interest Grouping (EIG) shall comprise minimum 2 members. No maximum is set by law.

Members may be people physical or persons moral, provided that each person pursues an economic activity which is an extension of that of the EIG, for example:

• Sole trader
• Managing director of SARL, in its own name (its economic activity results from its functions as ‘manager’ of a business)
• civil or commercial business
• Association whose activity is of an economic nature
• Commune upon authorization of a decree in the Council of State.

Merchant quality is not not required to be part of an EIG, even if the EIG is of a commercial nature.

Administration of the EIG

The EIG is administered by one or more persons, chosen from among or outside the members. A legal person may be appointed administrator of the grouping provided that it appoints a permanent representative who is liable to the same civil and criminal liability as if he were a director in his own name.

In its dealings with third parties (suppliers, customers, administrations), the administrator commits the EIG by any act which falls within the objects of the company of the grouping. For example, the administrator may enter into a loan to finance the purchase of equipment necessary for the development of the members' economic activity.

Assembly of EIG Members

The Assembly of Members shall have the power to to take all decisions (e.g. dissolution of the EIG), under the conditions laid down in the EIG contract. For example, the contract may provide for a meeting " ordinary competent to decide on the accounts of the EIG and the authorizations to be given to the directors, and a meeting ‘ extraordinary responsible for deciding on decisions involving an amendment to the EIG contract.

The contract also determines the majority conditions for decision-making. In the absence of specific clauses, decisions shall be taken inunanimity members.

In addition, the contract may award different number of votes to certain members depending, for example, on their number of shares held or the volume of business dealt with by the EIG.

Taxation of members

Each member is taxed for the part of the profits generated by the EIG which corresponds to his rights under theincome tax (IR) or thebusiness tax (IS), according to the rules applicable to the member.

Similarly, expenditure incurred by a member under the EIG may be deducted from its result.

Taxation of administrators

The tax treatment of directors varies according to their status as a member of the EIG:

• Member Administrators : their remuneration is added to their share of profits generated under the EIG as a member (IR or SI taxation as appropriate).
• Non-member Administrators : their remuneration is subject to the salary system.