You opened a succursale (branch) because it was fast and cheap: no share capital to deposit, no articles of association to draft, a single registration and you could start billing French clients. Two years later, the branch has its own team, its own client portfolio and its own revenue — and every contract it signs still binds your foreign parent company directly, with all of the parent’s assets exposed. Converting that branch into a French filiale (subsidiary), most often an SAS (société par actions simplifiée, the flexible joint-stock company foreign founders prefer), ring-fences your French risk, makes the business sellable and bankable, and gives local hires an employer with a French balance sheet. The operation is a standard piece of French company law, but it is not a change of status form: because a branch has no legal personality of its own, you must incorporate a new company, transfer the branch business to it, and then remove the branch from the register. Done in the wrong order, the transfer triggers avoidable tax, leaves employees in limbo and keeps the parent liable for contracts it thought it had moved. This guide walks you through the full conversion from abroad: the company-law mechanics, the fate of employees and contracts, the corporate income tax and VAT treatment, the registration costs, and the filings you can complete without boarding a plane.
I. Your branch is not a company: what conversion changes and which legal route to use
A. What foreign founders misunderstand about the succursale: no legal personality, no separate assets and unlimited exposure
A French branch of a foreign company is an establishment, not a person. The French Ministry of the Economy describes it in these terms: it has no legal personality or assets of its own, with everything it holds belonging to the foreign parent company. In plain English: the branch has its own premises, its own organisation and even its own business goodwill (fonds de commerce) run from those premises, but every right it holds and every debt it incurs belongs to the foreign parent. A Paris commercial court that has to enforce a branch debt does not seize the branch; it seizes the parent, including assets outside France through the usual cross-border enforcement channels. Founders who chose the branch to test the market often discover this only when a dispute arrives: the vehicle that felt light at setup is the heaviest possible vehicle in litigation.
The subsidiary is the mirror image. As the same official guide puts it: it is a fully-fledged French legal person with its own assets, acting in its own name. A subsidiary is a French legal person with its own assets, its own capital and liability limited to those assets. The SAS is the usual choice for a foreign-owned subsidiary because it can be formed by one or more persons whose risk is capped at their contribution: “Une société par actions simplifiée peut être instituée par une ou plusieurs personnes qui ne supportent les pertes qu’à concurrence de leur apport.” That single sentence, from article L. 227-1 of the Commercial Code, is the legal foundation of the whole conversion: one shareholder — your foreign company — can own 100% of a French SAS, and from that point the French risk lives inside the SAS, not inside the parent.
French companies acquire legal personality on registration, not on signature of the articles: “Les sociétés commerciales jouissent de la personnalité morale à dater de leur immatriculation au registre du commerce et des sociétés.” (article L. 210-6 of the Commercial Code). Registration today runs through the national business register (RNE, registre national des entreprises), the single register on which businesses operating in France must enrol: article L. 123-36 of the Commercial Code provides that “Il est tenu un registre national des entreprises, auquel s’immatriculent les entreprises exerçant sur le territoire français une activité de nature commerciale, artisanale, agricole ou indépendante.” In practice you file once on the Guichet unique portal, and the filing feeds the RCS (registre du commerce et des sociétés, the commercial court registry section), the tax authorities and the social security bodies. The branch already went through this when it was set up; the new SAS goes through it again, and the branch entry is removed only at the end, so the business is never unregistered in the middle of the operation.
Three misunderstandings cause most failed conversions. First, founders assume the branch can simply be transformed into an SAS the way an SARL converts into an SAS. It cannot: transformation presupposes an existing legal person, and the branch is none. What looks like a conversion is, in law, a creation followed by a business transfer followed by a deregistration. Second, founders assume the branch’s contracts move with a notification letter. Some do, by statute; most do not, as explained in Part II below. Third, founders assume the parent stays liable during the transition no matter what. It does — but only until each contract, debt and registration has actually been moved or closed, which is why sequencing matters more than speed. If you are still hesitating between vehicles, read our pillar guide on setting up a company in France as a foreign founder, from bank account to Kbis to VAT to first hire before committing to the conversion: in rare cases — a branch about to be wound down anyway, or a business with no employees and no goodwill — a straight liquidation of the branch plus a fresh SAS is cheaper than a transfer.
The commercial logic for converting is usually one of four events. Your French revenue has grown to the point that the parent’s auditors want the French activity in a standalone balance sheet. A French bank has refused the branch a credit line because a branch publishes the parent’s exposure rather than its own accounts. A key hire has asked for stock instruments (actions gratuites, BSPCE-style plans) that only a French company can issue. Or a buyer has appeared for the French business: nobody buys a branch, because there is nothing to buy — no shares exist. Each of these is a good reason, and each of them rewards doing the transfer properly rather than papering it with an internal memo that a court, a buyer or the tax authorities will later disregard.
B. The only clean route: incorporate the SAS, contribute the branch business, then close the branch entry
The conversion follows five steps, and the order is mandatory. First, incorporate the SAS: draft articles (statuts), appoint the president (président), deposit the cash portion of the capital with a bank, publish the formation notice, and register the company so it exists as a person. Your foreign parent can be the sole shareholder (associé unique); where the parent is itself a company, its legal representative signs through a duly empowered officer, with an apostilled board resolution and a certified translation if the documents are not in French. The SAS needs its own registered office (siège social): it can start at the branch’s address or at a domiciliation provider, and the address can be moved later. Nothing of the branch moves at this stage; the SAS is simply born next to it.
Second, value what the branch will contribute. The contribution (apport) is the legal heart of the operation: the branch’s French business — goodwill, equipment, stock, contracts, receivables where assignable — is appraised and contributed to the SAS in exchange for shares issued to the parent. French law then asks who checks that valuation. The default answer is an independent contributions auditor (commissaire aux apports), but the SAS regime allows a waiver: “les futurs associés peuvent décider à l’unanimité que le recours à un commissaire aux apports ne sera pas obligatoire, lorsque la valeur d’aucun apport en nature n’excède un montant fixé par décret et si la valeur totale de l’ensemble des apports en nature non soumis à l’évaluation d’un commissaire aux apports n’excède pas la moitié du capital.” Where the contributed business is substantial — and a going branch with goodwill and staff almost always is — appointing the auditor is the safe course even when a waiver would be technically available, because the auditor’s report is what protects the valuation against a later challenge by creditors, a buyer or the tax authorities. Skipping it to save a fee is the classic false economy of these operations.
Third, choose the transfer regime. French company law offers a purpose-built tool: the partial asset contribution (apport partiel d’actif). Article L. 236-27 of the Commercial Code provides that a company contributing part of its assets — and where relevant part of its liabilities — to one or more existing or new companies may elect, by mutual agreement with the beneficiary companies, to place the operation under the protective merger-rules division of the Code. The contribution is documented in a written plan (projet d’apport), and article L. 236-6 of the Commercial Code requires that “Ce projet est déposé au greffe du tribunal de commerce du siège desdites sociétés pour être annexé au registre du commerce et des sociétés et fait l’objet d’une publicité dont les modalités sont fixées par décret en Conseil d’Etat.” The greffe is the registry office of the commercial court — in Paris, the greffe du tribunal de commerce de Paris — and the filing plus the public notice is what makes the transfer enforceable against third parties. A bare assignment agreement kept in a drawer does not.
Fourth, execute the contribution and issue the shares. The parent, as sole shareholder of the SAS, approves the contribution; the SAS increases its capital by the appraised value and issues the corresponding shares to the parent. If liabilities are also transferred — supplier debts, the remaining term of a lease, accrued employee entitlements — they must be listed exhaustively in the contribution agreement, because anything not listed stays with the parent by default, and the parent, unlike a wound-up company, remains fully alive to be sued on it. This is also the moment to decide whether the branch’s business constitutes a complete and autonomous line of business (branche complète d’activité), a concept that drives the tax treatment in Part II: a branch that runs the whole French operation — premises, staff, clients, equipment — normally qualifies, while a mere sales desk with no organisation of its own may not. When in doubt, structure the contribution so that it demonstrably covers an autonomous business capable of operating on its own feet from day one.
Fifth, and only fifth, deregister the branch. Once the SAS is registered, the contribution is published, the employees and key contracts have moved, and the tax elections are filed, the parent resolves to close the branch and files the removal (radiation) of the branch entry. Closing the branch first — a surprisingly common mistake — leaves the business momentarily unregistered, interrupts the justification of the Kbis (the official certificate proving a French entity’s registration, which banks, landlords and clients ask for at every step), and can strand VAT and payroll filings between two entities. The branch’s Kbis dies with the branch; the SAS has had its own Kbis since its incorporation, and counterparties should have been migrated to it during the interim period when both entities coexisted.
A final company-law warning comes from the courts. Contribution transactions do get challenged — typically by insolvency practitioners arguing years later that the contributed business was worth less than stated, or that liabilities were left behind to defraud creditors. In a 2024 case arising from a partial asset contribution of a manufacturing business to a newly created subsidiary, followed by a sale of the subsidiary’s shares and a subsequent insolvency, the liquidator sought nullity of the whole contribution and of the beneficiary company itself; the Versailles Court of Appeal confirmed the dismissal of those nullity claims in its judgment of 23 January 2023/2024 (RG 21/04566, decision published on the Cour de cassation portal), holding in its operative part: “Rejette les demandes de nullité de l’opération d’apport partiel d’actif et de nullité de la société Nolam 24 ;”. The lesson for a foreign founder is not that challenges always fail — they do not — but that a documented valuation, an independent auditor’s report, a published contribution plan and a clean paper trail are what allow the operation to survive one. Paper the conversion as if a liquidator will read it in five years, because one day one might.
II. What the transfer does to your employees, contracts and tax bill
A. Employees, clients, leases and bank relationships: what moves automatically and what must be renegotiated
Start with the good news: employment contracts transfer by operation of law. Article L. 1224-1 of the Labour Code provides: “Lorsque survient une modification dans la situation juridique de l’employeur, notamment par succession, vente, fusion, transformation du fonds, mise en société de l’entreprise, tous les contrats de travail en cours au jour de la modification subsistent entre le nouvel employeur et le personnel de l’entreprise.” A contribution of the branch business to your new SAS is precisely a modification of the employer’s legal situation, and the phrase “mise en société de l’entreprise” covers it almost literally. Neither the employees’ consent nor a termination-and-rehire is required; the contracts continue with the SAS on the same terms, and seniority, accrued leave and ongoing notice periods travel with them.
The courts apply this rule to asset deals between group companies every week. In a 2025 Orléans Court of Appeal judgment (RG 24/00009, decision published on the Cour de cassation portal), employees of a retail business transferred under a partial asset contribution continued with the buyer by statute, and the court restated the test in terms every founder should memorise: the provision applies where an autonomous economic entity keeps its identity and continues its activity, and such an entity means an organised grouping of persons and tangible or intangible assets enabling an economic activity with its own objective. Your branch — staff, premises, client list, equipment — will normally satisfy that test without difficulty, which is exactly why the employee transfer is automatic rather than optional. The judgment is also a reminder that the rule is mandatory: the parties cannot contract out of it, so a side letter stating that the SAS will only take half the team is worthless against the employees concerned.
What the new employer inherits is defined by the next article: article L. 1224-2 of the Labour Code states that “Le nouvel employeur est tenu, à l’égard des salariés dont les contrats de travail subsistent, aux obligations qui incombaient à l’ancien employeur à la date de la modification, sauf dans les cas suivants : 1° Procédure de sauvegarde, de redressement ou de liquidation judiciaire ; 2° Substitution d’employeurs intervenue sans qu’il y ait eu de convention entre ceux-ci.” In a planned branch-to-SAS contribution there is always an agreement between the old and new employer, and no insolvency, so the exception does not apply: the SAS owes everything the branch owed on the transfer date — unpaid bonuses, pending disciplinary procedures, accrued profit-sharing, ongoing maternity protections. The practical consequence is a pre-transfer audit: list every employee, every contract type, every pending dispute and every collective commitment (unilateral undertakings, company-wide agreements the branch applied), price them, and reflect them in the contribution value or in a specific indemnity from the parent. Founders who discover a pending employment tribunal claim after the transfer learn that it moved with the contracts.
Inform and consult early. Where the branch employs staff representatives or where headcount thresholds trigger information-consultation duties, the employee representatives must be informed and consulted on the planned transfer before it happens, and all employees must be individually notified of the change of employer, the identity of the SAS, and the continuity of their contracts. From abroad, this is handled through a French counsel or the branch manager holding a written delegation: video-call briefings plus written notices work, provided the paper trail shows each employee received clear information before the effective date. Also verify immigration and secondment positions: a branch manager posted from the parent under a secondment arrangement does not transfer like a locally hired employee, and anyone whose right to work derived from the branch structure needs their file reviewed.
Client and supplier contracts do not transfer automatically. Apart from employment, French law has no general rule continuing contracts with a new legal person: each agreement follows its own assignment clause. Regulated clients — banks, insurers, public bodies — almost always require prior consent; master service agreements often contain change-of-control or assignment clauses that a contribution triggers; and invoices issued by the branch before the transfer remain branch receivables unless expressly assigned. The working method is an assignment schedule annexed to the contribution agreement: every material contract reviewed, classified (freely assignable, assignable with notice, requiring consent), and migrated with dated consent letters. Allow six to twelve weeks for this; enterprise clients’ legal departments do not move faster because you live abroad, and trading in the SAS’s name before the client has accepted the assignment leaves payment obligations floating between two entities.
Commercial leases deserve their own workstream. A branch operating from leased premises in Paris holds a commercial lease (bail commercial, the protective 3-6-9 lease regime) in the parent’s name. The lease may be part of the contributed business, but the landlord’s consent is typically required, the rent guarantee (caution or bank guarantee issued for the parent) must be reissued for the SAS, and the premises’ compliance file — safety inspections, insurance certificates, the Kbis displayed on site — must be updated. Negotiate this early: a Paris landlord presented with a well-capitalised SAS successor plus a parent guarantee for the first years usually consents; a landlord informed after the fact can treat the move as an unauthorised subletting. For founders based in Paris or Île-de-France, note that commercial court registries, tax offices (SIE, service des impôts des entreprises) and URSSAF branches in the Paris region process these migrations routinely, but each body wants its own form and its own proof — the contribution agreement for one, the new Kbis for another, the published notice for the third. Keep certified copies of everything.
Bank relationships restart. The branch’s French bank account belongs to the parent; the SAS, as a new person, opens its own account, completes its own KYC (know-your-customer identification), deposits its own capital and receives its own credit assessment. Schedule the account opening in parallel with incorporation, not after the transfer, because the SAS needs a functioning account the day it starts trading — to collect assigned receivables, pay transferred staff and receive the contribution cash. Payment terminals, direct debit mandates (mandats SEPA) and client payment references must all be reissued in the SAS’s name with its own IBAN. Where the branch benefited from the parent’s group cash pooling, document the exit: intercompany balances between the branch and the parent at the transfer date must be settled or formally assigned, or the auditors of both entities will qualify the accounts.
B. Corporate income tax, VAT, registration costs and filings you can complete from abroad
The tax treatment decides whether the conversion costs almost nothing or triggers tax on the branch’s entire unrealised goodwill. The starting point is territoriality: article 209 of the General Tax Code taxes profits made by businesses operated in France, so the branch is already within French corporate income tax (IS, impôt sur les sociétés) on its French profits, and the SAS will be too. The conversion itself — the contribution of the business — is in principle a taxable event: the parent is deemed to sell the branch assets at market value, and the latent gains (notably on goodwill the branch built for free) become immediately taxable. The standard relief is the merger-style rollover in article 210 A of the General Tax Code, under which merger gains on contributed assets are not immediately subjected to corporate income tax, provided the beneficiary company continues the values, reserves and commitments attached to the assets. Article 210 B of the same Code extends that relief expressly to partial asset contributions covering one or more complete branches of activity — which is why characterising the branch as an autonomous, complete business matters for tax as much as for employment law. A qualifying contribution defers the tax; a non-qualifying one pays it now.
Qualification is not automatic and should be secured in advance. The contribution must cover a complete branch of activity capable of autonomous operation, the SAS must take over the corresponding tax attributes, and the parties must file the specific election with the corporate tax return of the transfer year. Foreign founders should commission a French tax adviser to confirm qualification before signing, and consider a formal ruling request (rescrit fiscal) to the tax authorities where the amounts justify it: a ruling takes weeks, a reassessment (redressement) takes years and costs multiples. Remember also that the relief is a deferral, not an exemption — the SAS inherits the parent’s historic tax values, and the gain resurfaces if the SAS later sells the assets. Price that into any plan to flip the new subsidiary to a buyer within two or three years.
VAT follows its own, more forgiving logic. Article 257 bis of the General Tax Code provides: “Lors de la transmission à titre onéreux, à titre gratuit ou sous forme d’apport à une société d’une universalité totale ou partielle de biens effectuée entre redevables de la taxe sur la valeur ajoutée, aucune livraison de biens ou prestation de services n’est réputée intervenir.” A contribution of the branch’s entire business — or a self-sufficient part of it — from one VAT payer to another is therefore disregarded for VAT: no VAT to charge on the transfer value, with the SAS simply continuing the branch’s position, including VAT adjustments (régularisations) on previously deducted assets. Both entities must hold valid French VAT numbers (numéro de TVA intracommunautaire) at the transfer date, the SAS must declare that it continues the branch’s VAT position, and the transfer must be reported on the VAT returns. The trap is the partial transfer: contributing only selected assets while the branch keeps trading can fall outside the universality concept and turn each asset into a taxable supply. Contribute the whole business, or take advice before contributing a slice.
Registration duties (droits d’enregistrement) are the third layer. Contribution deeds must be registered with the tax authorities: article 635 of the General Tax Code requires registration of company formation and transformation deeds within one month of their date — a deadline stated by the statute itself, so diary it from signature day — and contribution agreements follow the same registration circuit, with the duty depending on the nature of the assets (a fixed duty for a pure going-concern contribution qualifying under the merger regime, proportional duties where real estate is included). Where the branch business includes French real estate, budget for land-registry tax (taxe de publicité foncière) and a notary: French law routes real-estate transfers through a notary in most cases, and the contribution agreement’s real-estate schedules must satisfy notarial standards. A branch that only leases its premises avoids this entire layer.
The all-in cost of a clean conversion for a small branch typically combines: incorporation costs (legal fees, publication, registration — a few thousand euros), the contributions auditor’s fee (usually the largest single item, scaled to the business value), tax and legal advice on the 210 A/210 B election and the VAT position, landlord and contract-migration costs (new guarantees, possible rent alignment), and the deregistration filing for the branch. Against this, set the recurring savings: no more permanent-establishment exposure analysis for the parent each year, a standalone French balance sheet the bank can lend against, and a saleable asset instead of an unsaleable establishment. Founders sometimes ask whether they can skip the auditor and the ruling to halve the bill; the Versailles case cited in Part I is the answer — the file must be defensible five years later, and the auditor’s report plus the published plan are the defence.
Almost everything can be done without living in France. Incorporation by a non-resident shareholder is routine: the Guichet unique filing accepts foreign corporate shareholders with translated, apostilled documents; the bank capital deposit can be arranged remotely with banks that onboard non-residents, though some founders fly in once for the KYC meeting to unlock faster processing; the contribution plan is signed with electronic signatures and filed by counsel; employee information can be delivered by the branch manager under written delegation; and the branch deregistration is filed online with the resolution of the parent attached. What cannot be done remotely is signing blind: every deed should be reviewed in both languages where the parent’s officers do not read French, because the French version alone binds the company before the greffe, the tax office and the courts. Keep a closing binder — incorporation certificate, auditor’s report, contribution agreement with schedules, publication proofs, new Kbis, VAT and tax election filings, deregistration receipt — and keep it for as long as the SAS lives plus the statutory retention period.
Conclusion
Converting a French branch into an SAS subsidiary is not a change of legal status but a disciplined three-act operation: a new company is born, the branch business is contributed to it under the partial-asset-contribution regime with proper valuation and publicity, and the branch entry is then removed. Employment contracts follow automatically under article L. 1224-1, provided the branch genuinely operates as an autonomous business; client contracts, leases and bank lines follow only through individual consents and new paperwork; and the tax cost stays near zero only where the contribution genuinely covers a complete branch of activity qualifying for the article 210 A/210 B rollover with the article 257 bis VAT disregard properly declared. Sequenced correctly — SAS first, contribution second, deregistration last — the operation converts unlimited parental exposure into a capped, bankable, saleable French company without interrupting trading. Sequenced backwards, it strands contracts, staff and tax filings between two entities and keeps the parent liable for everything it meant to shed. Start the valuation and the contract audit before you sign anything, file every election on time, and keep the closing binder as if it will be examined — because the authorities, a buyer or a court may one day examine it.