A 50/50 partnership means, first of all, a balance between the partners in their respective commitments, i.e. in their financial and personal contributions.
The financial investment, the amount of which will be fixed according to a business plan and projected investment and operating budgets, should be made in principle in equal shares, whether in equity capital (in cash or in kind) or in shareholder loans. While it is easy to ensure equality on incorporation of the company (particularly if the contribution is in cash), it is more complex to ensure that it is maintained during the life of the company, as the company develops and the resources and needs of each of the two partners evolve. It is therefore in their interest to agree initially on the principles they intend to follow:
- principles regarding distributions: for example, allocating profits to reserves until a certain amount of equity is reached, distributing dividends based on a percentage of distributable profits after certain thresholds are reached; and
- principles regarding the prioritization of the means of financing necessary for the company’s development: equity, bank financing, shareholder loans, capital increases and others.
The distribution of net income generated by the investment (distribution of dividends or reserves, payment of interest on shareholder loans, capital gains in the event of simultaneous resale) can thereby remain strictly equal.
Defining the personal engagement of the two partners will certainly raise greater difficulties and debate. The partners will first have to agree on the operational role and contribution of each, as well as their remuneration. If the personal commitment and contribution of each partner are expected to be equal, so too should be their remuneration, and its evolution should be parallel (depending for example on objective criteria linked to the development of the company).
Secondly, in terms of governance: the SAS (société par actions simplifiée) is undoubtedly the most flexible corporate form, leaving more room for imagination. The only constraint in terms of governance of an SAS is the mandatory presence of a President, who represents the company with respect to third parties and is vested with the broadest powers to act on its behalf. However, unlike a limited liability company (société à responsabilité limitée), which can be managed by co- managers, it is not possible to have multiple Presidents of an SAS. To overcome this difficulty, a number of scenarios – and combinations – can be envisaged for joint management by the two partners:
- Appointment of a Managing Director (Directeur général) with powers identical to those of the President (and, like the President, named as an officer on the Commercial Register (extrait K-bis)), implying that each of them individually holds the power to take all management decisions in the interest of the company
- Limitation of the powers of the President and the Managing Director on the most important management decisions, which must be subject either to a veto right of the other manager or to prior authorization by a collegiate body composed of the two partners; and/or
- Attribution of specific and/or technical powers to each manager, but equivalent in importance and investment.
Once proper thought has been given to the matter, the above principles should be laid down in the articles of association of the company or, if necessary for confidentiality purposes, in a shareholders’ agreement.