The following material gives an overview of the steps one must take to engage in business or other economic activity in the Principality of Monaco and the permitted forms of business presence there. No general discussion of this nature can be considered specific legal advice tailored to meet individual legal needs. Persons with specific legal needs may find the following information useful in getting a general understanding of the problems and issues involved, but they are strongly advised to consult with a competent professional to get advice tailored to their individual needs.

Government approval always required

All economic activities carried on in the Principality are subject to prior Government approval. The approval process can be very lengthy, complex, and time consuming. It is best to consult with competent professionals throughout; otherwise, the process could be considerably lengthened or frustrated entirely. The names and addresses of professional advisors who can assist with this process are found elsewhere in this article and on this web site.

General formalities

Under Law no. 1144 of July 26, 1991, any economic activity pursued in the Principality of Monaco, regardless of its nature (i.e., whether commercial, industrial, crafts, or services, professional and non-professional alike) must have prior Government authorization. The Direction de l'Expansion Economique (Economic Expansion Department) is normally the administrative agency that examines applications for permission to establish an economic activity in the Principality. The address of the Economic Expansion Department is:

If granted, the authorization is usually very detailed about what is authorized, and the duration of the authorization - usually for several years - is normally renewable for similar periods. Renewal is not automatic and must be sought. Typically, the authorization sets out the limits of the activities that may be performed. The authorization also specifies the premises where those activities may take place as well as any special conditions applicable to the performance of those activities.

The authorization is personal and non-transferable, except for the "leasing" of an entire business described below. Any material change in the authorized activities, the nature of holder of the authorization, or address or premises where the activity is conducted must be approved in advance. Any authorization may be suspended or revoked for misconduct as well as for the failure to maintain appropriate premises for conducting the activity, the absence of real activity, activities not in conformity with the authorization, etc.

There are a number of business forms that are usually available for conducting an economic activity in Monaco. These forms, which will be discussed more fully below, include:

• Sole proprietorship
• General partnership ("SNC")
• Limited partnership ("SCS")
• Monégasque general business corporation ("SAM")
• Limited partnership with shares ("SCA")
• Branch or administrative office (foreign companies only)
• "Leasing" of an entire business

In addition to the general approval requirements noted above, certain specified activities (that generally require special skills or training or where the interests of the public must be protected) must also comply with additional regulations and conditions before the Government will authorize them. A partial list of these activities includes:

• commercial banks
• portfolio and investment management (Law no. 1194 of July 6, 1997)
• notaries
• lawyers
• architects
• certified public accountants
• ship brokers
• pharmaceutical companies
• transport
• insurance
• weapons and arms dealing
• jewelers
• beverage sales
• taxis
• medical and paramedical professions

Activities that are of a professional or a personal nature, such as architecture, law, medicine, dentistry, accountancy, and the like, to the extent permitted to non-Monégasque nationals, and sole proprietorships, generally require Monégasque residency before an application for permission will be entertained. Monégasque residency is not normally required to set up a société anonyme monégasque, or general business corporation.

The Process of Seeking Authorization

The authorization process begins with the filing of a detailed application, usually on an official form, and all required supporting information. The review process can take time, and an incomplete or sparsely supported application will lengthen that process considerably. Thus, applicants would be well advised to consult with a qualified local professional, such as an accountant, conseil juridique, or, where appropriate, a notaire in determining the proper way to complete the application. As noted later herein, a general business corporation must be formed by a notaire. A notaire is optional, although often desirable, with most other forms of business. Also, as the approval process is administrative and Monaco's administrative review process is not well documented, it is often impossible to know in advance what the reviewers might require because of the lack of published regulations or precedents. Only a local professional would likely be able to determine this reliably.

Customs and tax regulation

Customs

Agreements between Monaco and France make French customs regulations applicable in Monaco. Thus, the two countries comprise a Customs Union. There is total freedom of commerce between the two countries with no border formalities on the movement of people or goods. The Principality is, therefore, as a practical matter, part of the European Union customs zone because of its special relationship with France. However, Monaco is not part of the European Union. Thus, it sometimes has an advantage of offering the commercial benefits of the EU, but not its regulations.

Business Profits tax

Monaco's tax system is generally attractive and hospitable to business. Its administrators believe the tax system's regulations are clear and well-defined. The system also offers many exemptions and deductions. Through the appropriate use of these exemptions and deductions it is often possible to minimize the impact of the Principality's tax system. However, as Monaco has a well defined tax system that generally applies to all commercial activities conducted there, Monaco is not a so-called "tax haven". Its taxes are real, and can be substantial without proper planning and structuring.

Thus, business enterprises with more than 25% of their annual sales outside of Monaco must pay an annual tax on their profits at the rate of 33.33%. However, businesses with more than 75% of their annual sales wholly within Monaco are not subject to this profits tax. What constitutes sales within or without Monaco is not always as clear-cut as it may seem and may require further study. For example, telecommunications services, even though primarily provided to entities outside of Monaco are normally viewed as value added services to the local telephone company and hence are not considered as revenues generated outside Monaco. In contrast, advertising revenues paid to a local radio station by advertisers not located in Monaco are outside Monaco and hence subject to profits tax.

Various deductions are available to reduce the amount of profit subject to tax. These deductions include, among others, wages and salaries, including the salaries of the administrators or managers who actually operate the firm, depreciation, and certain allowances. The combined effect can provide great scope for the reduction of taxable income. A local accountant can be very useful in dealing with these matters.

All businesses that are subject to profits tax are exempt for their initial two years. In practice, tax due on profits is as follows:

Administrative offices do not pay profits tax since their purpose is not considered commercial. Instead, by agreement with the Government, they are taxed on 2.66% of their operating expenses.

In addition to consulting with a local accountant, further information is available from:

Company Types

As already noted, in addition to special structures, the primary structures for business entities in Monaco are:

• Sole proprietorship
• General partnership ("SNC")
• Limited partnership ("SCS")
• Limited partnership with shares ("SCA")
• Monégasque general business corporation ("SAM")

Sole Proprietorship

Any individual, who must normally be a resident of Monaco, may pursue a permitted activity as a sole proprietor. The individual's real and personal property is then subject to the claims of the creditors of the business to the extent specified in articles 1928 and 1929 of the Civil Code on Obligations. Personal status is important, since according to the matrimonial system and the activity of the spouse, the spouse's property may also be affected by the sole proprietor's business commitments. Anyone who regularly and customarily engages in commercial activities are normally considered merchants.

Laws nos. 1002 of December 26, 1977, and 1121 of December 22, 1988, define the following activities, among others, as commercial:

• the purchasing goods and materials for resale , either in kind or after transformation
• the purchase of goods and materials for lease or rental to others
• the purchase of buildings and structures for resale, unless purchased with a view to their transformation, reconstruction, or rebuilding of one or several buildings and to sell them either as a unit or individually
• arranging (for a fee) for buying, subscription to, or sale of buildings or structures, businesses, or shares in real estate companies
• renting personal property
• manufacturing
• carriage by land or water
• the operation of business centers
• conducting auction sales and public shows
• public banking transactions, currency exchange, banking, and brokerage
• building construction, if the builder supplies the materials therefor
• processing credit notes between dealers, merchants, bankers, and others, bills of exchange and remittances in cash from one market to another
• construction, purchase, sale, and resale of sea going vessels
• maritime shipping
• purchases or sales of maritime gear, rigging, and stores
• freight and chartering services
• insurance and other contracts concerning maritime commerce
• agreements and contracts for the hiring of ship crews
• engagement of service crews on merchant ships

General Partnership ("SNC")

Two or more persons, at least one of whom is normally a resident of Monaco, may form a general partnership (société en nom collectif or "SNC") to do business under a name composed of the names of the partners only (Commercial Code - Section IV, Art. 27 et seq.). The general partners are jointly responsible for all partnership liabilities. The partnership agreement may limit the authority of certain partners to commit the partnership; otherwise, any single partner may commit the partnership. The partnership agreement may be drawn up privately (usually with the assistance of an accountant or conseil juridique) or formally before a notaire. Regardless of how prepared, he partnership agreement must be registered with the Tax Department.

Limited Partnership ("SCS")

One or more general partners, at least one of whom is normally a resident of Monaco, may form a limited partnership (société en commandite simple or "SCS") with one or more investors ("limited partners") who are sometimes also called "sleeping partners" or "silent partners" (Commercial Code, Section IV, Art. 30 et seq.). The partnership name must be composed of the name of one or more of the general partners and may include the name of a limited partner.

A limited partner's liability for partnership obligations is limited to the amount invested or, if not fully paid, the amount required to be paid for the limited partnership interest. Limited partners can not participate in the management of the partnership, even with a power of attorney.

The limited partnership agreement can be drawn up privately (usually with the assistance of an accountant or conseil juridique) or formally by notaire. Regardless of how prepared, the limited partnership agreement must be registered with the Tax Department.

Monégasque General Business Corporation (SAM) and Limited Partnership with shares ("SCA")

General business corporations (société anonyme monégasque or "SAM") and limited partnerships with shares (société en commandite par actions or "SCA") are governed by Sovereign Order of March 5, 1895, Law-Decree no. 152 of February 13, 1931, and Laws nos. 408 and 767, in addition to the Commercial Code. These entities may only be formed by ministerial decree with prior government authorization. The certificate of incorporation and by-laws must be prepared by a notaire.

Companies that enjoy a monopoly or a privilege are also subject to control by a special auditor and their authorization may be subject to specific approval of the State Council.

The Government's decision to approve a new corporation takes effect after the formal notification of the decision to the notaire and the publication of certificate of incorporation in the Journal de Monaco, the official journal of the Principality. The Journal de Monaco is published weekly on the last business day of the week, usually, a Friday.

Incorporation Costs. The costs of incorporating a SAM are generally:

• registration duty and fiscal stamps: 1% of the capital
• 0.5% of the stated value of the authorized shares, whether they have been issued or not
• notaire's fees: approximately 0.9% of stated capital
• required publications: the cost of printing the certificate of incorporation in the Journal de Monaco (currently 42 Francs plus VAT per line). Typically, about 28,000 French francs for a normal certificate.

Company capital. The minimum stated capital is 1,000,000 French francs. Depending on the nature of the activities to be pursued, minimum stated capital could be more either by administrative decision or specific legislation. For example, Law no. 1194 requires 3,000,000 French francs for certain financial services companies. Before the corporation can formally commence its existence, the shareholders must document their payment of their required capital contributions. This is done by the deposit of the funds into a special corporate account, and the bank confirms this deposit to the notaire forming the corporation. Th notaire then submits proof of this deposit to the first general meeting of the corporation which must be held within the three months following the ministerial decree granting authorization. This first general meeting also fixes the corporation's principal office, appoints the administrators (directors must be shareholders holding the minimum number of shares specified in the certificate of incorporation), and specifies the statutory auditors (two are required and must be selected from the list of approved accountants in the Principality of Monaco).

Shares are not transferable until the corporation has formally commenced existence and are fully paid. Founders' shares and shares representing the initial capital contributions can not be transferred for two years following the creation of the corporation.

Number of Shareholders. A corporation must have at least two shareholders who need not be residents of Monaco. There is no limit on the maximum number of shareholders.

Directors. Directors must be shareholders holding the minimum number of shares specified in the certificate of incorporation. Directors need not be natural persons and may give a power of attorney to a proxy. In addition, no individual sit on more than eight boards of directors of commercial companies whose registered offices are in Monaco.

Directors may be appointed for a maximum of six years and can be re-elected. When the certificate of incorporation names the initial directors and their appointment is not subject to the approval of the annual meeting, those directors cannot be appointed for more than three years.

Normally, directors may be removed with or without cause and may serve with or without compensation. The directors may, if all of them agree and if the certificate of incorporation permits, appoint agents to carry out the directives of the board. The directors remain responsible for the actions of these agents.

Registration procedure. A corporation's certificate of incorporation must be filed with the general registry within fifteen days of the creation of the corporation. A copy of the minutes of the organization meeting must be attached if consideration other than cash is used to subscribe for the corporation's shares, or special advantages are given to certain shareholders, along with the list of names of shareholders (surname, first names, title, address, and number of shares bought). Anyone may read the certificate of incorporation at the registry and, at his or her own expense, obtain a copy or an extract of it from the clerk of court or from the notary in possession of the minutes. Any one may also ask for a certified copy of the statutes from the corporation's registered office. Not later than two months from the start of activity, the corporation must register in the Commerce & Industry Register, if a commercial company, and in the Non-trading Company Register, if a non-commercial company.

Shareholders and Directors Meetings. The annual meeting of shareholders requires a quorum of shareholders representing at least a quarter of the capital. If not, another annual meeting must be called according to the certificate and by-laws. A quorum of fifty percent of the capital is required when the meeting is to deliberate upon contributions or to nominate the first directors, to deliberate upon the accuracy of the declaration made by its founders, upon the subscription to and payment of the initial capital, upon any amendment to the certificate of incorporation or upon the issue of debentures. The principal purpose of the corporation cannot be modified.

Any modification of certificate of incorporation or the issue of debentures made at a general meeting must be approved by the Government and can only come into effect after the official announcement of the approval in the Journal de Monaco.

Withdrawal of authorization. Any authorization for the creation of a corporation can be withdrawn after a hearing called for that purpose:

• if, without sufficient reason, the corporation has not performed reasonable activity in conformity with its certificate of incorporation for more than two years
• if the corporation has no premises or staff in Monaco for the normal pursuit of its purpose
• if, after having been declared bankrupt or found to be profitable during liquidation, the corporation has not come to a legal settlement or if this agreement has been terminated or settled
• if the corporation has permitted the performance of unauthorized activities in its premises

A corporation whose authorization is revoked must be dissolved and liquidated within two months of receipt of notification of the revocation. The liquidation procedure must be completed within six months of dissolution. The Register of Commerce & Industry must receive a certified copy of the minutes of the resolution fixing the dissolution and liquidation of the company within ten days of the shareholders meeting held for this purpose.

The Direction de l'Expansion Economique, whose address is set forth above, can provide further information about corporations as can local professional advisors.

Special structures

Administrative offices

Administrative offices (sometimes called "headquarters") are offices belonging to a firm or an international group, whose registered office is in another country. These offices carry out administrative and financial management and coordination or supervision tasks - for the group only - in a specified geographic area. Administrative offices work only for the entities belonging to the group. Their creation is subject to prior administrative authorization. This authorization is granted for a limited duration after which the application must be renewed. Applications must be addressed to the Ministry of State and must be deposited with the Direction de l'Expansion Economique whose address appears above. As in the case of other applications for permission, the assistance of a local professional is strongly advised.

Administrative offices pay tax on 2.66% of their operating expenses, as long as they have no activity outside their group and limit their activity to internal management of the group. Administrative offices do not pay profits tax.

Branches and Agencies

The notion of "branch" or "agency" means essentially the same thing in Monaco. Foreign companies may set up branch offices in Monaco after obtaining prior administrative authorization. Branches must be registered in the Register of Commerce and Industry. As in the case of other applications for permission, the assistance of a local professional is strongly advised.

Trusts

Trusts are governed by Law no. 214 of February 27, 1936. Any person whose national law permits him or her to create a trust may also do so in the Principality of Monaco, and the trust will be recognized as valid even though Monégasque law does not generally recognize the existence of trusts. The trust normally specifies the law under which is it to be governed, and that specification will be respected. The trust must be created by an authenticated document (i.e., a document prepared by a notaire) in conformity with the foreign law under which it is created. This conformity is assured by a certificate from an attorney of the jurisdiction in question who must be registered with the Presiding Judge of the Court of Appeals.

Only individuals or corporations registered with the Presiding Judge of the Court of Appeals may act as trustees. The creation, transfer, and operation of a trust are subject to registration duties payable to the Tax Department.

Additional information on trusts may be had by contacting:

Brokers

A broker (defined by Law no. 1008 of July 4, 1978) is an agent, who by usual, independent profession, and without being bound by an employment contract to his principal, negotiates and makes deals for the purchase, sale, hire, or performance of services in the name of producers, businesses, or merchants. An agent may be engaged for a limited or unlimited duration. The duties and authority of an agent and his sub-agents may be specified by agreement.

Brokers may represent several principals with the approval of the other principals if the the principals are competitors. Brokers may also conduct commercial transactions for their own account in fields that do not compete with their principals.

Brokers must register with the Commerce and Industry Department before starting activities. Registration lasts for five years and must be renewed prior to expiration.

"Leasing" an entire business

A commercial establishment may be operated either by its owner or by a manager. If the latter, the manager must have a prior authorization for the term of his management. As in the case of all applications for permission to conduct a business, the application to manage a business must be submitted by the prospective manager. The application requires the same documents as those required for a business. It must also include the management contract. This contract may be either an authenticated document (i.e., prepared with the assistance of a notaire) or a private document. In either case, the contract must be registered. The transaction typically looks like the lease of the entire business to the manager.

Notice of the "lease arrangement" must be published in the Journal de Monaco. The manager must also conspicuously post in the place of business notice that the business is run on a "lease basis". The "manager-lessor" cannot sub-let or transfer or assign his lease interest to a third party.

The lease agreement ends at the expiration of the term fixed in the contract, and the contract cannot stipulate an automatic renewal. The contract will sooner terminate on the death of the manager, his bankruptcy, or his commission of an offense sufficient to warrant the closing of the business. The termination of the lease arrangement must also be published in the Journal de Monaco.

Independent Professions

The liberal and other independent professions are also considered sole proprietorships. Non-Monégasque citizens must obtain prior authorization from the Government before they can establish a professional practice or independent business activity. Certain professions are regulated by what amounts to a quota system. These include:

• chartered accountants
• notaries
• solicitors (lawyers)
• bailiffs
• ship-brokers
• taxis
• medical and paramedical professions
• insurance activities

Those professions whose members are considered merchants must register in the Register of Commerce and with the Department of Statistics. This department issues an identification number to each authorized enterprise whatever its kind.

Persons wishing to conduct commercial or industrial activities as a sole proprietor must fulfill the appropriate formalities for registration. In addition, they must belong to the appropriate social benefit organization, obtain all required insurance policies, and abide by all applicable laws and regulations, particularly those pertaining to security, workplace suitability, and social requirements. Failure to do so will result in the cancellation of their authorization.

Sole proprietors must belong to one or more of the following social benefit organizations:

• Caisse d'Assurance Maladie, Accident et Materniti des Travailleurs Independants (C.A.M.T.I.) - the sickness, accident, and maternity benefit organization for the self-employed - Tel. +377 93.15.44.06
• Caisse Autonome des Retraites des Travailleurs Independants (C.A.R.T.I.) - the independent pension scheme fund for the self-employed -Tel. +377 93.15.49.59

Further details are available from:

The business health office is also a source of useful information regarding health, safety, and social requirements: