A Guide to Doing Business in the Principality of Monaco

By: Berg and Duffy, LLP

The purpose of the information contained herein is to give 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.

Economic Development of the Principality
Monaco’s economy has undergone a consistent evolution over since the late 1950s. From a country primarily dependant on the activities of the Société des Bains de Mer, the publicly owned company that runs the Casino and the major hotels in Monaco, the country has developed across many other sectors. The industry represents 10% of Monaco’s annual sales income, shipping accounts for over 4% of Monaco sales, banking and finance sector represents 18% in Monegasque sales, which include over 50 banking and credit establishments, and finally, commerce has over 1,000 retailers. Nevertheless, the traditional sector of tourism remains important to the business sector and is the main source of the Principality’s budget.

Investment and Economic activity
The Principality of Monaco is an international- minded country, a polyglot city where investments are welcome. Generally, there are no restrictions on foreigners or nonresidents from opening bank and brokerage accounts in Monaco or from buying real property. Monaco has several bilateral agreements with foreign governments against money laundering, to facilitate judicial assistance and communication between the judges and public prosecutors in charge of investigations. Cooperation agreements have been signed with Spain, Portugal, and Great Britain. Monaco also has its own money- laundering laws and financial control commission that require a bank or anyone dealing with funds received from another person to know the source of the funds. These laws normally pose no problem for legitimate persons. In addition to these common types of investment, any economic activity within the Principality is strictly regulated. Indeed, the approval of the government of Monaco is always required before conducting any economic activity in Monaco. Seeking government approval can be as simple as a declaration in the appropriate registry of one’s projected activity, or it can be more difficult, such as the requirement of obtaining authorisation. This latter 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.

Import and Export Regulations
Customs regulation in the Principality of Monaco is the same as in France. The two states have constituted a Customs Union and, on January 1, 1990, total freedom of capital movements between them was established. Hence, even though the Principality does not belong to the European Union, it is part of the European Union customs zone.

Exchange Control
Although not a member of the European Union, the Principality is in a position, thanks to its custom and monetary union with France, to fully benefit from all the advantages of economic and monetary union. Indeed due to the special economic relationship with France, all EU legislation that affects France about financial affairs as exchange control, control of banking and customs, applies to the Principality of Monaco. Indeed, the French legislation concerning banking institutions is applicable in the Principality under the Franco- Monegasque Treaty on exchange control signed on April 14th, 1945. Monegasque banks are therefore subject to the same rules of inspection and operation as French banks. Inspections are always conducted by the appropriate entities and conducted to ensure absolute confidentiality of transaction by Monegasque institutions.

Taxation in Monaco
The Principality of Monaco is usually described as a “tax haven,” but the reality is very different. Taxation, although light, is tightly monitored by the local administration, namely the Services Fiscaux or Tax Department. The Tax Department monitors on the applications of tax agreements in force with France and provides Monaco with the taxation revenue accounting for 75% of the Principality’s budget, half of which originates in VAT. There are various types of taxes applicable in Monaco: income tax, business profit tax, estate and inheritance taxes, and value-added taxes.

Personal Income tax
Normally, individuals pay no tax on earnings from personal services, such as consulting. The Principality has abolished the income tax for most individuals by a Sovereign Order in 1869. This abolition generally applies to all Monaco nationals, all foreigners and a small number of French citizens. The French citizens who are included are:

  • French citizens who have continuously resided in Monaco since October 13, 1957.
  • French citizens who are members or under the authority of the “Maison Souveraine” (the Prince’s staff).
  • French citizens who were born in the Principality and who have continued to reside in Monaco since birth.
  • French citizens who are working as civil servants, agents, or employees of the Principality and who have continuously resided in Monaco since October 13, 1963.
  • All other French citizens who reside in Monaco, are subject to French income tax.

Under the conventions of December 23, 1951, and May 18, 1963, between France and Monaco, the two countries collaborate and assist one another in avoiding tax fraud. Also, persons who are not citizens or residents of France who own real estate in France are generally subject to French income tax equal to 3 times the rental value of the property owned. There are a few exceptions for Monegasque nationals and French nationals stated in the conventions between France and Monaco. Since Monaco has not signed tax conventions with countries other than France, each country can reserve the right to apply its tax legislation to citizens residing abroad. Conversely, North American citizens who reside in the Principality are subject to the tax provisions of the United States of America.

Business Profits Tax
Monaco’s tax system is generally attractive and hospitable to business. The system also offers many exemptions and deductions. Through the appropriate use of these exemptions and deductions, it is often possible to minimise 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 without distinction as to company, type or country of registration, with more than 25% of their annual sales outside of Monaco, must pay the annual corporate tax (Impôt sur les Bénéfices or “ISB”) 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 directors or managers who 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 subject to profits tax are exempt for their initial two years. Thereafter, tax due on profits is as follows: Number of Years 1st and 2nd 3rd 4th 5th Over 5 % of Profits 0 8.33 16.67 25 33.33

Administrative offices do not pay profits tax since their purpose is not considered commercial. Instead, by agreement with the Government, they are taxed on a minimum basis of 2.66% of their operating expenses. In addition to consulting with a local accountant, further information is available from: Direction des Services Fiscaux (Tax Department) 57, rue Grimaldi MC 98000 MONACO Tel +377 93 15 81 04 or 24 Fax +377 93 15 81 55

Estate and Inheritance Taxes
Monaco has a “succession tax” that applies to transfers of estates by death. The rate varies according to the relationship to the decedent, and the tax is due by the recipient. The rate ranges from zero for 1st degree relatives and a maximum of 16% for persons with no relationship to the decedent. This tax does not apply to the estate of foreigners who have lived in Monaco for less than two years, as well as to French citizens who were not officially resident as of October 13th, 1957.

Value Added Taxes (VAT)
Because of the customs union existing between France and Monaco, French customs regulations and import and export codes are also applicable in the Principality. Value Added Tax is due for any sale and services rendered in Monaco even if occasionally. Importation of goods is also taxable. VAT is a tax due both by individuals and companies. By the Franco-Monegasque Fiscal Convention, VAT is not at the same rate in Monaco as it is in France.

The current Monegasque standard rate is 19.6%, there is also a reduced rate of 5.5% for specific services such as transportation or hotels and a special rate of 2.1% for daily newspapers, medicines and cultural performances.

Residency
Establishing residency is not usually an easy process, and it does take time. So, one should be prepared to spend at least four to six or more months completing the process. Professional assistance can sometime expedite the process, but this cannot be guaranteed. They are two different application procedures depending on whether the applicant is or is not a national of one of the states of the European Economic Area. Applicants who come from one of the states belonging to the European Economic Area needs to apply for a Monegasque residence permit (carte de séjour) to the Residents Section of the Directorate of Public Security. The Monegasque authorities require a number of documents, among which: a proof of means of existence (i.e.: a work contract granted by a company located in Monaco, a copy of the request for authorization to set up a business or company, a bank statement proving sufficient means of subsistence), a declaration of good conduct issued by the local administration, and an apartment rental contract or a deed of ownership. Nationals who do not belong to the European Economic Area need first to obtain a visa from the French Consul in Monaco. Afterwards, they are required to apply for a Monegasque residence permit (carte de séjour) from the Residents Section of the Directorate of Public Security and provide the same documents required for nationals of the European Economic Area. The procedure may be faster if the applicant who does not belong to the European Economic Area has lived for more than one year in France. In such a circumstance, providing the applicant holds a regular residence permit of France, the interested party will have to apply to the French Consulate – General in Monaco.

Labor
Employers willing to engage staff must open an employer file with the Department of Labor and Social Affairs. When the employer is given an identification number, it is required to meet with the Department of Labor and Social Affairs to receive the necessary forms for the registration of employees with the Monegasque public services as C.C.S.S. Social Services Compensation Fund; C.A.R. Independent Pension Scheme Fund; A.M.R.R. Monegasque Shared Pension Scheme. The total employer’s share of social security contributions on salaries represents an approximate average of 33%.

Companies and individuals willing to hire personnel in the Principality must consult first with the Employment Service, which has four days to present candidates to the employer. In fact, under the application of Law 629 of July 17, 1957, the Employment Service is in charge of supervising priority rules, with equal qualifications for a given job to Monegasque citizens, spouses of Monegasque citizen or direct descendants of Monegasque citizen, Monegasque residents, residents of the surrounding French communes. If there is no person with priority, the employer may propose the person of his choice. The chosen employee then obtains a work permit upon filing the appropriate application form with the Employment Service.

Monaco’s struggle against Money Laundering, Frauds, and Terrorism
It is maybe worth noting that the French government has often criticised Monaco for harbouring funds derived from criminal activities and money laundering. As a response to such attacks, Monaco has reinforced its collaboration with other countries, and its efforts to comply with the directives of the “Groupe d’Action Financière Internationale” (Financial Action International Group), or GAFI. Since the 1990s, when the laundering of funds started to arouse a growing interests particularly in Europe, the Principality of Monaco has enacted a broad spectrum of legislation, rules, and regulations, established several regulatory bodies to watch over financial activities, and has entered into a number of bilateral and multilateral relationships directed towards regularity in financial transactions.

Main legislation
The purpose of these measures is in large part to control money laundering, combat financing of terrorism and to prevent insider trading. More specifically, these measures include

  • Law 1144 of July 26, 1991, that regulates economic activities; Law 1161 of July 7, 1993, that makes a crime of knowingly acquiring funds of illegal origins, participating or attempting to participate in the laundering of such funds. When committed in the context of a criminal organisation, the crime is punishable by 20 years of imprisonment and a pecuniary fine;
  • Law 1162 of July 7, 1993, that imposes a number of obligations on banks, brokerage firms, insurance companies, and others that engage in financial transactions to “know their customer,” the source of the funds involved, and to report suspicious transactions, and provides criminal sanctions for failure to do so; Law 1194 of July 9, 1997, that regulates the provision of financial services and which created the “Commission de Contrôle de la Gestion de Portefeuilles et des Activités Boursières Assimilées” (Commission to Oversee Portfolio Management and Related Stock Exchange Activities);
  • Law 1241 of July 3, 2001, that makes a crime of knowingly engaging in insider trading.

Diplomatic Initiatives
Monaco has also taken numerous diplomatic steps to assure the integrity of financial transactions that take place in the Principality, including:

  • Reinforcing its collaboration with other countries to prevent investment of funds resulting from illegal transactions or frauds;
  • Fully complying with the directives of the “Groupe d’Action Financière Internationale” (International Financial Action Group or GAFI);
  • Creating the “Service d’Information de Contrôle des Circuits Financiers” or Department of Information and Control of Financial Trading (SICCFIN), which controls the transfers of suspicious funds and to which financial establishments must make disclosures, should they have any doubts about the legitimacy funds;
  • Signing bilateral agreements with Belgium, Great Britain, Spain, and Portugal to establish cooperation in tracking money laundering and strengthening judicial cooperation with other countries in economic and financial matters.

The International Agreement for the Suppression of Financing of Terrorism
Similar to many other countries, the September 11 attacks have led the Principality to implement antiterrorism measures. Indeed, on November 10, 2001, Monaco signed the International Agreement for the Suppression of Financing of Terrorism established in New York on December 9, 1999. Consequently, Monaco has enacted various sovereign orders to support the principles established in the aforementioned agreement, among which:

  • Sovereign Orders no. 15.319 dated April 8, 2002, that gives statutory authority to the International Agreement for the Suppression of Financing of Terrorism; Sovereign Orders no. 15.320 dated April 8, 2002, that makes terrorist financing a crime subject to a jail term of 5 to 10 years and orders confiscation of any funds used or destined to be used to finance terrorism; Sovereign Orders no. 15.321 dated April 8, 2002, that orders financing establishments, insurance companies and any other entities to freeze all funds that may be used or destined to be used to finance terrorism;
  • Sovereign Order no. 15.453 dated August 8, 2002, that strengthens the control on financial institutions and gambling establishments providing brand new guidelines on the ascertaining of client identities and recording of transactions.

The Convention on Laundering, Search, Seizure and Confiscation of Proceeds from Crime
On July 11, 2002, the Principality of Monaco has adopted the Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds from Crime drawn up within the Council of Europe in Strasbourg on November 8, 1990. The Convention has been adopted by most European member states and by few non- member states with the aim to facilitate international co-operation and mutual assistance in tracking down, seizing, and confiscating proceeds from criminal offences. The Convention seeks to implement forms of investigative assistance (such as procuring evidence, transfer of information to another state without request, adoption of common investigative instruments, and the lifting of banking secrecy), to adopt forms of provisional measures and measures to confiscate the proceeds of crime.

Protection of Intellectual Property


General Considerations
Protection of intellectual property covers two main branches:

  • copyright,
  • chiefly in literary, musical, artistic, photographic, and audiovisual work;
  • industrial property, chiefly in inventions, trademarks, industrial designs, and appellations of origin.

The following focus solely on the latter category, industrial property rights in the Principality of Monaco. Any company (civil or commercial) or individual can obtain protection of intellectual property. Residence in Monaco or Monegasque nationality is not required, providing that the country of origin of a foreign/non- resident applicant guarantees the same property rights to Monegasque citizens. Property rights entitle the author/creator to a right of priority recognised by all the countries belonging to the Paris convention. Registration is secured by application, submitted by the applicant or a representative, to the Department of Intellectual Property under the Department of Economic Growth. The Principality of Monaco has signed numerous international intellectual property agreements. These agreements make it possible to apply for international protection based on an initial filing in Monaco. The extent of property rights as regards the number of countries covered varies according to the nature of the property rights secured in Monaco. What follows is a summary of the main types of protection available.

Protection at the national level
Patents (Law no. 606 of 20 June 1955, amended by Law no. 625 of 5 November 1956) The cost of registering patents in Monaco is not very high, but they are granted without governmental review, i.e., without research as to the patentable nature of the invention or the existence of prior art. Until a patent is granted, only the applicant and his legal representatives may have access to the application. An applicant, therefore, sometimes seeks to delay the granting of the patent, which, according to the law, takes place within six months of registration. It is, therefore, possible to ask for one year’s adjournment and even (with payment of additional fees) to extend the granting of the patent for up to 18 months (in practice, this extension is in addition to the basic six month period; thus, the period of secrecy can last for about two years altogether). The grant of a patent or the issuance of an additional certificate is published in a quarterly supplement to the Journal de Monaco, the official journal of Monaco. The information published includes:
applicant’s name and address or registered office, patent number, date of filing, the date of grant, the title of the invention, its classification(s), and, if applicable, any priority is claimed. It is possible to claim priority based on a Monegasque patent when applying for property rights in another country, provided the foreign application is made within one year after the filing in Monaco.

Similarly, with appropriate proof, a patent filed in Monaco may claim priority based on one or several earlier filings in other jurisdictions. The applicant has six months to establish a priority, and it is no possible to extend this period. The maximum duration of a Monegasque patent is 20 years from the date of filing at the Intellectual Property Department, provided the applicant timely pays all required annual fees. A word of caution, the Intellectual Property Department does not send reminders for these fees. Patents granted in Monaco by the Patent Cooperation Treaty (the “PCT”) are subject to the same general arrangements as mentioned above. European patents designating Monaco have the same legal property rights as national patents. The annual fees will only be due from the year after the publication of the grant of the patent (in general, the third year).

Industrial Designs (Law no. 607 of 20 June 1955, amended by Law no. 623 of 5 November 1956)
The priority rules discussed above also apply to Industrial designs, but the priority is six months, not one year. Except as noted below, the Intellectual Property Department does not conduct any investigation before granting protection for industrial designs. Thus, to assure meaningful protection, applicants should carry out their own search by consulting the register of granted designs. The use of certain graphics that suggest royal dwellings or a state organisation of the Principality of Monaco is subject to review. In this case, the author must produce authorisation for use. The protection runs for ten years from the first deposit in Monaco with the possibility of renewal for periods of ten years, with a maximum total duration of fifty years. The department issues no renewal reminders. As a rule, the applicants hand in illustrations (drawings or photographs), objects, or designs, with, if necessary, an explanatory note. However, it is possible (although not customary) under certain circumstances, to submit copies of the object itself. Design patents are granted during the quarter following deposit. Notice of the grant is published in the quarterly supplement to the Journal de Monaco, stating the number of the patent, the date of deposit, the name and address of the applicant, and the title. If the applicant has filed an international design under the Hague Agreement, no other particular formalities in the Principality of Monaco are necessary to obtain protection within Monaco, if Monaco is designated in the international deposit. International designs are not published in the supplement to the Journal de Monaco.

N.B. Monaco permits the use of individual envelopes called “Soleau” envelopes. In practice, the use of these envelopes has been extended well beyond designs to include other types of creations. These envelopes are currently sold at the Intellectual Property Department for 10 Euro. Their main purpose is to enable the author to fix an “exact date” of creation.

Trademarks (Law no. 1058 of 10 June 1983)
Similar to industrial designs, the Industrial Property Department will not search for the uniqueness of the mark. The Industrial Property Department will perform such a search for a fee. This is usually advised for trademarks. The right of priority is six months from the initial deposit. Trademark protection can be refused for one of the following reasons: marks that are offensive to the public or moral order; marks protected by Article 6 of the Paris Convention, marks likely to mislead the public, and generic marks or common names. As in the case of industrial designs, some trademarks will only be accepted upon production of the authorisation of a competent authority. The duration of trademark protection is currently ten years starting from the first deposit in Monaco, with the possibility of multiple renewals. There are no current limits for the number of renewals.
It should be noted that trademarks deposited before October 1, 1983, enjoy a more extended period of protection. The department issues no renewal reminders. Trademarks are processed within two to three months from a deposit. They are published in the quarterly supplement to the Journal de Monaco. The publication mentions the protected trademark, the date of deposit, the registration number; the name and address of the owner, the categories in which protection is granted, the description of the products and services, and, if applicable, the references of the priority(ies) claimed. The publication also states whether it is a figurative trademark or a trademark with a specific graphic representation. If the trademark is based on colours, they are mentioned. Trademarks protected in Monegasque territory through international deposit with a designation of Monaco are not published in the supplement to the Journal de Monaco. Owners have no special formalities to accomplish at national level to obtain protection under the Madrid Arrangement.

Protection at the international level
The main international agreements signed by the Principality of Monaco and related to industrial property are the following: • • •

  • the Paris Convention for the protection of industrial property rights;
  • the Madrid Arrangement for the international registration of trademarks;
  • the Hague Agreement for the international deposit of industrial designs;
  • the convention establishing of the World Intellectual Property Organization (“WIPO”);
  • the Patent Cooperation Treaty (“PCT”);
  • the European Patents Convention.

Patents
Patent Cooperation Treaty
All Monegasque citizens or residents can file an international patent, either at the Intellectual Property Department or at the World Intellectual Property Organization, or at the European Patent Office (“EPO”). Applications enable protection in some or all of the contracting countries, which, today, reach over 80 countries throughout the five continents. Applications can claim priority for a previous filing (maximum 12 months). As a rule, the patent application is published in the PCT Gazette 18- months, after the date of priority. All international applications are subject to search by the EPO and the establishment of an ((international search report), available to the applicant within 4 to 10 months. It is also possible to ask for an international preliminary examination based on the international search report, according to patentable criteria (novelty, inventive step and industrial application). The results of these reports enable the owner to decide whether or not to start the procedure at the various national or regional offices (EPO) designated in the application. In each country where the national procedure is carried out (within a period of 20 to 30 months after the priority date), the patent will be of the same value as a national patent, if the applicant fulfils the condition of regular payment of annual fees.

The European Patent
Monegasque nationality or residence is not required to file for a European Patent at the Intellectual Property Department. A European patent offers the possibility of obtaining protection in some or all of the member-countries (18 to date). It is possible to claim priority on a previous filing within 12 months. The Monegasque Intellectual Property Department transfers European patent applications to the EPO for examination, search, publication, and granting of the patent. As a rule, the patent is published within 18 months with a search report from the earliest date of filing. After publication, it is possible to ask for examination.

Fees for filing, examination, search, and, if applicable, a claim must be paid to the EPO. The annual fees must also be paid until the year of publication of grant. Once the patent issues, any required fees must be paid to the national offices of the designated countries.

Industrial Designs
Any person whose nationality or domicile is in a country belonging to the Hague Agreement can obtain protection in some or all of the contracting countries, currently about twenty. No previous national deposit is necessary. The applicant makes the request directly to WIPO on the forms available from the Intellectual Property Department. After registration at the international level, the deposit is published in the International Industrial Designs Bulletin. This has the same effect as a national deposit in all of the countries designated. It is subject to the laws of these countries concerning industrial property, including, refusing protection, if the law of the country in question permits. This arrangement was signed in 1925, then revised in 1934, and again in 1960. The Union includes three groups of states, depending on whether they are bound by one or the other of these acts or by both of them. Both bind Monaco. The deposit is subject to different rules according to the act which binds the country of origin of the applicant, and to the one which binds to the country in which property rights are required (duration of protection, effects of the deposit, etc.).

Trademarks
Any person from a member country can apply for protection in some or all of the contracting countries (currently 44 countries) if the trademark has been registered in his country of origin. The notion of origin is very important for Monegasque applicants registering their trademark with the INPO (France) receiving a refusal of international deposit by Geneva. In this case, they must register in Monaco and make another request for international protection. After registration of the national application, the owner may request international registration if he has already paid the corresponding fees to WIPO. After presentation of the receipt and payment of fees, the Intellectual Property Department proceeds with the formalities at WIPO. The duration of protection is 20 years (with the possibility of paying for ten years and then for the rest). Protection can be renewed an infinite number of times for periods of 20 years each.

When protection has been registered with WIPO, mention of protection is published in the International Trademark bulletin and sent to member countries. This gives the same effects as national trademark registration in the countries designated (as stipulated by any applicable national legislation). The Intellectual Property Department can also provide access to databases in the following areas:

  • international trademarks;
  • European patents;
  • PCT patent applications.

It is also possible to consult international publications on patents, trademarks, and industrial designs at the Intellectual Property Department. An information centre, the Monaco Patent Information Center (“CIBIM”), is open to the public. Anyone interested may: • • • check out the novelty of a patent; consult databases on CD-ROM covering European patents, PCT applications, and nationa l patents from certain countries (France and Italy); consult on- line databases covering patents from most of the industrialised countries (USA, Japan, etc.).

The forms for international and/or European filings are available upon request from:

Division de la Propriété Intellectuelle (The Intellectual Property Department) Direction de l’Expansion Economique,

Avenue Prince Héréditaire Albert MC98000 MONACO

Tel +377 93.15.88.67 Fax +377 92.05.75.20

Doing Business in Monaco


General information
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 authorisation. The Direction de l’Expansion Economique (Economic Development Department) is normally the administrative agency that examines applications for permission to establish an economic activity in the Principality.

Economic Expansion Department:

Direction de l’Expansion Economique 9 rue du Gabian MC 98000 MONACO

Tel +377 93 15 88 53

Fax+377 92 O5 75 20

If granted, the authorisation 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 applied for. Typically, the authorisation sets out the limits of the activities that may be performed, the specific premises where those activities may take place, as well as any special conditions applicable to the performance of those activities. The authorisation is personal and non-transferable, except for the “leasing” of an entire business described below. Any material change in the authorised activities, the nature of holder of the authorisation, or address or premises where the activity is conducted must be approved in advance. Any authorisation 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 authorisation, etc. Monaco has a number of business forms that that may be used to conduct economic activity in Monaco. These forms, which will be discussed more fully below, include:

  • Sole proprietorship General partnership (“SNC”)
  • Limited partnership (“SCS”)
  • Monegasque general business corporation (“SAM”)
  • 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 authorise them. A partial list of these activities includes: • • • • • • commercial banks (Sovereign Order of August 4, 1899, and Law no. 594 of July 15, 1954) portfolio and investment management (Law no. 1194 of July 6, 1997) notaries lawyers architects certified public accountants 16

  • ship brokers
  • pharmaceutical companies
  • transport insurance
  • weapons and arms dealing
  • jewellers
  • beverage sales
  • taxis
  • medical and paramedical professions

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

The Process of Seeking Authorisation
The authorisation 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.

Business Structures
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”)
  • Monegasque 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 is normally considered a merchant. Laws nos. 1002 of December 26, 1977, 1121 of December 22, 1988 and 1.224 of December 28, 1999 modifying Article 2 of Commercial Code, 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 centres
  • conducting auction sales and public shows
  • public banking transactions, currency exchange, banking, and brokerage
  • building construction, if the builder supplies the materials, therefore, 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 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 18

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, the partnership agreement must be registered with the Tax Department.

Limited Partnership (“SCS”)
One or more general partners, at least one of which 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 partne rs” (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. A limited partner’s liability for partnership obligations is limited to the amount invested and, even if not fully paid to creditors, the amount of interest paid to the limited partner will not be requested. Limited partners cannot 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.

Monegasque 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 of January 20, 1945, and 767 of July 8, 1964, in addition to Article 36 & seq. of the Commercial Code. These entities may only be formed by ministerial decree with prior government authorisation. 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 authorisation 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 authorised 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 7.89 € plus VAT per line). Typically, about 5,000 € for a standard certificate.

Company capital
The minimum stated capital is 150,000 €. 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 450,000 € for certain financial services companies. Before the corporation can formally commence its existence, the shareholders must document the 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 is forming the corporation. The 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 authorisation. 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 cannot 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 may 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. Anyone 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 an 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 Authorisation
Any authorisation 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
  • the corporation has no premises or staff in Monaco for the normal pursuit of its purpose 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 the corporation has permitted the performance of unauthorised activities in its premises

A corporation whose authorisation 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, and their creation is subject to prior administrative authorisation. This authorisation 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 minimum basis of 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 authorisation. 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, 1936as amended by Law 1.216 dated July 7, 1999, and Sovereign Order 14.346 dated March 9, 2000, 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 Monegasque 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 “mortis causa” must be created by an authenticated document (i.e., a document prepared by a notaire), the trust “inter vivos” must be created following the same formalities required for donations. A certificate stating its conformity with the foreign law under which it is created, it is always required. 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 Appeal. Registration is granted just upon request to attorneys-at-law from the United States of America and to solicitors from the United Kingdom, the latter only if admitted to practice in the Supreme Court. Only individuals or entities registered with the Presiding Judge of the Court of Appeals may act as trustees. Appointed trustees that are not located in the Principality must designate a local representative among those registered with the Presiding Judge of the Court of Appeals. The creation, transfer, and operation of a trust are subject to registration duties payable to the Tax Department.

Additional information on trusts may be obtained by contacting:

Palais du Justice (Court House) 5, Rue Colonel Bellando de Castro MC 98000 MONACO Tel +377 93.15.81.28

Fax +377 93.50.05.68

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 subagents may be specified by the agreement. Brokers may represent several principals with the approval of the other principals if 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 before 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 authorisation 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 terminate sooner on the death of the manager, his bankruptcy, or his commission of an offence 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-Monegasque citizens must obtain prior authorisation 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 authorised enterprise whatever its kind. Persons wishing to conduct commercial or industrial activities as a sole proprietor must fulfil the appropriate formalities for registration. In addition, they must belong to the appropriate social benefit organisation, 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 authorisation. Sole proprietors must belong to one or more of the following social benefit organisations:

  • Caisse d’Assurance Maladie, Accident et Maternité des Travailleurs Indépendants (C.A.M.T.I.) Sickness,
  • Accident, and Maternity Benefit Organization for the Self-Employed Tel +377 93.15.44.06
  • Caisse Autonome des Retraites des Travailleurs Indépendants (C.A.R.T.I.)
  • Independent Pension Scheme Fund for the Self-Employed

Further details are available from

Caisses Sociales Monégasques (The Monegasque Social Benefit Funds)

11, Rue Louis Notari MC 98000 MONACO

Tel + 377 93.15.43.43

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

Office de la Médecine du Travail (O.M.T) (Workers Medical Office)

Tel. +377 92.05.35.01

Consulates in the Principality of Monaco

  • Consulate of Germany 27, Boulevard Princesse Charlotte MC 98000 Monaco
  • Consulate of Belgium 13, Avenue des Castelans MC 98000 Monaco
  • Consulate of Brazil 11, Boulevard de Belgique MC 98000 Monaco
  • Consulate of Canada 1, Avenue Henry Dunant MC 98000 Monaco
  • Consulate of Spain 20, Boulevard des Moulins MC 98000 Monaco
  • Consulate of the Russian Federation, La Madone 2, 98000 Monaco

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