Internal Regulations for Agricultural Companies
Although drafting internal regulations is not a legal obligation for all agricultural companies, it is strongly recommended, even necessary in some cases, as it is a contract complementing the statutes and defining the daily operation of the company.
Summary
- In GAEC, internal regulations are mandatory for obtaining approval. They are reviewed by the CDOA GAEC committee and must be provided along with the statutes and other documents to validate the transparency of the GAEC.
- For EARL and SCEA, internal regulations are recommended, especially when partners have distinct individual interests, notably when they are not from the same family.
- Internal regulations define rules subject to frequent changes that statutes cannot foresee. This includes Work organization, task distribution, and meeting frequency.
- They serve to prevent misunderstandings between partners, especially between siblings or non-family partners.
- Internal regulations are a contract between partners that has the force of law between them, but it is not enforceable against third parties as it is not published.
Contents of internal regulations
Internal regulations can cover a wide range of topics, including:
- Preamble: Definition of common objectives and the purpose of creating the company.
- Operation of collegiality: Organization of weekly meetings, decision-making, organization of the common office, and distribution of responsibilities.
- Financial relations: Compensation for work, exceptional withdrawals, private expenses, benefits in kind, and reimbursement of charges.
- Social aspect: External commitments, duty roster, leave, and training.
- Anticipation of events: Illness, accident, maternity, and appointment of a conciliator to prevent and manage disputes.
- Modification of internal regulations: Procedures for modification, generally requiring unanimity.
Importance of updating and discussions
It is important to:
- Discuss internal regulations openly among partners to ensure everyone agrees.
- Update internal regulations with each change of situation (new partner, change of social status) and during the ordinary general meeting to ensure it is always applied and relevant.
In summary, internal regulations are an essential tool for the proper functioning of an agricultural company. They clarify the rules, prevent conflicts, and ensure harmonious collaboration among partners.
Context
Drafting internal regulations in an operating company is not a legal obligation. However, internal regulations are a contract that can be very useful to complement the provisions of the statutes concerning the daily operation of a company, notably the joint work of partners.
The regulations are a contract that has the force of law between partners, like the statutes. However, since internal regulations are not published, they are not enforceable against third parties.
Internal regulations are necessary in GAEC
The standard GAEC statutes published by ministerial decree of 24/03/2015 provide in article 27 for the drafting of internal regulations by the partners. For the GAEC approval request, partners will complete a request form describing the distribution of their rights and the operation of their joint work and will provide the draft internal regulations to the DDT for review by the CDOA GAEC committee. Once the creation is completed, partners will provide, to validate the transparency of their GAEC, the constitutive statutes and proof of legal publicity, but also various complementary documents such as agreements for the provision of leased or owned assets and the internal regulations. In case of modification or compliance control, partners must also be able to provide the latest version.
Internal regulations are recommended in EARL and SCEA
For other companies, internal regulations are recommended when partners have very distinct individual interests, especially when they are not from the same family. This contract complementing the statutes is called a shareholders' agreement if it particularly concerns the commitments of non-operating partners, capital contributors.
Contents of internal regulations
The preamble
The introduction of the internal regulations should not be neglected. This is where partners can write "why they chose to associate."
Taking time to write their common objectives and the purpose of creating the company is very important. Several years later, if tensions arise between them, the conciliator can refer back to their writings about their professional project, the economic objectives they set, or their goals for improving their quality of life, for example.
Operation of collegiality
Weekly meetings
The statutes organize partners' decisions in ordinary and extraordinary general meetings. In the internal regulations, it is advisable to provide for daily or weekly meetings of operating partners to organize their schedules and workloads. It is important to institutionalize from the start a rhythm of common breaks and exchanges. Whether around coffee, a meal, an aperitif, or a computer, what matters is the regularity of these meetings. It is advisable to note important decisions, display the agenda, and post important points to do or postponed decisions not to forget.
The internal regulations can also require inviting other participants in the operation to these meetings and general assemblies, for example family helpers or collaborating spouses. Will they have the right to participate in the debate, will they have voting rights, and if so, which ones? Although not always desirable, it is good to ask this question when establishing the internal regulations to avoid misunderstandings about spouses' rights to participate in meetings.
The office
This is also where you should consider the organization of your common office. Where will it be located? Is it freely accessible (without passing through one partner's kitchen)? Who has the computer passwords?
Distribution of responsibilities
Properly establishing the distribution of responsibilities at the start is very important. Each partner will be particularly responsible for a farm workshop and will ensure its proper operation.
| Distribution of responsibilities | Mr. | Mrs. | Mr. |
|---|---|---|---|
| Crops | |||
| Administrative crops | |||
| Livestock | |||
| Administrative herd and veterinary follow-up | |||
| Treasury and accounting | |||
| Equipment maintenance | |||
| ... |
Financial relations with the company
Compensation for work
Compensation for the work of operating partners can be decided in an ordinary general meeting or within the internal regulations. The same applies to compensation for a collaborating spouse or family helper. The internal regulations allow determining the regular bank transfers set up to pay this compensation.
Exceptional withdrawals
The internal regulations will also provide for regular withdrawals, such as withdrawals to repay a personal loan for buying out shares. If partners are also managers, they can in principle give a transfer order to a personal account without needing approval from other partners. The internal regulations can limit this right to prevent any risk of conflict, by amount or purpose. It may be provided in this contract that the partner cannot freely take company cash up to … € without making the company account debtor; beyond that, they must request authorization from the other co-managing partners.
Private expenses, benefits in kind, and charge reimbursements
The internal regulations will provide for cash advances made by the company to cover partners' private expenses. For example, the MSA social contribution is a personal contribution of the operator. If the company pays it, this amount will be deducted from their partner current account as a cash advance.
The company may also have a re-invoicing of water, electricity, telephone, etc. with one of the partners. It is advisable from the start to clarify the percentage split between professional and private use.
Partners can also plan withdrawals in kind for self-consumption of their production.
The internal regulations will also frame reimbursement of travel expenses, meals, professional attire…
The implementation of these decisions will be visible in the company's accounting.
The social aspect of the company
External commitments
It is important to clarify among partners their notion of working time and external commitments. Operators are often solicited to be elected within local authorities and professional representation institutions. Although this activity is intellectually rewarding, it is often less so financially. Time spent outside is time not spent on the farm. What do the other partners think? What are their limits? And if the elected partner is compensated for their representation time, should they return this amount to the company itself so it can employ a replacement employee?
Weekend and public holiday duty roster
Working together allows sharing duty rosters for milking or monitoring. This is its main benefit. Therefore, the rules must be clearly established in the internal regulations to achieve this quality of life objective for partners. They may derogate, but having a clearly written rule will allow balanced distribution.
Leave
Partners should be supported in their discussion: "What does leave mean to you?!" For some, three consecutive days away from the farm are enough; for others, one week in the mountains in February and three weeks in August plus weekends when the weather is nice. There are also periods of reduced workload on the farm more suitable than others. It is therefore crucial that each partner can express themselves and confront their definition of leave with their partners, then determine a coherent, balanced, and sustainable rule for taking leave and duty rosters.
Training
Each partner has the right to participate in training in the interest of the company and for their personal development. What is the acceptable time and budget for all partners that can be allocated to this training?
Anticipating and planning for illness, disputes...
Illness and accident
In case of illness and work stoppage, it is possible to maintain compensation for work as an operating partner or to supplement the sickness benefit received by the partner to reach, for example, 1 minimum wage. It is possible to decide that this compensation maintenance will be decreasing over time.
It is also possible to provide from the start a different distribution of responsibilities on workshops in case of maternity of a partner, temporarily assigning more administrative tasks to the young mother.
It may be interesting to specify in this contract the possibility for a partner to be absent in case of illness of a child or family member, by notifying the other partners, without impacting the smooth operation of their joint work.
The conciliator to prevent disputes
It is required to designate a conciliator to obtain GAEC approval. The appointment of a mediator is also increasingly practiced in the professional business field.
Article R323-44 of the rural code grants the conciliator two particular missions:
- to be consulted in cases where partners' interests risk opposing each other during general meeting decisions;
- to reconcile partners on disputes arising between them.
They must therefore prevent and attempt to cure. The conciliator is a trusted, volunteer person designated by the partners. This can be a neutral family member, an advisor or lawyer from the supporting organization or Chamber of Agriculture, a neighbor, the mayor, the notary… Obviously, they must accept this delicate mission.
Modification of internal regulations
It is appropriate to provide procedures to modify the internal regulations contract. In practice, unanimity is often required since it involves modifying the social contract between partners. There is no need to update the internal regulations every year; however, during the ordinary general meeting, it will serve as a basis for partners' discussions on the functioning of their social life. The internal regulations must be updated with each new partner's entry or change of social status to integrate the new rules for joint work operation of operating partners.
How to know if I am compliant?
| Yes | No | Not concerned | |
|---|---|---|---|
| Have I signed internal regulations? | |||
| Have the internal regulations really been discussed among partners? | |||
| Are the internal regulations always up to date and applied? | |||
| Every year, at the ordinary general meeting,
do we review together the successes and areas for improvement of our joint work operation? |
In case of non-compliance
If you are in GAEC, internal regulations are a document to provide in case of compliance control by the DDT for transparency application. In case of control, it will be necessary to quickly update it and provide it to the DDT to continue benefiting from GAEC transparency. For other companies, internal regulations are not mandatory but recommended to set good rules for partners' joint work. The biggest risk without internal regulations is disagreement. By setting basic rules, a large part of partners' difficulties in understanding are already avoided.
References and tools
La version initiale de cet article a été rédigée par Aurélie Brunet.
Group agriculture file, GAEC and Companies, no. 115, April 2014, Authority, an essential framework for harmonious operation...
Group agriculture file, GAEC and Companies, no. 96, February 2011, Relations between partners: understanding and organizing operation
Models of internal regulations in:
Permanent Dictionary of Agricultural Enterprise, Legislative Editions
Legal guides, agricultural editions, Lamothe
