All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

Compliance rules, which require the undertaking to ensure it complies with all applicable ethical and legal standards, favor a unified approach to the group at the expense of the principle of legal autonomy. The range of regulations that may affect corporate groups is extensive: anti-corruption rules, competition law, duty of care, environmental regulations...
1) Anti-corruption rules 
The Sapin 2 …

Vigilance and responsibility of the parent company

GRIMONPREZ, For a liability of parent companies due to their subsidiaries, Rev. sociétés 2009, 715.

Compliance rules, which require the undertaking to ensure it complies with all applicable ethical and legal standards, favor a unified approach to the group at the expense of the principle of legal autonomy. The range of regulations that may affect corporate groups is extensive: anti-corruption rules, competition law, duty of care, environmental regulations...

The Sapin 2 Law  required companies to adopt internal operating rules to protect themselves from damage to their reputation and economic value that could result from breaches of integrity. This risk and the need to guard against it have become very real for corporate groups, even though the offense of corruption in principle only engages the liability of its material perpetrator. In a recent case, the Court of Cassation held a parent company criminally liable for an offense committed in its name and on its behalf by the employees of a subsidiary, who were de facto representatives of the latter, due to the matrix and cross-functional organization implemented by the group and the missions entrusted to them, despite the absence of any legal link between this parent company and these employees and any delegation of powers to their benefit .

In competition law, European authorities have long held that the concerted behavior of a subsidiary, implemented in violation of competition rules, can be attributed to the parent company with which it forms an economic unit, even if it has a distinct legal personality, as long as it does not autonomously determine its behavior but essentially follows the instructions given by the parent company . They subsequently established a presumption that the parent company holding all or almost all of its subsidiary's capital exercises decisive influence over the latter's commercial policy, allowing it to be considered jointly liable for the payment of the fine imposed on its subsidiary, unless it overturns this presumption by providing evidence regarding their organizational, economic, and legal links, demonstrating that the subsidiary behaves autonomously in the market . When the conditions for applying the presumption are met, the parent company can be attributed the subsidiary's infringing behavior without the need to establish its personal involvement in the infringement . Taken to the extreme, this theory has recently allowed the attribution of the parent company's behavior to the subsidiary . National competition authorities have quickly aligned with these solutions . The presumption can be overturned by contrary evidence provided by the parent company, considering all relevant elements regarding the economic, organizational, and legal links that unite them, showing that its subsidiary behaves autonomously in the market and does not constitute an economic unit with it . The fact that the parent company is a non-operational holding, which intervenes very little in the management of its subsidiaries, cannot overturn the presumption, as long as it coordinates financial investments within the group . Similarly, a parent company that is the sole shareholder of its subsidiary and maintains long-standing capital links with it does not overturn the presumption of decisive influence merely because the directors of the two companies are distinct, they do not have the same names, and they do not consolidate their accounts, as long as it has major levers of action, such as the appointment and dismissal of the non-partner manager . Conversely, a parent company holding less than 50% of its subsidiaries' capital cannot be presumed to have exercised decisive influence over their behavior, as the mere existence of common directors and shareholder agreements on the exercise of their voting rights, as well as the parent company's provision of strategic and development advice to one of them, is not sufficient to establish the effectiveness of such control .

The 2017 law on the duty of vigilance of parent companies and contracting companies   introduced a duty of vigilance for parent companies, established as joint stock companies, regarding the actions of their subsidiaries. Pursuant to Articles L. 225-102-4 et seq. of the Commercial Code, each parent company is now required to establish a plan to identify risks and prevent serious violations of human rights and fundamental freedoms, the health and safety of individuals, as well as the environment, resulting from their activities and those of their subsidiaries. These obligations may result in a formal notice to act, injunctions , and the risk of liability if damage arises from the failure to fulfill its obligation.

The rules established in recent years  regarding environmental protection also impose liability on the parent company for the actions of its subsidiary. Indeed, Article L. 512-17 of the Environmental Code provides that in the event of the judicial liquidation of a subsidiary, the parent company may be held responsible for financing the remediation of the site if it has committed a fault contributing to the subsidiary's asset shortfall. Similarly, Article L. 233-5-1 of the Commercial Code allows any company that owns more than half of the capital of another company or exercises control over it to assume, in the event of the linked company's failure, all or part of the prevention and remediation obligations incumbent upon the latter. Likewise, the climate law  establishes a principle of liability for the parent company for mining damage caused by a subsidiary.

ASTERLING, Criminal compliance, The risks of a criminal law of risk, RIDE, 2016/2, 217; BOURSIER, Anticorruption and anti-money laundering, the new risks facing undertakings, JCP E 2016, No 1622; FRISON-ROCHE, The law of compliance, D. 2016, 1871; GARAPON and MIGNON COLOMBET, From a defensive law to a cooperative law: the necessary reform of our criminal business justice, RIDE, 2016/2, 202; BOUCOBZA and SERINET, Sapin 2 Law and duty of vigilance, the undertaking facing new compliance challenges, D. 2017, 1619; DARDY, The obligation to prevent acts of corruption and influence peddling within undertakings, Journ. Sociétés February 2017, 26; DEDIEU and GALLOIS-COCHET, Obligations and liability of directors within the framework of compliance requirements in French law, BJS 2018, 173; MAGENDIE, Ethics and compliance in undertakings, Rev. Sociétés 2019, 730; PARANCE, Reactivity and adaptation at the heart of compliance requirements, Gaz. Pal. 19 June 2019, 46; BOURSIER, What is compliance? An attempt at definition, D. 2020, 1419; CORDIER-PALASSE et alii, Compliance and ethics in business law, RLDA suppl. December 2020, 165; FRISON-ROCHE, Compliance, in Economic Law in the 21st Century. Notions and issues, LGDJ, 2020, 99; GAUDEMET and ORY, For a European compliance law, JCP E 2020, 845; FRISON-ROCHE, The tools of compliance, Dalloz, 2021; MALIK, Compliance and soft law: at the crossroads, RLDC 2021, No 6954, 45; FRISON-ROCHE, Ex ante liability, pillar of compliance law, D. 2022, 621 and The monumental goals of compliance, Dalloz, 2022; MALIK, Imposed compliance in business law, in Towards self-regulation of the ethics of economic activities, between incentives and constraints, LexisNexis, 2022, 89; FRISON-ROCHE, The jurisdictionalization of compliance, Dalloz, 2023.

Act No 2016-1691 of 9 December 2016 on transparency, the fight against corruption, and the modernization of economic life, known as the Sapin 2 Law.

TPICE, 30 September 2009, LawLex200900003132JBJ; Cass. com., 18 October 2017, LawLex201700001681JBJ, holding that the fact that the parent company is a non-operational holding, does not interfere in the activities of its subsidiary, engages in various activities, is geographically distant from the subsidiary, which has its own local management and resources, and has opted not to contest the charges, unlike the holding, is not sufficient to overturn the presumption of effective exercise of decisive influence by the parent company over its subsidiary; ADLC, 16 March 2020, LawLex202000000542JBJ, considering that the fact that many "levels" separate the parent company from its subsidiary is not sufficient to overturn the presumption of imputability, since it applies not only when there is a direct relationship between them, but also in cases where this relationship is indirect, through interposed subsidiaries.

CA Paris, 6 May 2021, LawLex202100002550JBJ.

ADLC, 16 July 2020, LawLex202000001744JBJ.

DENIS-FANTOME and VINEY, Civil liability in the law on the duty of vigilance of parent companies and contracting companies, D. 2017, 1610; FRISON-ROCHE, Regulation, supervision, compliance, Dalloz, 2017; MALECKI, The duty of vigilance of parent companies and contracting companies: was it really reasonable?, BJS 2017, 298; PARANCE, The legislative enshrinement of the duty of vigilance of parent companies and contracting companies, Gaz. Pal. 18 April 2017, 16; PORACCHIA, Observations on the law of 27 March 2017 on the duty of vigilance of parent companies and contracting companies, RTDF 2017/4, 93; CUZACQ, The scope of the duty of vigilance of parent companies due to their subsidiaries and of contracting companies due to their subcontractors or suppliers, Mélanges Neau-Leduc, Lextenso, 2018, 287; PARACHKEVOVA, Implementation of vigilance in company law, JCP E 2023, No 1239.

L. 2017-399 of 27 March 2017 on the duty of vigilance of parent companies and contracting undertakings, JORF 74 of 28 March 2017.

For a rare illustration, Judicial Court Paris, 5 December 2023, LawLex202300014265JBJ, JCP G 2024, No 85, note BARBIERI; RJDA 2024, No 166; JCP E 2024, No 1070, note SCEMLA, PAILLOT de MONTABERT, KORKIKIAN, ordering an undertaking to complete its vigilance plan with a risk mapping aimed at their identification, analysis, and prioritization, to establish evaluation procedures for subcontractors based on the specific risks identified by the risk mapping, to implement a mechanism for alert and collection of reports after consulting with representative trade unions, and to publish an actual monitoring system for vigilance measures.

LENOIR, Compliance, For a fair sharing of global societal and environmental responsibility, Actes prat. ing. sociétaire 2020, 173; DUPOUY, Is environmental compliance the future of environmental law?, Infrastructures 2022, study 18; LERAY, Climate litigation and duty of care, Rev. sociétés 2023, 601.

L. 2010-788 of 12 July 2010, on the national commitment to the environment.

L. 2021-1104 of 22 August 2021 JORF 196 of 24 August 2021, on combating climate change and strengthening resilience to its effects.

Cass. crim., 16 June 2021, LawLex202200001378JBJ, BJS September 2021, 24, obs. SALOMON; JCP G 2021, No 768, obs. BRIGANT; JCP E 2021, No 1368, obs. DREYER; Dr. pén. 2021, No 140, obs. CONTE; JCP S 2021, No 1223, obs. DUQUESNE; Rev. int. Compliance 2021, No 220, obs. RUSSO; JCP E 2022, No 1101, No 13, obs. GASBAOUI.

CHAPUT, The autonomy of the subsidiary in anticompetitive practices law, Contrats Conc. Consom., 2010, study No 1; DESTOURS, It's not me, it's my daughter!, RLC, 2010/24, 33; ARCELIN-LÉCUYER, Imputability of the offense within a group: reception of community case law by the Competition Authority, RLC, 2011/27, 26; PIRONON, News on competition law and anticompetitive practices: Corporate groups in anticompetitive practices law, LPA, 2011, No 199, 3; ARCELIN, Combined approach to the notions of undertaking and imputability of the offense, RLDA, 2013/85, 51; SCHMEIDLER, The liability of the parent company for the acts of its subsidiary, D., 2013, 9, 584; d'ALES and TERDJMAN, The corporate veil, a shield against the implication of a parent company due to its subsidiary, JCP E, 2014, 1584; BERNARDEAU, Like mother, like daughter, (except) in competition law?, RLC 2015, No 2699; DECOCQ, Synthesis of French and European law on imputability and civil and criminal liability, AJCA 2015, 56; LUC, The approach of European and French courts on imputability and the impact on the amount of the financial penalty, AJCA 2015, 58; DUMARÇAY, The delicate handling of the notion of economic unit: a brief review of the implementation of the notion by French and European Union courts, RLC 2016/53, No 3028; CLAUDEL, Liability within groups in competition law: An example to follow?, Cah. dr. entr. 2017/5, Dossier, No 27; LEMAIRE, Competitive liability of corporate groups, Contrats Conc. Consom. July 2017, Dossier 5; THOMAS, The offending undertaking in anticompetitive practices law: Variations around the distinction between company and undertaking (European Union and France), Concurrences, 2021; BEHAR-TOUCHAIS, Imputability in competition law, in Mélanges Sirinelli, Dalloz, 2022, 557.

ECJ, 14 July 1972, LawLex200200004145JBJ.

ECJ, 10 September 2009, LawLex200900003031JBJ; CJEU, 20 January 2011, LawLex201100000062JBJ; GC, 27 November 2014, LawLex201400001357JBJ.

TUE, 12 July 2018, LawLex201800001093JBJ.

CJEU, 6 October 2021, LawLex202100005482JBJ.

See notably Cass. com., 22 September 2021, LawLex202100005386JBJ, deciding that the parent company holding 100% of the capital of its subsidiary, with which it is linked by organizational and governance ties, notably manifested by close financial control, can be attributed the anticompetitive behavior of the latter; Competition Authority, 9 December 2021, LawLex202100006199JBJ, holding that the undertaking controlling its subsidiary by more than 90% and having a directing power over it, to the point of depriving it of real autonomy in determining its market strategy, can be held responsible for the obstruction offense committed by the latter.

See a contrario, Cass. com., 18 October 2017, LawLex201700001681JBJ.

Company Law (en cours)

284. Vigilance and responsibility of the parent company(1)

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