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

Company Law (en cours)

The rules regarding disclosure requirements for significant equity investments are set out in Articles L. 233-7 to L. 233-14 of the Commercial Code  and 223-11 et seq. of the General Regulation of the Financial Markets Authority.

Pursuant to the first paragraph of I of Article L. 233-7, when the shares of a company with its registered office in the territory of the Republic are admitted to trading on a regulated market of a State party to the agreement on the European Economic Area or on a financial instruments market that allows trading of shares that can be registered with an authorized intermediary, any natural or legal person acting alone or in concert, who comes to hold, directly or indirectly, a number of shares representing more than one-twentieth, one-tenth, three-twentieths, one-fifth, one-quarter, three-tenths, one-third, one-half, two-thirds, eighteen-twentieths, or nineteen-twentieths of the capital or voting rights must inform the company, as well as the AMF , no later than before the close of trading on the fourth trading day following the day the threshold was crossed, of the total number of shares or voting rights they hold . Information on crossing the participation threshold must also be provided within the same time frame when the capital or voting rights participation falls below these thresholds .

The person required to provide information must also inform the Financial Markets Authority, within the same timeframes and according to the same procedures, from the moment the participation threshold is crossed, when the company's shares are admitted to trading on a regulated market or on a financial instruments market other than a regulated market, at the request of the person managing this market . In the latter case, the information due to the company and the AMF may only concern part of the previously mentioned thresholds, under the conditions set by the General Regulation of the Financial Markets Authority.

Finally, in accordance with Article L. 451-2-1 of the Monetary and Financial Code, the obligation of information on equity investments also applies to the issuer whose registered office is outside the territory of the European Economic Area and whose equity securities or debt securities have a nominal value of less than EUR 1,000 and are admitted to trading on a regulated French market . The Financial Markets Authority may exempt this person from the obligation of information if it considers the obligations to which it is subject under the legislation of the third country applicable to it to be equivalent. Similarly, the AMF may exempt the company whose registered office is established outside the territory of the European Economic Area from the obligations defined in II of Article L. 233-8 of the Commercial Code if it considers the obligations to which it is subject under the legislation of the third country in which it has its registered office to be equivalent. The AMF establishes, updates, and publishes the list of third countries whose legislative or regulatory provisions are considered equivalent to the obligations defined in I of Article L. 233-7 and II of Article L. 233-8 of the Commercial Code.

The articles of association may provide for an additional obligation of information concerning the holding of fractions of the capital or voting rights below one-twentieth . The obligation concerns the holding of each of these fractions, which cannot be less than 0.5% of the capital or voting rights.

For the calculation of the participation thresholds mentioned in Article L. 233-7 of the Commercial Code, account is taken of the shares and voting rights held, as well as, even if the person concerned does not hold shares or voting rights otherwise, the shares and voting rights that are assimilated thereto pursuant to Article L. 233-9 of the Commercial Code, which are related to the total number of shares comprising the company's capital and the total number of voting rights attached to these shares . In particular, shares or voting rights held by other persons on behalf of the person concerned by the threshold crossing declaration, shares or voting rights held by companies it controls, shares or voting rights held by a third party with whom it acts in concert, shares of which it has usufruct, shares or voting rights held by a third party with whom it has concluded a temporary transfer agreement concerning these shares or voting rights, shares deposited with it, provided that it can exercise the voting rights attached to them as it sees fit in the absence of specific instructions from shareholders, and voting rights it can exercise freely under a proxy in the absence of specific instructions from the concerned shareholders, are assimilated to the shares or voting rights of the person concerned . However, for this latter case, the voting proxies it benefits from should not be counted to determine if it reaches the threshold crossing declaration thresholds as long as, having published its voting intentions, it is bound by this publication and loses all freedom of action .

The total number of voting rights is calculated based on all shares to which voting rights are attached, including shares deprived of voting rights . To assess the crossing of a threshold by a company, which gives rise to a declaration obligation to the AMF, it is necessary to take into account all holdings in the target's capital that it holds directly or indirectly through subsidiaries .

The threshold crossing declaration must include : the identity of the declarant; if applicable, the identity of the natural or legal person authorized to exercise voting rights on their behalf; the date of the threshold crossing of participation; the situation resulting from the operation in terms of shares and voting rights; if applicable, the nature of the assimilation to the shares or voting rights held by the declarant resulting from Article L. 233-9 of the Commercial Code as well as, if applicable, the main characteristics of the financial instruments and agreements mentioned in points 4° and 4° bis of I of Article L. 233-9; if applicable, all the companies controlled within the meaning of Article L. 233-3 through which the shares and voting rights are held; and, if applicable, the number of shares acquired following a temporary transfer of shares and the signature of the person required to declare. The person required to provide information must also indicate in their declaration  the number of securities they hold that will eventually give access to shares to be issued and the voting rights attached thereto, and the already issued shares they can acquire, pursuant to an agreement or financial instrument mentioned in Article L. 211-1 of the Monetary and Financial Code, without prejudice to the provisions of points 4° and 4° bis of I of Article L. 233-9. The same applies to the voting rights they can acquire under the same conditions. Furthermore, on the occasion of threshold crossings of one-tenth, three-twentieths, one-fifth, or one-quarter of the capital or voting rights, they are also required to declare the objectives they intend to pursue over the next six months .

The declaration must be addressed to the company whose shares have been acquired and to the Financial Markets Authority. The information is made public by the AMF within three trading days following the receipt of the complete declaration . In the event of a change of intention within six months from the filing thereof, a new reasoned declaration must be sent to the company and the AMF without delay and made public under the same conditions. This new declaration restarts the six-month period . Furthermore, threshold crossing declarations made on obsolete forms that do not specify that it results from the waiver of purchase options and do not distinguish between shares and purchase options do not meet the requirements of Articles 223-11 and 223-14 of the AMF General Regulation . A company that fails to declare the crossing of a participation threshold within five trading days undermines the proper information of the public and the equality of information and treatment of investors or their interests, even if this late declaration had no effect on the price of the security concerned .

Any person who has not duly made the declaration to which they were bound is deprived of the voting rights attached to the shares that exceed the fraction that has not been duly declared for any shareholders' meeting held until the expiration of a period of two years following the date of regularization of the notification . Under the same conditions, the voting rights attached to these shares and which have not been duly declared cannot be exercised or delegated by the defaulting shareholder . The Commercial Court in the jurisdiction where the company has its registered office may, after hearing the public prosecutor, upon request of the company's president, a shareholder, or the AMF, pronounce the total or partial suspension, for a period not exceeding five years, of their voting rights against any shareholder who has not made the declaration or who has not complied with its content during the six-month period following its publication . The failure to declare the crossing of the 5% threshold within the deadlines is of an objective nature, which excludes justifications based on ignorance of the texts, lack of intention or profit derived from the failure, or the lack of diligence of the lawyer of the accused in their duty to advise .

In criminal matters, the act of presidents, administrators, members of the executive board, managers, or general directors of legal entities, as well as individuals, failing to fulfill the information obligations to which this entity is bound, is punishable by a fine of 18,000 euro .

Finally, any breach of the obligation to disclose equity investments may result in sanctions from the AMF, as long as it affects the equality of information and treatment of investors or their interests, as well as the proper functioning of the market . The assessment of the validity of breaches of the obligation to declare threshold crossings does not require demonstrating intent, although this may be considered when assessing the sanction imposed on the responsible party . The person accused of late declaration of a threshold crossing cannot attempt to exonerate themselves by claiming their intention to further increase their participation or the prohibitive cost of the contribution established by Article L. 621-5-3 of the Financial Markets Code . A regularization declaration, made at the request of the AMF, concerning multiple threshold crossings not declared in a timely manner, leaves the market unaware of the massive purchases made by the group and justifies a financial penalty, even if it does not involve a major issue for the group, as it concerns self-control shares .

RGAMF, Art. 223-14, I. - V., for an application, AMF, 25 July 2013, LawLex202300000943JBJ, considering that the obligation to declare the crossing of a threshold and, if applicable, to file a public offer applies to any person, acting alone or in concert, regardless of the origin and circumstances in which they "come to hold" a number of securities involving a crossing, which may notably result from the automatic allocation of double voting rights to shares held in registered form for more than two years.

Paris, 16 June 2016, LawLex202300000899JBJ.

Commercial Code, Art. L. 233-7, I, para. 3.

Commercial Code, Art. L. 233-7; RGAMF, Art. 223-14, VI.

AMF, 9 November 2006, LawLex202300000944JBJ.

C. com., Art. L. 233-14, para. 1. - For applications, See Paris, 16 June 2016, LawLex202300000899JBJ, considering that the non-performance of the obligation to declare threshold crossings, which does not allow for exceptions, cannot be justified by the concern to ensure the survival of the undertaking in question and holding that the transferee cannot argue that the transfer was carried out within the framework of the realization of a pledge, when he had consented to this guarantee and consequently to the possibility of a forced transfer, in order to exempt himself from his failure to declare the crossing below the 5% threshold of the capital; AMF, 1 March 2007, LawLex202300000945JBJ, specifying that the chairman and CEO of a company who declares a threshold crossing below 10% very late, without taking into account, in his declaration, bearer shares or shares of which he was the usufructuary, undermines the equality of information and treatment of investors or their interests as well as the proper functioning of the market.

Commercial Code, Art. L. 233-7, I, para. 1 and R. 233-1.

Commercial Code, Art. L. 233-14, para. 2.

Commercial Code, Art. L. 233-14, para. 23.

Paris, 24 June 2014, LawLex202300000978JBJ, affirming that the failure to declare within five days the crossing of the 5% shareholding threshold in the capital of a listed company is sanctionable even if it is not linked to insider trading or an attempt at creeping control, and even if no demonstration of an effect on market functioning is provided. - Also see AMF, 13 January 2011, LawLex202300000951JBJ.

CMF, Art. L. 451-1-2, II, 3°, by reference to Art. L. 451-2-1, para. 1.

Commercial Code, Art. L. 233-7, para. III.

Paris, 22 April 2021, LawLex202300006368JBJ.

154. Crossing of thresholds