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

Company Law (en cours)

When one or more majority shareholders jointly hold at least 90% of the capital or voting rights of a company whose shares are admitted to trading on a regulated market in a Member State of the European Union or party to the Agreement on the European Economic Area, including France, or have ceased to be so, minority shareholders may request the AMF to require the majority shareholder(s) to file a  …

Principle

When one or more majority shareholders jointly hold at least 90% of the capital or voting rights of a company whose shares are admitted to trading on a regulated market in a Member State of the European Union or party to the Agreement on the European Economic Area, including France, or have ceased to be so, minority shareholders may request the AMF to require the majority shareholder(s) to file a draft public buyout offer . The public buyout offer implies that the minority shareholder's share, upon request, has lost its liquidity on a market narrowed by the relative weight of the majority shareholders, allowing them to exit the company under normal conditions of price and timing . In fact, the filing of a public buyout offer is not required when observing the average of shares traded during the reference period, on effective trading days, shows that a significant number of shares have been transacted almost daily, and thus, their liquidity appears satisfactory . If the AMF declares the request admissible, it notifies the majority shareholder(s), who are then required to file, within a timeframe it sets, a draft public buyout offer formulated under conditions that can be declared compliant. The offer must cover all capital securities or securities granting access to capital and voting rights in circulation.

The draft public buyout offer may also be submitted spontaneously by the majority shareholders . In this case, the minority shareholders cannot claim that the obligation to sell their shares to the initiator of the public offer violates the right to property guaranteed by the ECHR, as it arises from the legislation governing financial markets and the transfer of ownership, carried out with fair and equitable compensation for the withdrawing party by the offer initiator under the supervision of the market authority, meets the interest of the proper functioning of the market, without the need to justify in concreto the public utility of the operation . Similarly, the submission of a draft public buyout offer is justified even if its initiator has partly increased its stake in the target by acquiring treasury shares, as long as, even after deducting the voting rights attached to them, its stake reaches the required thresholds . Furthermore, the fair evaluation of the minority shareholders' rights does not need to be supplemented by compensation related to the absence of dividend distribution or be calculated based on a single method, the most favorable to their interests, or based on random events .

Finally, the filing of a public buyout offer is required when a public limited company whose shares are admitted to trading on a regulated market in a Member State of the European Union or another State party to the agreement on the European Economic Area takes the form of a partnership limited by shares . The person or persons who controlled the company before its transformation or the general partner(s) are required, as soon as the general meeting of shareholders adopts the resolution for the transformation of the company, to file a draft public buyout offer without any minimum condition and worded in such a way that it can be declared compliant. The initiator of the draft offer must specify to the AMF whether they reserve the right, at the end of the offer and depending on its outcome, to request that all capital securities or securities giving access to capital and voting rights of the company be delisted from the regulated market on which they are admitted . Finally, the AMF itself may require the filing of a public buyout offer when it learns, within the framework of its right to information, that one or more companies controlling another are considering submitting to the approval of an extraordinary general meeting one or more significant amendments to the statutory provisions, particularly those relating to the form of the company, the conditions for the transfer and transmission of capital securities, as well as the rights attached thereto, or decide on the principle of merging this company with the company that controls it or with another company controlled by the latter, the transfer or contribution to another company of all or most of the assets, the reorientation of the corporate activity, or the elimination, for several fiscal years, of any remuneration of capital securities. In these two scenarios, the AMF makes its decision based on the consequences of the planned operation with regard to the rights and interests of the holders of capital securities or voting rights of the company.

The mandatory withdrawal, which initially only concerned the aftermath of a public buyout offer, has applied to all public offers since the law of 31 March 2006. Pursuant to Article 237-1 of the AMF regulations, following any public offer and within three months after the offer's closure, the offer initiator may have the non-tendered shares transferred from minority shareholders, provided they do not represent more than 10% of the capital and voting rights, with compensation for the latter. Article 237-2 requires the initiator, when filing their offer, to indicate to the AMF whether they intend to request the implementation of the mandatory withdrawal once the offer is completed and based on its outcome. According to Article L. 433-4, II, 2° of the Monetary and Financial Code, the compensation offered must be equal, per share, to the price proposed during the last offer or, if applicable, to the result of an evaluation conducted using objective methods applied in asset transfers, taking into account, with appropriate weighting for each case, the value of the assets, the profits made, the market value, the existence of subsidiaries, and business prospects. An independent expert is also tasked with submitting a report on the proposed evaluation. The evaluation of shares is a contentious point that generates abundant litigation. Case law considers that implementing a mandatory withdrawal procedure requires, to achieve fair compensation by the offer initiator, applying a plurality of known, objective, and significant criteria with appropriate weighting for the case, excluding, if necessary, irrelevant criteria or instead adopting valuation methods not specified by the legislator but likely to lead to a fair evaluation of the company in question . In the absence of new elements between the public buyout offer and the mandatory withdrawal, the same value, determined by applying the multi-criteria method, may be used for the price offered in the first procedure and the compensation set in the second . Finally, a public entity cannot, to oppose the mandatory withdrawal, invoke the principle of the inalienability of its assets, as this procedure does not constitute the exercise of an enforcement measure and the shares in question only pertain to its private domain .

It follows from the combination of Article L. 433-4, II of the Monetary and Financial Code and Articles 237-2 and 237-3 of the AMF General Regulation that the threshold condition for the mandatory withdrawal, as stated by Article L. 433-4 II, is assessed on the date of the public offer's closing . It must be inferred that only the decision by which the AMF declares the mandatory withdrawal compliant or, if applicable, sets its implementation date, has the purpose and effect of confirming that the threshold condition for the mandatory withdrawal is legally met .

Commercial Code, Art. L. 433-4, I, 1° and AMF General Regulation, Art. 236-1. - See for an application, Paris, 26 November 2020, LawLex202200008547JBJ, considering that minority shareholders of a company can submit a request to the AMF for the implementation of a public buyout offer when the majority shareholders jointly hold 90% of the capital or voting rights of this company, even if this level of participation falls below this threshold between the date of submission to the AMF and the date on which the authority has made its decision.

CA Paris, 26 November 2020, LawLex202200008547JBJ. See also CA Paris, 7 April 1998, LawLex202300006351JBJ, holding that the inability of a minority shareholder, given the volume of the potential transaction, to sell their shares under normal conditions of time and price justifies the obligation imposed on the majority shareholder to file a public buyout offer.

Cass. com., 29 April 1997, LawLex202200007246JBJ.

Cass. com., 21 January 2014, LawLex202300006370JBJ.

Cass. com., 15 March 2023, LawLex202300004129JBJ.

CA Paris, 4 November 2003, LawLex202300006345JBJ. See also Cass. com., 6 May 1996, LawLex202300006352JBJ.

Cass. com., 29 April 1997, LawLex202200007246JBJ; 17 July 2001, LawLex202200007243JBJ; CA Paris, 16 September 2003, LawLex202300006377JBJ.

CA Paris, 1 February 2000, LawLex202300006442JBJ.

CA Paris, 5 May 1998, LawLex202300006338JBJ.

Commercial Code, Art. L. 433-4, I, 2° and AMF General Regulation, Art. 236-5.

AMF General Regulation, Art. 236-5, para. 2.

CA Paris, 9 April 2002, LawLex202200008542JBJ. See also, on the necessity of a multi-criteria approach, CA Paris, 13 November 2001, LawLex202300006343JBJ; 19 December 2000, LawLex202200008546JBJ.

Company Law (en cours)

151. Principle

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151. Principle

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