France’s stock exchanges are operated by Euronext Paris, which was created in the September 2000 merger of the Amsterdam, Brussels and Paris exchanges and subsequently, in 2002, of the Portuguese exchange; Euronext also acquired Liffe in 2002. Euronext and the New York Stock Exchange were combined into a new entity called NYSE Euronext. Euronext Paris has 749 listed companies and a market capitalisation of about €1.490 billion. In February 2005, the Premier Marché, the Second Marché and Nouveau Marché of Euronext Paris were merged into a single regulated market named ‘Eurolist by Euronext’, and an unregulated but structured market was created, Alternext.
Eighty-six public tender offers were completed in France in 2005, against 72 in 2004 and 69 in 2003. Their aggregate value in 2005 decreased by 12 per cent compared to 2004. The largest public tender offer recently launched was the tender offer by Mittal Steel for Arcelor’s shares.
Securities offering and the sale and subscription of securities are regulated by the French Monetary and Financial Code (MFC) and the Autorité des marchés financiers (AMF) General Regulation and its implementing instructions.
As a consequence of the implementation process under French law of the Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments, the Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC and Commission Regulation 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC, the MFC has been amended by the French Ordinance 2007-544 of 12 April 2007 relating to markets in financial instruments (the ‘2007 Ordinance’). The 2007 Ordinance relates inter alia to the definition of financial instruments, investment services, regulated markets, market operators, systematic internalisers, obligations of investment firms, tied agents, transparency obligations, and cross-border cooperation.
Further implementation measures were to be enacted by decree or by the AMF.
Two decrees were issued on 15 May 2007 implementing the provisions of the 2007 Ordinance: ie Decree 2007-901 and Decree 2007-904. These decrees modify the regulatory provisions of the MFC and relate to a modification of the definitions of financial instruments and of investment services. They reflect substantially the provisions of MIFID.
An executive order from the Minister of Economy and Finance of 15 May 2007 approves changes in the general regulation of the AMF for purposes of implementing MIFID.
Although some technical points may need some further fine tuning, France is now on the starting blocks to meet the MIFID implementation deadline of 1 November 2007.
The 2007 Ordinance (together with its implementing Decrees) will be in force by 1 November 2007. Accordingly, French securities laws and regulations will be substantially modified, such forthcoming changes not being taken into account in the present chapter.
Note that:
(a) securities issued in France and subject to French law are in dematerialised form ie, registered with the issuer or recorded with a financial intermediary in book entry form. Dematerialisation of such securities is mandatory and no physical share certificates are issued.
(b) financial instruments include:
A public offering occurs when a financial instrument:
French public offering rules require the drafting of a prospectus submitted to the visa of the AMF or, as a result of the implementation of the Prospectus Directive under French law, to the visa of the competent authority of an EU or EEA member state.
French laws and regulation provide for exemptions either from the application of French public offering rules or from prospectus requirements.
Irrespective of the use of advertising, solicitation, whether or not made through credit institutions or investment firms, issues or sale of financial instruments to qualified investors or made within a restricted circle of investors qualify as private placement, provided that such investors act for their own account.
In such a case, no prospectus or information memorandum is needed.
French laws and regulations provide for exemptions other than those concerning ‘private offering’ to which French public offering rules do not apply.
The prior authorisation of the French Ministry of the Economy is no longer needed before introducing foreign financial instruments on French territory.
The AMF General Regulation includes specific rules relating to financial instruments listed on a foreign recognised market or a regulated market of the EEA. These rules aim at providing to the French public information which is accurate, precise, and fair.
Companies do not have to be locally registered or licensed in order to offer securities in France. However, and subject to European passport rules, foreign issuers must also comply with local regulations with respect to securities and offerings, including the AMF General Regulation. No local formal presence is required.
These requirements are detailed below in section 8. However, it should be noted that foreign issuers must provide inter alia the names of the issuer’s main shareholders, the number of securities that will be offered on the Euronext Paris market, and a certified statement made by the issuer’s consular authority certifying that all documents provided by the issuer for the purpose of the Euronext Paris listing comply with the laws and regulations of its country of incorporation.
Under French law, securities (valeurs mobilières) belong to the legal category of financial instruments. Financial instruments are defined very broadly by the MFC and encompass most categories of French equity and debt instruments as well as their foreign equivalents. However, to qualify as securities, financial instruments must be, inter alia, transferable by book entry or by physical delivery, and issued by an entity which has the capacity to proceed with a public offering (appel public à l’épargne).
The French supervisory authorities are the AMF, the Commission bancaire, and the Comité des établissements de crédits et des entreprises d’investissement (CECEI). The AMF is an independent administrative authority created by French law No 2003-706, dated 1 August 2003 (the Commission des opérations de bourse (COB) and the Conseil des marchés financiers (CMF) were merged into the AMF). The AMF has broad duties to protect the markets and is authorised to issue rules and regulations, which are codified in the AMF General Regulation and its implementing instructions, as well as recommendations or positions. The AMF has wide investigative, disciplinary and other powers in relation to financial market operations.
The Commission bancaire supervises credit institutions and investment firms and has disciplinary and administrative power over them. The Commission bancaire operates with the support of the Banque de France.The CECEI may grant and withdraw approval of credit institutions, investment companies and custodians (teneurs de compte conservateur) authorised to operate in France as well as address European passport notification to the relevant foreign regulatory authority.
The offering document under French law is a prospectus. The AMF General Regulation and its implementing instructions lay out the requirements for prospectuses.
Generally, the public offering of French or foreign financial instruments requires the drafting of a prospectus which must be submitted for an AMF visa. The prospectus must be issued and made publicly available.
When a public offering of financial instruments is planned in France, the prospectus approved by the competent supervisory authority of another member state of the European Community or a State Party to the EEA agreement, called European passport, shall be valid for a public offering of such financial instruments in France, provided that the AMF receives notification of this prospectus by the competent supervisory authority.
A first admission for trading on a regulated stock exchange requires a detailed prospectus (document de base).
The issuer may also establish a shelf-registration document (document de référence) which will be referred to in a simplified prospectus (note d’opération) each time the issuer proceeds with a new operation. The shelf-registration document must be kept up-to-date and remain available to the public.
The issuer is responsible for the offering document but in practice it is prepared by the issuer’s advisers, ie, its investment banks, lawyers and auditors.
Reference is made in paragraph 5.4 below.
Various penalties are set up by law if it appears that the information contained in the prospectus are false, or if significant information has been omitted. The AMF ensures due diligence through its General Regulation.
Directors of the issuer must certify that to the best of their knowledge, the data contained in the prospectus are true and reflect the true situation of the issuer, and contain no fact or omission which may be misleading. Auditors must also certify the financial statements which are incorporated in the prospectus. They shall draw up a completion letter (lettre de fin de travaux) for their work on the prospectus and shall state their observations, if any. If the letter contains observations, the AMF shall take appropriate action such as specific warnings when reviewing the prospectus.
Under the provisions of the AMF General Regulation, any investment services provider (ISP) involved in a public offering must confirm to the AMF that the prospectus has been reviewed by its officers and that such review did not reveal any error or omission in the prospectus which may mislead investors.
A person who provides the public with false information concerning an issuer whose financial instruments are listed may be criminally liable.
Under the provisions of the AMF General Regulation and its implementing instructions, the prospectus must contain all the information necessary for investors to fairly evaluate the issuer’s assets, activities, financial situation and outlook, and the rights attached to the financial instruments being offered.
The issuer’s policy on dividends during the last three fiscal years is highlighted in the prospectus in order to provide the public with sufficient information. Under French corporate law, every public company must publish financial statements which disclose whether any dividend has been distributed to shareholders in the past. Moreover, the obligation to disclose any information useful to investors in order for them to evaluate the issuer’s situation and the rights attached to the financial instruments being offered renders the disclosure of the issuer’s history with regard to dividends necessary.
Only an entity licensed as an ISP either in France or in a State Party to the EEA agreement, and benefiting from the European passport is entitled to carry out investment services in France.
A distribution group usually involves at least two or three distributors.
The distributor must be either licensed in France or in a State Party to the EEA agreement as an ISP.
6.4 Involvement of distributor in the preparation of the offering document
The lead underwriter coordinates the preparation of the offering document, but the issuer is legally responsible for its drafting and filing with the AMF.
Euronext has the authority to accept or refuse the listing of financial instruments on its markets. The AMF may use its veto; however, its role is only to approve the prospectus, not to decide on the admission of the financial instruments.
Under French law, the general rule is that listed financial instruments may only be distributed to the public by an ISP, either registered in France or in another member state of the EU and duly ‘passported’ in France. Trading of a financial instrument on a regulated market must be done through a member of such market.
Some exceptions must be highlighted: sales of listed securities between two individuals may be done directly, as well as a sale of financial instruments between a parent company and its subsidiary (the parent must own at least 20 per cent of the share capital of its subsidiary, either directly or indirectly in order to fall within this exception). Furthermore, it must be noted that only licensed entities and their agents are entitled to carry out solicitation activities in France.
French issuers and issuers from a member state of the OECD have free access to the debentures market in France, so long as they notify the French Ministry of the Economy of their intention to issue.
Debentures may be sold directly to individuals by one or more financial institutions. Such financial institutions may also undertake to purchase any unsold debenture, or purchase the debentures themselves before reselling them to the general public. Usually, debentures are sold by a syndicate of financial institutions.
Debenture holders may be grouped into a ‘Masse’, which is an entity enjoying legal capacity by virtue of law or pursuant to the terms and conditions applicable to such debenture. Such Masse is mandatory in respect of domestic issues but optional in respect of international issues. The entity is managed by representatives in the interests of the group and may seek information from the issuer. Such an entity may be particularly effective in organising collective action in cases such as amendments of terms and conditions, restructuring and insolvency.
In order to be admitted to the official list of Eurolist by Euronext, the issuer must file an application which must contain the following documents:
The Board of Euronext reviews applications and decides whether the financial instruments should be admitted or not. The Admission Committee processes the applications and advises the Euronext’s Board. Issuers may challenge a Euronext decision on a tort basis before the courts in accordance with rules of civil procedure.
Every listed company must file a prospectus each time it plans to proceed with a public offering. Alternatively, such listed company may file a shelf-registration document with the AMF, which must be kept updated, and which will be supplemented by a simplified document known as a Note d’opération for each new public offering. The shelf registration document must be made available to the public and must contain all the legal, economic and financial data about the issuer required by French and European law.
In the event of a refusal by the AMF to grant its visa to the prospectus, the issuer may bring the case before the Paris Court of Appeal, which has exclusive jurisdiction in such matters.
The company running the French Stock Exchange is Euronext Paris; however, the AMF is the administrative authority in charge of supervising all regulated markets in France.
The power to impose disciplinary and administrative sanctions is distributed among the Commission bancaire and the AMF.
The Commission bancaire
The Commission bancaire is allowed to impose on credit institutions and investment firms one of the following disciplinary sanctions: warning, blame, temporary or definitive ban from exercising in whole or in part its activities, compulsory resignation, withdrawal of approval of credit institutions and investment firms authorised to operate in France, and monetary penalties.
The AMF
The AMF can use the following sanctions: warning, blame, temporary or definitive withdrawal of the professional card, temporary or definitive ban from exercising in whole or in part its activities, and monetary penalties commensurate with the seriousness of the failures and in relation to the damage caused by these failures. Also, the same sanctions may be imposed on persons entitled to carry out solicitation activities and advisers in financial investments (conseillers en investissements financiers) who have violated professional rules and regulations.
Violations of the special prohibitions contained in the MFC and in the French Commercial Code (CC) relating to the issuing of securities and the ability for a company to make a public offering are sanctioned by the commercial courts who can declare null and void the contracts that may have been concluded in relation to the issues or the securities that may have been issued.
Furthermore, by law, any shareholders are entitled, within a five year statute of limitation, to bring an action or to obtain from courts the annulment of the contract on the grounds that they are victim of an error, a fraud, or a violence which would have vitiated their consent.
9.3 Criminal penalties
Criminal courts may inflict criminal penalties to regulated entities when they violate rules dealing with market transparency. These criminal offences are, inter alia, insider trading, communication of privileged information, and market manipulation. Criminal penalties can be inflicted on individuals and companies.
10. ONGOING COMPLIANCE REQUIREMENTS
10.1 Nature of ongoing requirements
These requirements are set up by the CC and by the AMF General Regulation. Under these rules, issuers must (i) publish copies of their periodical financial statements in the Bulletin des annonces légales obligatoires (BALO), and (ii) provide the public with accurate and sincere information, and with any fact that may materially impact the listing price of the financial instruments.
10.2 Periodical financial statements
As a result of the incorporation into French Law of EU directives (transparency), a listed company must provide to the public:
10.3 Obligations regarding proxy solicitation
Proxies may only be given to other shareholders or to the shareholder’s spouse. Blank proxies may also be sent to the corporation; such proxies are then granted by law to the chairman of the board. Such blank proxies may only be sent to the shareholders together with, inter alia, the agenda of the general meeting, a copy of the proposed resolutions and a form that may be used to request additional documents.
10.4 Continuing requirements of reporting and notification of substantial shareholdings
Any person who increases his shareholding in a French listed company so that it crosses certain thresholds must notify both the issuer and the AMF (see section 15 below).
10.5 Clearing
Clearing activities are regulated by the MFC. Clearing agents must be either licenced as a credit institution or managed by a credit institution. Under the provisions of the AMF General Regulation, rules of operation of clearing houses must be approved by the AMF. The following legal entities only may become members of clearing houses:
Clearing houses of a regulated market in France have the legal duty to guarantee the correct execution of the orders managed by them.
11. CORPORATE GOVERNANCE
11.1 Law and/or Code
French Corporate Governance is mostly governed by the CC. The AMF also made several recommendations to listed companies.
11.2 Management structure
There are two management systems applicable to a French Société Anonyme (SA):
The chief executive position of a company may be held by the Président du conseil d’administration who holds then both the positions of president of the board and of directors and general manager (Directeur Général). The position of Directeur Général may also be held separately, all under conditions provided for in the by-laws (statuts).
The management board structure is less flexible and less common than the board of directors structure.
The general manager represents the company vis-à-vis third parties. He has all powers to manage the company. He can perform any act in the name of the company. His authority is limited only by the corporate purposes and the powers vested by law with the shareholders’ meeting or the board of directors.
In case of a management board structure, the management board is vested with the powers to perform any act in the name of the company consistent with its purpose and not expressly assigned by law or the by-laws to the supervisory board or the shareholders’ general meeting. The company is represented vis-à-vis third parties by the chairman of the management board. The supervisory board has the duty of supervising the management board, with the right to examine any corporate records. However, the supervisory board cannot intervene in the management of the company. Any conflict between the two organs can only be settled by a decision of the shareholders’ general meeting.
11.3 Obligations to publish information on the internet
Listed companies must file certain information with the AMF, which makes it available to the public on its website.
11.4 Responsibility of inside/outside directors
There is no legal requirement regarding board member independence under French law, where a board of directors is regarded as a collegial body. However, the chairman of the board of directors has to specify in the annual report submitted to shareholders’ meetings the conditions under which the meetings and the activities of the board are prepared and organised, as well as the company’s internal control procedures.
The AMF has recommended, pursuant to the principles laid down by a consolidated report made by the AFEP-MEDEF organisations in 2003 (which includes, inter alia, the Bouton Report of September 2002), that half of the members of the board should be independent in listed companies without controlling shareholders, and a third in other situations. According to AMF recommendations, characterisation as an independent director should be discussed by an appointment committee and reviewed every year by the board of directors. Otherwise, the AMF requires that such company explain how and why its practices differ from such recommendations.
11.5 Committees
Further to AMF’s recommendations, it is common practice for listed companies to create audit, compensation and appointment committees within the board of directors or supervisory board. The responsibility of such committees is determined by the board of directors or the supervisory board.
11.6 Obligation to ask consent of shareholders’ meeting
The shareholders have exclusive authority to enact certain decisions such as modifying the by-laws, issuing shares or other equity securities or approving the annual accounts.
Contracts entered into between the company and a corporate officer or a 10 per cent-shareholder (or any related company) are subject to the prior approval of the board and subsequent approval of the shareholders’ meeting. This procedure does not apply to agreements entered into at arm’s length conditions in the ordinary course of business.
11.7 Depth of information – proxy solicitation
The conditions under which the meetings and the activities of the board are prepared and organised, as well as the internal control procedures set up within the company, must be specified in the annual report.
11.8 Appointment/dismissal of directors
Directors and members of the supervisory board are appointed and dismissed by the shareholders’ meeting. The general manager and members of the management board are appointed and dismissed respectively by the board of directors and the supervisory board.
11.9 Income and options for directors
Shareholders have exclusive authority to approve the compensation of board members. Such authority belongs to the board of directors as regards its chairman and the general manager, and to the supervisory board as regards members of the management board. Employees may be appointed as mandataires sociaux, but mandataires sociaux may not enter into employment agreements. Board members may not be granted stock options unless they also exercise executive functions in the company.
The compensation packages of corporate officers, the aggregate compensation of the top ten (or top five) executives, and information relating to stock options awarded must be disclosed in the annual report.
11.10Earnings guidance
Listed companies are required to file financial information on a regular basis. Certified annual accounts, and certified consolidated accounts if any, and annual reports of the board must be submitted to the shareholders’ meeting on an annual basis.
Listed companies must disclose, as soon as possible by means of press releases, any event that may have a material effect on the listing price of its securities or on the situation of holders of securities. However, such disclosure may be postponed, for legitimate purposes, if the listed company can preserve the confidentiality of this information.
11.11MD&A
Management discussion and analysis (MD&A) practice is not regulated under French law, however in order to preserve market efficiency all actors shall be given equal access to relevant information.
11.12Directors’ liability
Directors are liable for breaches of law or by-laws’ provisions and mismanagement. A board member is not necessarily released from any liability by voting against a resolution or resigning. He must make his disagreement clear, for example by justifying his decision in writing or requesting that a shareholders’ general meeting be convened.
12. INSIDER TRADING
12.1 Law and regulations
Transactions carried out by persons having access to inside information are regulated by the MFC and the AMF authority.
12.2 Code of conduct
Insider trading
Any person benefiting from inside information shall refrain from using such by acquiring or disposing, or trying to do so, for his own account or for the account of a third party, either directly or indirectly, of securities issued by an entity to which that information relates.
Insiders shall also refrain from:
Market manipulation
It is also criminally sanctioned for a person to:
Notification of transactions
The following persons shall notify to the AMF all acquisitions, transfers, subscriptions and exchanges of securities of any entity carrying out public offerings as well as the financial instrument transactions associated with it:
12.3 Definitions
Inside information
Inside information shall mean information of a precise nature which has not been made public and, relates to one or more issuers, securities or financial instruments which, if made public, would be likely to have an effect on the listing price of the relevant securities or financial instruments.
Concerned persons
The obligation to refrain from trading securities or disclosing inside information shall apply to any person who possesses inside information:
The issuer shall establish, update and keep at the AMF disposal the list of the persons employed by him and any third party having access to inside information. Any third party having access to inside information shall also comply with such requirement.
12.4 Sanctions
The MFC provides for the following criminal sanctions against insider trading:
Stock exchange rulings provide for additional prohibitions and sanctions that may be inflicted by the AMF on any person or entity that uses inside information to complete a transaction.
13. MUTUAL FUNDS
Undertakings for collective investment in transferable securities (UCITS) are primarily regulated by the provisions contained in the MFC, the AMF General Regulation and its implementing instructions.
UCITS encompass the two following categories:
13.1 The following rules are common to these two categories
Their constitution – just like their transformation, merger, spin-off or winding-up – requires the approval of the AMF (except for certain types of vehicles where a prior notification only is required). Approval is delivered by the AMF within one month from the filing of an application containing, inter alia, the by-laws/statement of rules of the UCITS, an application form and a prospectus. UCITS must comply with legal or contractual ratios.
UCITS must provide subscribers with an information document (the prospectus) before any subscription to its shares/units. They are also under the duty to (i) publish or make available annual or semi-annual reports and (ii) inform the shareholders/unitholders of any change in the UCITS within the conditions and format stated by the AMF General Regulation and its implementing instructions. The assets of a UCITS must be held by a depositary (custodian) whose duties also cover the control over the UCITS decisions. A depositary must be chartered as a credit institution, investment firm authorised to carry out custody activities or an insurance company.
13.2 Special rules for open-ended investment trusts
SICAV are limited companies whose purpose is the holding and management of securities portfolio. The amount of the share capital of a SICAV is equal to its net asset value. The initial amount of the share capital must be at least equal to €8 million. If the assets of a SICAV drop down to €4 million, share redemptions are forbidden. The SICAV may manage itself and does not need a management company. However, for practical reasons, most SICAVs are managed by a management company.
13.3 Special rules for mutual funds
An FCP is defined by law as a co-ownership of securities with no legal personality. It is created under the common initiative of a management company and a depositary. The management company manages the assets of the FCP and represents the fund vis-à-vis third parties. The initial amount of the share capital must be at least equal to €400,000. If the assets of an FCP fall to €300,000, unit redemptions are prohibited.
13.4 Marketing of foreign UCITS in France
The marketing of foreign UCITS in France requires prior approval of the AMF. Foreign UCITS in France must appoint one or more financial correspondents whose duties are inter alia the treatment of subscriptions, redemptions, payment of dividends, the status of AMF correspondent, the information of shareholders/unitholders and the payment of the AMF annual royalty.
14. SECURITIES INSTITUTIONS
The securities institutions in France are market executive undertakings, securities clearing houses, central securities depositories and investment firms.
14.1 Market executive undertaking (entreprises de marché)
A market executive undertaking is a limited company whose business is mainly to operate a regulated market. Euronext Paris SA is the only market executive undertaking in France. It provides price quotation and trading services. In addition to its duties as a market executive undertaking, Euronext has developed its own share indexes.
14.2 Securities clearing house
The purpose of a securities clearing house is to supervise positions, margin calls and, as the case may be, the liquidation of positions. Since 2001, LCH.CLEARNET SA, which is a subsidiary of Euronext, is the only securities clearing house of the markets managed by Euronext. It is a single securities clearing house that deals inter alia with shares, debentures, warrants, share options, forward contracts. A mechanism of clearing funds (fonds de garantie de la compensation) has been implemented by LCH.CLEARNET SA in order to secure uncovered risk.
14.3 Central securities depository
EUROCLEAR France is the French central securities depository. Its purpose is to act as a central securities depositary and manage securities settlement and the RGV 2 settlement system. Dematerialised securities are transferred between EUROCLEAR France accounts by means of electronic book-entry transmissions.
14.4 Investment services providers (ISP)
ISP are investment firms and credit institutions authorised to carry out investment services (ie, orders receipt and transfer on third parties’ behalf, orders execution on third parties’ behalf, trading for one’s own account, portfolio management on third parties’ behalf, underwriting and placement. The licensing authority is the CECEI, or the AMF when the service of portfolio management is the principal activity of the ISP. Investors can benefit from a collateral securities mechanism (mécanisme de garantie des titres) in the event their financial instruments or deposits in connection with investment services are not available.
15. NOTIFICATION OBLIGATIONS
Shareholders must notify the AMF and the relevant company if the number of shares or voting rights they own directly, indirectly or as part of a concert reaches five per cent, 10 per cent, 20 per cent, 25 per cent, one-third, 50 per cent, two-thirds, 90 per cent or 95 per cent of listed companies incorporated in France, within five trading days of such event. The information is then made public by the AMF. The by-laws may provide for additional thresholds between 0.5 per cent and five per cent; the notification obligation is only directed at the company itself.
Any person who acquires (directly, indirectly or as part of a concert party) shares representing more than 10 per cent or 20 per cent of the share capital or voting rights of a French listed company must declare to the target company and the AMF any intentions with regard to such interest for the next 12 months.
Shareholders of a credit institution must obtain a prior authorisation from the CECEI if the following thresholds are being reached (upwards and downwards): 10 per cent, 20 per cent and one-third of the voting rights, but also the acquisition or the loss of effective control.
16. PUBLIC TAKEOVERS
16.1 Applicable laws and regulations
Public takeovers are regulated by the MFC, the AMF General Regulation and its implementing instructions.
16.2 Mandatory takeovers
The filing of a takeover bid is mandatory where a person, acting alone or in concert:
A mandatory offer cannot be subject to any minimum level of acceptance condition.
16.3 Price
In case of a mandatory takeover, the offered price for the securities must be at least equal to the highest price paid for the same securities by the offeror, or by persons acting in concert with it over a period of 12 months before the filing of the bid. However, the AMF may adjust upwards or downwards the price in circumstances and in accordance with criteria determined in the AMF General Regulation.
Otherwise the price is freely determinable but is subject to the review of the AMF, which can measure the offered price against a number of financial criteria (net asset value, profitability, market capitalisation, discounted cash flow analysis and in comparison with similar transactions).
A competing or increased takeover bid must be at least two per cent higher in value or otherwise contain more favourable terms.
16.4 Timing
The different stages of a takeover bid are:
16.5 Strategy
There is no legal requirement for an offeror to negotiate or even approach the target company before announcing an offer. In practice, however, offerors make preliminary contact on an informal basis with the AMF and any other authorities whose approval will be necessary for launching the offer.
16.6 Share dealings
Before the announcement by the AMF of the filing of a tender offer, there are no particular restrictions on the offeror’s ability to buy and sell target company’s shares, subject to restrictions resulting from insider trading rules and acquisition disclosure obligations.
From the opening date until the closing date, dealings in target company’s shares may only take place on the regulated market on which they are listed. No off-market trading can be completed unless pursuant to an agreement notified to the AMF prior to the filing of the tender offer. The voting rights attached to shares acquired in breach of this rule are suspended for two years.
Only if the offer is in cash and not subject to any condition, the offeror and persons acting in concert with it may buy the target company’s shares in the market during the offer period at the offer price. Otherwise, share dealings are forbidden.
Between the closing date and the publication of the results of the offer, the offeror and any person acting in concert with it may not sell any target company’s shares on the market.
16.7 Offer document content
The information to be included in the offeror’s prospectus includes:
16.8 Drafting of offer documents
The directors of the offeror are responsible for the accuracy of the information contained in the offeror’s offer documents.
The prospectus shall include a statement from the investment service providers designated by the offeror certifying the accuracy of the information pertaining to the offer and to the elements on the basis of which the proposed price on the exchange ratio was set, and the report of the offeror’s statutory auditors concerning the accuracy of the offeror’s accounts. The directors of the target company are liable for the information regarding the target company, whether the information is contained in a joint prospectus presented together with the offeror or contained in a separate document in response to the information provided by the offeror.
16.9 Due diligence
The performance of due diligence prior to a tender offer is possible only to the extent the confidentiality of the proposed transaction can be preserved. In case of a competing offer, the competing offerors shall be granted access to the information made available to the first offeror.
16.10Conditions
An offer may be conditional on:
16.11Obligation of financing
The investment service providers designated by the offeror guarantees the payment of the offered price.
16.12For cash/for shares/mixed
A public tender offer may consist of:
However, where the consideration offered by the offeror does not consist of liquid securities admitted on a regulated market of a member state or a State Party to the EEA, it shall include a cash alternative.
In any event, the offeror shall offer a cash consideration at least as an alternative where it or persons acting in concert with it has purchased for cash securities representing five per cent or more of the voting rights in the offeree company, over a period of 12 months before the filing of the bid.
The offeror may give securities holders the option of selling their securities at a later date, provided that the option is exercisable within a reasonable time, that it is subordinate to the main bid, and that its exercise is unconditionally guaranteed by the institution sponsoring the offer as referred.
16.13 Breakup fees
The provision of a breakup fee shall in no event prejudice the enforcement of the general principle of free competition between the offers.
16.14 Defence mechanisms
During the public offer period, the board of directors (conseil d’administration), the supervisory board (conseil de surveillance), with the exception of their power of appointment, the management board (directoire) and the general manager (directeur général) of the offeree company shall obtain the prior authorisation of the general meeting of shareholders before taking any action, other than seeking alternative bids, which may result in the frustration of the bid.
Any delegation of power to take an action likely to result in the frustration of the bid granted before the public offer period by the general meeting of shareholders is suspended during the public offer period.
As regards decisions taken by the board of directors, the supervisory board, the management board, or the general manager before the public offer period not yet partly or fully implemented, the general meeting of shareholders shall approve or confirm any decision which does not form part of the normal course of the company’s business and the implementation of which may result in the frustration of the bid.
The general meeting may decide to issue and make a free allotment of warrants benefiting the company’s shareholders allowing them to subscribe to new ordinary shares under preferential conditions before the end of the public offer period.
Without prejudice to transfer restrictions resulting from legal requirements, any restrictions on the transfer of securities provided for in the articles of association of the offeree company shall not apply vis-à-vis the offeror during the time allowed for acceptance of the bid.
Where, following a bid, the offeror holds 75 per cent or more of the capital or voting rights of the offeree company, no restrictions on voting rights provided for in the articles of association shall apply vis-à-vis the offeror during the first general meeting of shareholders following the end of the public offer period.
An SCA is a form of a partnership limited by shares in which general partners hold nontransferable shares and veto rights on significant corporate decisions; in practice, the takeover of an SCA gives the offeror virtually no management control of the target company.
16.15Nature of listed securities
Shares in a French listed company may be held in registered or bearer form and, as a general rule, are freely transferable.
17. FOREIGN INVESTMENT CONTROLS
Financial relationships between France and foreign countries are free. Nevertheless, the French government is allowed to submit specific operations to notification, prior authorisation, or review procedures. French regulations governing foreign investments in France have been substantially amended in 2003 and 2004.
17.1 Foreign investments submitted to administrative notification
Foreign investors are required to notify the French Ministry of the Economy in the following cases:
Furthermore, statistical declarations must be made either with the Banque de France or with the Direction du Trésor, depending on the type of investment and specific thresholds.
17.2 Foreign investments submitted to prior authorisation
The prior authorisation of the French Ministry of the Economy is required when foreign investment activities relate to matters defined by law pertaining to French public order, safety, national defence, weapons and explosives, etc.
17.3 Exemptions of notification or prior authorisation
Transactions which are exempted from notification are listed by article R. 152-5 of the MFC. A notification exemption shall not be interpreted as an exemption to obtain any required prior authorisation or fulfil any requested conditions to exercise a regulated activity in France.
Companies or groups of companies and French residents whose foreign transactions exceed certain thresholds in respect of specific categories of services or revenue must file monthly statistical declarations with the Banque de France.
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