Public M&A

Focusing on combinations leading to a change of control, businesses publicly listed in France can combine through either acquisitions or reorganisations.

Acquisition of a majority participation

As a rule, shares of publicly listed companies can be acquired either off-market or on the stock exchange.

The purchase of a controlling interest in a listed company is possible through a public tender offer, which may be voluntary or mandatory.

The applicable thresholds for filing a mandatory public tender offer vary depending on the type of financial market the shares are listed on. On regulated markets, such as Euronext Paris, filing a public tender offer becomes mandatory when the following thresholds are reached:

• when an investor, acting alone or in concert with others, becomes the owner, directly or indirectly, of more than 30 per cent of the share capital or voting rights of a listed company; or
• when an investor who already holds between 30 per cent and 50 per cent of the company, acting alone or in concert with others, acquires, directly or indirectly, more than 1 per cent of the capital or voting rights of such company in less than a year.

Under these thresholds, the purchase of a controlling interest is made through a voluntary public tender offer.

Aside from in specific cases, tender public offers must be made for 100 per cent of the shares and securities giving access to the capital or voting rights of the target company. They can be made in consideration of cash, existing or newly listed shares, or a combination of both.

Reorganisations

There are three main ways of reorganising French listed companies:

• mergers: all assets and liabilities are transferred to an existing (legal merger) or new (merger contribution) company;
• demergers: the different lines of business of a company are divided into separate existing or new companies; and
• partial asset contributions: an autonomous line of business is contributed by a company into an existing or new company, which receives shares in the beneficiary company in return.

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In France rules governing business combinations and acquisitions of publicly listed companies come from a variety of sources at both the European and the national levels.

As regards the European level, the main rules are as follows:

• Regulation (EU) No. 596/2014 on market abuse;
• Regulation (EU) No. 1129/2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market;
• Regulation (EU) No. 139/2004 on the control of concentrations between undertakings and Regulation No. (EU) 802/2004 implementing Regulation (EU) No. 139/2004; and
• European Securities and Markets Authority (ESMA) guidelines.

As regards the national level, the main provisions to consider are:

• the Monetary and Financial Code (CMF);
• the Commercial Code;
• the Civil Code;
• the General Tax Code;
• the Labour Code;
• the General Regulations of the French Financial Markets Authority (AMF); and
• the rules and regulations of the market operator applicable to the relevant financial market (eg, Euronext Paris and Euronext Growth).

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Whether transaction agreements are concluded when publicly listed companies are acquired depends on the combination used.

Combination resulting from acquisition of shares (transfer of shares or takeover)

When the investor intends to purchase a controlling interest a public tender offer is filed, which requires a strictly regulated offer prospectus. This offer prospectus is governed by French law.

In addition to the prospectus, investors may enter into an agreement with the main shareholders of the target company to secure their undertaking to tender their shares. Furthermore, when the board of the target company recommends the bid, investors may enter into an agreement with the target company to set out the terms and conditions of the offer. Both types of agreements can be governed by any law at the discretion of the parties but are typically subject to French law when the target company is French. When the transaction agreements are governed by a foreign law, French law still governs the formalities for the transfer of shares in all French companies.

Combination resulting from a reorganisation (merger, demerger or asset contribution)

A merger, demerger or asset contribution agreement, entered into between the participating entities, outlines the legal, financial, tax and accounting terms of the transaction. Such agreement shall be governed by French law.

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Filings with the AMF and the Trade and Companies Registry

During public takeovers a draft offer prospectus is to be filed by the bidder with the AMF. The bidder must also publish on its website a press release presenting the main terms of the offer (see also questions 3 and 5). Upon receipt of the offer prospectus, the AMF publishes the draft offer prospectus and the summary terms of the offer on its website. The AMF then assesses the compliance of the draft offer prospectus with the relevant legal and regulatory rules and against the principles of loyalty and market transparency before approving it.

During reorganisations (mergers, demergers and partial asset contributions), a draft simplified prospectus presenting the contemplated transaction is submitted to the AMF (known as ‘Document E’). Upon receipt of this simplified prospectus, the AMF publishes the draft prospectus and the summary terms of the offer on its website. Information on the transaction shall also be published on the participating companies’ websites, if they are publicly listed, and be made available to the public through different channels (publication in a national newspaper; in the relevant service providers; at the registered seat of the company or from the relevant market operator). Various documents are filed with the relevant Trade and Companies Registries during different phases of the transaction, namely the:

• draft reorganisation agreement;
• report on the transaction prepared by the external auditor;
• minutes of the shareholders’ meetings of the participating companies;
• declaration of conformity certifying that the transaction complies with applicable laws and regulations; and
• legal notices on the transaction, to be published before and after the execution of the operation.

Fees charged by the Trade and Companies Registry for the various above-mentioned filings generally do not exceed €500 for each participating company.

Filings with competition authorities

French or EU antitrust control rules, or both, apply, above certain thresholds, to mergers with or acquisitions of French companies. French antitrust controls apply to all production, distribution and service activities, including those of public companies but only if the total worldwide pre-tax turnover of the participating parties exceeds €150 million and the total turnover excluding tax realised individually in France by at least two of the parties is greater than €50 million.

However, this is not the case when operations fall within the scope of EU merger control, unless the European Commission decides to send it back to the French authorities.

EU merger controls apply when:

• the combined aggregate worldwide turnover of all the companies concerned is more than €5 billion; and
• the aggregate turnover in the EU of each of at least two of the companies concerned is more than €250 million, unless each of the companies concerned generates more than two-thirds of its aggregate EU-wide turnover within a single EU country.

If the above-mentioned thresholds are not reached, a concentration nevertheless has an EU dimension if:

• the combined aggregate worldwide turnover of all the companies concerned is more than €2.5 billion;
• in each of at least three EU countries, the combined aggregate turnover of all the companies concerned is more than €100 million;
• in each of at least three EU countries, the aggregate turnover of each of at least two of the companies concerned is more than €25 million; and
• the aggregate EU-wide turnover of each of at least two of the companies concerned is more than €100 million, unless each of the companies concerned generates more than two-thirds of its aggregate EU-wide turnover in one and the same EU country.

The contemplated concentration must be notified to the relevant competition authority by the parties who acquire control before it is completed. After conducting a competitive assessment of the operation and ascertaining whether it contributes to economic progress, the competition authority may prohibit the transaction or authorise it, in some cases providing that the parties take certain measures to ensure sufficient competition.

Other filings

For filings specific to foreign investments, see question 11. For tax filings related to and payment of stamp duties, see question 18.

For filings specific to certain sectors, see question 17.

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Publicly traded companies on a regulated market are required to immediately communicate to the public what is known as inside information. This refers to any precise information that has not been made public and is likely to have a significant effect on their share price.

Similar provisions are applicable to any person preparing a financial transaction liable to have a significant impact on the market price of shares, or on the financial position and rights of holders of those shares. Such persons must disclose the features of the transaction to the public as soon as possible.

If confidentiality is temporarily necessary to carry out the transaction and if the person is able to ensure such confidentiality, the General Regulation of the AMF sets out that such person may assume responsibility for deferring the disclosure of the transaction.

Shareholders and managers of publicly traded companies must also notify the AMF of the following information, which will be made public:

• any crossing of thresholds and declaration of intent (see question 6);
• shareholders’ agreements concluded between shareholders concerning at least 0.5 per cent of the share capital or voting rights;
• draft amendments to the articles of association;
• transactions carried out by management on the company’s financial instruments and insider lists;
• any change in the rights attached to the different categories of shares, including the rights attached to the derivative instruments issued by the issuer and giving access to the shares of the issuer;
• any change in the terms of the issue that may have a direct impact on the rights of holders of financial instruments other than shares. New issues of debt securities and the guarantees to which they may be attached; and
• pro forma financial information intended to provide information on the impact that the transaction in question would have had on a company’s historical financial statements if the transaction had occurred at a date prior to its actual occurrence. The purpose of this information is to assist the shareholder or investor in analysing the entity’s future prospects.

Takeover bids

In the case of takeovers and reorganisations, specific rules apply.

Public tender offers

The offer letter filed with the AMF must disclose:

• the objectives and intent of the bidder;
• details on the target’s securities that the bidder already holds (alone or in concert) or that it could potentially hold at its own initiative (eg, under an option agreement) (including number, type and purchase date);
• the price or exchange ratio;

conditions precedent to the offer; and

• the terms of the acquisition including the identity of service provider.

This offer letter is filed along with the draft offer prospectus prepared by the bidder, which includes the:

• identity of the bidder (structure, shareholders, accounting and financial situation);
• provisional schedule of the offer;
• financial conditions of the operation;
• political and industrial policies for at least the next 12 months;
• guidelines for employment policy;
• law applicable to agreements between the bidder and holders of the target company’s securities following the offer, and the competent jurisdictions; and
• any agreements with the entities with which the bidder acts in concert.

If the bidder and the target did not prepare a joint offer prospectus, the target company must file a reply note mentioning:

• any agreements with an impact on the takeover bid;
• capital structure;
• statutory limits on voting rights and transfer of shares;
• rules of the board member’s appointment;
• agreements ending in case of control change, if any;
• opinion of the social and economic committee;
• opinion of the board of directors; and
• whether directors intend to bring their securities to the offer.

Reorganisations (mergers, demergers, partial asset contributions)

A draft reorganisation agreement has to be prepared on which the shareholders of the companies vote, mentioning:

• form, name and registered office of all the participating companies;
• goals and conditions of the operation;
• all the assets and liabilities transferred;
• exchange ratio;
• merger or contribution bonus, if any; and
• terms for the allotment of securities.

If a company plans to merge with a company with a controlling interest, the relevant companies must notify the AMF, which then decides whether to set up a public buyout offer to allow minority shareholders to withdraw.

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Notification relating to crossing of shareholding thresholds

A shareholder (acting alone or in concert with others) who holds shares in a publicly traded company shall inform the company and the AMF when his or her holding exceeds 5, 10, 15, 20, 25, 30, 33.33, 50, 66.66, 90 or 95 per cent of the capital or voting rights of a company based in France and admitted to trading on an EU regulated market or financial instruments market. Other thresholds are applicable to shares listed on multilateral trading facilities (such as Euronext Growth).

When crossing these thresholds, shareholders also have to disclose the number of securities they hold that give deferred access to future shares and the voting rights attached thereto and the shares already issued that these shareholders may acquire by virtue of an agreement or a financial instrument. Such notification is also required if the equity participation or voting rights fall below the same thresholds.

Declaration of intent

If the shareholder exceeds the threshold of 10, 15, 20 or 25 per cent of the capital or voting rights, he or she must declare the objectives that he or she intends to pursue over the next six months.

If these declarations are not complied with, the AMF may impose a penalty and the shareholder may be deprived of voting rights attached to the securities in excess of the amount that has not been declared for two years following the date of regularisation.

Statutory obligations

The company’s by-laws may require additional disclosure obligations based on lower thresholds than those set out by law.

All of the above requirements also apply when the company is a party to a business combination.

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General duties

Directors and CEOs, individually or jointly, may incur civil liability towards the company, shareholders or third parties if they breach laws and regulations applicable to companies, a company’s by-laws or their duty of care as managers.

They can only be held liable to third parties if they have personally committed a fault separate from their functions. The claimant will also have to demonstrate that he or she has personally suffered damages separate to those suffered by the company.

Actions against the directors or the CEO for damages suffered by the company can be brought by the CEO, any deputy CEOs or by one or more shareholders. In such case, demonstrating that the directors’ or CEO’s breach has been committed outside the course of their duties is not required.

In addition, directors and officers (as well as closely related persons) of publicly listed companies shall disclose any sale and purchase of their own company’s shares to the AMF and to the company.

Specific rules applicable to business combinations or sales

In the event of a takeover bid, managers are allowed to take any measure to frustrate the offer within the limits of the corporate interest of the company.

Management must also comply with the public and private disclosure requirements specific to each transaction (see question 5). In addition to the documents detailed in question 5, management must make available to the shareholders before the general meeting the external auditor report on the transaction, the annual accounts of the last three years and an intermediate accounting statement. They must also inform and consult the employee representative bodies on the transaction.

Management does not owe any particular information to creditors who only benefit from public disclosures.

Controlling shareholders do not have duties similar to those of the management; they must only comply with the disclosure obligations detailed in questions 5 and 6.

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Public tender offers

The shareholders of the bidder

If the offer involves a share component, it can be made conditional on obtaining the approval of the issuance of the new shares by the bidder’s extraordinary general meeting. Furthermore, if the legal, regulatory or statutory provisions applicable to the bidder require systematic approval of tender offers by its shareholders, the AMF can authorise the bidder to condition even a cash offer on obtaining such approval (provided that the shareholders’ meeting has already been convened at the time of filing of the offer).

The target’s shareholders

The public offer does not entail any obligation for shareholders. The shareholders are in principle free to decide whether to accept the offer made to them. They may retain their securities if they deem it preferable. But the scope of this principle is limited. In the event of a successful tender offer, the bidder, who will hold at least 95 per cent of the voting rights, may require the minority shareholders to withdraw from the company (see question 14).

The by-laws of the target company may validly limit the management’s powers during a public offer period, providing for instance that:

• all defence measures are authorised beforehand by the shareholders’ general meeting and that all delegations of authority that may cause the offer to fail, except the search for other offers, are suspended; and
• any decision of the board taken before the offer period that is not fully or partially implemented, which is not part of the normal course or business of the company and whose implementation may result in the frustration of the bid, must be approved.

Following a takeover bid or exchange offer or the acquisition of a controlling interest, the shareholders who hold the majority of the capital or the voting rights may convene the general meeting. The purpose of this meeting generally concerns the replacement of the board but nothing prevents the shareholders from deciding on other issues, including statutory amendments.

Reorganisations (mergers, demergers, partial asset contributions)

The combination is approved by the extraordinary general meeting of the shareholders of each of the companies involved, under the conditions set out for amending the by-laws.

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Hostile takeover bids are allowed in France. The board of directors is nonetheless allowed to take anti-takeover measures to frustrate the offer without the shareholders’ prior approval provided that such measures are taken in the interests of the company and within the limits of the powers reserved to shareholders’ meetings.

Set out below are examples of preventive defence measures, which can be implemented by the board of directors or the shareholders:

• creation of double voting rights if the detention of shares exceeds a certain time limit so the bidder will not be able to claim it;
• shareholders’ agreements such as standstill agreements or pre-emption agreements;
• statutory ceiling on voting rights;
• flip-in: existing shareholders can purchase additional shares at a discounted price;
• issue of bonds with redeemable equity warrants; and
• the transformation of the company into a private company limited by shares to separate the capital from the power.

Set out below are examples of defence measures that can be implemented during the offer by the board of directors or the shareholders:

• self-tender offer: purchase of its own shares by the company to limit the number of shares available on the market;
• seeking to develop a core group of shareholders, for an anti-takeover fund;
• distribution of exceptional dividends during the offer period; and
• sale of crown jewels assets: transfer of a strategic asset to a third party (usually an ally), thereby making the offer interest-free for the bidder.

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In the context of prior negotiations to the takeover bid (generally in the case of friendly bids), the potential bidder may propose break-up fees, which are compensation paid to the bidder (break-up fee) or to the shareholders or the target (reverse break-up fee) in the event of renunciation of the offer or blocking of the transaction by an authority. Such clauses are not prohibited per se provided that the freedom not to contract and the principle of the free interplay of bid and counterbid are maintained. The amount of break-up fee must also be proportionate and reasonable.

When the break-up fee is payable by the target, the validity of such a clause is more questionable, particularly in view of the corporate interest of the company. Under this clause, the target company undertakes to pay a fee in the event that it recommends to its shareholders a competing offer. However, competing offers are of interest to the shareholders, and so management therefore has no interest in forbidding any competing offer.

Break-up fees payable by a publicly listed company to a bidder must be disclosed to the AMF at the date of filing of the offer and to the public in the offer prospectus.

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Foreign investment

As a rule, financial relations between France and foreign investors are not restricted. All foreign direct investments in excess of €15 million must be declared to the French Central Bank for statistical purposes within 20 days of completion of the transaction.

Nevertheless, in some protected sectors, specific laws prohibit or restrict the ability of foreign investors, mainly non-EU, to take control of French companies. The French CMF lists sensitive activities that require approval from the Ministry of Economy. This list varies depending on the EU or non-EU origin of the investor, with stricter rules applying to investors from outside the EU, and concerns sensitive activities that affect public authority, public order, public security or the interests of national defence.

This authorisation is only required if the investor purchases one company’s branch of activity with headquarters in France, the investor acquires control of a French company, or the investor reaches 33.33 per cent of the share capital or voting rights of a French company.

The application for authorisation is made by letter to the Ministry of Economy as soon as the parties agree. The Ministry shall take a decision within two months of the request. If the Ministry fails to respond within such period, the authorisation is deemed granted. The Minister may simply authorise the investment or may subject it to conditions to ensure that it will not affect national interests.

Public sector

A transaction leading to the transfer of a company from the public sector to the private sector can only be implemented after being authorised by a law, a decree or by the Ministry of Economy.

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Public tender offers

Public offers are irrevocable upon filing, with the following exceptions:

• minimum acceptance threshold: all public offers, whether voluntary or mandatory, automatically lapse if the bidder (acting alone or in concert with others) does not reach at least 50 per cent of the capital or voting rights of the target at the closing of the offer. In voluntary offers, the bidder may set a higher minimum condition (in practice, the AMF does not allow acceptance conditions above two-thirds);
• tied offers: bidders can condition voluntary offers on the success of other public offers filed simultaneously;
• approval of the competition authorities, when applicable (Phase I clearance only); or
• prior authorisation of the bidder’s extraordinary shareholders’ meeting, when applicable, provided that the meeting has already been convened when the draft offer prospectus is submitted.

The bidder can waive certain of these conditions between the filing of the offer and the publication of the offer results by the AMF. In addition, bidders can revoke public offers when subject to approval by the AMF, the target adopts measures that modify its substance or result in the offer becoming more expensive for the bidder and when a competing bid has been filed and approved by the AMF. In any event, takeover bids cannot be subject to any financing condition.

Reorganisations (mergers, demergers, partial asset contributions)

Terms and conditions of reorganisations shall be set out in an agreement concluded between the participating entities. This agreement is freely negotiated between the parties who can, therefore, include any conditions in accordance with ordinary rules. In that respect, it shall be noted that purely discretionary conditions are unenforceable under French law.

Set out below are common conditions specified in reorganisation agreements:

• approval of the transaction by the general meeting of each participating company;
• preparation and delivery of the report of the mandatory external auditor on the contemplated transaction;
• transfer of authorisations, approvals or specific contracts (leases, borrowing) to the absorbing or beneficiary company;
• confirmation by the AMF that the combination will not require the filing of a mandatory tender offer; and
• release of existing securities.

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As detailed in question 12, public tender offers cannot be subject to financing conditions. Therefore, prior to the publication of the offer prospectus, bidders must ensure they have the necessary funds available for paying the consideration to the shareholders accepting the offer. Furthermore, the offer prospectus shall describe the means of financing of the offer and their impact on the assets, business and earnings of the target and of the bidder.

As financing precedes filing of offers, sellers do not have to assist bidders in their financing. Nonetheless, there is a general rule of fairness in transaction, which implies that the seller communicates to the buyer any information that may be needed for the financing of the operation.

Outside of public tender offers, should an investor wish to conclude a share purchase agreement with a shareholder, the parties thereto are free to set out any financing conditions in accordance with ordinary rules.

As for public tender offers, there is no obligation on sellers to assist buyers in their financing besides the general rule that the parties to a contract must perform such contract in good faith, which implies that the seller should communicate to the buyer any information that may be needed for the financing of the operation.

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In principle, shareholders cannot be excluded from the company but the squeeze-out procedure is an exception to this rule.

Following the tender offer, the shareholder or the majority group holding at least 95 per cent of the share capital or voting rights can impose on minority shareholders who did not respond to the offer the obligation to withdraw from the company with compensation. The buy-back programme covers all the shares and securities giving access to capital not yet owned by the majority, including those held by the company itself.

The squeeze-out procedure is subject to various conditions. When submitting the offer, the bidder must disclose to the AMF whether they want to implement the squeeze-out at the end of the offer or if they reserve the right to request a mandatory squeeze-out only after the offer has been completed depending on the result of it.

In the offer, the bidder must provide an assessment of the valuation of the securities in accordance with objective methods (stock price, asset value, perspective, etc). As the squeeze-out procedure is inseparable from the tender offer, the share value can be the same as long as no new development occurred between both transactions. Furthermore, the target company has to designate an independent expert to control the fairness of the financing conditions, who delivers a report.

Automatic squeeze-out

When submitting the offer, the bidder should announce its intention to launch a squeeze-out offer as soon as the offer is closed and regardless of the results of it. The bidder designates an account keeper to centralise the share indemnity transactions and deposits the amount of the compensation in a blocked account opened for this purpose.

When the transaction closes, the securities concerned are delisted from the regulated market to which they were admitted. The account keeper must transfer securities not presented to the offer in the name of the majority.

The day after closing, the funds are blocked and the account keeper shall credit the shareholders’ accounts.

Squeeze-out with conditions

When submitting the offer, the bidder reserves the right to proceed with the squeeze-out offer depending on the outcome of the offer. It shall indicate to the AMF, within a maximum of 10 days of the closing of the bid, whether it waives the option.

If the bidder decides to proceed with the compulsory acquisition, it informs the AMF of the price proposed for compensation, which is at least equal to the price of the initial offer. If the AMF agrees, it sets out the conditions for implementing the squeeze-out, in particular the date on which its decision becomes enforceable.

On this date, as in the automatic squeeze-out procedure, the securities concerned are delisted from the regulated market. The account keeper transfers the shares to the bidder and the compensation to the minority shareholders.

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French law and regulations apply to all takeover bids relating to financial instruments that are listed on a French regulated market, regardless of the nationality of the bidder.

The EU Directive of 26 October 2005 on cross-border mergers of limited liability companies institutes special provisions in the case of a merger between companies located in different EU states. A distributive application of the national laws is made for all the terms and conditions. In this sense, each company participating in a cross-border merger complies with the provisions and formalities of the applicable national legislation.

The cross-border merger is structured like in France so it results either from the creation of a new company by regrouping several companies or from the absorption of a company by another. It also has the same effects (ie, the complete transfer of assets and liabilities).

This Directive does not cover demerger and partial asset contributions. However, these transactions remain possible in accordance with the principle of freedom of establishment.

See question 11 for foreign investment rules.

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Public tender offers

Notification to the AMF

Before making a takeover bid, the bidder must file an offer letter with the AMF, which must indicate certain information detailed in question 5. This request must also include a draft offer prospectus, the content of which is also detailed in question 5.

Upon receipt of the bidder’s letter, the AMF shall make public the main provisions of the draft offer and may decide to suspend the listing of the shares of the companies concerned. This publication marks the beginning of the offer period.

The AMF has 10 days of trading from this date to assess the conformity of the draft offer prospectus with applicable legislative and regulatory provisions. In this respect, the AMF may request additional guarantees or explanations and require that the draft offer prospectus be amended. Where the draft offer prospectus meets the requirements, the AMF publishes a statement of compliance (the ‘visa’) on its website, which constitutes an approval of the offer prospectus.

Where the concerned companies did not draw up a joint offer prospectus, the reply note must be submitted to the AMF no later than the fifth day following the publication of the statement of compliance. The AMF then has five days to deliver its visa.

Shareholders who wish to participate in the offer can make their orders within 25 trading days from the trading day following the publication of the visa to the offer prospectus or to the reply note, as applicable.

Information of employees

In the case of public tender offers, employees of both the target company and the bidder must be informed, either directly (in the event of lack of staff representatives) or through the information and consultation of such staff representatives (Labour Code, articles L.2312-42 and L.2312-50).

Information of the employees’ representative body of the target company

Upon the filing of the offer prospectus with the AMF, the target company must immediately convene a meeting to inform its staff representatives (the social and economic committee (CSE), newly implemented and replacing the former French works council) about the filing of the offer, specifying whether the offer has been solicited.

During the meeting, the CSE indicates whether it wishes to:

• hear the bidder at a later meeting (to take place within one week of the filing of the draft offer prospectus); and
• appoint an accountant, whose duty would consist in drafting a report (within three weeks as from the filing of the draft offer prospectus), assessing the bidder’s industrial and financial policies, its contemplated strategic plans for the company and the repercussions of the implementation of its offer on the employment (the expenses pertaining to the appointment of the accountant are borne by the company).

Before the board of directors issues its opinion regarding the interest offer in the reply note (if no joint offer prospectus was issued), the CSE shall be consulted in a meeting on the offer, examine the accountants’ report (if any) and may require that the bidder attend the consultation meeting. Failing to attend the meeting for the bidder’s representative could entail the suppression of its voting rights (Labour Code, article L2312-48).

The CSE shall issue its opinion, which does not bind the employer, within one month from the filing of the draft offer prospectus (the CSE is deemed to have been consulted on this matter in case of lack of opinion within this time frame). The CSE can ask for the intervention of a judge in order to obtain additional information, should the CSE consider it has not been provided with sufficient information.

Information of the employees’ representative body of the bidder

The bidder’s CSE shall be informed and consulted on the content of the offer and its potential impact on employment within two business days from the publication of the offer.

At the bidder’s request the target company can consult its CSE within two business days following the announcement of the offer. The schedule provided above would run as from the announcement of the offer.

Reorganisations (mergers, demergers, partial asset contributions)

When the securities of the acquiring or target company are listed on a regulated market, such company may be exempted from the preparation of a prospectus in the event of a merger, demerger or partial asset contribution if it draws up an equivalent documentation as a prospectus. This document, known as ‘Document E’, must include some particulars (economic and legal aspects of the transaction, remuneration of the contributions, consequences for the target company and its shareholders).

The prospectus must be submitted to the AMF at the latest two months before the date of the general meeting convened to approve the transaction.

The prospectus shall be published in national newspapers, made available at company headquarters and posted on the website of the company and of the AMF as of its registration by the AMF and at least 15 days before the meeting called on to approve the partial asset contribution or one month before the meeting called on to approve the merger or demerger.

Creditors of the company hold a right of opposition to the operation of combination if their debt obligation precedes the publication of the draft term. The opposition procedure must be launched within 30 days from the last publication but the company can complete the operation despite the existence of an opposition.

In addition, the CSE of each participating entity may have to be informed and consulted on the proposed business combination before any decision is taken.

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French regulations allow the French state to oversee access, exercise and capital control of strategic or sensitive activities.

Foreign investment control

The French foreign investment control system conditions the acquisition of French companies intervening in certain limited sectors related to defence, national security and public order on the prior authorisation of the Minister of Economy.

See question 11 for further details on this control.

Sector-based regulations

Specific authorisations are required when the target company’s business is related to certain sectors, in particular:

• credit and insurance sectors: acquisitions of one-third, one-fifth or one-tenth of voting rights in a credit institution, a finance company, an investment firm, a payment institution or an insurance company must first be approved by the French banking regulator, the Autorité de Contrôle Prudentiel et de Résolution (ACPR);
• media sector: combinations which directly or indirectly concern a publisher or a distributor of radio and television services must be first approved by the French audiovisual regulator, the Conseil Supérieur de l’Audiovisuel (CSA); and
• energy sector: the French state must hold a minimum percentage in the share capital of some strategic companies. For instance, it must keep at least 70 per cent in the share capital of Electricité de France or 30 per cent in GDF-SUEZ to preserve the essential interest of France in the energy sector.

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Public tender offers and acquisitions of publicly listed companies’ shares

Exchange offers (OPE) and cash tender offers (OPA) are treated differently from a tax standpoint.

As regards the OPE, a tax deferral regime applies at the level of the shareholder, irrespective of whether it is a company or an individual. The capital gain, if any, resulting from the exchange transaction is not taken into account in the year of the securities’ exchange. Taxation will only occur upon subsequent disposal of the securities received in exchange for the shares initially contributed. The capital gain will be determined by reference to their initial purchase price. This deferred taxation system was adopted so as not to penalise investors who are not getting cash out of these transactions.

Conversely, as regards the OPA and the remittance of the shares being done in exchange for cash, no tax deferral applies. Therefore, as regards individuals, the capital gains are subject to a single flat tax of 30 per cent corresponding to 12.8 per cent of income tax and 17.2 per cent of social security contributions, and as regards companies, the capital gain is taxable either at the standard corporate income tax rate (the applicable rate in 2019 is 28 per cent for the first €500,000 and 31 per cent beyond that amount), or at the preferential regime of long-term capital gain leading to an effective tax rate of 3.36 per cent up to €500,000 and 3.72 per cent beyond that amount, provided that the shares qualify as participation shares.

For non-residents, withholding tax in France will be levied at the rate of 12.8 per cent. The withholding tax rate could be lower depending on the applicable double tax treaty.

Acquisitions of securities listed on a French regulated market of a company having its registered office in France, with a market capitalisation exceeding €1 billion on 1 December of the year preceding the transfer (applicable to 142 companies in 2018), give rise to the payment by the investment service provider of a 0.3 per cent tax on financial transactions.

Finally, no registration duties are due on transfers of shares of listed companies when no deed has been drawn up for such transfer. In the situation where a deed has been drawn up, the financial transaction tax is not due but ad valorem 0.1 per cent registration duties apply.

Reorganisations (mergers, demergers, partial asset contributions)

The combination of businesses can be achieved via a merger or dissolution without liquidation. Although they are not subject to the same corporate law regime, they both benefit from the same tax regime, as it is the case also for demergers and partial assets contributions.

French companies may opt for a favourable tax treatment provided for by article 210 A of the French Tax Code, which provides for the tax-neutrality of mergers provided the following conditions are met:

• the companies involved are both subject to corporate income tax;
• the merger results for the absorbed entity in the transfer of all its assets and liabilities to the absorbing entity; and
• in consideration for the transfer, the merged company’s shareholders receive shares in the absorbing company and, as the case may be, a cash payment, which should not exceed 10 per cent of the nominal value of the shares received to be able to benefit from the tax-neutral regime.

With respect to cross-border mergers, the favourable tax regime is no longer subject to prior ruling from the French tax authorities.

The favourable tax treatment is applicable to the extent that the absorbing company undertakes, in the merger agreement, to:

• enter in its own balance sheet the merged company’s provisions;
• compute the capital gains that may be realised on a subsequent transfer of non-depreciable assets by reference to the tax value these assets had in the merged company’s balance sheet;
• add back the capital gains generated by the transfer of depreciable assets to its own taxable profits over a five-year period (15 years for gains arising from real estate or depreciation on such depreciable assets may be computed on the contribution value); and
• enter in its own balance sheet the non-fixed assets transferred by the absorbed entity for the value they had in the accounts of the absorbed company.

To avoid the loss of outstanding net operating losses, a specific ruling can be requested, subject to specific conditions.

As mentioned above, upon receipt of the shares of the absorbing entity in exchange for the shares of the absorbed company, the shareholder benefits from a tax deferral until the subsequent disposal of such securities. The absorbed company, as well as the shareholders of the absorbing company, therefore avoid any immediate taxation.

The 0.3 per cent tax on financial transactions does not apply to transfers in the case of mergers, demergers or partial asset contributions.

Since 1 January 2019, reorganisation operations such as mergers, demergers or spin-offs, or partial asset contributions are no longer subject to registration duties. Previously, these operations were subject to a fixed registration duty of €375 or €500, depending on whether the company’s capital was less or more than €225,000.

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In public tender offers, the target company remains the employer. The target company and the bidder company must inform their employees’ representative body in accordance with the rules specified in question 16. At the end of the public offer, should the bidder have acquired the control of the target company under certain circumstances, the bidder will have to periodically report to its CSE how its declarations of intent, and, as the case may be, its commitments, have been implemented, notably in terms of employment (Labour Code, article L2312-51).

In the event of a sale or merger involving the transfer of an autonomous economic entity retaining its identity, all existing employment contracts, regardless of their nature, are automatically transferred to the merging or beneficiary company, which becomes the new employer of the transferred employees. An autonomous economic entity is defined as an organised group of persons, with its own operating resources, clients and line of business.

The automatic transfer of employees is a French public order rule that cannot be bypassed. In this respect, the new employer cannot choose the employees it would want to keep before such a transfer. The dismissals of employees, implemented just before the transfer by the transferor, are thus prohibited and would be deemed void.

Employment contracts are automatically transferred without any modification (except for the identity of the employer). However, most of the time, the merger will entail the termination of the employees’ collective rights provided for in the transferor’s company’s bargaining agreements (after a limited period of time). The transferred employees benefit from the existing collective agreements applicable within the new employer.

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In collective proceedings, French law imposes a wide obligation to inform the various parties interested in the procedure, in particular the creditors. Similarly, the AMF and the market must be informed of the opening and further stages of the collective proceedings. Often, these situations of financial difficulties result in the need for issuers to recapitalise by converting claims or providing funds, such transactions requiring a prospectus subject to the AMF approval.

Disclosure obligations are more complex in the case of preventive proceedings, which are, as a rule, confidential. In such cases, issuers must inform the AMF when the procedure is initiated, and must preserve the confidentiality of information. The market may not be informed of the initiation of such proceedings provided that the conditions for delaying the publication of insider information are met (the issuer justifies a legitimate interest, the absence of publication does not mislead the public and the issuer is able to ensure that the proceedings remain confidential).

In order to limit the consequences of the issuer’s default risk and to limit the risks of misinformation, issuers may request the market operator to suspend the trading of their shares.

Securities of an issuer subject to collective proceedings are grouped in a specific compartment entitled ’compartment of insolvency proceedings‘.

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The Criminal Code, article L445-1 et seq criminalises both active and passive bribery. Active private bribery is the fact of proposing without right, directly or indirectly, to a person who exercises a management function, offers, promises, gifts or any advantages for him or herself or for another, to accomplish or refrain from performing an act, in violation of its legal, contractual and professional obligations. Passive bribery is the fact of indulging to a person who solicits, without right, offers, promises, gifts or any advantages to perform or to abstain an act in breach of its legal, contractual or professional obligations. Both types of bribery may be sanctioned with up to five years’ imprisonment or a fine of up to €500,000 or two times the proceeds of the offence.

In addition, the Sapin II Law of 9 December 2016 added new sanctions for companies of a certain size if they do not set up internal procedures in order to reduce the risk of corruption. Companies covered by these obligations are those with at least 500 employees and a turnover of more than €100 million. To prevent corruption, these companies must set up a series of measures such as a code of conduct, accounting control procedures and training of the most exposed staff.

In the event of a breach of these obligations, the company and its directors may be subject to a financial penalty. The maximum amount payable is €200,000 for natural persons and €1 million for legal entities, it being specified that the amount must be proportionate to the breach and to the financial situation of the person penalised.

Since the Sapin II Law was enacted, at the time of a company’s acquisition, more and more anti-corruption due diligences are being performed to assess bribery risks.

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