Legal column by Marie-Aude Noury, member of the Paris Bar, partner, Squair A.A.R.P.I.
Ordinance n°2023-393 of May 24, 2023, issued in application of Law n°2023-171 of March 9, 2023, transposes into French law Directive (EU) 2019/2121 of November 27, 2019 amending Directive (EU) 2017/1132 as regards cross-border transformations, mergers and demergers. The ordinance was supplemented by decree no. 2023-430 of June 2, 2023.
This transposition was eagerly awaited. France had until January 31, 2023 to transpose, and on March 31, 2023 the European Commission issued a formal notice to complete transposition within two months.
Directive (EU) 2019/2121 of November 27, 2019 amended Directive (EU) 2017/1132 to make it easier for companies to merge, split up or move within the single market, by setting up a common procedure, and formulating safeguards against abuse and for the preservation of stakeholders' rights.
A unified procedure
The ordinance introduces cross-border demergers and transformations into French law. These two operations share a common set of rules with cross-border mergers. In a cross-border demerger, a company splits into several companies registered in different member states.
Cross-border transformation means that a company can transfer its registered office to another member state, while retaining its legal personality. Until now, the possibility of transferring the registered office to another member state without dissolving the legal personality was only open to companies with the European Company Statute (SE).
The ordinance also transposes the provisions of the directive on cross-border mergers.
As a result of the Directive and Ordinance, a unified procedure applies to cross-border mergers, demergers and transformations. This procedure is designed both to ensure adequate information (drafting of a joint operation plan, management report, verification by an independent expert) and to protect the rights of stakeholders, i.e. shareholders, employees and creditors.
To this end, a right of withdrawal is provided for associates who oppose the operation, enabling them to have their shares bought back.
Employees must be informed and consulted before the operation, and their right to participate in the company's governing bodies is preserved after the operation.
Creditors whose claims arose prior to the proposed transaction may take legal action to obtain guarantees from the debtor company.
The right of withdrawal of associates
The right of shareholders to withdraw is recognized for cross-border mergers due to a change of nationality. It does not apply to purely domestic mergers, which are decided by a majority of shareholders. He refers to the right of shareholders to withdraw in the event of an SE transferring its registered office.
This right of withdrawal resulting from the directive is an individual right of the shareholder, open only to shareholders of the absorbed company who are opposed to the operation, to whom have been assimilated the holders of shares deprived or temporarily deprived of voting rights. This right may be exercised by the shareholder within 10 days of approval of the proposed merger by the shareholders' meeting, and concerns all the shares held on the date of the request. If the right of withdrawal is exercised, the company makes a buyback offer to each shareholder who has made the request. This right of withdrawal is also available to the shareholder of a demerged or transformed company who opposes the cross-border transaction.
In particular in the case of a merger involving a listed company, the AMF has the power, under article 236-6 of its General Regulations, to require controlling shareholders to file a public buyout offer, taking into account the consequences of the transaction for shareholders' rights and interests. Such a public buyout offer presupposes the existence of controlling shareholders, targets all other shareholders and concerns only companies listed on the regulated market. It is implemented at the discretion of the AMF, which reserves the right to assess whether the change in shareholders' rights resulting from the transaction is such as to justify offering minority shareholders a liquidity solution.
Clearly, these two cases of withdrawal are different in nature and scope, although they are potentially destined to coexist. In the future, it will be interesting to see how the AMF applies Article 236-6 in the context of cross-border transactions, where minority shareholders have the option of requesting liquidity.
Renforcement operations control cross-border
In France, control of the conformity and legality of the transaction has been entrusted to a single authority, the clerk of the commercial court.
A check on the conformity of the operation is carried out beforehand in the member state of the country of departure. This check becomes more substantial, as the registrar must ensure that there is no fraud or abuse in the conduct of the operation.
A control of the legality of the operation is also carried out in the Member State of destination.
The new regime applies to all proposed transactions filed with the commercial court clerk's office from July 1, 2023.
From new techniques in domestic law
Domestic law has also been amended by the ordinance, which now enshrines partial demergers in the French Commercial Code. Partial demergers, as provided for in the Directive, enable the shares received as consideration for the contribution to be allocated directly to the shareholders of the transferring company.
There is no doubt that these new provisions in domestic law will provide innovative tools for mergers between companies established within the European Union.