The French government, seeking to limit the closure of healthy companies, adopted new legislation known as Loi Hamon (31 July 2014) (Hamon law) which came into force on 1 November 2014. The legislation requires employers planning to sell a company with fewer than 250 employees or its stock-in-trade, to inform employees. This legislation enables employees to put forward an offer, and so helps them buy the company in the event of a closure leading to redundancies.
The Hamon law initially set up two types of information rights for companies with fewer than 250 employees:
- A triennial obligation to provide information to the employees generally of the possibility of making an offer to buy 50% or more of the shares of the business or a business transfer
- An obligation to provide information to the employees, at least two months before a proposed sale of:
- More than 50% of a limited liability company or share company
- Commercial property
Failure to comply with this obligation could result in the share sale/business transfer being null and void.
Employees must be informed that:
- A sale is proposed
- They have the right to make a bid
Employers are not required to give any other information, such as information on the company or the business that is for sale.
The legislation provides an exhaustive list of cases where the two months’ prior information obligation is not applicable. In particular, the right does not apply to the sale (including a free transfer to a spouse, an ascendant or descendant) of a business, shares, stock or securities giving access to the majority of capital, or when the sale happens in the context of conciliation or sauvegarde (“safeguard”) procedure (i.e. where companies which are in difficulty obtain a stay on payments and the suspension of judicial proceedings).
The company should inform the employees individually at least two months before the sale (i.e. before the transfer of property). Employers should ensure that they obtain confirmation of the date of receipt of the information by the employees (e.g. using registered post, email with acknowledgement of receipt, having a meeting with the employees and asking them to sign a document acknowledging receipt of the information, etc.).
In companies that have employee representatives, the employees and employee representatives must be informed simultaneously otherwise the employer will be guilty of obstruction if the information is given to the employees before the employee representatives.
There is no legal timeframe within which the employees should make their bid, but it should be prompt. The employees may request the assistance of a representative of the chamber of commerce or any person of their choice (e.g. a lawyer, banker etc) to help them make a bid. The employees, and anyone representing them, are bound by a duty of confidentiality.
The seller has no legal obligation to enter into negotiations with the employees, nor are they obliged to provide the employees with any informative documents on the company. The seller also has no obligation to justify refusing the employees’ bid - the law only indicates that the seller should consider all bids loyally.
If the employer does not comply with the right to provide information, or the employees receive the information too late, or it is incomplete, any interested employee may request that the sale is annulled.
However, the employees must lodge a request for an annulment within two months of the publication of the sale (for business sales), or of the information being made available to the employees (for share sales) – and an annulment is not automatically granted. The judge will consider the position before deciding whether or not to annul the sale.
The Hamon law has been challenged and criticised so many times that the government has indicated it will carry out a review, and a Bill is currently being discussed which would remove the triennial information obligation. So there may well be further amendments to this legislation.