The ministerial order of 31 January 2011 (the "Order") organises how the changes made to takeover rules in France by the recent banking and financial regulation law1 (the "Law") are to be transposed into the AMF general regulations, further to the market consultation held by the AMF in December 2010. This e-bulletin summarises the main modifications made to the rules as incorporated into the AMF general regulations.
- Changes to the rules on mandatory offers on the regulated market (Euronext Paris)
- Transposition of the new 30% threshold and transitional system
New 30% threshold. The new 30% threshold now set out in the French Monetary and Financial Code (Code monétaire et financier) for triggering mandatory offers2 has replaced the previous threshold of one third in the relevant articles of the AMF general regulations.3
Transitional measures/"grandfather" clause. A new article in the AMF general regulations captures the transitional measures introduced by the Law.4 Persons who, on 1 January 2010, hold an interest of between 30% and one third of the share capital or voting rights of a company admitted to trading on Euronext Paris will continue to benefit from the one-third threshold for an unlimited period of time. This rule also applies to persons holding interests which have risen to or fallen between the two thresholds between 1 January 2010 and 1 February 2011 as a result of a firm undertaking concluded before 1 January 2010. This measure, which is known as a "grandfather clause", is designed to protect rights obtained before 1 January 2010 and has finally not been restricted by a time limit, as the AMF initially planned.
What happens if the 30% threshold is crossed during the transitional period? Persons with holdings that have risen to or fallen between 30% and one third between 1 January 2010 and 1 February 2011, other than as a result of a firm undertaking concluded before 1 January 2010, will need to reduce their holding to below 30% or file a mandatory offer by 1 February 2012.
Split application. Although not expressly confirmed by the new article, the AMF has indicated in its commentaries on the changes to the general regulations that the grandfather clause can be applied separately to holdings in share capital or in voting rights.
If, for example, on 1 January 2010, a person held between 30% and one third of the voting rights of a company admitted to trading on Euronext Paris but less than 30% in share capital as a result of holding shares with double voting rights, the benefits of the grandfather clause would only apply to the holding in voting rights. It follows, in the same example, that if the person's holding then crossed the 30% threshold in share capital after 1 January 2010 (if not as a result of a prior firm undertaking), he or she would need to have reduced the holding in share capital to below 30% or have filed a draft offer by 1 February 2012. In the same way, if a person were to hold over 30% of the issuer's share capital at 1 January 2010 but under 30% of the voting rights on the same date due, for example, to preference shares with no voting rights or double voting rights held by other shareholders, then the benefits of the grandfather clause would only apply to the holding in share capital.
Lastly, the grandfather clause ceases to apply when a holding in share capital and/or voting rights that exceeded 30% on 1 January 2010 is subsequently reduced to below 30%.
AMF notification. The Order provides that all persons concerned by these new provisions must notify their holdings in share capital and voting rights on 1 January 2010 and on 1 February 2011 to the AMF without delay, as from 1 February 2011.
On 21 March 2011, the AMF published an initial list (up-to-date on 16 March 2011) of those persons with holdings on 1 January 2010 and/or 1 February 2011 of between 30% and one third of the share capital or voting rights of a company admitted to trading on Euronext Paris. This list shows, on the one hand, those shareholders who benefit from favourable treatment under the grandfather clause system5 and, on the other, those who must reduce their holdings to under 30% of the share capital and/or voting rights before 1 February 20126 . It may be updated by the AMF as a result of new notifications.
- Change to the calculation method of the 30% threshold
Alignment with threshold notification rules. In keeping with the principle introduced by the Law, the Order provides that the calculation method of the 30% mandatory offer threshold will be aligned with that used for legal threshold crossing notifications, as set out in the French Commercial Code (Code de commerce).7
Consequently, shares that have already been issued and may only be purchased using financial instruments are now to be taken into account for the calculation of the threshold over which a mandatory offer must be filed. However, unlike legal threshold crossings, for which the range of financial instruments to be considered under this rule is not limited, an exhaustive list of those instruments which must be taken into account for the calculation of the 30% threshold is included in the AMF general regulations and comprises the following financial instruments: convertible bonds, futures and options.8
Direct or indirect holdings. The AMF general regulations also state that the types of holdings to be taken into account for the calculation of the 30% threshold should be assessed both "directly and indirectly".9 Extending the assessment to indirect holdings has resulted in the repeal of the specific provisions in the AMF general regulations requiring shareholders to file an offer if they indirectly crossed the one-third threshold of a listed company which constitutes an essential part of the assets of another company subject to an acquisition of control, merger or contribution. This concept has survived in the form of an exception. Accordingly, the AMF may consider that there is no need to file a mandatory offer where the 30% threshold has indirectly been crossed if the listed company concerned is not an essential asset of the company contributed to another company or subject to a change of control or merger.10 Lastly, in a bid to harmonise the terminology of the AMF general regulations with that of the French Monetary and Financial Code, the old notion of "essential part of the assets" has been replaced by that of "essential asset" in the AMF general regulations.11
- Removal of the ceiling limit on temporary authorisations
The Order has removed the ceiling limit on temporary authorisations to cross the mandatory offer threshold,12 thereby compensating in part for the impact of lowering this threshold. In the past, the AMF could authorise temporary crossings of the one-third threshold if the crossing concerned less than 3% of the share capital and/or voting rights and did not last for more than six months. Temporary crossings are now possible with no limit on the amount, although the maximum term of six months still applies. Further, persons concerned by these temporary crossings must be able to show that the aim of the transaction which led to the crossing was not to obtain or to increase control over the company and must undertake not to exercise the voting rights attached to the shares that are to be re-transferred within six months. Lastly, this provision now not only applies to crossing the new 30% threshold but also to transactions known in French as an "excès de vitesse", i.e. when a person already holding between 30% and 50% of the share capital or voting rights of a company then acquires a further 2% or more of the share capital or voting rights in less than twelve consecutive months.13
- Changes relating to the price of the mandatory offer
The Order has incorporated the Law's modifications to the calculation method for mandatory offer prices into the AMF general regulations. The price must now be "equal" (and not "equivalent") to the highest price paid by the offeror during the twelve months prior to "the event triggering the threshold crossing" (and not "the date of filing of the mandatory offer").
- Other changes to takeover rules on the regulated market (Euronext Paris)
- End of the price guarantee offer
In so far as the Law has removed the rules on price guarantee offers (garantie de cours) from the French Monetary and Financial Code, this system has also been removed from the AMF general regulations. It had become redundant given that the event triggering a price guarantee offer, namely the acquisition of a block of shares corresponding to 50% of the share capital or voting rights, would almost always also constitute an event triggering a mandatory offer: shareholders acquiring such a large block of shares would necessarily cross the 30% threshold or qualify for the 2% "excès de vitesse" rule14 in virtually all cases.
- New rules for buy-out procedures
The AMF general regulations now provide that the AMF may oblige shareholders to file a buy-out offer (offre publique de retrait) in the event of a merger between a company and its sister company (in addition to mergers with parent companies).15
- Changes to takeover rules on multilateral trading facilities (Alternext)
- Substitution of the mandatory offer for the price guarantee offer
The AMF general regulations have been amended to substitute the mandatory offer system used on the regulated market for the price guarantee offer currently used on Alternext. Two important adaptations have been made: first, the threshold for a mandatory offer is not 30% but rather 50% on Alternext;16 second, the applicable procedure is that of a simplified takeover bid on a regulated market17 (minimum of 10 days, buy order on the market or centralisation on an exceptional basis).
- Introduction of buy-out and squeeze-out procedures
The Order has also extended the Euronext Paris procedures for buy-outs (offre publique de retrait) and mandatory squeeze-outs (retrait obligatoire) following a buy-out offer or a mandatory offer to Alternext, subject to a certain number of adaptations.18 Certain buy-out offer triggers available on the regulated market will not be available on Alternext, such as the conversion of a société anonyme into a société en commandite par actions, the reorientation of the company's business or any substantial amendments to a company's articles of association, disposals of major assets or mergers between companies from the same group of companies.