Structure and process, legal regulation and consents

Structure

How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

In most cases and unless there is a natural choice (eg, a joint-venture partner or a majority shareholder willing to buy out minority shareholders), the seller would seek to promote competition between different bidders through a competitive auction process, whose conduct is not subject to specific rules apart from the requirement of good faith (see question 10).

The typical auction process would start with the seller soliciting offers - possibly with the support of a financial adviser or accountant (see question 9) - by providing a short presentation about the target (a teaser). After having signed a non-disclosure agreement, interested bidders will gain access to an information memorandum, on the basis of which interested buyers would provide non-binding letters of interest. Selected bidders may also be granted access to a data room, the management of the target through management presentations and possible site visits, to be in a position to make binding offers.

The time period for achieving the transaction varies depending on the circumstances, but it usually takes three to five months to execute an agreement once the process has started

Legal regulation

Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

Private acquisitions and disposals are generally governed by contracts law, as provided by the French Civil Code, which underwent a major reform in 2016 with the aim of modernising and simplifying the applicable rules. In addition, specific additional legislation may be applicable depending on the nature of the assets being sold. By way of example, the transfer of real estate assets require the assistance of a French notary. In addition, the transfer of certain sensitive activities to a foreign investor requires the prior approval of the French Ministry of Economy and Finance.

Where one or more of the parties are non-French or where there are assets located in various jurisdictions, it is possible to subject a transaction involving a French target or asset to a foreign law (except for certain specific assets such as real estate).

Legal title

What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

In general, a buyer would acquire the title of ownership over shares in a company, a business or assets and all of the powers attached thereto (ie, the right to use or dispose of such shares, business or assets). The transfer of ownership occurs either upon the entry into the relevant sale and purchase agreement or, as applicable, upon the satisfaction of mandatory regulatory conditions or contractually agreed conditions precedent.

Where title to shares is concerned, such title is transferred via registration in the buyer’s shareholder account of the company’s register, which may be done, for unlisted securities, by using blockchain technology.

French law does not distinguish between legal and beneficial titles, but provides a single concept of ownership right. However, a few concepts under French law may be analogous to beneficial titles, such as:

  • the fiducie, whereby one or more persons may transfer assets, rights or guarantees to a third party, who has the duty to administrate these on behalf on the beneficiary; and
  • the division of shareholder rights between a bare owner and a beneficial owner (the latter benefiting solely from the right to use and receive the revenue from the assets).
Multiple sellers

Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

As a general principle, a buyer must obtain the consent of each shareholder to buy his or her shares. Indeed, no squeeze-out mechanism is currently available under French law for non-listed companies to allow a buyer to force a minority shareholder to sell his or her shares unless he or she previously consented to (for instance, through a drag-along clause, an exclusion clause or a call option, all of which can be stipulated in the by-laws or in a shareholders’ agreement).

Exclusion of assets or liabilities

Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

As long as the transfer of a business results in the transfer of an autonomous and complete branch of activity, such transfer would entail the automatic transfer of all related assets and liabilities, with the exception of agreements concluded intuitu personae (in consideration of the other party’s quality) as well as agreements that expressly prohibit such transfer without the other party’s approval.

The transfer of real estate assets may require specific formalities and authorisations.

Consents

Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

Generally, there is no restriction on such transfers, including in relation to foreign investors. Nonetheless, French authorities may object to foreign investments in a few specified sectors, the list of which was expanded in 2014 following the takeover battle between Siemens and GE over Alstom’s energy business and extended once again in 2018. Such strategic sectors now include activities that are essential to guarantee the country’s interests in relation to public policy, public security or national defence (the supply of energy sources or of water, transport and electronic communications services, etc) and, in certain circumstances, R&D activities with respect to semiconductors, artificial intelligence, cybersecurity and robotics.

In practice, the French authorities adopt a pragmatic approach when dealing with sensitive transactions, using their veto power to impose specific conditions to safeguard national interests. Any such conditions regarding EU investors would typically be more lenient than they would be for non-EU investors. In the event of non-compliance with such conditions, sanctions may be imposed on involved parties as a result of recent Pacte bill adopted in May 2019.

In addition, pursuant to an EU Regulation issued on 19 March 2019, the European Union has established a coordination mechanism between member states in the implementation of domestic filtering or control procedures for foreign direct investment from third countries that may adversely affect projects or programmes that are of particular relevance for the European Union. In essence, any investment project that is subject to a domestic supervisory procedure must be simultaneously communicated to the European Commission as well as to any member state concerned to enable them to issue and channel an opinion to the member state responsible for the ongoing control.

Furthermore, transactions in specific industries (eg, banking, telecoms, insurance) may also require the consent from the competent regulatory bodies.

Moreover, the transaction could be subject to the merger control of the European Union, or to French merger control regulations (in addition to merger control regulations of other EU member states). Under such French merger control regulations, transactions meeting the three following conditions may be required to be filed with the French Competition Authority (ADLC): (i) the gross worldwide total turnover of all of the companies involved in the concentration exceeds €150 million; (ii) the gross total turnover generated individually in France by each of at least two of the companies involved in the concentration exceeds €50 million; and (iii) the merger does not fall within the scope of the EU’s Merger Regulation.

Finally, other legal or tax restrictions may also affect the possibility of completing a transaction (eg, tax schemes subject to lock-up commitments).

Are any other third-party consents commonly required?

Depending on the corporate form of the entity, whose shares are being transferred (closely held companies such as partnerships (SNC or SCS) or private limited liability companies (SARL), for instance), the consent of the other shareholders (or the board of directors in a société anonyme) may be required for one shareholder to transfer his or her shares. Otherwise, such consent is not necessary, unless stipulated in the by-laws.

In a situation where a corporate entity is the seller, the decision to sell is taken by the management. This position, however, ought to be qualified for some strategic decisions (eg, in the event of a sale of the majority of assets) for which, depending on the by-laws, the board of directors’ or shareholders’ prior approval may be necessary.

Regulatory filings

Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

While the acquisition of shares generally involves limited formalities (tax filings and, with respect to certain corporate forms (SNC, SARL, SCS), additional filings with the Commercial Register), a transfer of a business or assets may involve specific disclosures to inform the seller’s creditors of the sale or other formalities depending on the assets being sold (eg, the transfer of any real property involves a notarial deed and may require the waiver of municipal pre-emptive rights).