Company response strategies


What are the fiduciary duties of directors in the context of an activist proposal? Is there a different standard for considering an activist proposal compared to other board decisions?

As previously discussed, a defining duty of directors in France is to act in accordance with the corporate interest of the company.

There is no different standard applicable to activist proposals.

What advice do you give companies to prepare for shareholder activism? Is shareholder activism and engagement a matter of heightened concern in the boardroom?

Appropriate planning for an activist attack includes laying the groundwork for strong teamwork in a crisis by and among the board, management and advisers as well as other key internal constituencies. Maintaining strong relationships and lines of communication with external constituencies, notably including significant shareholders, is essential.

Companies should engage in ongoing monitoring and be ready to respond to early warning signs, particularly during vulnerable periods (eg, active M&A operation under way, results or other metrics remain below those of peers, enduring criticism of governance or leadership, etc). Continuously assessing corporate strategy to ensure that it is rigorously defensible becomes paramount in the event that the business underperforms compared with peers. Maintaining good governance, and a relationship of trust with regulators, are also worthwhile investments.

Shareholder activism and engagement has been a subject of increasing focus in French boardrooms in recent years, with a significant uptick in awareness in the past 12 months.


What defences are available to companies to avoid being the target of shareholder activism or respond to shareholder activism?

In the event an activist does emerge, a strong response by the company often includes rallying the company’s financial, legal and communications advisers at short notice and making sure that any public communications by the company are coherent and disciplined across all key constituencies. The board and management should redouble efforts to maintain strong cohesion. Individualised outreach may be appropriate to key shareholders. In addition, ongoing monitoring should be maintained to ensure the company can rapidly respond to any additional tag-along attacks or related activity. An open line of communication should typically be maintained with the relevant authorities such as the AMF, as well as proxy advisers and other key constituencies, including other significant shareholders. Given the likely heightened focus on the company and its conduct during the time of the attack, a particular effort should be made to avoid legal or other missteps that will be seized upon by the activist or others (including the AMF). Likewise, the activist’s actions and statements should be carefully reviewed for missteps or weaknesses in its strategy. In certain cases, seeking regulatory intervention or even initiating litigation against the activist may be appropriate.

Reports on proxy votes

Do companies receive daily or periodic reports of proxy votes during the voting period?

In France, the record date for shareholder voting is legally set at two trading days prior to the meeting. Many companies listed in Paris outsource their share registrar (including the management of voting at shareholders’ meetings) to external service providers. These service providers may keep issuers apprised of the general tendency of votes received as from the date of the initial notice of the meeting but, in any event, the bulk of the voting returns are not available until the last few days preceding the shareholders’ meeting.

As background, French public companies must provide their proxy voting guidelines in a notice that must be made at least 35 days prior to the meeting. Shareholders must be provided with a supplemental notice of meeting no less than 15 days prior to the meeting. Both notices must specify, among other details, the deadline for the return of proxy forms.

Shareholders may choose between one of the three following options of participation:

  • attend the general meeting in person;
  • grant proxy to the chairman of the shareholder’s meeting or to any individual or legal entity of their choice or;
  • vote by post (or electronically if permitted).

Under the relevant legislation, the proxy forms must be provided by mail to the company at least three days prior to the meeting, except if a shorter period is permitted under the company’s bylaws, or if to be provided electronically, the proxy forms must be received by the company no later than 3pm on the day prior to the meeting.

Private settlements

Is it common for companies in your jurisdiction to enter into a private settlement with activists? If so, what types of arrangements are typically agreed?

Formal settlements with activists are relatively rare; however, there are precedents, including Valeo and Saint Gobain. It may be necessary to disclose the main terms of such agreements under AMF rules.

These agreements may include board representation, an undertaking not to vote in favour of resolutions that do not have board approval, a cap on voting rights or a standstill and pre-emption rights.