The Social and Solidarity Economy Act (2014-856) of 31 July 2014 contains a section the aim of which is to facilitate the transfer of businesses to their employees. These provisions require that a notification process be organised to enable employees of businesses which qualify as petites et moyennes entreprises to make an offer in the event that their company’s business undertaking (fonds de commerce) is to be sold, or in the event that securities or financial instruments that equate to more than 50% of the company’s share capital are to be sold. The main provisions of the Act, which covers the businesses which employ less than two hundred and fifty employees and which have an annual turnover lower than Euro 50 million or a total balance sheet lower than Euro 43 million, are the following.
In businesses where there is no works council, the company must notify its employees that it intends to sell, at least two months before the sale completes, and inform them that they are entitled to make an offer to purchase. The sale may not proceed until this period has expired unless each employee has confirmed in writing that he or she does not wish to make an offer.
In businesses where there is a works council in place, the above information must be provided to the employees in parallel with the information and consultation of the works council on the proposed sale.
Any sale that occurs in breach of these provisions may be annulled on an application by any employee, within two months of publication of the notice that the business undertaking has been sold and, where securities are sold, since there is no legal publication, as from the date on which all employees have been informed of the sale. In this respect, where securities are sold, it is advisable to notify the employees in writing.
This obligation to notify relates all “sale” transactions (“cessions”). Thus, all sales, whether voluntary or imposed by the courts, are covered. In addition, although this does not appear to be the spirit of the Act, there is no exclusion for intra-group sales. For that reason, they are subject to these provisions. Conversely, transfers which do not qualify as “sales”, such as contributions or distributions, are not covered by the Act.
If the transaction takes the form of a sale of securities, only sales of more than 50% of the share capital of sociétés à responsabilité limitée (limited liability companies) and sociétés par actions (joint stock companies such as sociétés anonymes, sociétés par actions simplifiées and sociétés en commandite par actions) are covered by this legislation. Conversely, sales of units in sociétés en nom collectif, sociétés en commandite simple or economic interest groups are not covered. As listed companies qualifying as petites et moyennes entreprises (biotech companies, real estate companies, etc.) are not excluded from the legislation, they are covered.
As an exception to this, the legislation does not apply to transactions involving inheritance or the liquidation of matrimonial property (in the case of sole traders) or disposals to spouses, ascendants or descendants or companies that are subject to conciliation, safeguard or compulsory administration proceedings.
In practice, the new provisions raise a number of questions relating particularly to:
- the nature of the information to be provided to employees and the methods for providing such information. On this point, a two-stage communication process (depending on the interest shown by certain employees) could be envisaged, provided that the timeframe given to employees to prepare their offer can be considered adequate; and
- the consequences on the timetable for the transaction where one or more employees wish to proceed with the proposed acquisition. In this respect, the employees have no right of first refusal and the business or shareholder has no obligation to sell to them. Nevertheless, one would anticipate that the seller will at least be required to enter into discussions with the relevant employees.
The effect of these new provisions, applicable to all sales occurring as from 1 November 2014, will be to significantly extend the timeframes for carrying out certain transactions, particularly sales to a third party of businesses with fewer than two hundred and fifty employees where there is no works council in place and sales taking place as part of intra-group reorganisations.