Sources of corporate governance rules and practices

Primary sources of law, regulation and practice

What are the primary sources of law, regulation and practice relating to corporate governance? Is it mandatory for listed companies to comply with listing rules or do they apply on a ‘comply or explain’ basis?

The main sources of law relating to corporate governance in France are:

  • the Commercial Code;
  • concerning listed companies, the general regulations, which are binding, and recommendations of the French stock exchange authority (AMF), which may be binding on a case-by-case basis; and
  • specific laws that organise the governance of corporate vehicles designed for certain business sectors (financial institutions) or professions (such as auditors or pharmaceutical businesses).

The relevant European regulations have been incorporated into these sources.

The Commercial Code encourages companies listed on a regulated market to refer to a corporate governance code, and requires those companies that do not intentionally refer to these codes to explain their reasons for not doing so and to clarify their own corporate governance rules.

Two established corporate governance codes are currently available: the Afep-Medef Code, designed for large listed companies, and the MiddleNext Code, which was initially dedicated to small and medium-sized listed companies and now also addresses the case of large listed firms controlled by one shareholder or a group of shareholders. They are non-binding, based on the ‘comply or explain’ principle. A corporate governance code for (non-listed) medium-sized and start-up companies was also published by a professional organisation of managers and directors (ADAE) several years ago.

Responsible entities

What are the primary government agencies or other entities responsible for making such rules and enforcing them? Are there any well-known shareholder groups or proxy advisory firms whose views are often considered?

There is no specific agency with exclusive competence in the elaboration and enforcement of corporate governance rules.

However, the AMF, as guarantor of sound market information, closely reviews and monitors corporate governance practices of listed companies and publishes an annual report on this matter.

The Afep and Medef associations have set up a high-level committee on corporate governance in order to review the practices of the listed companies applying the Afep-Medef Code and to ensure the effective implementation of the ‘comply or explain’ principle. This committee works closely with the AMF.

Several shareholders’ associations are active in order to promote and defend shareholders’ rights. They are often consulted by authorities in the development of new regulations and are sometimes involved in legal actions to defend their position.

Rights and equitable treatment of shareholders

Shareholder powers

What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action? What shareholder vote is required to elect or remove directors?

In France, the ‘limited liability company’ concept covers different corporate forms of vehicles:

  • Public limited company (SA): most functioning rules are provided for by the Commercial Code and are compulsory; the SA is the only type of vehicle (apart from the SCA) that may be listed.
  • Joint-stock company (SAS): functioning rules are predominantly decided by the shareholders in the articles of association.
  • Limited company (SARL): functioning rules are provided for by the Commercial Code and are compulsory; a SARL is generally reserved to small businesses.
  • Limited partnership (SCA), organised by the Commercial Code and to a certain extent by the articles of association - a sort of limited partnership with a share capital, where two types of members coexist: general partners, who are liable on their personal assets for the SCA’s debts, and limited partners who basically are shareholders. The SCA form is chosen by listed companies as a poison pill against hostile takeover bids.

In an SA, either with a one-tier structure (a board of directors) or with a two-tier structure (an executive board and a supervisory board), the shareholders always have the power to remove members of the (supervisory) board at a simple majority vote in a meeting, even if this matter has not been included in the agenda.

SCAs are managed either by a general partner or a third person whose rules of appointment and removal are freely set in the articles of association. SCAs also have a supervisory board whose role is to control management and that may exercise a veto right on the appointment of managers. The power of shareholders in such companies is limited: every decision has to be confirmed by the general partners, with the exception of the appointment of the members of the supervisory board.

Shareholders of an SAS benefit from a large flexibility to draft the articles of association, especially as regards governance rules, which is the reason why investors who need to address specific governance issues and tailor peculiar corporate functioning rules generally choose this legal form. Appointment and removal rules of executives and directors are provided for in the articles of association.

SARLs do not have a board of directors per se, as management and executive functions are combined in a single type of duty. The appointment and removal of managers are decided by the shareholders at a simple majority unless the articles of association provide for a qualified majority. Shareholders may also request removal of the managers with cause to the courts.

When consulted on a specific question, a shareholders’ vote is binding (with a few exceptions). But apart from their removal right regarding the board or legal action, shareholders have no direct way to require the board to pursue a particular course of action.

Shareholder decisions

What decisions must be reserved to the shareholders? What matters are required to be subject to a non-binding shareholder vote?

Shareholders’ approval is required for the following decisions:

  • approval of the company’s (and consolidated) annual accounts;
  • dividends allocation;
  • appointment of the (supervisory) board members and allocation of the global amount of their attendance fees, the (supervisory) board having the exclusive power to split the fees between members;
  • appointment of the statutory auditors;
  • approval of the report of the statutory auditors on transactions between the company and its related parties;
  • amendment of the articles of association (eg, increase or reduction of the share capital, mergers, change of corporate form or nationality, etc); and
  • dissolution.

The articles of association may also provide that certain other decisions require the shareholders’ prior approval, but such restrictions cannot be opposed to third parties and agreements concluded without such a prior approval remain binding. The company’s representatives can, however, be held liable for the loss suffered by the company as a result of such agreements. The same solution applies regarding transactions with related parties when the shareholders have refused to approve the statutory auditor’s report.

Disproportionate voting rights

To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

French law provides for the ‘one share one vote’ principle in non-listed companies (but exceptions are permitted) while in companies listed on a regulated market, a double voting right is automatically granted to registered shares after a two-year period of uninterrupted holding (unless otherwise provided for by the articles of association).

Companies may also issue preference shares deprived of voting rights, usually in consideration of entitlement to preferred dividends. Such preference shares are limited to a quarter of the total amount of shares in listed companies (half in non-listed). On the contrary, some preference shares benefit from double voting rights, or a veto right for certain decisions.

A cap on the votes may also be implemented for each shareholder, it being specified that the articles of association of listed companies may suspend such a limit in the event of a takeover bid.

In an SAS, disproportionate voting rights are allowed with no restriction.

Shareholders’ meetings and voting

Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote? Can shareholders act by written consent without a meeting? Are virtual meetings of shareholders permitted?

Shareholders must justify ownership of their shares two business days prior to the meeting in listed companies (record date) and either this date or the meeting date for non-listed companies.

Shareholders who cannot attend the meeting can vote by mail or proxy. This proxy is either given to a specific person, who may be a shareholder, or sent to the company with no specific proxy holder’s name, which corresponds to a vote in the way recommended by the board. In companies that have adapted their articles of association accordingly, shareholders may also vote electronically.

Although French law allows shareholders to participate virtually in the meetings if the articles of association so provide, professional associations and law professionals do not, at present, recommend using such an option.

Shareholders and the board

Are shareholders able to require meetings of shareholders to be convened, resolutions and director nominations to be put to a shareholder vote against the wishes of the board, or the board to circulate statements by dissident shareholders?

Shareholders’ meetings are generally convened by the board.

All shareholders may request the court to force a board to convene the annual shareholders’ meeting in the event of the board’s failure to do so as and when legally required. All shareholders may also request the court to appoint an agent who will convene a shareholders’ meeting in the event of emergency. Shareholders holding at least 5 per cent of the share capital have the right to request the court to appoint an agent who will convene a shareholders’ meeting on a given agenda. (They do not need to evidence emergency, but the judge will assess whether the request is consistent with the company’s interests).

After a public takeover or a change of control of a company, majority shareholders may also convene a shareholders’ meeting.

Before a meeting, minority shareholders (holding at least 5 per cent of the voting rights in companies with a share capital not exceeding €750,000, less if it does) may force the board to put a matter on the agenda, including director nomination, which will be discussed during the shareholders’ meeting. They may justify their action in a statement, which will be transmitted to the shareholders. Otherwise, shareholders cannot force the board to circulate any statement.

Controlling shareholders’ duties

Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action be brought against controlling shareholders for breach of these duties?

French law does not provide for any duties owed by controlling shareholders to the benefit of the company or to minority shareholders. However, case law prevents majority shareholders from voting in favour of resolutions taken against the company’s interests with the sole purpose of favouring their own interests to the detriment of other shareholders. When this is characterised by the judge, the disputed vote may be declared null and void and the majority shareholders may be sentenced to pay damages.

Shareholder responsibility

Can shareholders ever be held responsible for the acts or omissions of the company?

The responsibility of shareholders is normally limited to the price paid for their shares.

However, the corporate veil may be pierced when a shareholder has de facto replaced the CEO and committed mismanagement acts, for example if it has commingled its assets and those of the company or caused the insolvency of the company by obvious misconduct.

In addition, parent companies may be held liable for damage caused by their subsidiaries: as regards environmental losses, if a mismanagement action can be assessed against the parent company; and if they belong to a large group (employing 5,000 persons in France or 10,000 worldwide), as regards human rights abuses, physical injuries or environmental losses, if the parent company has failed in the setting-up of a specific prevention plan and if a loss directly arises out of such failure.

Corporate control

Anti-takeover devices

Are anti-takeover devices permitted?

Anti-takeover devices are allowed under French law insofar as they abide by the corporate interest. Although France has implemented the Takeover Directive, it has often chosen not to adopt some options of the Directive.

Before a takeover bid is public, various measures may be implemented to thwart any offer, including:

  • double voting right, which increases the number of shares that a bidder must acquire to gain the target’s control;
  • prior disclosure of shareholders’ agreements provisions relating to share transfer (see question 12);
  • share repurchase programmes (up to 10 per cent of the share capital); and
  • delegations to the board to issue new shares or specific ‘bid warrants’. Such warrants are designed to be attributed, if a takeover bid takes place, to existing shareholders for no consideration, in order to maintain the share ownership, being specified that if the bid fails, the company can finally decide not to issue the shares.

During the takeover bid, unless the articles of association provide otherwise, the board is no longer (as it formerly was) required to remain neutral and to submit any anti-takeover action to shareholders’ approval. The board may also sell (or buy) a strategic asset, seek an alternative and friendly bid (the white knight), use delegation previously granted by the shareholders, etc. However, an approval is still necessary to perform a repurchase programme if it may harm the success of the bid.

Issuance of new shares

May the board be permitted to issue new shares without shareholder approval? Do shareholders have pre-emptive rights to acquire newly issued shares?

Shareholders’ approval is necessary for the issuance of new shares but can be delegated to the board (which may then sub-delegate such power to the executive officers). Rights of issuance can be granted to the board with or without a preferential subscription right to shareholders. In such latter case, a priority right may be implemented in listed companies by the board, depending on the shareholder delegation’s terms.

Restrictions on the transfer of fully paid shares

Are restrictions on the transfer of fully paid shares permitted and, if so, what restrictions are commonly adopted?

Restrictions on share transfers are compulsory in SARLs (prior approval of any transfer to a third party) and optional in other non-listed limited liability companies. If some or all shareholders agree to be bound by such restrictions, they are provided for in the articles of association or in shareholders’ agreements (in which case they may remain confidential).

Shareholders of listed companies may include share transfer restrictions in shareholders’ agreements only and such restrictions must be disclosed to the public when they relate to at least 0.5 per cent of the shares or voting rights, failing which the undisclosed agreement will have no effect during a takeover bid (see question 10).

Common restrictions include pre-emption rights, prior approval (by the shareholders’ meeting, the board or a specific corporate body), tag-along and drag-along rights, standstill. But apart from the latter clause whose effect has to be limited in time, such restrictions may not harm the ability of a shareholder to exit the company if it has found a buyer (the transfer being made to this buyer or to the company or the other shareholders).

Compulsory repurchase rules

Are compulsory share repurchases allowed? Can they be made mandatory in certain circumstances?

The shareholder of a non-listed company may force the company or other shareholders to buy its shares if the implementation of a prior approval clause contained in the company’s articles of association has given rise to the refusal of the contemplated share transfer (see question 12).

Articles of association of an SAS and non-listed SA may contain drag-along rights or exclusion clauses (with objective exclusion causes and price determination rules) whereby a shareholder may be forced to sell its shares.

In listed companies, compulsory repurchase may only occur when 95 per cent of the shares and voting rights are held by a shareholder or shareholders acting in concert. Such bid may be triggered either by minority shareholders or by majority shareholders, or may follow a takeover bid at the successful bidder’s initiative.

Dissenters’ rights

Do shareholders have appraisal rights?

Minority shareholders do not have the right to sell their shares if they disagree with a decision of the company unless it is so provided in the articles of association or in a shareholders’ agreement.

Certain restructuring transactions (such as a merger, a disposal of all or most of the company’s assets, reorientation of the company’s purpose, substantial changes to the articles of association) involving listed companies may lead to the AMF imposing on the majority shareholders to launch a takeover bid at fair market value (this is compulsory in the event of the conversion of an SA into an SCA).

Responsibilities of the board (supervisory)

Board structure

Is the predominant board structure for listed companies best categorised as one-tier or two-tier?

One-tier structured SAs are largely predominant, representing about 80 per cent of large issuers. About two-thirds of them are led by a CEO who is also the chair of the board. Two-tier structured SAs represent about 15 per cent and SCAs about 5 per cent.

Board’s legal responsibilities

What are the board’s primary legal responsibilities?

The board of directors is the corporate body in charge of setting the main lines of the company’s business activity and strategy and of ensuring their implementation, in accordance with the powers reserved by law to the shareholders and the company’s executives. If the board is legally entitled to deal with any issue it considers relevant, it has by law exclusive competence in the following matters:

  • drawing up of the annual (consolidated) accounts and management report;
  • suggestion of dividends allocation;
  • convening of shareholders’ meetings and fixing their agenda;
  • appointment and removal of the company’s executives;
  • authorisation of guarantees granted by the company and of transactions with related parties; and
  • bonds’ issuance (unless reserved to the shareholders’ meeting by the articles of association).

In two-tier structures, the supervisory board’s role is mainly to appoint (remove if permitted by the articles of association), control and supervise the executive board (eg, review of the accounts, management reports and strategy, prior approval of transactions with related parties) and refer to the shareholders’ meeting. The executive board and the supervisory board may each convene shareholders’ meetings.

Board obligees

Whom does the board represent and to whom does it owe legal duties?

The board has no legal personality and is only a corporate body that promotes and defends the company’s interests.

Ultimately, the board is responsible to the shareholders, who can decide, at each meeting, to remove any of its members (including all of them). However, civil and criminal liability of directors may be sought where applicable either by the company itself or by shareholders (see question 18) (or third parties in limited cases and public prosecutor as regards criminal liability).

Enforcement action against directors

Can an enforcement action against directors be brought by, or on behalf of, those to whom duties are owed?

Legal actions may be brought against directors individually or collectively. The ‘corporate’ derivative action aims at indemnifying against losses suffered by the company itself as a result of faults of its directors. It can be initiated for the account of the company either by the company’s legal representative or by a shareholder acting on behalf of the company. Shareholders may also bring an action in order to be indemnified for losses that they have directly suffered.

Such actions may only be brought in the event that directors have committed a breach of law or of the company’s articles of association, or mismanagement acts. When the fault is committed collectively, the enforcement action is led against all directors taken individually, but each member of the board may elude its liability if it can prove that it opposed the disputed decision.

Criminal liability may be sought in specific cases, mainly in the event of misuse of corporate assets, abuse of powers, distribution of fictitious dividend and publications of untrue accounts. It may be initiated by any purported victim, but the legal action is controlled by criminal judges.

Care and prudence

Do the board’s duties include a care or prudence element?

Directors owe a duty of care to the company at all times. Case law has promoted a specific duty of loyalty by board members in the event that such directors hold sensitive information and are involved in share transactions with other shareholders.

Internal rules of the board often describe more precisely the scope of such duty (eg, attendance of members, conflict of interests).

Board member duties

To what extent do the duties of individual members of the board differ?

The duties of the various board members are the same and considered on an equal basis.

Directors may be members of specific board committees (audit (which is compulsory in listed companies), appointment, compensation, strategic, ethical, etc) and their work (and exposure) may so differ in practice. Usually, members of specific committees are chosen among directors with skills and experience corresponding to their field of expertise.

Delegation of board responsibilities

To what extent can the board delegate responsibilities to management, a board committee or board members, or other persons?

The board may delegate to the management some of its specific powers such as the authorisation of guarantees (by law), or the issuance of new shares (upon shareholders’ approval).

The board may create committees in charge of monitoring specific questions. It can also appoint any person in order to perform specific tasks. But the aim of such committees or such appointments is only to facilitate or improve the work of the board and its decision-making process. Directors cannot ignore any of the matters discussed in board meetings: committees or individuals that the board has appointed always act under its authority.

Non-executive and independent directors

Is there a minimum number of ‘non-executive’ or ‘independent’ directors required by law, regulation or listing requirement? If so, what is the definition of ‘non-executive’ and ‘independent’ directors and how do their responsibilities differ from executive directors?

Companies listed on a regulated market must appoint at least one independent director at their audit committee. The Afep-Medef and MiddleNext codes require that at least half of the directors are independent or one-third in case of a company controlled by a majority shareholder or a group of shareholders. The Afep-Medef Code also provides that independent directors should represent two-thirds of the audit committee and the majority of the appointment and compensation committee if applicable.

The definition of independence is left by law to the board (or supervisory board). Governance codes propose criteria in order to assess independence, which may be adapted by companies to the extent that they explain their approach. For companies referring to the Afep-Medef Code, independent directors are defined as having no particular relationship (majority shareholder, employee, family, others) with the company’s executives. According to these criteria, an independent director is someone who:

  • has not been an employee or an executive officer for the last five years in the company or a related company;
  • is not a significant supplier, a client or a financing institution; and
  • has not been an independent director for longer than 12 years (renewal included). This last provision is specific to the Afep-Medef Code.

While they are expected to be particularly cautious of the company’s interests, their liability does not differ by law from that of the other directors.

Board size and composition

How is the size of the board determined? Are there minimum and maximum numbers of seats on the board? Who is authorised to make appointments to fill vacancies on the board or newly created directorships? Are there criteria that individual directors or the board as a whole must fulfil? Are there any disclosure requirements relating to board composition?

The board size of between three and 18 members is ultimately determined by the shareholders. If they do not provide otherwise, no more than one-third of the directors may be over 70 years old. The same threshold applies for employees of the company.

Listed companies and large companies (ie, companies that had, for three consecutive financial years, over 500 permanent employees and a total turnover or balance sheet of more than €50 million) must appoint women in a proportion of at least 40 per cent of the members as of 2017. As of 1 January 2020, the threshold in terms of permanent employees will be lowered to 250. As an exception to the 40 per cent requirement, in boards made up of eight members or less, the gender gap cannot be larger than two directors.

Before their appointment, shareholders may request information on the candidates’ curricula vitae during the last five years, and in listed companies a brief summary of their expertise is always available. Apart from the specific requirement regarding the independent member of the audit committee, expertise is not required by law.

Criminal records are only provided to the AMF for listed companies during initial public offerings, but directors or supervisory board members in all companies must demonstrate that they have not been restricted from running a business owing to criminal proceedings.

The (supervisory) board may appoint temporary new members in the event of a vacancy, subject to confirmation by the next shareholders’ meeting, while only the shareholders may create new directorships.

Board leadership

Is there any law, regulation, listing requirement or practice that requires the separation of the functions of board chair and CEO? If flexibility on board leadership is allowed, what is generally recognised as best practice and what is the common practice?

Laws and governance codes do not require the separation or joining of these functions, but organise decision-making processes (including in terms of transparency) in this respect.

Historically, such functions were joint and this structure still prevails today (about two-thirds of SAs with a one-tier structure are managed by a CEO who is also the chair of the board).

Board committees

What board committees are mandatory? What board committees are allowed? Are there mandatory requirements for committee composition?

The audit committee is mandatory in companies listed on a regulated market, but the board of directors may decide to take over its functions directly. In such cases, when the agenda of the board meeting handles relevant matters of the audit committee, executive members of the board must temporarily leave. Only board members may be part of the audit committee, of which at least one independent director must have a specific financial expertise (see question 22).

Otherwise, the board may set up whatever committees it considers appropriate and has complete flexibility to organise them.

Board meetings

Is a minimum or set number of board meetings per year required by law, regulation or listing requirement?

Legally, in one-tier structures, the board must meet at least once in order to draw up annual accounts and convene the annual shareholders’ meeting (twice in listed companies, which have to publish half-year accounts).

In two-tier structures, the supervisory board has to meet at least four times a year in order to review the executive board’s report.

However, in listed companies, corporate governance codes require more frequent meetings: the MiddleNext Code recommends a minimum of four meetings a year, whereas the Afep-Medef Code does not set a minimum requirement but provides that the number of meetings must be sufficient to enable the board to perform an in-depth review of all topics that are put on its agenda and that one meeting per year must be held without the presence of the executive officers.

Board practices

Is disclosure of board practices required by law, regulation or listing requirement?

A listed company is required to disclose in a report established by the chair of the board specific information on its operations and on the company’s governance in general. Such information includes the structure of the board, the numbers and the overall attendance of the meetings during the last year, which governance code it applies and a review of the company’s compliance with that code. Explanations on the items it has chosen not to enforce have to be disclosed under the ‘comply or explain’ principle.

Remuneration of directors

How is remuneration of directors determined? Is there any law, regulation, listing requirement or practice that affects the remuneration of directors, the length of directors’ service contracts, loans to directors or other transactions or compensatory arrangements between the company and any director?

In consideration of their duties in such capacity, directors can only receive attendance fees, the global amount of which is decided by the shareholders’ meeting. The split of this amount is, however, reserved to the (supervisory) board itself, being specified that governance codes recommend to allocate the fees in consideration of the attendance of each relevant member to the meetings, a criterion that should be predominant for the Afep-Medef Code. Directors are also reimbursed for the expenses incurred while carrying out their duties but no other compensation is allowed.

Directors’ appointment term is legally capped at six years (renewable) but the shareholders may retain a shorter term of duties.

Loans to directors are prohibited and transactions between the company and directors (or relatives) are submitted to a prior approval by the board and subsequent review by the auditors and vote by the shareholders. Transactions that exceed one year must now be reviewed by the board.

Remuneration of senior management

How is the remuneration of the most senior management determined? Is there any law, regulation, listing requirement or practice that affects the remuneration of senior managers, loans to senior managers or other transactions or compensatory arrangements between the company and senior managers?

The remuneration of senior management is determined by the (supervisory) board, and has, in listed companies, to be disclosed to shareholders and to the public and is submitted to a compulsory say-on-pay vote (see question 37).

Governance codes intend to set effective criteria in order to give a general and consistent frame to the executive officers’ compensation. These criteria include benchmark, balance, intelligibility and consistency.

When variable compensation is provided, the AMF requires that it is calculated with respect to objective criteria fixed in advance.

Executive officers are in the same position as directors regarding loans or transactions with the company (see question 28).

D&O liability insurance

Is directors’ and officers’ liability insurance permitted or common practice? Can the company pay the premiums?

Directors’ and officers’ liability insurance is permitted and very common in companies having significant business exposure. Usually, companies pay the corresponding premiums.

Indemnification of directors and officers

Are there any constraints on the company indemnifying directors and officers in respect of liabilities incurred in their professional capacity? If not, are such indemnities common?

As opposed to market practice in other jurisdictions, a French company never indemnifies managers acting in their professional capacity as any fault committed by them would likely give rise to a claim by the company itself against such managers or the purpose of the D&O liability insurance scheme, which is authorised by French law, would cover the relevant situation where the managers would incur personal liability (unless the acts having given rise to liability cannot legally be covered by an insurance policy).

Exculpation of directors and officers

To what extent may companies or shareholders preclude or limit the liability of directors and officers?

Executive officers may delegate to employees part of their powers in specific matters and consequently preclude their personal, including criminal, liability (eg, in labour law or tax matters). To be effective, the delegation must be precisely determined and the assignee must be granted all resources and powers needed to perform the relevant tasks (including in the articles of association or otherwise).

There is no other way to preclude or limit the liability of directors and officers.


What role do employees have in corporate governance?

All companies employing at least 50 individuals have to set up a social and economic committee (corresponding as from the 2017 Reform to the former works council), which has to be periodically consulted and informed on various matters that include in some instances contemplated corporate governance changes. Representatives of the committee may attend all meetings of the corporate bodies and must be provided with the same level of information.

Two non-cumulative schemes exist in order to appoint one or several genuine directors representing the employees in companies listed on a regulated market according to a process provided for in the articles of association: when they have employees owning more than 3 per cent of the share capital; or when they employ, with their subsidiaries, more than 1,000 individuals (5,000 worldwide) and must set up a social and economic committee.

Board and director evaluations

Is there any law, regulation, listing requirement or practice that requires evaluation of the board, its committees or individual directors? How regularly are such evaluations conducted and by whom? What do companies disclose in relation to such evaluations?

French law requires the chair of the (supervisory) board of each listed company to issue an annual report on the corporate governance in place within the company. The (supervisory) board has to approve the terms of this report. The statutory auditors must also give their views thereon.

The content of this report addresses most of the corporate governance issues: the frequency of the (supervisory) board meetings, options chosen when the ‘comply or explain’ principle applies, description of the (supervisory) board’s and the committees’ work, description of the compensation policies for executives and directors, review of the independence criteria applicable to the directors, etc. The Afep-Medef Code issued a recommendation on a board evaluation process including an evaluation of the effective contribution of each director to the work of the board.

Every year, the AMF reviews a sample of these reports and delivers a study, which is a major source of sound practices in corporate governance (see question 2). The latest AMF report notes that only a limited number of companies include an evaluation of the individual contribution of each director in their annual report and stresses the importance of this measure in order to ensure an improvement of corporate governance.

Disclosure and transparency

Corporate charter and by-laws

Are the corporate charter and by-laws of companies publicly available? If so, where?

All companies’ articles of association are available at the companies registry and can be sent electronically. Corporate governance codes recommend that listed companies publish their board and committee internal rules on their website.

Company information

What information must companies publicly disclose? How often must disclosure be made?

All companies must file specific corporate documents with the companies’ registry, such documents being publicly available (eg, articles of association, and shareholder resolutions amending the articles of association or appointing corporate bodies, merger agreements, statutory auditors and specific auditors’ reports).

Listed companies have periodic disclosure obligations. In particular they must make publicly available their annual financial report (containing the annual accounts and notes thereto, management report, statutory auditors’ report), half-year information (half-year accounts, interim management report, and statutory auditors’ limited review report) and certain other information such as statutory auditors’ fees and missions, data regarding repurchase programme, etc. Quarterly results are no longer subject to a disclosure obligation but listed companies usually continue to disclose them. The annual financial report is often presented in a document, filed with or controlled by the AMF, which contains all sections of a prospectus not related to a specific securities transaction (and which can be used, with a supplement containing all such sections, as a prospectus).

They also have an ongoing disclosure obligation, where they must disclose with no delay any non-public information that, if known to the public, would likely have a significant effect on the securities price (privileged information). The AMF regulations authorise the relevant issuer to postpone such disclosure in order to protect its legitimate interests, provided that the public is unlikely to be misled and the issuer ensures confidentiality of such information.

Hot topics


Do shareholders have an advisory or other vote regarding remuneration of directors and senior management? How frequently may they vote?

Shareholders have a binding say-on-pay vote for companies listed on regulated markets as regards remuneration of the corporate officers (CEO, deputy CEO, chair of the (supervisory) board but excluding directors). Two votes are compulsory and binding:

  • a first vote must be organised to approve the general terms and structure of the fixed and variable pay of the corporate officers, it being specified that in the event of a negative vote, the existing terms or structure would survive; and
  • subsequently, votes on the individual remuneration (fixed, variable and exceptional) of corporate officers must be organised after the relevant financial year, it being specified that the variable and exceptional remuneration may not be paid until a positive vote occurs.

Golden parachutes have to be authorised as transactions with related parties (the vote not being purely advisory; see question 4).

Shareholder-nominated directors

Do shareholders have the ability to nominate directors and have them included in shareholder meeting materials that are prepared and distributed at the company’s expense?

Before a meeting, shareholders holding a certain number of shares (5 per cent if the share capital does not exceed €750,000, less if it does) may force the board to put the appointment of a director on the agenda. All meeting materials (including those at shareholders’ request or initiative) are prepared and distributed at the company’s expense.

During shareholders’ meetings, in the event that a director nomination is on the agenda or upon dismissal and appointment of a director, every shareholder may apply for the board position.

Regarding proxy solicitation, shareholders may freely consult the list of registered shareholders in order to contact and convince them to vote in a certain way. However, they have no right of access to the list of bearer shares’ holders (except those who are also registered shareholders and have expressed their intention to vote at the meeting with their bearer shares). The cost of proxy solicitation is assumed by the initiator of such solicitation. Anyone can actively solicit proxies if it discloses its voting policy.

Shareholder engagement

Do companies engage with shareholders? If so, who typically participates in the company’s engagement efforts and when does engagement typically occur?

French listed companies are increasingly engaging with shareholders beyond the mandatory, legal interactions at the time of the annual shareholders’ meeting (through written or oral questions, resolution proposals, etc). The engagement efforts mainly depend on the size of the company: the larger it is, the more specific and dedicated staff it involves. The types of initiatives are also diversified (shareholders’ clubs, social events, periodical information meetings, newsletters, etc).

Sustainability disclosure

Are companies required to provide disclosure with respect to corporate social responsibility matters?

Large listed companies (ie, companies listed on the regulated market that have over 500 permanent employees and either a total turnover of €50 million or a balance sheet of €20 million at the end of the financial year) and large non-listed SAs and SCAs (ie, companies that have over 500 permanent employees and a total turnover or balance sheet of €100 million at the end of the financial year) must disclose, in respect of the financial year starting on 1 January 2017 and with the full regime applicable in respect of the financial year starting after 1 September 2017, corporate social responsibility information.

This information includes, for both listed and non-listed companies, details on the impact of the activity on climate change, actions taken in favour of sustainable development and recycling, relations and state of negotiations with the social and economic committee, diversity programmes, etc. Additionally, listed companies must disclose information on the effect of their activity upon human rights and the fight against corruption.

This information is disclosed in the annual report and must be verified by an independent body prior to the annual shareholder’s meeting. The independent body verifying corporate social responsibility disclosure must be certified with recognised accreditation. The independent body is subject to the same rules on conflict of interests as statutory auditors.

CEO pay ratio disclosure

Are companies required to disclose the ‘pay ratio’ between the CEO’s annual total compensation and the annual total compensation of other workers?

No pay ratio needs to be disclosed under French law. However, shareholders are entitled to receive information on the compensation of the five or 10 (depending on whether the company has over 200 employees) best-paid people in the company. The exact amount, which should include advantages in kind, is certified by the company’s auditor.

Gender pay gap disclosure

Are companies required to disclose ‘gender pay gap’ information? If so, how is the gender pay gap measured?

Companies are required to disclose the gender pay gap as part of the annual consultation of the social and economic committee. For companies employing fewer than 300 persons, a general comparison is made by taking into account differences in pay, qualification, experience, age and promotion rates per occupation category. Companies employing over 300 persons must provide a breakdown of this data by specifying for each gender the average period between two promotions, average experience level per occupation, within each occupation, per level and hierarchy within the company. The average age is to be presented by occupation and level and hierarchy within the company.

Information on pay is therefore broken down by average monthly pay per occupation, level and hierarchy within the company and age group. The information on the 10 best paid women in the company is also to be provided.

Update and trends

Recent developments

Please identify any new developments in corporate governance over the past year (including any significant proposals for new legislation or regulation, even if not yet adopted). Please identify any significant trends in the issues that have been the focus of shareholder interest or activism over the past year (without reference to specific initiatives aimed at specific companies).

New PACTE law

A new law setting out an action plan for businesses’ growth and transformation (the PACTE law), definitively adopted on 11 April 2019 by the French Parliament, aims to empower businesses to innovate, transform, increase and create jobs. A series of its provisions relates to corporate governance or shareholders’ rights:

  • companies that do not exceed certain thresholds no longer have to disclose their income statement to the public and are exempted from the preparation of a management report;
  • SAs (whose shares are not admitted to trading on a regulated market), SCAs and SASs whose economics are below certain thresholds are no longer obliged to appoint a statutory auditor;
  • the threshold of majority shareholding enabling the implementation of a squeeze-out procedure is lowered from 95 to 90 per cent of the share capital and voting rights;
  • information provided to SA shareholders in respect of the aggregate amount of compensation paid to the most highly paid employees (relevant employees) is given in respect of five relevant employees if the company employs fewer than 250 people and 10 relevant employees if the company employs more than 250 people (compared with 200 people previously);
  • at least two directors representing the employees are appointed to the board of directors of SAs and SCAs when the board of directors has more than eight members (compared with 12 previously);
  • the articles of association provide that the issuing company or its agent are entitled to request information concerning the owners of the shares, not only from the central depositary, Euroclear France, but also directly from one or more intermediaries (article L.221-3 of the Monetary and Financial Code). It is provided by ordinance that companies with a registered office in France are only allowed to require the identification of shareholders holding more than a certain percentage of shares or voting rights. No disclosure of their identity is guaranteed for shareholders not exceeding 0.5 per cent;
  • the French government is authorised to overhaul by ordinance the legal provisions relating to compensation of executives and directors of companies whose shares are listed on a regulated market to make them consistent with the relevant EU directive provisions;
  • multiple voting preference shares are authorised, and double voting preference share creation conditions are softened; and
  • the concepts of ‘social interest’ and ‘reason for existing’ are added to the Civil Code in respect of companies.