Hamon Law

The Hamon Law of July 31 2014 imposed a far-reaching obligation on small and medium-sized enterprises (SMEs) to provide information to their employees regarding the transfer of majority shareholdings and businesses (for further details please see "New obligations for SMEs to inform employees before share sales and business transfers").

If a shareholder intends to transfer more than 50% of the shares in a company or a company contemplates divesting its business, employees must be informed of the intended transfer or divestiture before it takes place. The required notice period depends on the size of the company and may be up to two months. Within this period, the employees are entitled to submit an offer to acquire the shares or the business, which the seller has sole discretion to accept or reject (the Hamon Law does not provide for a pre-emptive right).

This requirement was intended to ensure the survival of businesses which failed to find buyers by giving employees the opportunity to step in. However, the law's scope of application went too far, as it applied to all types of transfer (eg, intra-group transactions and contributions in kind).

The penalty for violation of the Hamon Law was harsh, as employees were entitled to challenge the validity of the transaction concluded in violation of the law. Thus, a competent court could declare the whole transaction null and void.

Recent developments

Two recent developments have somewhat alleviated the burdens imposed on prospective sellers by the Hamon Law.

On July 17 2015 the Constitutional Court held that the penalty of a share transfer being declared null and void if it breached the Hamon Law was contrary to the Constitution.

Further, the Macron Law of August 6 2015 has limited the scope of the Hamon Law to sales transactions (rather than all transfer scenarios). As a result, all transactions providing for a transfer of shares and/or assets outside a sale scenario should be exempt from the Hamon Law obligations. However, in view of the cautious opinions of some scholars, it remains to be seen whether and to what extent the new wording has effectively clarified the scope of the Hamon Law.

The Macron Law also introduces a new penalty for violation of the Hamon Law. Instead of the transaction being declared null and void, it remains valid, but the breaching party must pay a fine of up to 2% of the transaction price. However, the Macron Law provides that the Hamon Law amendment will apply from a date to be determined by a future decree – in any event no later than six months after publication of the Macron Law.

Legal black hole

As a result, practitioners face an unclear situation. A transaction may fall within the scope of the Hamon Law, but no specific penalty applies since:

  • the Constitutional Court has held that the penalty of nullity, as initially set down by the Hamon Law, is invalid under the Constitution; and
  • the decree amending the Hamon Law to impose a fine of up to 2% of the transaction price has not yet been published.

For further information please contact Alain Levy, Gwenaëlle de Kerviler or Sophie Allex Lyoudi at AyacheSalama by telephone (+33 1 58 05 38 05) or email (a.levy@ayachesalama.com, g.dekerviler@ayachesalama.com or s.allex-lyoudi@ayachesalama.com). The AyacheSalama website can be accessed at www.ayachesalama.com.

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