Legal and regulatory framework

Types of transaction

What types of transactions are classified as ‘corporate reorganisations’ in your jurisdiction?

There is no legal definition of a corporate reorganisation under French law. A corporate reorganisation can take a variety of forms. A corporate reorganisation typically refers to the following transactions within the same corporate group:

  • a merger;
  • a demerger;
  • a partial contribution of assets;
  • a transfer of shares;
  • a transfer of assets (transfer of isolated assets, transfer of assets under the regime of a successor agreement transfer of a going concern or of a branch);
  • a contribution of assets or shares;
  • a contribution of a branch; or
  • dissolution without liquidation with universal transfer of all assets and liabilities (TUP).

All of these transactions have different levels of legal constraints and imply different timings. Corporate reorganisations are driven by several factors, such as, for instance, the integration of an acquisition or the preparation of a disposal or the simplification of a corporate group to gain efficiency and have less structural complexity. Corporate reorganisations may be implemented in a global context or nationally.

Rate of reorganisations

Has the number of corporate reorganisations in your jurisdiction increased or decreased this year compared with previous years? If so, why?

The data related to the number and typology of corporate reorganisations in France is quite limited. Corporate reorganisations are driven by various factors. Changes in legislation may typically increase the number of corporate reorganisations, for instance, if a new law introduces tax incentives or changes in the labour conditions. The number of corporate reorganisations is also related to M&A activity. In any case, it appears that multinational corporate groups seem more and more interested in corporate reorganisations and the need for simplification, cost reduction, gain of efficiency and flexibility and mitigation of business risks they entail. French law undergoes a general trend of simplification. Indeed, structural and business flexibility is a competitive necessity to achieve efficiency, operational synergies, cost savings and enhanced shareholder value in fluid and fast-paced global markets.

Jurisdiction-specific drivers

Are there any jurisdiction-specific drivers for undertaking a corporate reorganisation?

Tax authorities around the world have become more assertive in collecting taxes. Many governments view the old system of tax treaties and transfer pricing rules as insufficiently robust to protect national tax bases in the modern world of highly mobile people and capital and increasingly technology-based global trade. These issues have led to a raft of supranational and national initiatives and legislative proposals, many of which will be of critical importance to any multinational business.

As far as corporate legislation is concerned, the current trend in France is simplification. Two main recent laws illustrate this trend, as outlined below.

The PACTE Law (The Action Plan for Business Growth and Transformation, Law No. 2019-486 adopted on 22 May 2019)

The main changes in relation to mergers are as follows:

  • removal of the mandatory preparation and filing of the declaration of regularity and conformity for the French simplified joint-stock company (SAS) and joint-stock partnership (SCA) in national mergers; and
  • possibility to delegate the completion of a merger between stock to the governing body of the company for limited periods of time.
The ‘Soilihi Law’ (The Simplification, Clarification and Updating of Company law, Law No. 2019-744 dated 19 July 2019 and adopted on 21 July 2019)

The main changes in relation to corporate reorganisations are as follows:

  • transfers of going concerns:
    • removal of a certain number of mandatory written statements that were required in any going concern transfer agreement under penalty of nullity;
    • removal of the requirement that a going concern must have been operated for two years before it can be granted under a management lease;
  • simplified mergers (no decisions of the shareholders of the absorbing and absorbed entities, no report from the governing body, no intervention of a merger auditor or a contribution auditor, ‘lighter’ merger agreement where certain mandatory statements are not applicable, for example, all provisions relating to the exchange of shares): the scope of the simplified merger regime is extended to new types of transactions such as, for instance, the simplified merger between sister companies; and
  • simplified partial contributions of assets: application of the simplified regime when the transferring company holds 100 per cent of the capital of the company receiving the contribution and inversely, when the receiving company holds 100 per cent of the capital of the transferring company.

How are corporate reorganisations typically structured in your jurisdiction?

There are many ways to structure a corporate reorganisation in France (eg, sale of assets, sale of shares, distribution, contribution, liquidation, merger, demerger, spin-off). The selected method will depend on the desired outcome and on the facts and circumstances. The common goals are usually seeking to simplify and rationalise the corporate structure: if legal entities in an organisation serve similar or overlapping functions, or are dormant or redundant, there may be various benefits to simplifying the group structure or prepare in anticipation for an acquisition or the divestment of a business. The choice of a method will also depend on the timing of each possible transaction. Under French law, certain transactions may lead to longer formalities such as the publication in a legal gazette usually leading to the opening of a 30-day creditors’ opposition period during which the transaction may not be completed. The choice may also be driven by the accounting and tax characteristics and consequences of a transaction. For instance, both the TUP (universal transfer of all assets and liabilities) and the simplified merger are eligible to the favourable tax regime provided for by article 210 A of the French Tax Code (tax neutrality under certain conditions). However, the TUP may not have a retroactive effect from an accounting standpoint.

Laws and regulations

What are the key laws and regulations to consider when undertaking a corporate reorganisation?

The key laws and regulations to consider when undertaking a corporate reorganisation will depend on which type of transaction is contemplated. As mentioned above, the current trend in French law is for simplification; however, each type of transaction has its own legal requirements in terms of corporate documentation to prepare and in terms of formalities to carry out and related timing. The French Commercial Code gathers all applicable laws and regulations. In addition, the French Tax Code also applies and shall be taken into consideration when carrying out a corporate reorganisation. Indeed, any corporate restructuring must take into account the tax implications in France relating to corporate income tax and indirect taxes (eg, registration duties, etc). The French Tax Code contains specific rules relating to tax exemption in the event of a corporate reorganisation. From an employment law standpoint, prior information and consultation of employee representatives shall be required under French Labour Law.

National authorities

What are the key national authorities to be conscious of when undertaking a corporate reorganisation?

There is no overarching national authority in France that is automatically involved in a corporate reorganisation. Typically, a corporate reorganisation may entail filings with the French Tax Administration and with the clerk of the competent commercial court.

In addition, should the company be involved in a highly regulated business, such as pharmaceuticals, financial services or the defence industry, specific authorities may have to be involved and specific procedures or filings may have to be carried out. Typically, in these situations, governmental consents or approvals may be required from the relevant authorities. Another situation where specific consents, approvals and procedure may be required is where publicly held companies are involved in the corporate reorganisation.

Key issues


What measures should be taken to best prepare for a corporate reorganisation?

Active collaboration lies at the heart of successful corporate reorganisations. This requires planning and engagement between the in-house reorganisation team, internal stakeholders, other professional advisers and third parties and the law firm that will work with local specialists whose work shall be centralised by one responsible attorney and team.

The first step is usually the preparation of a macro step plan for each country involved in the corporate reorganisation, once the scheme and the nature of the transactions are decided upon. Then a micro legal step plan is prepared, describing in detail all actions that shall be taken and all documents that shall be prepared to implement each macro step plan. The key to a successful corporate reorganisation is the identification in advance of all actions, documents to prepare, or collect, filings to make, third parties to involve (finance team, merger auditor, contribution auditor, etc), which will be necessary to carry out the contemplated transactions. In addition, the timing should be clear and discussed in advance. Each corporate reorganisation requires preliminary actions that shall be carried out with due care. Due diligence is a key step of this preliminary work. It allows for the identification of the assets to be transferred, the types of corporate entities involved, the specific provisions inserted in the statutory documents of each entity (bylaws, shareholders agreements), the necessity to obtain approvals from national authorities, governing bodies of companies within the corporate group, or from third parties (counterparties of commercial or services agreements or shareholders). In the context of a TUP, for example, the transfer of certain assets and certain liabilities requires particular formalities such as, for instance, trademarks, patents or real estate assets. In the context of a share sale or of an asset sale, the transfer of agreements may require obtaining approvals or dispatching notifications if they contain prior approval provisions or if they are intuitu personae agreements.

Employment issues

What are the main issues relating to employees and employment contracts to consider in a corporate reorganisation?

One of the main issues to consider when dealing with a corporate reorganisation is whether or not and how works councils (newly designated economic and social committees (CSEs)) should be informed and consulted.

Share acquisitions require a prior information and consultation of the CSE of the target entity in case of direct change of control of that entity. On the contrary, in principle, no prior CSE information and consultation is required in case of indirect change of control of a French entity, except if (1) such transaction has, per se, a direct impact on the workforce; and (2) the acquired shares are that of its holding company (either French or not) with no CSE and no operating activity. As for asset deals, they require prior CSE information and consultation if employees are among the assets to be transferred or if the transfer of assets has consequences on the (remaining) employees.

CSE information and consultation shall be completed before any binding document is signed (eg, before the signing of the share purchase agreement (SPA)) or any binding decision is made (eg, before a reserve for restructuring costs is taken) regarding the corporate reorganisation. CSE members shall be provided with substantial information on the contemplated corporate transaction as well as on its consequences on employment. Provided the CSE receives that information, the CSE information and consultation process takes maximum one to three months depending on the organisational structure of the entity (whether it has a single or several establishments) and on whether or not the CSE decides to seek the assistance of an expert. If the CSE does, the qualified expert has access to extensive financial, organisational and accounting information regarding the employing entity and possibly its parent company or other entities of the group. In the case of concentration, a specific process shall also be implemented with the CSE, which may appoint a merger expert.

The CSE has no veto right regarding the contemplated reorganisation. However, failing to consult with the CSE, or to provide the CSE (or its expert) with sufficient information regarding the contemplated reorganisation and its consequences on employment may lead to emergency proceedings aimed at restarting the consultation or at suspending the deal and its effects until these obligations are complied with.

While share acquisitions trigger limited direct consequences for the employees of the target entity, apart from exiting or joining the scope of Group CBAs (no change to existing employment contracts, company CBAs, company practices and unilateral commitments), consequences of asset deals on employment are potentially much more important. TUP transfer is one of the key issues to assess, especially because, under French law employment contracts automatically transfer without the employees’ having a right to opt out the transfer. TUP regulations will apply where the acquired assets form an ‘autonomous economic entity’ (ie, a standalone business) the identity of which is continued following the acquisition (ie, when the business continues its activities with similar means and resources after the transfer), with in practice a strong court case-by-case factual approach.

Due diligence will be key to gain an understanding of the corporate culture and of the quality of social dialogue within the acquired business or company. This is crucial to anticipate possible strikes or collective actions from employees and to overcome the hurdles of post-acquisition HR harmonisation and integration actions.

Integration actions may include redundancies. In companies with 50 or more employees, a social plan must be implemented if 10 or more redundancies are contemplated over a 30-day period (or if 10 or more employees refuse proposed changes to their contractual terms of employment). A social plan must include various measures aimed at avoiding or limiting the number of dismissals and facilitating the repositioning of employees whose dismissal cannot be avoided (eg, training actions or outplacement services). They add up to statutory severance payments. The content of the social plan may be negotiated with union representatives before the CSE information and consultation process on the contemplated reduction in force (RIF) or exclusively discussed with the CSE. Labour authorities are highly involved in this process because no social plan can be implemented until it has been approved by the labour authorities. Continuous communication with the labour authorities is key to avoid delays in the implementation of the RIF. More employer-friendly schemes than social plans do exist to handle collective changes of contracts but they do rely on specific agreements with the majority of the representative unions.

Harmonisation of employees’ collective status is also another key step for the corporate reorganisation to be a success in the medium and long term. For that action, the main interlocutors of the employer are the union delegates of the representative unions within the company. Such negotiations are mandatory in the case of TUP transfers, because company CBAs (as well as the industry CBA, when different from the one applied within the transferee entity) are automatically terminated on the date of transfer and continue to apply for a maximum period of 15 months. The law now authorises the initiation of negotiations even before the corporate reorganisation becomes effective, which may be, in some circumstances, a useful tool to facilitate the integration of the transferred employees in the new employing entity.

Last but not least, the key employees and leaders of the acquired business or company shall be identified as early as possible and adequately incentivised to assist with and support the acquisition and subsequent integration actions.

What are the main issues relating to pensions and other benefits to consider in a corporate reorganisation?

Corporate reorganisations have no impact on employees’ social security insurance coverage and pension benefits. Only additional pension benefits, when implemented at the level of a company or group, may be put at risk but this concerns few groups or companies in France. Harmonisation actions may be required post-acquisition regarding employees’ welfare and health insurance schemes.

Financial assistance

Is financial assistance prohibited or restricted in your jurisdiction?

Financial assistance is generally defined as the granting of funds by a company (and sometimes its subsidiaries) to a third party for the purpose, whether directly or indirectly, of acquiring shares of the company.

As a general rule, French law prohibits financial assistance. Article L225-216 of the French Commercial Code provides that: ‘a company may not advance funds, grant loans or securities in view of the subscription or purchase of its own shares by a third party’. This prohibition only applies to stock companies, which are the most common forms for companies.

The French Commercial Code provides for two specific exceptions to the general prohibition of financial assistance: (1) transactions made by credit institutions and financing companies in the ordinary course of business; and (2) transactions carried out to enable employees to purchase shares in their employing company, one of said company’s subsidiaries or a company that is a member of a group savings scheme.

Common problems

What are the most commonly overlooked issues or frequently asked questions in a corporate reorganisation?

An important point of attention is whether a business being transferred qualifies as a ‘complete branch of activities’ as it may have major consequences for the corporate structuration of the reorganisation as well as from tax and employment perspectives (for instance, the employees may or may not be automatically transferred). The question of whether the assets transferred qualify as a complete branch of activities or a mere collection of assets depends mainly on whether the entity is technically and administratively independent and is capable of functioning on a standalone basis. In addition and more generally with respect to the transfers of assets, the assets to be transferred shall be clearly identified because French law requires the identification of such assets in the transfer agreement and because, depending on the assets being transferred, the transfer may be structured as a transfer of isolated assets, successor agreement or transfer of going concern (if the transfer of a clientele is contemplated). The valuation of the assets or shares being transferred and of the shares being granted in remuneration in the context of a contribution is also a common focus point. Another common point of attention is the necessity to obtain year-end accounts or interim accounts for the companies involved in the corporate reorganisations.

Accounting and tax

Accounting and valuation

How will the corporate reorganisation be treated from an accounting perspective? How are target assets and businesses valued?

The accounting treatment depends on all the facts and circumstances surrounding the reorganisation. The company’s accounting team should review and comment on the contemplated reorganisation beforehand.

Pursuant to the provisions of article 743-1 of the French Regulation on Accounting Standards dated 5 May 2017, in the context of a merger, demerger of partial contribution of assets, the target assets and businesses shall usually be valued: (1) at the net book value (where the parties involved are under common control); or (2) at the fair market value (where the parties involved are non-related parties or in the event following the completion of the operation, the beneficiary is sold to a third party).

Tax issues

What tax issues need to be considered? What are the tax implications of carrying out a corporate reorganisation?

From a French tax perspective, a corporate reorganisation could benefit, under certain requirements, from the principle of neutrality provided by section 210 A of the French Tax Code resulting in the deferral of capital gains and recapture of provisions taxation at the level of the contributing company.

The benefit from a principle of neutrality is, notably, subject to the justification of the corporate reorganisation from an economic standpoint (ie, the corporate reorganisation is driven mainly by non-tax reasons).

As a general rule, the cessation of a business activity causes notably the forfeiture of the carried-forward tax losses of the merged company. Furthermore, the transfer of carried-forward tax losses in case of merger requires a specific ruling and is notably subject to the condition that the activity that originated the tax losses did not suffer any significant change in terms of customers, staff, operating resources, nature and volume of activity (see section 209, II of the French Tax Code).

Consent and approvals

External consent and approvals

What external consents and approvals will be required for the corporate reorganisation?

As the name suggests, corporate reorganisations entail changes in the structure of the companies concerned and can have an impact on several matters. In this respect, the following items should be analysed and it should be checked whether external consents and approvals should be granted with respect to:

  • real estate assets;
  • commercial leases;
  • intra-group or bank loan agreements;
  • intellectual and commercial property (licence, patent etc);
  • matters subject to public or regulatory law (regulated activity etc);
  • agreements entered into between the company and third parties (employees, suppliers etc); and
  • agreements including change of control clauses or securities or warranties.
Internal consent and approvals

What internal corporate consents and approvals will be required for the corporate reorganisation?

Internal consents and approvals depend on the corporate form of the concerned company and it is necessary to refer to the by-laws of the company concerned, which may subject certain decisions to the prior authorisation of a corporate body. It is also important to refer to the terms of the shareholders’ agreement, if any, which may contain specific provisions relating to certain corporate reorganisation transactions.

The voting modalities will depend on the transaction contemplated and the type of company concerned.

In general, the board of directors of a public limited company will have to, before the final approval by the shareholders, authorise beforehand certain transactions because it is in charge of the control of the management and the strategic orientations of the company. Regarding other companies (SAS, partnership corporation, limited liability company (SARL)), corporate reorganisation transactions are proposed by the president or the manager and decided by the shareholders of the concerned company.


Shared assets

How are shared assets and services used by the target company or business typically treated?

Before carrying out any corporate reorganisation, it is recommended to check whether or not there are shared assets or services and the legal consequences that such reorganisation could have on such agreements. A distinction must be made between contracts setting up a sharing of assets and services and taking place within the group and those outside the group to which the concerned company belongs. Indeed, intra-group agreements often take into account potential corporate reorganisations and therefore contain less restrictive provisions. Particular attention shall be paid to the duration of such agreements and the impact that a change of control could eventually have.

Transferring assets

Are there any restrictions on transferring assets to related companies?

Under French law, there is, in principle, no restriction regarding the transfer of assets.

Depending on the assets transferred, certain conditions should be complied with (eg, regulatory regime, notification of the transfer of a receivable to the creditor, the transfer of a going concern is subject to specific legal publicity, consultation with the Social and Economic Committee, if any).

In addition, it should be verified whether or not the assets transferred are free of any liens or encumbrances and whether or not the relevant company is in difficulty, in which case special rules will have to be complied with.

Can assets be transferred for less than their market value?

In principle, the transfers of assets should be carried out on the basis of the market value. However, depending on the nature of the assets being transferred, a specific case-by-case analysis shall be done to determine whether the net book value, for instance, may be taken into account in the concerned context.


Date of reorganisation

Can a corporate reorganisation be backdated or deemed to have already taken place, for example, from the start of the financial year?

From a French law perspective, a corporate reorganisation may have a different effective date than its actual execution date.

Mergers, for instance, may be retroactive from an accounting standpoint and from a tax standpoint. The date of completion of a merger may correspond to an earlier date than the execution of the merger treaty as long as it is not earlier than the date of opening of the current fiscal year of the absorbing company.

Regarding the TUP, the transaction may not be retroactive from an accounting standpoint but only from a tax standpoint. The completion date of a TUP corresponds to the end of the 30-day objection period for creditors, which follows the publication in a legal gazette of the decision of the TUP.


What documentation is required in a corporate reorganisation?

The documentation required for a corporate reorganisation depends on the type of corporate reorganisation concerned.

Typically, for most of the corporate reorganisations the required documents are as follows:

  • legal step plan;
  • tax analysis;
  • the necessary administrative authorisations in the case of a regulated activity;
  • the corporate documentation of the corporate bodies involved regarding the approval of the transaction, the agreements, as well as changes that could impact the company (minutes of the board of directors or any other corporate body, minutes of the general meeting of shareholders, related reports from third parties such as merger or contribution auditors, etc);
  • letters of release of the existing pledges;
  • transfer forms;
  • amended by-laws; and
  • main agreement: contribution agreement, asset or share purchase agreement, merger or demerger agreement.

Other documents are also required to complete the subsequent legal formalities: filings with the Trade and Companies Register, registration with the French tax authorities and any other competent authority depending on the nature of the company concerned (bank, investment company, listed companies, etc).

Representations, warranties and indemnities

Should representations, warranties or indemnities be given by the parties in corporate reorganisation?

Corporate reorganisations take place within an intra-group context. It is unusual (not common practice) in this situation to grant extensive representations and warranties.

The representations and warranties granted by the parties in this context are standard and generally relate to the ownership of shares, the ownership of assets, the company’s compliance with legal and regulatory provisions, the existence of a loan (etc).

Assets versus going concern

Does it make any difference whether assets or a business as a going concern are transferred?

Pursuant to French legal provisions, and depending on the assets to be transferred, there are three different ways to achieve a transfer of assets.

Transfer of a going concern

Under French law, a going concern is an autonomous branch of activity (ie, a unit that performs an autonomous activity on both organisational and technical levels) to which a specific clientele is attached. A going concern gathers all tangible and intangible assets (excluding buildings) (ie, goods, commercial name, lease agreement, authorisations, intellectual property rights, etc) that are affected to satisfy the clientele; the going concern being, under French law, the whole of the assets. Case law considers that a business concern does not exist without clientele.

Under French law, a transfer of a going concern entails the automatic transfer of the lease agreement, the employment agreements (by application of TUP regulations) and insurance agreements. If the transfer concerns any other assets or liabilities (including debts, proceedings, contracts, etc) it has to be strictly mentioned in the transfer agreement.

As far as the list of assets is concerned, there is not strictly an obligation to detail all the assets that are transferred from a legal standpoint.

However, from a tax standpoint, the French tax authorities require to have an allocation of the price (for the purposes of calculating the relevant registration fees) per item. As a consequence, a detailed and estimated inventory of any and all assets and liabilities should be provided in the agreement.

Following the completion of the transfer, the agreement has to be registered with the French tax authorities and published. The creditors have 10 days as of the publication date to object to the payment of the transfer price.

Also, the town hall may have a pre-emptive right on the transfer and that the employees, in the event there is no work’s council, must be notified of the transfer at least two months prior to the transfer (if there is a work’s council, it will have to be informed and consulted on the transfer).

Transfer of isolated assets

It is also possible to transfer the assets via a simple transfer agreement.

If so, the agreement will have to clearly identify the assets to be transferred and it will be necessary to obtain the consent of the employees to be transferred.

The agreement will have to be registered with the French tax authorities.

Transfer of assets pursuant to a ‘successor’ agreement

This transfer is similar to the transfer of the business concern and allows the transfer of all the necessary elements (including the employees) to start a business, it being specified that it does not entail the transfer of the clientele.

The transfer via a successor agreement is not subject to the same procedure as the transfer of a business concern; that is, there is no publication in a legal gazette and thus, no period for the creditors to object to the payment of the transfer price.

As for the transfer of the business concern, it is possible to include the transfer of debts provided it is mentioned in the agreement.

Also, the agreement will have to be registered with the French tax authorities.

The choice of the structure is also tax driven.

Types of entity

Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.

When a corporate reorganisation is carried out, it is important to determine the type of company involved. Indeed, there are as many different applicable rules of law as there are types of existing companies. There is a common legal framework for each corporate form.

With respect to publicly traded companies, they are subject to the corporate law provisions of the French Commercial Code relating to their corporate form and the provisions relating to listed companies as well as to the various stock exchange rules.

In addition, public companies and private companies whose activity is regulated are subject to a more stringent formalism and certain corporate reorganisation transactions may be subject to an authorisation from the relevant regulatory authority.

Non-profit entities are regulated by specific provisions. However, governmental entities and non-profit entities are rarely engaged in reorganisation transactions.

Another element to be taken into account in this distinction is the timing. Indeed, the requests for authorisation or legal publication that publicly traded companies or regulated entities may be subject to can have an impact on the timetable of the corporate reorganisation transactions.

These elements should, therefore, be analysed beforehand during the corporate reorganisation step plan.

Post-reorganisation steps

Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation?

In most cases, corporate reorganisations will entail legal formalities after their completion.

The most common post-reorganisation formalities are the following:

  • filing with the clerk’s office of the competent commercial court when required (update of the ‘Kbis’ extract or amendment of the company’s by-laws, declaration of beneficial owner or owners);
  • publication in a legal gazette;
  • tax registration;
  • registration of pledges or withdrawal of pledges;
  • updating of share transfer registers and shareholders’ accounts;
  • notification of the merger or of the TUP to employees;
  • notification requirements for specific regulated businesses;
  • coordination with the bank or notary (opening, closing of account, money transfer); and
  • notification of reorganisation transactions and sending documentation to the competent Regulatory Authority (eg, the French Prudential Supervision and Resolution Authority, Financial Markets Authority, or any other public control entity).

Update and trends

Hot topics

What are your predictions for next year and how will these impact corporate reorganisations in your jurisdiction (for example, expected trends or pending legislation)?

Recent French corporate laws have been adopted to simplify corporate transactions. This should lead to large corporate groups increasing their reorganisation plans. In a global environment where M&A transactions are carried out more and more often, the need for corporate reorganisations seems to be a key challenge for most international companies. Therefore, we anticipate an increasing number of corporate reorganisations.

Law stated date

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