In order to meet the transparency requirements set forth in Directive 2004/25/EC of 21 April 2004 on takeover bids, French law provides various measures of disclosure that now enable us to determine the preventive defence mechanisms established by companies listed on Eurolist by Euronext Paris. Annual reports, articles of association and minutes of general meetings, together with the information released by the French Market Authority (AMF), are all sources of information that may be drawn upon to present an overview of the defences used by CAC 40 companies to prevent takeover bids (Appendix 2) and to establish statistical analysis (Appendix 1).
1. Information contained in annual reports
Article L. 225.100-3 of the French Commercial Code provides a new obligation for disclosure in annual reports. They must now include every year the following information to the extent it may be material in the event of a takeover bid:
- the structure of the company’s capital;
- any restrictions on the exercise of voting rights or the transfer of securities, as provided by the company’s articles of association;
- any direct and indirect shareholdings in the capital of the company of which it becomes aware as a result of the provisions on threshold crossings;
- a list of the holders of all securities with special control rights and a description of those rights;
- any control mechanisms provided in the employee shareholding system, where applicable, if control rights are not exercised by the employees;
- any agreements between shareholders which are known to the company and may result in restrictions on the transfer of securities and the exercise of voting rights;
- the rules governing the appointment and replacement of board members and the amendment of the articles of association;
- the powers of boardm embers, and in particular the power to issue or buy back shares;
- any agreements to which the company is a party and which would be altered or terminated upon a change of control of the company, except where such disclosure would be seriously prejudicial to the company; this exception does not apply where the company is specifically obliged to disclose such information on the basis of other legal requirements; and
- any agreements between the company and its board members or employees providing for compensation if they resign or are made redundant without valid reason or if their employment ceases due to a takeover bid.
While these new provisions do effectively allow us to obtain a clearer view of the defence mechanisms set up by listed companies, it should nevertheless be noted that this list is not necessarily exhaustive and that it does not cover, for example, the exercise of a regulated activity or an activity that is subject to the provisions on foreign investment restrictions. Yet taking control of a company carrying out a regulated activity (particularly via a takeover bid)may be subject to prior authorisation froma regulatory authority:
- Subject matter regulated business sectors: investments in certain business sectors (e.g. press, insurance, banking, etc.) may be subject to prior authorisation;
- Subject matter and personal regulated business sectors: foreign investments in a French company which, even on an occasional basis, takes part in the exercise of public authority or which falls under a certain business category (activities that could affect public order, public safety or national security; researching,manufacturing or dealing in weapons, ammunition or explosive powders or substances) are subject to prior authorisation fromthe French Ministry of Finance (MINEFI). This prior authorisation regime is evaluated on amore flexible basis (higher notification threshold limit and fewer categories of activity) for foreign investors based in the European Union.
2. Publication of articles of association
The articles of association of commercial companies registered with the Commercial Court Registry that are available to the general public include information regarding a certain number of legal mechanisms that may constitute a defence against takeover bids. This is the case of:
- the structure of the issuer (i.e. société en commandite par actions (partnership limited by shares) or société anonyme (public limited company));
- amendments to the exercise of voting rights (i.e. double voting rights, preferred shares, or ceilings on voting rights provided for in the articles of association); and
- shareholding structure (i.e. identifiable bearer securities, registered shares or mandatory crossing threshold as provided for in the articles of association).
3. Publication of minutes
In light of the new principles governing the distribution of powers between the general meeting of shareholders and the management of the target company during takeover bids1, a review of the minutes of meetings held over the previous eighteen months reveal certain defence structures that could be implemented by the management (against a “non-virtuous” bidder2 , namely one that is not subject to equivalent measures in terms of the board passivity rule), such as issuing so-called “poison pills” (known in French as “bons Breton”) or carrying out a reserved capital increase.
4. Information released by the AMF
The Markets Authority also releases information regarding:
- the shareholding of listed companies (i.e. publication of declarations of crossing of shareholding’s thresholds that are provided to it);
- shareholders’ agreements (i.e. agreements between shareholders that may lead to restrictions on the transfer of securities and affecting at least 0.5%of the capital or voting rights of the company); and
- the company’s registered office and places of listing.