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Before a Public Takeover Bid
3. Before a Public Takeover Bid

[Last updated: 1 January 2025, unless otherwise noted]

3.1 Shareholding rights and powers

The table below provides an overview of the different rights and powers that are attached to different levels of shareholding within a French listed corporation:

Shareholding Rights
One share
  • The right to attend and vote at general shareholders’ meetings.
  • The right to obtain a copy of the documentation submitted to general shareholders’ meetings.
  • The ability at a general shareholders’ meeting to block any decision that must be taken unanimously, such as:
    • relocation of the registered office outside of France (except if the target company is incorporated as a SE (Societas Europaea) and relocated with the European Union);
    • increase in the shareholders' obligations towards the company, e.g., increase of the share par value, change of the corporate form into an unlimited liability form, etc.; and
    • change of the corporate form into a simplified joint-stock company (société par actions simplifiée).
  • The right to submit questions to the directors and statutory auditors at general shareholders' meetings (either orally at the meeting or in writing prior to the meeting).
  • The right to request the nullity of decisions of general shareholders' meetings for irregularities as to form, process, or other reasons.
5%
  • The right to submit questions to the management regarding any matter which may compromise the operations of the company, twice a year, at any time.
  • The right to petition a court to appoint an expert to establish a report on one or more operations of the management.
  • The right to request the addition of new items on the agenda and draft resolutions in relation to a general shareholders' meeting. The shareholding required to make such request gradually decreases from 5% for target companies whose share capital is above EUR 750,000.
  • The right to petition a court to appoint an agent to convene a general shareholders' meeting.

33 ⅓ % + one share

The ability at a general shareholders' meeting to block resolutions of the extraordinary general shareholders' meeting's competence, which are the following:

  • any changes to the articles of association;
  • mergers and/or de-mergers;
  • capital increases and/or capital reductions;
  • change of the corporate form;
  • issue of new shares and/or any equity securities (including, but not limited to, convertible bonds, mandatory convertible bonds and warrants);
  • issue/allocation of stock options or RSUs;
  • relocation of the registered office in another district (département) (other than an adjacent district);
  • dissolution of the company or extension of its term;
  • any change in the rights attached to the shares, including, but not limited to, the introduction of a double voting right or the creation of a new class of shares;
  • the disapplication (limitation or cancellation) of the preferential subscription right of existing shareholders in case of share issues in cash, or issues of convertible bonds or warrants; and
  • any other amendments to the articles of association.
Given that the outcome of a vote on a resolution at a general shareholders' meeting is determined based only on the total number of votes cast by shareholders participating in the meeting (physically, by mail or by proxy) without counting the voting rights held by the non-participating shareholders, the level of shareholding required to block a resolution is usually less than 33 ⅓% in practice.

50% + one share

The ability at a general shareholders' meeting to pass resolutions of the ordinary general meeting's competence, which are the following:

  • approve the annual standalone and consolidated financial statements;
  • decide a dividend and any other exceptional distribution (reserves and premium);
  • appoint and dismiss directors;
  • approve the remuneration policy and the individual remuneration of the executive corporate officers;
  • appoint the statutory auditors;
  • decide a share buy-back program;
  • approve the related party agreements entered into by the company;
  • ratify the relocation of the registered office within the same district or an adjacent district (as decided by the board of directors); and
  • take decisions for which no special majority is required.

For the reasons set out above, the level of shareholding required to block a resolution is usually less than 50% in practice.

66 ⅔%

The ability at a general shareholders' meeting to pass resolutions of the extraordinary general meeting's competence, as listed above.

90%

The ability to implement a "squeeze- out" (retrait obligatoire) of the minority shareholders following a takeover offer, and subsequently delist the company from Euronext Paris.

 

3.2 Restrictions and careful planning

French law contains a number of rules that apply before a public takeover bid is announced. These rules impose restrictions and hurdles in relation to prior stake building by an bidder, announcements of a potential takeover bid by the target company or the bidder prior due diligence by a potential bidder. The main restrictions and hurdles have been summarized below. Some careful planning is therefore necessary if a potential bidder or target company intends to start up a process that is to lead towards a public takeover bid.

3.3 Insider dealing

Before, during and after a takeover bid, the normal rules regarding insider dealing and more broadly market abuse remain applicable. For further information on the rules on insider dealing and market abuse, see 6.3 below.

Prior to the announcement of the offer, the bidder is not prohibited from trading the target's shares subject to the general principles governing offers and insider trading rules.

The knowledge by the bidder of its offer is not regarded as an obstacle to the bidder acquiring shares of the target company but under certain circumstances, such acquisitions may be challenged by the AMF for being allegedly in breach of the general principles governing public takeover offers (in particular, market integrity). Any bidder having access to a data room opened by the target would, in any event, be deemed an "insider" and thus prohibited from acquiring the target's shares in the market.

During the pre-offer period, i.e., from the announcement of the offer until the filing of the offer, the bidder is prohibited from buying the target's shares.

3.4 Disclosure of shareholdings

The rules regarding the disclosure of shareholdings and transparency apply before, during and after a public takeover bid.

Pursuant to these rules, if a potential bidder starts building up a stake in the target company, it will be obliged to announce its stake in the share capital or that the voting rights attached to this stake have crossed a disclosure threshold. Such threshold crossings should be reported to both the AMF and the company.

The relevant disclosure thresholds in France are 5%, 10%, 15%, 20%, 25%, 30%, 33 ⅓%, 50%, 66 ⅔%, 90% and 95%. Several listed companies also apply a lower threshold than the initial threshold of 5% (0.5% in most cases), with disclosure to the company having to be made at each crossing of a multiple of said initial threshold (1%, 1.5%, etc.). It should be noted that the disclosure must be made regardless of the direction of the crossing (either upwards or downwards).

In addition, any crossing of the shareholding threshold of 10%, 15%, 20% or 25%, either in voting rights or in share capital, triggers the additional obligation to disclose, to the AMF and the target company, a description of the objectives intended to be pursued by the stake builder with respect to the company for the subsequent six months, within five trading days of the crossing of the threshold. Such declaration of intent must disclose, among other things, whether the shareholder is acting alone or in concert, whether or not it seeks to purchase additional securities of the company, whether or not it intends to obtain corporate control and whether or not it intends to request the appointment of board members.

When determining whether or not a threshold has been passed, a potential bidder must also take into account the voting securities held by the parties with whom it acts in concert (see 3.9 below) and any other assimilated shares under French rules (including shares subject to a call option of which it is the beneficiary).

3.5 Disclosures by the target company

The target company must comply with the general rules regarding disclosure and transparency throughout the takeover process. In particular, as a listed company, it must immediately disclose any inside information under Market Abuse Regulation. For further information on inside information, see 6.1 below.

The negotiation of a public takeover bid may constitute inside information. If so, the target company must disclose it. However, the management of the target company can (and usually does) delay disclosure on the ground of the legitimate interest of the company (arguing that early disclosure would prejudice the negotiations regarding a bid). A delay of the announcement, however, is only permitted if such non-disclosure does not mislead the public and the company can keep the relevant information confidential. The company's management may be held liable for delaying disclosure if considered unlawful.

3.6 Announcements of a public takeover bid

Any bidder contemplating a transaction that may have a material impact on the market price of a stock (such as a takeover offer) must state its intents and disclose the main terms of the contemplated transaction as soon as possible.

The bidder may postpone the disclosure at its own risk provided confidentiality is maintained. In case of a friendly offer, confidentiality is secured by a non-disclosure agreement between the bidder and the target / its shareholders covering the existence and content of the on-going negotiations and the information exchanged between the parties

As soon as a bidder makes the terms of a potential offer public, it must immediately inform the AMF. The AMF will subsequently post a notice on its website, which starts the pre-offer period during which share dealing restrictions apply to the bidder.

If there are rumors or leaks that a potential bidder intends to launch a public takeover bid, the AMF could force such potential bidder to disclose its intentions. This mechanism could lead to an early disclosure and accelerate the bidder's preparations. It is therefore recommended to prepare a “leak strategy” to be in a position to react immediately in the event of unexpected leaks. For further information, see 3.7 below.

3.7 Early disclosures – Put-up or shut-up

  1. Early disclosure required by the AMF – The AMF may require any person making statements either personally or via intermediaries that raise questions with the public as to such person's intentions regarding a potential public takeover bid to disclose its intentions within a time period set by the AMF. The disclosure must typically be made within a couple of trading days.
  2. Put-up or shut-up – In addition to the foregoing rule, the AMF is entitled to force a person to make an announcement as to whether or not it intends to carry out a public takeover bid under certain circumstances. The relevant rules, inspired by the UK rules, can be summarized as follows:
    • The AMF can require an announcement by a suspected bidder if it has reason to believe that it is preparing a takeover bid (for example, in the event of market rumors), and particularly where the market for the securities of the issuer shows significant price volatility or unusual trading.
    • In requiring such announcement, the AMF can impose a window of time within which the announcement must be made, typically a couple of trading days.
    • A person that confirms their intention to launch a public takeover bid must launch such takeover bid within the term agreed by the AMF (usually between 15 and 20 trading days).
    • If a person denies its intention to launch a public takeover or does not confirm its intention to launch a bid within the term imposed by the AMF, it (and the persons acting in concert with them) will be prevented from launching a takeover bid for the securities of the target company for a period of six months following the publication of such announcement (or the expiry of the term imposed by the AMF to make such announcement), unless the circumstances, the situation of the target company or the shareholding of the entities concerned have substantially changed.

3.8 Due diligence

The French public takeover bid rules do not contain specific rules regarding the question of whether or not a prior due diligence can be organized or how such due diligence is to be organized. Be that as it may, the concept of a prior due diligence or pre-acquisition review by a bidder is generally accepted, including by the AMF as well, and appropriate mechanisms have been developed in practice to organize a due diligence or pre-acquisition review and to cope with potential market abuse and early disclosure concerns. These mechanisms include the use of strict confidentiality procedures and data rooms.

The due diligence process will vary depending on the type of bid.

In a friendly offer, the bidder is given access to a data room containing non-public information, subject to the display of a "serious interest" expressed by the bidder for the transaction and the execution of a letter of intent as defined by AMF Regulation n° 2016-08. In accordance with the level playing field rule, if there are any competing bids, the target is required to allow any competing bidder to have access to the same level of non-confidential information as the initial bidder, subject to antitrust considerations as the case may be. The offer documentation must state whether or not a data room was put in place. In addition, any material non-public information made available in the data room must be disclosed in the offer document made public by the bidder in order to provide shareholders with the same level of information, which in practice restricts the content of the data room in public M&A transactions.

In a hostile offer, the bidder will usually need to rely on publicly available documents, as the target company will not allow it to have access to a data room. The most comprehensive document is the universal registration document (document d'enregistrement universel) disclosed every year by most French public companies listed on Euronext Paris, which can be found on their website. Regulated information (permanent and periodic disclosures) made public by French public companies in accordance with the Transparency Directive, as implemented into French law, are also available on their website. Corporate documents (certificate of incorporation (K-bis), by-laws, security interests, bankruptcy filings) are available from clerks of competent commercial courts.

3.9 Acting in concert

Under French corporate law, persons "act in concert" if they enter into an oral or written agreement to acquire, sell or exercise voting rights aimed at implementing a common policy relating to the company or to acquire control over the company.

Such agreement is deemed to be existing:

  • between a company, its chairman and its general managers (directeurs généraux). Depending on the corporate form of the company, instead of the chairman and the general managers, the officers to be considered acting in concert with the company would be the members of the managing committee (directoire) or the managers (gérants);
  • between the company and the company it controls under the meaning given to control by French law;
  • between companies controlled by the same person;
  • between the shareholders of a simplified joint stock company (société par actions simplifiée), towards the companies that such company controls; and
  • between the trustee (fiduciaire) and the beneficiary (bénéficiaire) of a fiduciary contract (contrat de fiducie), where the beneficiary is also the settlor (constituant).

For the purpose of the French takeover bid rules, the persons who enter into an agreement with the initiator of a takeover bid aimed at acquiring control of the target company are considered to be acting in concert. Persons who enter into an agreement with the target company aimed at preventing the takeover bid are also considered to be acting in concert.

The concept of persons acting in concert is very broad and, in practice, many issues can arise to determine whether or not persons act in concert. This is especially relevant in relation to mandatory takeover bids. If one or more persons in a group of persons acting in concert acquires voting securities as a result of which the group in the aggregate would pass the 30% threshold, the members of the group will have a joint obligation to carry out a mandatory takeover bid, even though the individual group members do not pass the 30% threshold.

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