FRENCH UPDATE – Activist Strategies and Defenses in France

Executive Summary: Sitting in France, reports of the decline of activism in Europe appear somewhat exaggerated, just as the predictions of a few years ago of an impending wave of U.S.-style activist activity in Europe were equally overstated.

In contrast to the rapid rise of activism in the United States, the level of activism in France has generally remained fairly constant, experiencing a mild uptick in recent years.

As we discuss in detail in the text, French law and regulation potentially provide both sides in an activist campaign with significant tools.  For the attacking activist: French law provides a holder of as little as 0.5% of a company’s shares with the right to add matters to the agenda of a shareholder meeting and include proposed resolutions in the “proxy” materials circulated by the company to shareholders; directors may be removed and replaced by a simple majority of any shareholder meeting, even if the matter is not formally on the agenda; and French shareholders have a “say-on-pay.”  For the defending company, French law provides stringent disclosure requirements on stake-building, with significant penalties for failure to comply (and a company’s bylaws may provide for still more stringent disclosure thresholds); and French law’s expansive concept of a company’s intérêt social (a nexus of constituencies, which may include not only the company and its shareholders, but also employees, creditors, customers and suppliers and other stakeholders) provides a strong basis for a French board of directors and management to resist an activist’s purely short-term financial strategy when appropriate.

In light of the low barriers to entry, the paradox in France may be that there have not been more activist interventions.  Against a background of ascendant activism elsewhere, the long native tradition of activism in France and the arsenal of rights potentially available to activists, it remains prudent for French companies to plan for the eventuality of an activist attack.

This article surveys the major legal tools that are most relevant in engagements between French listed companies and activist investors, as well as providing an overview of recent notable activist (and analogous) interventions in France.

Click here to read Activist Strategies and Defenses in France.