FRENCH UPDATE – Activist Strategies and Defenses in France

Executive Summary:  Many of the fundamentals driving increased shareholder activism in the United States and elsewhere are also relevant in France.  The disclosure regime under French securities law should permit companies to identify activist investors, their concert parties and their economic exposure, however, 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 now 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 importantly, French law’s expansive concept of a company’s intérêt social (a nexus of constituencies, which includes 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.

It is prudent for even 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.

Click here to read Activist Strategies and Defenses in France.