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Beyond Borders: Eversheds Sutherland's ICR insights series. EU Mobility Directive – Legal Update – France

  • France
  • Corporate
  • Labor law and trade union issues

24-11-2022

Country specific - France

This country specific outline contains further information regarding the implementation of the provisions of the EU Mobility Directive into French law and provides further local insight.

For further information and to access any of our other country-specific briefings that we have prepared, please refer to the bottom section of our general briefings page here.

Cross-border mergers, divisions and conversions

Current status of implementation

The Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 with regard to cross-border conversions, mergers and divisions (the “Directive”) is still in the process of being transposed into French Law. A report on the implementation of the Directive was published on 23 November 2020 by a group of experts, the “Haut Comité Juridique de la Place Financière de Paris”. This report establishes recommendations relating to the transposition of the Directive, in particular with regard to the right of withdrawal of minority shareholders and the control of legality introduced by the Directive.

Since the publication of this report, no more recent information has been released regarding the introduction of the Directive into French law. Thus, in view of this lack of recent information, it is not expected that France will transpose the Directive into French law before the implementation deadline of 31 January 2023.

Please note that if there is a delay in the implementation of the Directive into French law, certain provisions of it will nevertheless apply. This is the case for the provisions which are unconditional, sufficiently clear and precise. These provisions will apply in French law as of 31 January 2023 as a result of the “direct effect” concept of the European Union Law.

Summary of current and future French legal landscape

The current legal landscape of the cross-border mergers and divisions is codified in the articles L. 236-25 to L. 236-32 of the French commercial Code. To date, cross-border conversions (a conversion (redomiciliation) is an operation whereby a company, without being dissolved or liquidated, converts into a legal form of another Member State and transfers at least its registered office to that Member State) are not regulated under French law (apart from the European company or SE), which deals only with domestic conversions.

Nevertheless, cross-border conversions are sometimes implemented on the basis of the EU case law regarding freedom of establishment and movement (notably, Luxembourg Court of Justice in Cartesio, Vale and Polbud).

The Directive provides guidance on the formalities to be carried out for the implementation of such cross-border conversions.

With the implementation of the Directive, France will have a unified legal framework for cross-border mergers, divisions and conversions within the EU/EEA, safeguarding the rights of creditors, employees and (minority) shareholders. These important structuring tools should further facilitate cross-border reorganisation operations.

Permitted companies and geographic scope

Currently, under French law, cross-border mergers and divisions can take place between French joint stock companies (société anonyme, société en commandite par actions, société européenne immatriculée en France, société à responsabilité limitée, société par actions simplifiée) and limited liability companies from the other EU/EEA Member States.

Under the Directive, these cross-border operations are also mainly limited to EU/EEA Member States. French Law does not currently regulate the cross-border operations with limited liability companies outside of the EU/EEA. However, in practice, cross-border operations may sometimes take place with limited liability companies outside of the EU/EEA by applying the rules of conflict of laws and international private law. However, in these cases, the absence of an unified legal framework raises a number of issues.

Timings

With the implementation of the Directive, generally speaking, the French side of a simplified, non-complex cross-border operation (i.e. a transaction involving companies with only one shareholder (each), no employee and no secured asset) will take at least four months to complete (approximately), given the prescribed three month creditor opposition period. More complex cross-border operations could take six to twelve months, as formalities in the EU/EEA Member State of exit and entry will both need to be complied with.

The Directive provides for an extensive legal framework and (largely) harmonised legal process for these cross-border operations and introduces specific safeguards for creditors, employees and (minority) shareholders. For any further guidance and advice on these matters, please do reach out to your local Eversheds Sutherland contact.

Competent authority, pre-transaction certificate and anti-abuse checks

The Directive distinguishes between (i) the control that takes place when a certificate is issued prior to the operation and (ii) the control of the legality of the operation for the part of the procedure relating to the carrying out of the operation governed by the law of the Member State of destination.

A control of legality already exists in France regarding cross-border mergers.

The clerk of the court where the company involved in the operation is registered, is responsible for issuing a pre-transaction certificate (“declaration de conformité”) in respect of the formalities accomplished prior to the merger.

Once the merger has been completed, the companies involved are also required to file a declaration with the clerk of the court confirming the legality of the operation, the content of which is to be checked by the clerk. In addition, a notary or the clerk of the court within whose jurisdiction the company resulting from the merger will be registered is to verify the legality of the completion of the merger and the formation of the new company resulting from the merger.

With the implementation of the Directive, France will have to choose the authority which will conduct the control necessary for the issuance of the pre-transaction certificate and the control of the legality of the operation (the “ Competent Authority”) as regards cross-border operations.

The report published by the group of experts of the Haut Comité Juridique de la Place Financière de Paris stated that, besides the value of the experience already acquired by notaries and clerks of the courts in the field of cross-border mergers, there seems to be no reason to entrust other authorities with such control.

Under the Directive, as part of its pre-transaction certificate due diligence, the Competent Authority will have to conduct an anti-abuse check. The Competent Authority will not issue the pre-transaction certificate and will not authorise the cross-border operation if it determines that the operation has been set up for unlawful or fraudulent purposes aimed at evading European or national law.

In cases of an outbound cross-border operation, meaning an operation whereby a French company converts to or transfers assets (in)to a company based in another EU/EEA Member State, the cross-border operation shall subsequently be finalised in the other Member State involved. Based on the pre-transaction certificate issued by the Competent Authority, the designated competent authority of the other Member State will be able to proceed and legally complete the procedure locally.

In cases of an inbound cross-border operation, meaning an operation whereby a company (or companies) based in another EU/EEA Member State transfers assets (in)to or is converted into a French company, the cross-border operation shall subsequently be finalised in France. To be able to legally complete the procedure in France, the Competent Authority will require a pre-transaction certificate from the designated competent authority of the other Member State(s) involved.

Effective date, method and manner of inbound cross-border operations

Inbound cross-border operations become effective in the form, manner and on the date as prescribed by French law, it being specified that the effective date of an in-bound cross border operation cannot be prior to the control of legality (by the clerk or the notary), nor subsequent to the closing date of the current financial year of the beneficiary company during which this control was carried out.

With the implementation of the Directive, inbound cross-border operations will be effective on the date determined by French law and only after obtaining the pre-transaction certificate and the exercise of the control of legality by the competent authorities.

Key local contacts

Should you have any questions or if you require any assistance in this regard, please do not hesitate to contact us.

Other country specific

For reference, please find other country-specific information we prepared as part of this Insight Series here