It should be remembered that, in the wake of the liberal case law of the Court of Justice of the European Union, most recently in its Polbud judgment (see CJEU, 25 Oct. 2017, C-106/16, Polbud-Wyskonawstwo sp. z.o.o.), the European Commission undertook to relaunch the construction of a harmonised framework concerning so-called cross-border mobility transactions within the EU. Although this framework had already been set up for mergers (see Directive 2005/56/EC of 26 October 2005 on cross-border mergers of limited liability companies), albeit imperfectly, it was sorely lacking for divisions and, above all, cross-border conversions, the new term used by the Commission to designate the cross-border transfer of registered offices, an operation which until then had only been permitted for European companies.
The result was the adoption of a directive dated 27 November 2019 (Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border transformations, mergers and divisions, OJEU L 321, 12 December 2019), providing in particular for measures (i) to control abuse and (ii) to protect stakeholders in view of the change in lex societatis brought about by these transactions, and which had to be transposed by the Member States by 31 January 2023 at the latest.
Following the example of a number of Member States, France transposed the directive a few months late, having been given the legislative authority to legislate - as has become customary for this purpose - by executive order (ordonnance) under Law no. 2023-171 of 9 March 2023 containing various provisions for adapting to European Union law. However, the authorisation was broader than expected, in that Article 13 of the aforementioned law authorised the government, in addition to the actual transposition, to "simplify, complete and modernise the rules governing mergers, divisions, partial transfers of assets and transfers of registered offices of commercial companies as provided for in Chapter VI of Title III of Book II of the Commercial Code".
It was therefore to be expected that the text finally published by the government would not simply transpose the directive by dealing solely with cross-border mobility transactions, but would also make a more general adjustment to the regime for internal restructuring transactions. On the whole, these expectations have not been disappointed on reading Ordonnance 2023-393 of 24 May 2023, supplemented a few days later by its implementing Decree 2023-430 of 2 June 2023.
In addition to setting out a comprehensive framework for cross-border mobility transactions (I), these new texts make a number of changes, some of them significant, to domestic operations (II).
The regime for cross-border reorganizations
The provisions concerning these transactions are now grouped together in a single section of the Commercial Code (see art. L. 236-31 to L. 236-53 for the legislative part, and R. 236-20 to R. 236-40 for the regulatory part), on the understanding that the rules laid down for internal transactions in the three previous sections also apply to them on a subsidiary basis.
While the provisions of the Commercial Code resulting from the aforementioned Ordonnance and Decree deal successively with cross-border mergers, demergers, partial transfers of assets and conversions, those relating to mergers actually serve as a common core for the other three types of transaction.
The result is that for each of them:
- A unified procedure: in particular, a joint draft of the transaction, a written report from the directors of each participating company and an independent expert opinion on the financial terms of the transaction must be drawn up successively;
- Approval of the operation by the shareholders by a qualified majority: since the Directive requires that this majority be at least 2/3 and at most 90% of the votes, the Ordonnance transposes this requirement to the articles of association of SARLs and SASs, which cannot therefore provide for a majority below this floor or above this ceiling for the adoption of the operation, but remain free to set the cursor as they wish between these two limits;
- A compliance check carried out exclusively by the registrar of the commercial court within whose jurisdiction the participating company was initially registered: this check becomes more substantial, with the registrar being responsible for ensuring that the transaction is not carried out for abusive, fraudulent or criminal purposes. This leads to a significant lengthening of the timetable for the transaction, since the primary investigation period is set at 3 months from approval of the transaction, but may be extended several times for a total of up to 8 months;
- A right of withdrawal for shareholders who (i) would be exposed to a change in the lex societatis and (ii) have opposed the transaction, including holders of securities without voting rights and shareholders temporarily deprived of their voting rights: this right of withdrawal must be exercised by each shareholder within 10 days of approval of the draft terms of transaction by the shareholders' meeting and applies to all the shares held on the date of the request, and the company must, within the following 10 days, make an offer to buy back the shares, although the price offered may be challenged in court;
- Protection for employees and other creditors of participating companies: for the former, their opinion within the framework of the employee representative bodies must always precede publication of the proposed transaction and communication of the directors' report, and their right to participate in the management bodies must be preserved after the transaction; as for the latter, they will have a period of 3 months - compared with 30 days in an internal transaction - from publication of the transaction to claim for adequate safeguards.
Changes to the regime for domestic operations
In addition to a more readable layout that finally gives partial transfers of assets the specific place they deserve in the texts, there are two points of particular interest here:
- On the one hand, welcome corrections have been made to past blunders on the part of the legislator: we might mention in particular (i) the extension of the "quasi-simplified" merger regime to transactions involving an SARL, (ii) the restoration of the simplified partial transfer of assets in the presence of a parent or subsidiary in the form of SARL, or (iii) the reinstatement of the simplified merger regime for demergers between joint stock companies where the recipient companies hold the entire capital of the demerged company.
- Secondly, there is a genuine innovation resulting from the introduction into the Commercial Code of the partial division : in accordance with what Article 115 2° of the CGI allowed in order to make the operation tax-neutral, it is now possible to allocate directly to the shareholders of the transferring company the securities issued by the receiving company in consideration for the contribution. In addition, the legislation allows the shares given to the shareholders of the transferring company to be, in whole or in part, those of the transferring company, and not exclusively those of the transferee company, according to an allocation that must be specified in the proposed transaction, and which might not be made in proportion to the shareholding of the shareholders of the transferring company, a point that is bound to give rise to discussion.