Hughes Hubbard & Reed LLP
While Hughes Hubbard & Reed LLP has a distinguished history dating back to 1888, the firm has been recognized as part of the "new elite" among "the profession's top tier," according to a survey by The American Lawyer magazine ("The A-List", July 2011).Show more
Banking & Financial Services
In January 2019 France passed Act 2019-75, which authorised the government to take measures to prepare for the United Kingdom's departure from the European Union without a deal by way of ministerial orders, particularly in the area of financial services. Subsequently, in February 2019 the government adopted a ministerial order which, among other things, aims to ensure that International Swaps and Derivatives Association-type master agreements on financial services continue to be used.
Corporate & Commercial
As part of a range of emergency measures to help businesses meet the challenges posed by the COVID-19 pandemic, the government adopted Ordinance 2020-318 on 25 March 2020. The measures temporarily extend deadlines in the financial reporting and accounts approval process of listed and unlisted companies alike. In addition to commercial and civil companies, the new rules apply to partnerships, cooperatives, mutual companies, charities and foundations.
The COVID-19 pandemic has had a profound effect on business operations. Companies are having to adapt quickly to social distancing measures and travel restrictions and many are now dispensing with face-to-face board meetings in favour of virtual meetings or written procedures. Thus, an ordinance was recently adopted to relax the rules around virtual board and shareholder meetings.
Law 2019-744 of 19 July 2019 seeks to simplify and update wide-ranging aspects of company law. The measures include changes to the approval process that public limited companies must follow in order to issue, in favour of a third party, a guarantee of the obligations of a subsidiary that they control. These changes aim to enable foreign subsidiaries of French companies to respond more quickly to international tender processes.
The Commercial Division of the Supreme Court has clarified how an assignment of business receivables, known as a 'Dailly assignment', operates. Through this decision, the Supreme Court has reinforced the effectiveness of the Dailly assignment mechanism by giving full effect to the assigned debtor's actual knowledge of the assignment and by giving no effect to contractual provisions that restrict assignment.
The new law on the duty of vigilance for parent companies and principal contractors aims to improve the accountability of multinational companies, prevent serious incidents in France and abroad and allow parties to obtain compensation for losses which they suffer as a consequence of non-compliance. To achieve these aims, the law requires companies to draft an awareness plan and implement a monitoring and whistleblowing system. It also introduces penalties for non-compliance.
The Sapin II Law aims to support transparency, modernise business activity and combat corruption. It introduces measures to regulate executive pay in listed companies, simplify company law and modernise bond issues. Among other things, it has simplified the procedure for contributions of goodwill, abolished the prior authorisation requirement for certain transactions and simplified the procedure for issuing bonds.
The concept of de facto management makes it possible to hold a parent company liable for its subsidiary by requiring that it make up any shortfall in its assets if the subsidiary is insolvent. This ultimately leads to a piercing of the corporate veil. A recent Supreme Court ruling points to a shift in case law towards a more restrictive interpretation of de facto management, thereby reinforcing the corporate veil.
Sudden termination of established commercial relationship in international context: lessons from recent EU rulingFrance | 28 November 2016
A recent landmark European Court of Justice (ECJ) ruling calls into question the type of liability incurred when an established commercial relationship is suddenly terminated. According to the ECJ, the liability is contractual, whereas for the French Supreme Court, tortious liability arises. The practical consequences of this ruling are significant in that EU law on jurisdiction differs substantially, depending on whether the liability in question is tortious or contractual.
The long-awaited reform of the law of obligations was recently issued by the Ministry of Justice. Even though the reform is mostly a codification of existing case law, it establishes a number of innovations, such as hardship and anticipatory non-performance. Legal advisers should pay close attention to the changes introduced by the reform when drafting, interpreting or enforcing contracts.
As the sale of a business does not automatically involve a transfer of the seller's rights and obligations to the buyer, this raises the issue of whether commercial relationships entered into by the seller must be continued by the buyer or whether they constitute new relationships created when the business is taken over. A recent Supreme Court decision clarified the law in this area.
Article 18 of Law 2014-856 has introduced a new requirement for small and medium-sized companies to provide employees with information every three years about buying out their company. The main aim of the legislation is to improve employee awareness of the benefits and difficulties of buying their company and to provide information about the aid packages that are available.
New legislation requires certain limited liability companies to include social and environmental and corporate responsibility information in their annual reports. While it should help to foster greater transparency and social and environmental responsibility, it also increases red tape and thus sits uneasily with the government's ambition of boosting economic growth by simplifying rules and regulations for businesses.
Within a group of companies, the principle that a company is autonomous and independent provides the basis for the legal independence of a subsidiary in relation to its parent company or the other companies within the group, and for the fact that a parent company cannot be held liable for the actions of its subsidiaries. However, the courts and the legislature have created exceptions to this principle in order to protect third parties.
Manufacturers and service providers often have recourse to third-party companies or individuals, commonly referred to as 'agents', to promote their products or services in France. However, even when a relationship is regulated by an agreement which clearly sets out each party's obligations and rights, disputes can arise regarding the qualification of the relationship as a commercial agency.
The government recently introduced legislation to regulate crowdfunding and protect investors. If a simplified joint stock company offers securities to the public through crowdfunding, it must now comply with a number of rules that apply to public limited companies. The changes are designed to give shareholders better information and more say over the company's affairs.
A new presidential order, which implements a number of measures previously announced in Law 2014-1, affects regulated agreements, the time limit for holding annual general meetings and the enforceability of share transfers in certain companies. Further, as part of an ongoing initiative to boost competitiveness by simplifying business rules and regulations, the Senate is debating a draft law on the simplification of business rules.
France has specific, mandatory rules governing the termination of commercial relationships. Foreign business partners who have dealings in France or with French partners are often unaware that terminating their business relationship could lead to liability in tort under French law, even if there is no breach of contract or the business relationship has been performed outside of France.
New legislation aims to simplify the rules and regulations applicable to companies. The government's objective is to help businesses by reducing bureaucracy and relaxing the multitude of regulations that affect them. The legislation also seeks to modernise administrative procedures, allowing companies to focus on their core activities, in order to boost competitiveness.
A recent law has brought about greater employee involvement in corporate governance by introducing a new system of employee representation on boards of directors and supervisory boards. It takes a cautious approach, applying only to groups that employ a relatively large workforce, and does not address whether employee-appointed directors should be entitled to sit on key committees, such as remuneration or audit committees.
Shareholders are increasingly resorting to legal action to protect their investments not only when they have suffered a loss directly, but also when the company in which they hold shares has suffered the loss. However, their scope of action remains limited in the latter case: their only remedy is to take action against the company executives who fail to defend the company properly against third parties for the company's loss.
France has so far lagged behind efforts to give shareholders a greater say on remuneration for corporate officers. However, the government has indicated that it may propose legislation later in the year, possibly before the summer, to modernise legislation on corporate executive pay. To this end it is consulting stakeholders on the shape that future changes could take.
Management agreements have become a useful tool for the effective organisation of management structures within group companies. However, their implementation is far from risk free. The most sensitive area is the provision by the holding company of core executive management functions, such as general leadership, supervision and strategy, as opposed to more technical or accessory functions, such as finance or IT.
Hot on the heels of the changes introduced by the 2012 finance law, further amendments have now been made to transfer duties due on the transfer of securities. Under the new provisions, share transfers in listed and unlisted companies will be subject to a single rate of 0.1% instead of the previous three-band scale.
The legislature recently introduced a diverse package of measures designed to modernise French company law by introducing simplified procedures and removing constraints across a wide range of areas. Among other things, the rules on the preparation and filing of annual accounts have been simplified; but the Commercial Court has gained more powers to require companies to comply with their filing requirements.
Insolvency & Restructuring
The government has taken a number of emergency measures on bankruptcy and insolvency proceedings as part of its response to the COVID-19 pandemic. These measures apply during the duration of the so-called 'health emergency', plus one or three months, depending on the case. This article considers the impact of the emergency measures on bankruptcy and insolvency proceedings in France.