FRANCE: An Introduction to Corporate/M&A: High-end Capability

The French M&A market showed signs of recovery with an increase in deals focused on strategic sectors such as technology (eg, energy transformation; digitalisation, AI), and energy. Economic and political uncertainties, however, have limited market growth. For 2025, the outlook remains promising, though heightened vigilance is still required.

EU Corporate Sustainability Due Diligence Directive

The Corporate Sustainability Due Diligence Directive (CS3D), which entered into force on 25 July 2024 and must be implemented into domestic law by 26 July 2026, reinforces the duty of care in terms of corporate sustainability. In practice, the requirement related to the CS3D will apply progressively between 2027 and 2029, depending on certain thresholds (eg, employees and turnover).

It applies to EU companies that either: (i) employ more than 1,000 employees and generated a consolidated turnover of more than EUR450 million in the last financial year; (ii) are the ultimate parent companies of a group meeting the above thresholds; or, (iii) have entered into franchise or license agreements within the EU for royalties with independent third parties subject to, among others, certain royalty and turnover thresholds. It also applies to companies incorporated under the legislation of a third country that meet these thresholds within the EU.

CS3D covers not only the activities of the concerned company but also those of its subsidiaries and direct and indirect business partners throughout their value chains. This “value chain” concept extends to upstream activities of business partners and downstream activities such as distribution, transportation, or storage when performed for or on behalf of the company.

Companies must implement an internal due diligence policy, including a description of their due diligence approach, a code of conduct, and an internal process for implementing, monitoring and reviewing due diligence. A risk alert procedure and reporting mechanism must also be established.

Procedures must be set forth to identify, by risk mapping, prevent, and remediate negative impacts on human rights and the environment linked to their activities and those of their supply chains.

The likely impact of the implementation of CS3D on deals includes increased transaction costs related to ESG audits but also enhanced valuation for companies aligned with these criteria. Investors must incorporate these requirements into their acquisition strategies to avoid post-transaction legal risks.

While states are free to set their own penalties in case of violations, the directive specifies that fines should be based on worldwide turnover, with a minimum cap of 5%.

French “Attractivité” law

Most of the provisions of the French “Attractivité” law dated 13 June 2024 entered into force on 15 June 2024. Certain provisions became effective on 14 September 2024. Implementation decrees, published or still to come, will clarify the application methods. Provisions mainly apply to listed “société anonyme” and “société en commandite par actions”.

The main changes resulting from this law relate to the introduction of multiple-voting rights and greater flexibility for capital increases.

Multiple voting rights

From now on, French “société anonyme” and “société en commandite par actions” may issue preferred shares with multiple voting rights but only on the date of their first listing (on a regulated market or a multilateral trading facility) for a maximum of ten years, renewable once for a further five-year period under strict conditions. At the expiry of this period, the shares are converted into ordinary shares.

However, French law explicitly provides that the multiple voting rights may not be exercised in relation to certain decisions (eg, appointment of statutory auditors, approval of the annual accounts, or amendments of the by-laws except in the event of a capital increase). By-laws may also limit further multiple voting rights (eg, during public tender offers).

Such preferred shares are converted into ordinary shares in specific situations such as in the event of a transfer of property, inheritance, liquidation of community of assets by spouses or inter vivos gift, change of control, dissolution of the corporate shareholder, at maturity, or in the context of insolvency proceedings.

Also, holders of multiple-voting shares are not entitled to the standard double voting rights, even if they have been holding them for more than two years (or longer, depending on the by-laws). It is only when the preferred shares are converted into ordinary shares that the shares held in registered form can be granted double voting rights upon the lapse of two years (or longer, depending on the by-laws).

Capital increases

New rules aim at easing the process of fundraising and improving the competitiveness of the French M&A market:

• As a reminder, an ordinance dated 22 January 2009 authorised the issuance of equity securities to qualified investors or a limited group of investors, up to 20% of the share capital per year. This kind of capital increase, exempt from a prospectus, is now permitted up to 30% of the share capital per year (rolling period). This change applies only to “immediate” capital increases through a share issuance, excluding “deferred” increases via securities granting access to capital.
• The shareholders may now grant the board of directors the right to freely set the price of the capital increase with no cap to the number of shares issued.
• The law also introduces a new article in the French Commercial Code, allowing the general meeting of a listed company to delegate to the board the authority to designate the beneficiaries of a capital increase, up to 30% of its share capital.
• To further enhance flexibility, especially during M&A transactions, the limit for capital increases in kind, remunerating contributions in equity securities, is raised from 10% to 20% of the share capital.

Women on Boards Directive

In France, a framework already ensures gender parity at the level of the board of directors: the “Coppé-Zimmermann” law, which requires a minimum of 40% representation of the less-represented gender on corporate boards, applies to all listed companies and non-listed companies with at least 250 employees and either a turnover or total balance sheet exceeding EUR50 million.

In compliance with Article 5 of the French “DDADUE” law of 22 April 2024, effective as of 24 April 2024, the French ordinance, published on 15 October 2024, transposing the Women on Boards EU Directive of 23 November 2022, strengthens this framework to align French law with European requirements. A decree is still expected to clarify certain provisions.

The directive requires a minimum representation of 40% of women in non-executive director positions or at least 33% across all director positions, whether executive or non-executive. Additionally, one or more bodies should be designated to promote, analyse, monitor, and support gender parity on corporate boards.

Also, members of the board of directors designated as employee representatives and shareholder-employee representatives will have to be taken into consideration when calculating the 40% ratio. For parity determination, shareholder-employee representatives will be included within the college of all other directors. Directors elected as employee representatives also constitute a separate college and parity rules will depend on their appointment procedure.

These new provisions apply to “société anonyme” and “société en commandite par actions” which are either (i) listed or (ii) non-listed but have more than 250 employees and either a turnover exceeding EUR50 million or a total balance sheet exceeding EUR43 million.

The application timetable provides that listed companies with more than 250 employees and either a turnover exceeding EUR50 million or a total balance sheet exceeding EUR43 million must comply by 30 June 2026 and the others by 1 January 2027.

Adjustments to by-laws, internal regulations where applicable, and procedures for the election of directors acting as employee or shareholder-employee representatives must be implemented by the concerned companies to meet the ordinance’s requirements.

These adjustments must also be checked in the context of governance audits prior to any transaction and during the implementation of recruitment policies.