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The French Parliament adopted on March 23, 2020 the emergency law n°2020-290 to deal with the Covid-19 epidemic (the "Emergency Law"). Article 11 of the Emergency Law authorizes the Government to take all necessary measures within the scope of the law by means of order (in French "ordonnance"), as permitted by Article 38 of the Constitution.

On March 25, 2020, the Government adopted several orders, two of which1 aim at temporarily adapting corporate law rules for listed and unlisted companies to the health crisis by simplifying, through a first order, the meeting and deliberation modalities of the management bodies (1.) and the shareholders meetings (2.), and, through a second order, the timetable for preparing, closing and approving the accounts (3.).

1. Adjustment of the operating rules of the management bodies

1.1.Application scope

  • Entities concerned: all the legal persons and entities without legal personality (in particuar civil and commercial companies, listed or unlisted, associations or security holders groups) benefit from these exceptional provisions.
  • Temporal application: the order applies retroactively to all meetings of management bodies held from March 12, 2020 until July 31, 2020, with a possible extension by decree until November 30, 2020 at the latest.

1.2. Participation and deliberation rules

  • Bodies concerned: all collegiate administrative, supervisory and management bodies are concerned (such as, in particular, boards of directors, supervisory boards and management boards).
  • Meetings and decisions: all the decisions of the management bodies may be taken in a virtual meeting (by videoconference or teleconference) or by written consultation, regardless of the purpose of the decision on which the body is called upon to rule, including the closing or the examination of the annual accounts, regardless of any legal provision or stipulation contained in the bylaws or the internal regulations.
  • Conditions: the technical means must allow for the identification of participants and their effective participation by a simultaneous and continuous transmission of their voice. The collegiality of deliberations must be ensured. Quorum rules remain unchanged.

Companies may therefore, exceptionally, use alternatives to physical meetings (videoconference, teleconference or written consultation) for the closing or the examination of the annual accounts (corporate and consolidated) for the financial year ending December 31, 2019, as well as for any other subject, regardless of the provisions of the bylaws.

2. Adjustment of the operating rules of the shareholders meetings

2.1. Application scope

Shareholders meetings concerned: all the shareholders meetings of the entities mentioned in 1.1 above are concerned by these rules, regardless of their purpose (such as, in particular, general meetings of shareholders, special meetings and security holders meetings).

Temporal application: the order applies retroactively to all meetings held from March 12, 2020 to July 31, 2020, with a possible extension by decree until November 30, 2020 at the latest.

2.2. Convening and information rules

Convening of shareholders meetings

  • Companies which have already carried out all or part of the formalities for convening meetings and which decide to adjust the modalities of their meetings in accordance with the provisions of the order must inform the members by any means ensuring their effective information at least three business days before the date of the meeting. Listed companies must publish a press release. The change of place or methods of participation shall not require renewing the meetings' convening formalities and shall not constitute a convening irregularity.
  • For listed companies, no nullity of a meeting shall arise from the sole motive that the convening notices that should be sent by mail2 could not be sent by mail due to external circumstances beyond the company's control. However, this measure is not applicable to unlisted companies, regardless of the number of shareholders.
  • Right of communication of shareholders: companies may respond to shareholders' requests for information by email, provided that the shareholder indicated his/her email address in the request.

In the absence of communication of an email address by the shareholder, the company remains, surprisingly, obliged to inform the shareholder concerned by post, which may be materially impossible in the current circumstances.

2.3. Participation and deliberation rules

Closed doors shareholders meetings

  • The body competent to convene the shareholders meeting may decide that the meeting shall be held in closed doors (in French "huis-clos"). In such case, the meeting will be held in the absence, both physical and virtual, of the members authorized to participate (in particular shareholders, but also statutory auditors and employees representatives). However, this exceptional measure is only applicable if the meeting has been convened in a place subject, on the convening date (or the date of notice of meeting for listed companies) or on the meeting date, to an administrative measure restricting collective gatherings for health reasons.
  • Shareholders nevertheless retain their other rights (right to request the addition of items or resolutions on the agenda, right to ask written questions, etc.), including their voting rights. Voting rights may however be exercised exclusively by mail, by a proxy given to the Chairman or, for listed companies, by electronic means if the bylaws allow it (e-vote through a secure voting platform).
  • Quorum rules remain unchanged. If it is decided to hold a closed doors meeting, all votes must be received before a set deadline in postal or electronic form, so that quorum may be known as early as on the deadline for receiving the votes (and the "blank" proxies granted to the Chairman), without having to formally wait for the opening time of the closed doors meeting.

This measure has already been implemented by some issuers.3 It avoids the postponement of annual meetings scheduled in the following weeks and, for companies not wishing to seek government assistance, to maintain, if necessary, the planned date of distribution of dividends.

However, several activist funds and voting agencies criticized closed doors meetings, which would deprive them of the opportunity to ask oral questions to the management team in the presence of shareholders or to have draft resolutions amended at the meeting.

Regarding annual general meetings, several listed companies preferred to postpone their meeting to end of June rather than hold a closed meeting.4 This should allow them to adjust the content of certain resolutions if necessary (particularly with regard to the payment of dividends) and to maintain a time for discussion with their shareholders, if possible depending on the circumstances at that time.

Virtual meetings

Virtual meetings are authorized, including already convened meetings, even when the bylaws do not provide for it or even when they prohibit it. The participants via videoconference or teleconference will then be deemed present for the calculation of quorum and majority.

Again, the technical means must allow for the identification of the participants and their effective participation through the simultaneous and continuous transmission of their voice. However, for companies that have already allowed the use of the videoconference in their articles of association, the conditions set out in the bylaws continue to apply. In all cases, the collegiality of deliberations must be ensured.

Written consultations: when decision-making by written consultation is legally permitted, this option is open even when the bylaws do not provide for it or even when they prohibit it, regardless of the purpose of the decisions.

2.4. Implementation measures

Implementing decree: a decree will specify the conditions of application of the order. In particular, it should specify the constitution modalities and the powers of the meeting's bureau and allow the shareholders of a listed company having applied for an admission card to change their voting modalities.

The French financial markets authority ("Autorité des marchés financiers" or "AMF") also published a press release highlighting a number of best practices in applying this order to guide issuers.5

3. Simplification of the timetable for preparing and approving the accounts

3.1. Preparation, presentation and closing of the accounts

Joint-stock companies with a management board and supervisory board (sociétés anonymes à directoire et conseil de surveillance)

  • The three-month period from the financial year end during which the management board must submit to the supervisory board the documents referred to in Article L. 225-100 of the French Commercial Code (i.e., the annual accounts, the consolidated accounts, if applicable, the management report and, if applicable, the corporate governance report) is extended by three months.
  • This measure is mostly applicable to joint-stock companies with a management board and supervisory board which fiscal year ended between December 31, 2019 and one month after the date of cessation of the state of health emergency declared by the Emergency Law, i.e., currently June 24, 2020, (subject to extension or reduction).
  • However, this measure is not applicable to companies for which the statutory auditor had already prepared his report on the annual accounts before March 12, 2020.

Companies in liquidation

  • The three-month period during which the liquidator must prepare the annual accounts in view of the inventory and the report on the liquidation operations is extended by two months.
  • This measure is mostly applicable to all companies which fiscal year ended between December 31, 2019 and one month after the date of cessation of the state of health emergency declared by the Emergency Law, i.e., currently June 24, 2020.

Provisional management documents

  • The four-month period during which the management body is required to prepare the provisional management documents referred to in article L. 232-2 of the French Commercial Code (i.e., the situation of the realizable and available assets and the current liabilities, the forecast profit and loss account, the cash flow statement and the forecast financing plan) is extended by two months.
  • This measure is mostly applicable to all companies which fiscal year ended between November 30, 2019 and one month after the date of cessation of the state of health emergency declared by the Emergency Law, i.e., currently June 24, 2020.

Entities benefiting from a public grant

  • The six-month period during which the entities benefiting from a public grant must file a financial report with the granting administrative body to state the compliance of the money use with the grant conditions (article 10 of the Law No. 2000-320 dated April 12, 2000) is extended by three months.
  • This measure is applicable to the entities benefiting from a public grant which fiscal year ended between September 30, 2019 and one month after the date of cessation of the state of health emergency declared by the Emergency Law, i.e., currently June 24, 2020.

The order does not extend the four-month period granted to the listed companies from their financial year end to publish the annual financial report prescribed by Article L. 451-1-2 of the Monetary and Financial Code.

However, on March 30, 2020, the AMF specified that it expected issuers that could not publish their financial reports within the deadlines to inform the AMF and the market of any anticipated delay in publishing on the regulatory timetable, the reasons for the delay and an expected publication date.6 It also specified that it would postpone its reminder policy by two months regarding the annual financial reports for the financial years ending between December 31 and March 31.

3.2. Approval of the accounts

Extension of the time period to approve the accounts

  • The legal, regulatory or statutory time-period for the approval of the accounts is extended by three months by operation of law, without the need to petition with the court.
  • This measure is applicable to all legal persons, and entities without the legal personality, which fiscal year ended between September 30, 2019 and one month after the date of cessation of the state of health emergency declared by the Emergency Law, i.e., currently June 24, 2020.
  • For joint-stock companies (sociétés anonymes or SA), limited liability companies (société à responsabilité limitée or SARL), sole shareholder limited liability company (entreprise unipersonnelle à responsabilité limitée or EURL), general partnerships (société en nom collectif or SNC) and sole shareholder simplified joint stock companies (sociétés par actions simplifiées unipersonnelles or SASU), the period for approval of the accounts is extended from six months to nine months from the end of the financial year. With regard to the simplified joint stock company (sociétés par actions simplifiées or SAS), the period is that specified in the articles of association to which is added the extension of three months.

Exception

  • However, this measure is not applicable to companies for which the statutory auditor had already prepared his report on the annual accounts before March 12, 2020.

The deadline for the annual distribution of dividend has not been modified by the order and remains set at nine months following the financial year end.

 

1 Order n°2020-321 of March 25, 2020 adjusting the rules for meetings and deliberations of the assemblies and governing bodies of legal persons and entities without legal personality under private law due to the covid-19 epidemic and Order n°2020-318 of March 25, 2020 adjusting the rules relating to the preparation, closing, auditing, examination, approval and publication of accounts and other documents and information that legal persons and entities without legal personality under private law are required to file or publish in the context of the covid-19 epidemic.

2 Registered shareholders having requested a convening notice by post.

3 Elior or Sanofi in particular.

4 Accor, LVMH, Renault, Scor and Valeo in particular.

5 Covid-19: The AMF informs shareholders and listed companies of exceptional measures taken to organise general meetings (AMF, March 27, 2020 available in French here).

6 Continuity of the periodic information in the context of the Coronavirus epidemic (AMF March 30, 2020, available in French here).

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