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Corporate Authorisations and Capital Markets Law in France

Corporate authorisations give approval for companies to enter into transactions (such as financings or acquisitions), and authorise people (“company representatives”) to sign the transaction documents on behalf of the company.

The new regime of delegation applicable to limited companies is now synchronised with the regime applicable to credit institutions. This allows the possibility to delegate to any persons, the power to carry out the contemplated bond issue.

The term person used in Article L. 228-40 is generally understood as individual. This construction is consistent with market practice, even if, from a French law perspective, a literal interpretation could lead to the possibility for a person within the meaning of French law to carry out the contemplated bond issue.

Such a literal construction would imply the possibility for another company, for example for a company within the same group of the issuer, to carry out a bond issue. Such a construction, although not being currently in line with market practice of corporates or banks, cannot be excluded.

In practice, this would lead to the possibility for an issuer to administratively externalise the carrying out of the bond issue and, why not, to the possibility for a specific dedicated entity to be created within a group of companies or banks to bear the administrative burden of the bond issue.

This might be interesting for companies or banks which are contractually structured as a group of companies, with the funding being separately managed.

In practice, this amendment allows members of the issuer, typically members of the funding department, to carry out bond issues. Such members do not longer have to be at the same time members of the Board of Directors as this is, to a certain extent, considered as useless for the single purpose of carrying out bond issues decided by the Board of Directors.

In addition, asking a member of the Board of Directors to carry out bond issues may lengthen the issuance process due to his potential non-availability.

It has also to be emphasised that Article L. 228-40 maintains the concept of delegation of powers only, this being in line with market practice. However, in theory, it can be considered that a delegation of signature is also possible, as new Article L. 228-40 does not prohibit it.

Characterisation of Bonds and Capital Markets Law in France

Capital markets are financial markets in which long-term debt or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold.

On 23 November 2017, the French Cour de Cassation ruled, by a literal and traditional construction of Article L. 213-5 of the French monetary and financial Code, that the characterisation of bond is not conditioned on the guarantee of repayment at par. Bonds that are not capital guaranteed remain nevertheless bonds.

In the previous instance, on 21 June 2016, the French Court of appeal of Paris ruled, on the contrary, that repayment at par was included as an essential feature in the concept of bond. This position was held to protect consumers, in a context where they have subscribed for life insurance based on non-capital guaranteed products, and they have not get back, at least, what they have invested.

It has to be mentioned that insurance companies are sometimes sellers in the secondary market of bonds, that the market calls structured products. This implies that the performance of the bond is linked to an underlying which can be volatile and sometimes the capital invested is not guaranteed. In a way, non-capital guaranteed structured obligations can economically be similar to derivatives and this may result in massive losses.

In such circumstances, the insurance company has to ensure, when such bonds / structured products are sold to consumers repackaged as life insurance, that the advisory and the information obligations are fully complied with.

When we are in presence of bonds that are not capital guaranteed, the characterisation of bond is then not only crucial for insurance companies but also for issuers, subscribers, and holders for other regulatory purposes.

The current position of the French Cour de Cassation will reassure the bond market as a whole.

Contract and Capital Markets Law in France: A Comprehensive Overview

In the heart of Europe lies France, a nation with a rich legal heritage and a prominent position in the global capital markets. This article delves into the intricate landscape of Contract and Capital Markets Law in France, shedding light on its key aspects, regulations, and implications for investors, businesses, and legal practitioners. As we explore this fascinating domain, it’s important to note that while every effort has been made to ensure accuracy, consulting legal experts for specific cases is recommended.

Contract Law in France

Contract law in France is governed by the Civil Code (Code civil), which lays the foundation for the principles of freedom of contract and good faith. The Civil Code defines a contract as an agreement by which one or more persons undertake to one or more other persons to perform or refrain from performing a particular act. It emphasises the importance of mutual consent, clear terms, and fairness in contracts.

Capital Markets Law in France

The capital markets in France play a vital role in the country’s economy and are regulated by various authorities, primarily the Autorité des Marchés Financiers (AMF). The AMF oversees the issuance and trading of securities, ensuring transparency, market integrity, and investor protection. The law governing capital markets in France covers a range of financial instruments, including equities, bonds, derivatives, and investment funds.

Key Aspects and Regulations

Disclosure Requirements: French capital market regulations mandate issuers to provide accurate and timely information to investors. This includes financial statements, risk factors, and any material information that could impact investment decisions. This transparency promotes informed investing and safeguards market integrity.

Prospectus Regulation: The Prospectus Regulation sets out the requirements for companies seeking to raise capital through public offerings. A prospectus must be approved by the AMF before securities can be offered to the public. This process ensures that potential investors receive comprehensive information about the issuer and the securities being offered.

Insider Trading and Market Abuse: French law prohibits insider trading and market abuse, aiming to maintain a level playing field for all market participants. Those with privileged information are restricted from trading on that information until it becomes public, preventing unfair advantages and market manipulation.

Takeover Regulations: The AMF regulates takeover bids and mergers to ensure fairness for shareholders and prevent hostile takeovers. Shareholders are granted certain rights and protections, including the right to receive accurate and timely information regarding takeover offers.

Implications for Investors and Businesses

For Investors: Understanding Contract and Capital Markets Law is crucial for investors looking to navigate the French market. Having insight into the regulatory framework ensures that investors can make informed decisions, assess risks, and protect their interests.

For Businesses: Businesses seeking to raise capital in France must adhere to the stringent regulatory requirements. Crafting a clear and comprehensive prospectus, ensuring compliance with insider trading regulations, and respecting takeover regulations are vital steps in building investor confidence and ensuring a smooth market entry.

Conclusion

The intersection of Contract and Capital Markets Law in France forms the backbone of a thriving economic ecosystem. The robust legal framework promotes transparency, fairness, and investor protection, bolstering the confidence of both investors and businesses. While this article provides an informative overview, it’s essential to consult legal experts well-versed in French law for specific legal matters. As France continues to evolve in the global economic landscape, staying informed about its Contract and Capital Markets Law remains a critical aspect of successful investment and business operations.