Following President Sarkozy's decision to require French companies to share their profits upon certain distributions of dividends to their shareholders, a bill[1] creating a mandatory bonus for value-added sharing (prime dividendes) to be paid to employees was adopted by the French Parliament on July 13, 2011 (the Bill). The Bill was enacted on July 28, 2011. An Administrative Order[2] dated July 29, 2011 was issued in order to provide guidelines for the practical implementation of the Bill. The Bill is effective until December 31, 2013.

This new legislation is important as it impacts distribution policies for companies or groups located outside France that do business in France through a French subsidiary (or group of subsidiaries).

At this time, scholars and practitioners are still wondering about certain interpretations of the new Bill and the Administrative Order. Discussions and debates are going on within various circles and authorities (e.g., National Association of Limited Liability Companies (ANSA), French ministry of employment) seeking clarification and legal certainty. In this LawFlash, we have chosen to adopt a conservative approach to this new scheme.