• Harmonization of the legal framework for cross-border operations (mergers, spin-offs, partial contributions of assets, transformations) within the European Union.

• Strengthening the protection of shareholders, creditors, and employees of the concerned French entities.

• Implementation of a supervisory authority (the clerk of the commercial court – greffier du tribunal de commerce) to ensure that cross-border operations are not carried out for abusive, fraudulent or criminal purposes.

• French law adjusted to facilitate and clarify certain local operations.

Ordinance no. 2023-393 of May 24, 2023 and Decree no. 2023-430 of June 2, 2023 transpose EU Directive 2019/2121. They reform the French regime for mergers, spin-offs, partial contributions of assets (apports partiels d’actifs), and cross-border operations. The objective is to facilitate these operations within the European Union by harmonizing the legal framework and strengthening the protection of stakeholders. Until now, such operations have been relatively rare, mainly due to the disparity between the applicable regimes in the Member States. Cross-border operations should, therefore, now be facilitated, even if certain inaccuracies remain to be corrected via the ratification law.

It should be noted that all of the modifications below are applicable to operations filed with the commercial court as from July 1, 2023.

Contributions related to cross-border operations

This reform mainly harmonizes the law within the European Union on cross-border mergers while introducing three other cross-border operations: spin-offs, partial contributions of assets, and transformation. More specifically:

• Cross-border mergers: The major contribution of this reform is to strengthen the protection of shareholders, creditors, and employees.
• Cross-border spin-offs and partial contributions of assets: The ordinance establishes these two new operations for joint-stock companies (e.g., French SAS) and limited liability companies (French SARL). A legal framework is thus provided for these two operations, with a regime largely based on that of French operations and cross-border mergers.
• Cross-border transformation: It is now permitted for a company to change its corporate form and applicable law while maintaining its legal capacity.

In general, the initial European directive strengthened the protection of public interests by establishing in each Member State a supervisory authority responsible for ensuring, within the framework of compliance monitoring, that cross-border operations are not carried out for abusive, fraudulent, or criminal purposes or for the evasion or circumvention of European Union or French law. The French transposition thus assigns this responsibility to the clerk of the commercial court (greffier du tribunal de commerce).

The ordinance also aims to strengthen the protection of shareholders, creditors, and employees of the French entities involved in this type of operation. More specifically:

• each involved company must now publish a notice informing shareholders, creditors, and employee representatives or, failing that, the employees themselves, that they can submit observations concerning the matter to the company. This notice is filed with the clerk of the commercial court and annexed to the trade and companies register;
• regarding minority shareholders, the ordinance grants them a right of withdrawal, allowing them to sell their shares to the company in case they do not approve the operation. Shareholders who have not exercised this right of withdrawal have the right to contest the share exchange ratio before the court in the jurisdiction in which the company's registered office is located;
• creditors of the French companies concerned (whose debts predate the proposed cross-border operation) now have a 3-month period (instead of 30 days) from the publication of the operation to file an opposition. This period remains suspensive and therefore extends the deadline for implementing these cross-border operations;
• finally, for employees of a French company (the regulations in force at the level of the other company taking part in the operation also being applicable), their right to be represented within the company’s supervisory board or board of directors, as well as their equivalent prerogatives and protections, must be preserved. The draft treaty can only be filed after the opinion of employee representatives is obtained. The timetable for the operation must therefore consider the underlying timeframes.

Some additional changes

The French legislature also took advantage of the ordinance to clarify or modify some provisions of French law governing this type of operation at the local level. Of particular note:

• the “quasi-simplified” merger (i.e., when the absorbing company holds more than 90% of the absorbed company) now applies to limited liability companies (French SARL);
• any draft merger, spin-off, and partial contributions of assets treaty will be made available to the public and annexed to the trade and companies register, thus enhancing accessibility for third parties;
• the simplified spin-off is reintroduced for joint-stock companies (e.g., French SAS) and is extended to spin-offs between 100% sister companies (and no longer only between direct subsidiaries). It should be noted that limited liability companies (French SARL) are now excluded, but it is not impossible that this will be corrected soon in the ratification law;
• the “partial spin-off” is established, allowing a partial contributions of assets for the benefit of several beneficiary companies and a company to contribute part of its assets to another company, without dissolving, while allocating the securities that remunerated this contribution directly to its own shareholders (and not to the company itself);
• the protection of creditors of companies participating in a spin-off is also evolving and now benefits from its own regime. Joint and several liability (solidarité) between the participating companies is reinstated. The contributing company will be fully liable for the debts transmitted. However, the beneficiary company's liability with the other will be limited to the value of the net assets it has received, valued on the effective date of the spin-off;
• the “simplified” partial contributions of assets regime between a parent company and its wholly-owned subsidiary is extended to operations involving limited liability companies (French SARL) and no longer just joint-stock companies.