New report of the French Financial Authority (AMF) on shareholder general meetings

The just released AMF implementation report on general meetings, is a welcome revision of the working report chaired by Olivier Poupart Lafarge commented several times on this site.

This “implementation” has receives little critique from Proxinvest because the French market regulator has consulted and ultimately took into account many amending suggestions from the investor side. These debates have demonstrated the power of the business lobby braced on all possible comfort arrangements for issuers at the expense of the interests and equality of shareholders as of corporate integrity.

It was this employer activism that will ultimately produce an awkward bill in August 2014 adding length to the French Commercial Code requesting a new double reporting of the related party transactions, instead of encouraging better implementation of law for better minority investors’ protection.

The power of the issuers’ lobby was attested by a point discreetly omitted by the AMF report, a point unfortunately not recognized early enough by Proxinvest: a full liberalization of “free related party transactions” when they are deemed to be current and at normal price. The bill followed various modifications of the 2001 text: the business lobby obtained in several steps that no written qualification of these private dealings was longer to be made.

The NRE law of 2001 in its article L225 -39 had submitted these free agreements associating one insider, when concluded at common and normal conditions, to a simple declarative procedure: their list and their content have to be communicated by the Chairman to the members of the Board and to the company’s Auditors. Their list was also to be kept available to any shareholder prior to the general meeting. 

The auditors were deprived in 2011 of their access to the text of each conventions and the shareholders were deprived of access to the list (though it was very rarely asked) The remaining supervision on the list was just completely removed from the auditor control in 2014. Until 2014, the Article L 225-of the French Commercial code provided that the list of current “free agreements” was presented by the Chairman to the auditors. This article is repealed today: hidden arrangements will remain hidden.


Posted on 12 February 2015Pierre Henri Leroy