When considering M&A transactions or group restructuring in France, companies should take into account the high level of protection that French law affords to employees.
Information and Consultation Process
In the case of acquisitions involving a French company with at least 50 employees, the “social and economic committee” (CSE), which consists of a delegation of elected employees, must be informed and consulted on the potential transaction.
This notification and consultation must take place prior to taking any binding decision sell-side on the transaction and is subject to statutory maximum timeframes of, typically, up to 1-2 months. As a result, it is customary in France that signing occurs in two steps: first, a put option whereby the purchaser is committed to acquire the target upon exercise of the option by the sellers, after completion of the notification and consultation process and second, a share purchase agreement, which is usually in agreed form at the time of execution of the put option.
The findings of the CSE after consultation are non-binding and the employees’ representatives are held by a confidential duty.
Automatic Transfer of Employment Contracts
When a modification to an employer’s legal situation occurs, the employment contracts in force as of the date of the modification are automatically transferred to the new employer.
The new employer cannot halt the transfer of the employees, if the following two conditions are cumulatively met:
the transfer must concern an autonomous economic entity; and
the company’s activity will be continued or will keep its identity despite the takeover by a new owner.
Obligation to Inform Employees
The Hamon Law imposes on French companies with less than 250 employees and with a maximum turnover of EUR 50 million per year or a maximum balance sheet amount of EUR 43 million the obligation to inform their employees that a stake of more than 50% of the share capital in their company or a business of their company is about to be sold – to the extent such stake is held by a single shareholder.
This notification is made in order to give employees the opportunity to make an offer to buy the stake/business for sale.
To make this notification, the process must be completed:
at least 2 months before the signing of the binding agreement for companies with less than 50 employees (unless all employees of the company provide written waivers to their individual right to make an offer);
at the latest at the same time as the first meeting of the CSE on the proposed transaction for companies with at least 50 employees (no possibility to obtain waivers from employees).