FRANCE Law and Practice Contributed by: Carine Le Roy-Gleizes, Corentin Chevallier, Alice Messin-Roizard and Antoine Juquin, UGGC Avocats
6.4 Shareholder or Parent Company Liability As of 2010, the French Environmental Code provides that a parent company may be held financially liable for the remediation measures of contaminated land if it wrongfully contributes to its subsidiary’s bankruptcy. 6.5 ESG Requirements Under the French Commercial Code, certain com- panies have to include a non-financial performance statement in their annual management report. The obligation to publish such a statement falls on com- panies with more than 500 employees, as well as on listed companies with total assets of EUR20 million or a turnover of EUR40 million and non-listed companies with EUR100 million in total assets or a EUR100 mil- lion turnover. The statement must tackle environmental and societal issues such as climate change, social commitments to sustainable development and the circular econo- my. Listed companies must also add to their state- ment pieces of information concerning their activity’s effects on human rights and the fight against corrup- tion and tax avoidance. In December 2023, France transposed the EU Cor- porate Sustainability Reporting Directive into French law, extending the scope of companies required to publish sustainability information, opening the audit- ing of such information to new players and introduc- ing new sanctions. Further transposition measures will also be required later, given the directive’s progressive timetable, which sets different deadlines for different types of company (2028, and then 2029). 6.6 Environmental Audits In France, environmental audits are used in a wide variety of operations. Although the situations an envi- ronmental audit covers are varied, European Regu- lation 1221/2009 provides that it is a “systematic, documented, periodic and objective evaluation of the environmental performance of an organisation, man- agement system and processes designed to protect the environment”. Environmental audits are often used by companies following the detection of an anomaly or the occur- rence of an incident or accident on an operating site.
In France, there is no general obligation for compa- nies to carry out an environmental audit, but certain circumstances imply that one should be performed. By way of example, an environmental audit is often required: • prior to the purchase of land, an industrial building or a factory; or • in the event of the acquisition of a brownfield or the transfer of remediation obligations. Directors and officers can be held personally liable for environmental damage or violations of environmen- tal law if their personal conduct contributed to the offense or if they had knowledge of the offense and failed to act. This standard applies beyond the envi- ronmental sector. The individual’s level of authority is not considered when finding them liable, but rather the fact that they were acting in the capacity of a company’s repre- sentative or acting on the company representative’s instruction or delegation. In the latter situation, the judge will carefully examine the scope and regularity of the delegation or representative’s instruction. 7. Personal Liability 7.1 Directors and Other Officers The penalties for environmental offences range from a fine of up to EUR100,000 to a prison sentence of up to two years. Additional penalties, such as prohibition from doing business in a similar area for a time period of up to five years, may also be imposed. Global liability insurance for company directors can cover defence expenses and damages arising from civil procedures (thus including environmental mat- ters) and can sometimes benefit the spouse and/or inheritors or legal representatives. Criminal fines are not covered by liability insurance. The company will be the signatory of the insurance contract for the ben- efit of all natural persons likely to be held personally responsible and therefore who had, have or will have an executive or representative position in the com- pany or in its subsidiaries.
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