FRANCE Law and Practice Contributed by: Sophie Vermeille, Vermeille & Co
4. Cancellation and Buybacks of Shares 4.1 Cancellation In France, shares can only be cancelled after issue in very limited, legally defined situations, as follows. • Share capital reduction – shares may be cancelled as part of a capital reduction, which must follow the strict procedures of the French Commercial Code (eg, EGM for SAs, protection of creditors). • Buyback and cancellation – in listed companies, cancellation typically follows a share buyback authorised by the shareholders and carried out within statutory limits. • Void issuance – shares can also be cancelled if their issuance is declared null and void by a court, but such cases are exceptional. Outside these cases, shares cannot simply be can- celled at will once they have been validly issued. 4.2 Buybacks Companies can buy back their shares; rules differ for private and listed companies. • Private companies (sociétés par actions not listed) may only buy back their own shares for the pur- pose of awarding them to employees or officers under an employee incentive plan, and subject to strict conditions in the Commercial Code. • Listed companies may repurchase up to 10% of their share capital, for a wide range of purposes authorised by law (eg, cancellation, employee plans, market-making). This requires prior share- holder authorisation and compliance with AMF regulations. Repurchases can also be conducted through a public share buyback offer ( offre pub - lique de rachat d’actions ).
3.2 Share Transfers In listed companies, shares are freely transferable under French law; any restriction on transfer would be unenforceable. In non-listed companies, particularly SAS, the by- laws may impose a wide range of transfer restrictions, including approval ( agrément ) clauses, pre-emption rights and lock-up periods. However, a total prohibi- tion on share transfers can only be temporary and is limited by law to a maximum of ten years. 3.3 Security Over Shares Shareholders may grant security interests over their shares under French law. The applicable rules dif- fer depending on whether the company is listed or not, but in both cases it is legally possible. In private companies, the by-laws may impose restrictions (for example, prior approval requirements). 3.4 Disclosure of Interests French law requires shareholders to disclose their interests, but the rules differ significantly between listed and non-listed companies. • Listed companies (SA): shareholders must notify both the company and the AMF when they cross certain statutory thresholds of share capital or voting rights (5%, 10%, 15%, 20%, 25%, 30%, one-third, 50%, two-thirds, 90% and 95%). In addition, specific disclosure obligations apply dur- ing the course of a tender offer, notably for persons crossing 1% thresholds, to ensure transparency in market activity. • Company-level disclosure: in both listed and non- listed companies, the articles of association may require additional disclosure of interests directly to the company when specified thresholds are crossed, sometimes set as low as 0.5% or 1%. Failure to comply with these disclosure require- ments may result in the suspension of voting rights attached to the relevant shares.
5. Dividends 5.1 Payments of Dividends
In France, dividends may only be paid out of distrib- utable profits or reserves, as defined in the French Commercial Code, after the approval of the annual accounts by the shareholders’ meeting. Distributable
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