FRANCE Trends and Developments Contributed by: Saam Golshani, Diane Lamarche, Félix Thillaye and Victoire Segard, White & Case LLP
On this point, Paris Europlace highlighted in its June 2024 report a number of best practices in order to promote regular shareholder dialogue. These notably included the appointment of an independent admin- istrator in charge of shareholder dialogue. More practical recommendations include the setting up of a dedicated email address, an annual letter to the shareholders, and greater transparency about share- holders’ meetings and related materials. The AMF has clarified its current doctrine on “quiet periods” by clearly enabling issuers to reply to public statements made by activist shareholders during such periods and to provide the market with any necessary information. On that point, the 2022 report of the Club des juristes went further by suggesting that investors should not release any statements of publications during quiet periods, if “exceptional circumstances” occur. The AMF also completed its current policy on share- holder engagement in public campaigns. Sharehold- ers are now required to immediately disclose, to issu- ers and to the market, the material information and arguments sent to other shareholders (white papers, letters to shareholders, etc). The Club des juristes again went one step further by suggesting the introduction of a reasonable minimum period of time between the attempt at dialogue with the issuer and the launch of the public campaign. During that period, the investor would send its white paper to the issuer, on a confidential basis, thereby enabling the issuer to “report material errors, chal- lenge interpretations or make comments”. In its 2024 guide on shareholder dialogue, Paris Euro- place goes in the same direction by recommending the communication of any white paper to the issuer prior to the public launch of an activist campaign. Finally, the AMF indicated in 2020 that it would seek clarification from the European Securities and Mar- kets Authority (ESMA) and the European Commission regarding the applicability of the current regulation on investment recommendations (Commission Delegat- ed Regulation (EU) 2016/958 of 9 March 2016) to pub- lic statements of activist investors. This is a welcome
initiative that could clarify and secure the framework of activist campaigns, to the benefit of both issuers and shareholders. However, the AMF did not provide additional information on this topic at this stage. Given these developments, the latest report from the Club des juristes supported the drafting of a common good practice guide to structure issuer-shareholder dialogue, involving all stakeholders of the Paris finan- cial marketplace. The drafting of such guide would involve the representatives of all stakeholders in the shareholder dialogue. Short selling and regulation of securities lending One of the most sensitive topics surrounding share- holder activism in France is short selling, and the 2019 working groups made several suggestions to amend the current legal framework, which mainly derived from Regulation (EU) No 236/2012. Notably, the French parliament’s dedicated committee had recommended the introduction of a presumption of abnormal market functioning when the short selling of a financial instrument exceeds certain limits, prompt- ing an AMF-led investigation. The AMF did not take up these recommendations in its publication of 20 April 2020, nor in its updated offi- cial doctrine of 2021, considering that “[T]he existing framework already enables the regulator to respond in the event of exceptional circumstances and market dysfunctions. As a result, it does not seem advisable, as things stand, to recommend a radical change in the regulations applicable in this area”. The AMF merely indicated that it would support proposals made at the EU level to request short-selling investors to disclose their exposure to debt instruments (notably, bonds and credit-default swaps). On that point, the follow-up report of the Club des juristes clearly supports an amendment of Regula- tion (EU) No 236/2012 to impose information on debt instruments in these mandatory declarations, which should also be supplemented with the declaration of intent if certain thresholds are crossed. The report also suggests that investors acting in concert should file joint declarations.
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