FRANCE Law and Practice Contributed by: Fernand Arsanios, Delphine Guillotte, Guillaume Chaboureau, Houda Idaroussi and El Sayegh, King & Spalding
The long-form documentation is usually signed prior to the filing of the tender offer. Certain funds provisions are also commonly used in a private acquisition transaction without the specific protection mechanism described above (ie, direct right of drawdown and guarantee). 3.9 Recent Legal and Commercial Developments Since the COVID-19 pandemic, the use of electronic signatures for finance documents has become stand- ard practice. Following the 2021 reform of insolvency law, English law-style inter-creditor agreements have also become standard, and now incorporate provi- sions addressing the treatment of impaired creditor classes. In large deals, negotiations around LME (liability management exercises) and lender protec- tion have emerged. Finally, ESG-linked loans are also gaining traction, often supported by government or EU initiatives. Notably, the traditional “rendez-vous clause” for later negotiation of ESG terms has disap- peared; these provisions are now negotiated upfront, and typically based on the Loan Market Association (LMA) template. 3.10 Usury Laws French usury laws apply to loans granted: • to (i) individuals for non-professional purposes; or (ii) legal entities other than those having industrial, commercial, agricultural, or non-commercial pro- fessional activities; or • in the form of overdrafts. A loan is considered usurious if, at the time it is grant- ed, its overall effective rate exceeds by more than one-third the average overall effective rate applied by credit institutions during the previous quarter for transactions of the same nature involving similar risks. This usury rate is calculated by the Banque de France and published on its website after each quarter. Usurious loans are subject to civil sanctions and, unless they qualify as overdrafts, may also give rise to civil and criminal penalties, as follows.
• Civil sanctions – interest exceeding the usury rate shall first be applied to the payment of interest accrued at a rate within the legal limit, then to the repayment of principal, and any remaining excess must be reimbursed to the borrower. • Criminal penalties – two years’ imprisonment and/ or a fine of EUR300,000. These penalties apply to the person who has granted the usurious loan and any person who has participated directly or indi- French law does not provide for any specific obligation to disclose certain contracts to authorities or clients. Based on strict confidentiality rules, credit institutions would also be prohibited from disclosing any privi- leged client-related information obtained in the course of their professional activities. The 2018/822 Directive (DAC 6) does, however, provide for mandatory dis- closure of cross-border arrangements by intermediar- ies or taxpayers to the tax authorities, and mandates automatic exchange of this information among EU member states in order to dissuade taxpayers from implementing aggressive tax arrangements. rectly in the granting of the loan. 3.11 Disclosure Requirements No withholding tax applies on interest paid by a French company to a non-resident lender unless the interest is paid outside France in a so-called “unco-operative state or territory”, as defined in a blacklist published annually by the French authorities. In the latter case, a 75% withholding tax applies on interest payments. Note that the 2025 blacklist includes American Samoa, Anguilla, Antigua and Barbuda, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad and Tobago, the Turks and Caicos Islands, the US Virgin Islands and Vanuatu. 4.2 Other Taxes, Duties, Charges or Tax Considerations No tax duties or charges should be due by lenders making loans to (or taking security and guarantees from) French borrowers. 4. Tax 4.1 Withholding Tax
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