FRANCE Trends and Developments Contributed by: Sophie Vermeille and Jens Waldner, Vermeille & Co
by investors alleging governance and disclosure fail - ures, are currently pending. While the outcome of these proceedings cannot be prejudged, the fact that shareholders and bondholders have succeeded in organising themselves to litigate on an equal footing with the defendants is already notable. The Casino case therefore illustrates the gradual strengthening of enforcement mechanisms in France. The Casino and Atos cases share a common dynamic that the economic literature describes as “gambling for resurrection”: facing a deteriorating situation, management defers the necessary restructurings and instead pursues high-risk decisions designed to buy time – asset disposals at fire-sale prices, debt at pro - hibitive rates, or unsustainable dividend policies that drain cash at the most critical moment. Each manipu - lation calls for the next to conceal the preceding one. The collapse is not sudden; it is simply the moment when the fiction ceases to be sustainable. The accumulation of these cases has not gone unno - ticed. In May 2024, Les Echos – France’s leading business daily – published a front-page investiga - tion under the headline “Atos, Casino, Orpea… Can we still trust corporations?” (“ Atos , Casino , Orpea … peut - on encore croire les entreprises ?”). The article noted that while France had not experienced its own Wirecard moment, a series of affairs were sowing seri - ous doubts about the quality of financial information provided by listed companies. The fact that such a question could be raised openly in the country’s most pro-business newspaper evidences how profoundly the landscape has shifted. The anatomy of financial fraud: a silent and systemic threat Corporate fraud in France has changed over the past three decades. In the post-war era, major scandals typically involved the direct misappropriation of cor - porate funds by executives. The Elf Aquitaine affair – where more than EUR300 million was diverted through Swiss and Liechtenstein accounts between 1989 and 1993 under Loïk Le Floch-Prigent – remains the emblematic case.
Historically, the consequences of corporate failure were often mitigated by State intervention. When Alstom neared bankruptcy in 2003, the government organised a EUR2.5 billion bailout and took a 21% stake. When Areva collapsed in 2014–2015 after a EUR4.8 billion loss, the State restructured it via EDF, committing “whatever was necessary” to preserve the nuclear sector. Whatever their industrial rationale, these rescues had a governance cost: they masked the true consequences of managerial failure and insu - lated boards from full accountability. The implicit guar - antee of State support weakened market discipline. That era has ended. Fiscal constraints, European State aid rules, and the scale of recent crises have made systematic bailouts unrealistic. The collapses of Atos, Orpea and Casino unfolded in a context where the State either could not, or would not, intervene – at least not in the same manner as before. The state remains prompt to help companies avert liquidation by granting massive deferrals of tax and social security liabilities, a form of support it does not necessarily extend to smaller businesses. At the same time, French corporate governance has objectively improved. The crude forms of fraud that marked the Elf period have become rarer. Board practices have professionalised: formal evaluations, induction programmes, and external advisers are now standard in major listed companies. The growing inter - nationalisation of boards has further diluted traditional networks and strengthened formal independence. Paradoxically, these advances have altered rather than eliminated the governance risk. Contemporary fraud on French capital markets no longer centres on mis - appropriation, but on the distortion of financial reality. It operates through accounting judgements, valuation assumptions and narrative framing. This “silent fraud” is particularly dangerous because it is intellectual and incremental: it blurs benchmarks, anaesthetises con - trols and postpones stakeholder reaction. By exploit - ing information asymmetry, such practices mislead investors, employees, creditors and regulators while preserving the appearance of normality.
245 CHAMBERS.COM
Powered by FlippingBook