FRANCE Law and Practice Contributed by: Idris Hebbat, Camille Perrin, Franck Vacher and Nicolas Menard-Durand, C-Level Partners
6.10 Other Protections in Acquisition Documentation
company is supported by the purchaser unless pro - vided otherwise in the sale and purchase agreement. Usually, the sale and purchase agreement provides a representations and warranties mechanism pursuant to which the seller can indemnify the purchaser if the target suffers a liability as a result of events prior to closing. There is usually a limitation on the amount of the liability of the seller, such as: • a cap (stated between 10% and 30% of the pur - chase price); • a threshold or a franchise; and • a de minimis. In private equity deals, more risks are taken by the purchaser since the representations and warranties are usually more limited (and sometimes there are almost none, except for the fundamental ones – eg, capacity, and titles to share). 6.9 Warranty and Indemnity Protection When selling off their stakes, private equity funds are generally reluctant to make representations and guar - antees other than warranties of title and capacity. In contrast, the representations and warranties given by the management team usually cover a broad range of topics. Such warranties may, for instance, include: • warranties regarding the target’s financial situation and financial statements; • warranties regarding the conduct of business; • operational warranties; and • warranties regarding compliance with all the appli - cable laws and regulations. As mentioned in 6.8 Allocation of Risk , representa - tions and warranties are usually limited by a cap, a franchise/threshold, and a de minimis. The liability of the seller can also be limited by the duration of the warranties, which is usually from 12 to 36 months. Finally, it is worth noting that full disclosure of the data room is typically allowed against the warranties in open bid.
The other protections included in acquisition docu - mentation mainly consist of an escrow agreement set between 25% and 50% of the cap. The purchaser also often asks the seller to find a guarantor who may have to commit personal funds. Also, in the biggest deals, the stakeholders may contract representation and warranty insurance. 6.11 Commonly Litigated Provisions In the French jurisdiction, the provisions that are most likely to lead to a dispute relating to private equity transactions are those that provide for com - pletion accounts and earn-out mechanisms. They are a breeding ground for litigation, despite their good drafting. Nevertheless, and despite the adjustment discussed above, the private equity market remains a pro-seller market and locked-box mechanisms are becoming more common. Similarly, warranties indemnification may give rise to litigation when implemented. Public-to-private deals are uncommon in France. 7.2 Material Shareholding Thresholds and Disclosure in Tender Offers In France, shareholders acting either alone or in con - cert with others are required to disclose their stakes in publicly traded companies when exceeding or fall - ing below one of the following thresholds (whether in capital or voting rights): 5%, 10%, 15%, 20%, 25%, 30%, 33.33%, 50%, 75%, 90% and 95%. The French Commercial Code also requires the share - holder, when crossing certain thresholds of share - holding (10%, 15%, 20% and 25% of the capital and voting rights) in a publicly listed company, to declare the objectives they plan to pursue during the next six months. 7. Takeovers 7.1 Public-to-Private If one of the aforesaid thresholds has been reached, the relevant investor must file a report with the French
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