FRANCE Law and Practice Contributed by: Karl Hepp de Sevelinges, Nicolas Martin, Cyril Deniaud and Benjamin Cohu, Jeantet
8. Duties of Directors 8.1 Principal Directors’ Duties
Ad hoc committees are in charge of making rec - ommendations on the appointment of the inde - pendent expert, monitoring the independent expert’s works, and preparing a draft reasoned opinion ( avis motivé ) of the board of directors on the proposed offer. Such ad hoc committees must comprise a majority of independent directors. 8.3 Business Judgement Rule In France, there is no formal equivalent to the US business judgement rule. However, French courts generally adopt a def - erential approach to decisions made by a com - pany’s board of directors in the context of a business combination, provided that directors have acted in good faith, on an informed basis, in accordance with their legal duties and in the corporate interest of the company. French law imposes fiduciary obligations on directors, including duties of loyalty, care and diligence. Courts do not typically review the merits of the business decision itself, but rather assess whether directors have respected their procedural and legal obligations. This approach is increasingly aligned with the spirit of the busi - ness judgement rule, recognising the discretion - ary nature of strategic decisions, particularly in M&A transactions. This principle was implicitly reaffirmed in recent case law and doctrinal commentary, which con - firm that courts refrain from substituting their judgement for that of the board, unless there is clear evidence of breach of duty or misuse of power. However, in cases of conflict of inter - est, failure to disclose key information, or abuse of majority power, courts may exercise stricter scrutiny.
In accordance with French law requirements, the legal representatives have a duty to act in the corporate interest ( intérêt social ) of the company. This involves taking into account the interests of the shareholders as well as of other stakeholders (eg, the employees, ESG considerations, etc). In case of non-compliance with this requirement, the legal representatives may engage (depend - ing on the nature of the fault) their civil and crimi - nal liability. In a public M&A context, the board of directors of the target company must issue a reasoned opinion ( avis motivé ) on the tender offer, provid - ing shareholders with an informed assessment of its terms, fairness and potential consequences. In the context of a business combination, the legal representative shall act as a prudent busi - nessperson would, ensuring that the envisaged transaction is carried out in the interest of the company from a legal, financial and strategic standpoint. 8.2 Special or Ad Hoc Committees Private M&A transactions do not imply the estab - lishment of special or ad hoc committees in the context of business combinations. The situation is different in the context of public M&A transactions. In case of a tender offer likely to cause conflicts of interest within the board of directors, jeopardise the equal treatment between the target company’s shareholders or involve a squeeze-out procedure, the board of directors of the target company has to establish an ad hoc committee.
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