FRANCE Law and Practice Contributed by: David-James Sebag, Donald Davy and Marie-Sophie Chevreteau, Gide Loyrette Nouel
tribution différentielle sur les hauts revenus” or CDHR) which should only apply to income received/gains realised in 2025, and aims to pro - vide a minimum level of taxation of 20% on high income. In all cases: • a surtax on high income (3% to 4%) may apply to beneficiaries; and • the different regimes described herein are based on the French rules currently in force (it is important to be aware that tax laws change frequently, and occasionally on a retroactive basis) and offer certain options which may be applicable for beneficiaries depending on their specific situation, on a case-by-case assessment. 5.4 Implementation The percentage of pre- or post-closing ESOP is negotiated as part of the discussion on the valuation of the company. On the closing date of the financing round, the shareholders grant the management of the com - pany the power to issue and grant the securities. The allocation is very often subject to the prior approval of the board at the qualified majority (ie, including the prior approval of one or two of the members appointed by the investors). This delegation of power is limited to 18 months. The allocations are made after closing on one or several occasions.
cally governed by provisions in the shareholders’ agreement. • Transfer restriction before liquidity: the transfer of shares is subject to lockup (for the founders exclusively), full tag-along rights (in case of change of control, disinvestment by the founders and sale to a non-financial investor) and, in certain matters, proportional tag along rights (on transfer by the founders). • Drag-along rights provide that, if a sharehold - er receives an offer by a third party over at least 95% of the share capital, and if the offer is accepted by a certain majority of the share capital, all the shareholders are committed to transferring their shares. In the negotia - tion of the majority to trigger the drag-along rights, parties usually try to avoid individual veto rights (except in case of an offer before a certain period or below a certain multiple threshold). • Liquidity provisions generally provide that the parties aim to find a liquidity solution (in the form of a sale or IPO) within a negotiated time frame. After a four- or five-year period, inves - tors negotiate the right to appoint investment bank(s) to identify liquidity options for the company. The drag-along majorities may be amended after the liquidity period to allow the investors to force a sale of the company. In the case of pre-IPO, the shareholders’ agree - ment may detail registration rights, lock-up provisions and undertakings to subscribe to the IPO as cornerstone investors. The decline in the number of exits has led to new requests from the investors in terms of liquidity provisions: (i) free transfer of their shareholding as from the end of the liquidity period; and (ii) free transfer to secondary funds ( fonds de position secondaire ), applying as from the fundraising (vs only in the event of liquidation of the fund).
6. Exits 6.1 Investor Exit Rights
In France, shareholder exit rights in the context of a sale, IPO, or other liquidity event are typi -
202 CHAMBERS.COM
Powered by FlippingBook