Order n°2016-1635 dated 1 December 2016 required companies, other than those whose securities are admitted to trading on a regulated market, to declare their beneficial owners with the registry of the Commercial Court where their head office is located.
Decree n° 2018-284 dated 18 April 2018 was created to clarify the system for declaring beneficial owners. These clarifications came into effect on 21 April 2018.
The two following provisions of the decree should be highlighted:
1. The definition of the “supervisory power” exercised by the beneficial owner
Before 21 April 2018, article R. 561-1 of the French Monetary and Financial Code indicated that the beneficial owner of a company was the natural person:
– Either directly or indirectly holding more than 25% capital or voting rights in the company;
– Or exercising, via any other means, a supervisory power over managing, administrative or executive bodies of the company or over the general meeting of shareholders.
The new decree specifies the notion of “supervisory power” and amends article R. 561-1 of the French Monetary and Financial code to this end.
As of 21 April 2018, the supervisory power is now defined “within parts 3 and 4 of section I of article L. 233-3 of the French Commercial Code”.
The notion of “supervisory power” is thus clarified and a natural person shall be considered as fulfilling the review criterion in the two following cases:
– Either, he/she determines, via the voting rights in his/her possession, the decisions in the company’s general meeting (article L. 233-3, I, part 3);
– Or, he/she is a member or shareholder of the company and holds the power to appoint or to remove a majority of members of the administrative, executive or supervisory bodies of this company (article L. 233-3, I, part 4).
2. The default beneficiary owner
Before 21 April 2018, the texts did not indicate how to process a case where it is impossible to identify a natural person as a beneficial owner on the basis of criteria established in the first paragraph of article R. 561-1 of the French Monetary and Financial Code.
From 21 April 2018, the registry practice has been enshrined in the new decree. Article R. 561-1 now specifies that, when no natural person can be identified, the beneficial owner is the natural person or persons or, if the company is not registered in France their equivalent under foreign law, who legally represents the company, namely;
a) The manager or managers of partnerships, limited partnerships, limited liability companies, limited stock partnerships and civil societies;
b) The managing director of limited companies with a board of directors;
c) The sole managing director or the chairman of the board of limited companies with a board of directors and a supervisory board;
d) The President and, if needed, the managing director of simplified joint stock companies.
If the legal representatives mentioned in letter a) or letter d) are legal persons, the beneficial owner is the natural person or persons who legally represent these legal persons.
Even if the companies concerned by this obligation are presumed to have submitted their declaration by 1 April 2018 at the latest, the new aforementioned rules shall apply for the filing of any corrective statement required in the event of amendment to the initially declared beneficial owners resulting in a change to the shareholding or control of the company.
In order to promote the use of telework, Article L.1222-9 of the French Labour Law from the “Ordonnance Macron” n°2017-1387 dated September 22, 2017 and modified by the Bill of ratification on March 29, 2018 simplifies the means for implementing telework.
From now on, an employment contract no longer needs to be modified to allow an employee to “telework” (work remotely).
A telework situation can be implemented on the basis of one of the following 3 means:
– a charter drawn up by the employer,
– a collective labour agreement,
– a simple agreement with the employee (verbal, postal or email agreement, etc.).
Article L.1222-9 of the French Labour Law does indeed foresee that, in the absence of a charter or collective labour agreement implementing the telework situation, the employee and employer may officialise their agreement to use this type of work arrangement by any means whatsoever.
The third means of implementation, previously only possible in the event of “temporary” use of telework provided for in the initial Law, has been extended by the Bill of ratification to all types of use of telework, whether temporary or permanent.
Although a verbal agreement may suffice, a detailed, written one is nevertheless preferable, in particular for the sake of proof in case of a dispute.
Moreover, and when telework is organised on the basis of the collective agreement or charter, the Law requires that the conditions for switching to telework be specified, in particular in the event of an air pollution episode.
That specification made in the Bill of ratification actually echoes the Bill, proposed by the senators in January 2018, aimed at promoting telework in the event of an air pollution episode.
Lastly, whatever the means for implementing telework, the Law specifies that the rights of teleworkers remain identical to those of employees performing their work on the company premises.
In the terms of article 219, I-a quinquies of the French Tax Code (CGI), the quasi-exemption regime for long-term capital gains is applicable to shares held for at least two years, which:
– Have, in accounting terms, the nature of equity securities, whether they are entitled, or not, to the parent companies’ tax regime; and
– Are entitled to the regime of the parent companies and subsidiaries (CGI, article 145) without having, on the accounting level, the nature of equity securities subject to the shares being recorded in a special subdivision of a balance sheet and subject to representing at least 5% of the distributing company’s capital.
In accounting terms, equity securities are those whose lasting ownership is considered useful to the activities of the company, notably because they enable the company to exercise control or influence over the company issuing the shares.
In principle, the usefulness of lasting ownership of transferred shares can be characterized by the existence of a shareholders’ agreement.
In the case judged by the Council of State, it was considered, quite to the contrary, that such was plainly not the case as the agreement established that the shareholders were solely pursuing the objective of financial returns. In this instance, neither the intent to exercise influence over the issuing company nor the intent to ensure its control was therefore characterized by this agreement.
Moreover, regarding the condition of holding at least 5%, the Council of State specified that the percentage had to be assessed based on the date of the event having generated the tax, i.e. regarding capital gain on transfer, on the date of that transfer, and not in a continuous manner over a 2-year period.
A drawing or model is considered new if, on the date of filing the application for registration or on the date of the claimed priority, no identical model or design has been disclosed, i.e. made accessible to the public (ex: publication, use, exhibition at a trade show or by any other means).
Are you, or your employees, creating a product that has a new appearance or a specific feature? A shoe? A piece of furniture? A handbag? Apparel? A pattern? Do not disclose it before having filed a registered design application. If you shared, released, or presented your product to the public less than 12 months ago, you should apply for protection of the design and model as soon as possible and do so, before the 12-month time period expires. Failing that, your registered model and design risks being cancelled for lack of novelty.
As such, Crocs, Inc.’s rights on the community model of its clogs did not survive the application for declaration of invalidity filed against them. Their novelty was destroyed due to the disclosure of the product more than 12 months prior to filing the registered Community design application.
In its decision of March 14, 2018, the EGC considered that disclosure was constituted by: showing the clogs at issue at an international boat show in Fort Lauderdale, Florida; putting the clogs on sale in the United States (for which sales trends are substantial for the EU market) and featuring them on the internet (which, by nature, is accessible everywhere in the world).
By doing so, and therein is the importance of the court ruling, the EGC took into account the evidence of disclosure having occurred outside of the European Union in order to rule on the invalidity of a community model.
The company Crocs, Inc. could have avoided its model being invalidated if it had managed to prove that the invoked evidence did not constitute disclosure, i.e. that its model could not reasonably have been known, according to normal business practices in the industry concerned, in this case, shoe manufacturing and sales professionals operating within the European Union.
The EGC specified elements that might have convinced the Court not to retain disclosure of the community model: proof that the website was not – in practice – consulted, or very little, by users from the EU; proof that the boat show had not been attended by exhibitors or participants from the EU; proof that the distribution and sales network of the clogs to which the disputed model or design had been applied was not, in actual fact, operational and that no orders had been placed via that network.
This ruling strongly reminds the caution that creators and right holders must exercise before any disclosure of their product. The actual international means of communication inevitably leads to more easily take into account evidence having occurred outside of the European Union even when protection had been requested for the EU territory.
New measures to facilitate decision-making and the participation of shareholders in public limited companies (SA), companies limited by shares (SCA) and limited liability companies (SARL) introduced by French Decree n° 2018-146 dated February 28, 2018 as per ruling n° 2017-747 dated May 4, 2017.
1. Shareholders’ Meetings held exclusively via remote, virtual means.
The Articles of Association of public limited companies (SA) and companies limited by shares (SCA) may provide for general meetings held exclusively via videoconference or means of telecommunication enabling the identification of its shareholders.
Nevertheless one or several shareholders, holding at least 5% of the capital, have the right to request that a physical meeting be convened. The Articles of Association must specify if this right to oppose is to be exercised before or after the formalities of convening the meeting.
– Right to oppose exercisable prior to the convening of the general meeting:
– The company must notify its shareholders of the meeting date at least 35 days prior to the former by sending the text of the draft resolutions and a reminder of the conditions for exercising the right to oppose.
– The opposition must be addressed to the company at least 25 days prior to the meeting date.
– Right to oppose exercisable after the convening of the general meeting:
– The company sends to its shareholders the notice of meeting reminding them of the right to oppose and the conditions for exercising that right as well as the location where the meeting is to be held if opposition is made to holding it exclusively via remote, virtual means.
– The opposition must be addressed to the company within 7 days following the publication or sending of the notice of meeting.
– In the event of opposition, the company notifies its shareholders, at the latest 48 hours before the meeting, that it will not be held exclusively via remote, virtual means.
2. Inclusion of items or draft resolutions on the agenda for the company’s (SARL) general meeting made by shareholder(s) holding at least 5% of the capital.
Any and all companies (SARL) are required to send a notice to one or several shareholders holding at least 5% of the capital if so requested, informing them of the date scheduled for the assembly meeting.
When shareholders seek to include an item or draft resolution on the agenda, they must justify their request, accompanied by the draft text if need be, and address it to the company at least 25 days prior to the meeting date. If the request is in compliance with the legal terms, management must include it on the agenda.