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On October 9, 2018, the French National Assembly adopted at first reading, the draft PACTE law (Action Plan for Business Growth and Transformation).
Among the many measures in the draft law, some are aimed at reinforcing the development of a social and solidarity-based economy.
1- Simplifying conditions of access to “Social and Solidarity-based Enterprise” (ESUS) accreditation
Since July 1, 2015, companies can receive a “Social and Solidarity-based Enterprise” (ESUS) accreditation for a five-year period (or a two-year period for companies under 3 years old).
To be eligible for the ESUS accreditation, a company must meet the following criteria:
- – Pursue “social benefit” as its main objective (provide support to vulnerable people, contribute to combatting exclusion or inequality, take part in sustainable development, energy transition or international solidarity);
- – Prove that the burden generated by the company’s social benefit objective has a significant impact on its profit and loss account or its financial profitability;
- – Adhere to a compensation policy meeting two requirements: the average of the compensations paid, including bonuses, to the 5 highest-paid employees or managers must not exceed a yearly limit capped at 7 times the monthly minimum wage (SMIC) and the salary for the highest-paid employee must not exceed a yearly limit capped at 10 times the minimum wage (SMIC);
- – Equity securities issued by the company cannot be traded on financial markets.
For ESUS-eligible entities, the measure is aimed at facilitating access to equity capital funding, either through tax breaks (such as the IR-PME scheme), which individuals investing in such entities benefit from, or through the obligation made to funds fiscally encouraged to meet certain investment quotas in the entities concerned.
Article 29 of the draft PACTE law proposes to introduce the following improvements to the ESUS accreditation measure:
- – Facilitate access to accreditation, by clarifying the definition of “social benefit” in particular for activities related to ecological transition, cultural promotion and national solidarity;
- – Simplify the modalities for assessing the impact of social benefit activities on the business model of the companies applying for accreditation;
- – Eliminate the obligation to include the wage caps in the company statutes, and standardise the application of those caps to all eligible companies.
The possibility of setting up an online accreditation procedure is also being discussed.
2- Taking into account a company’s social and environmental aspects
Article 61 of the draft PACTE law proposes to modify Articles 1833 and 1835 of the Civil Code as follows:
- – Article 1833 with: “The company shall be managed in its social interest and taking the social and environmental aspects of its activity into consideration.”
- – Article 1835 with: “The articles of association may specify the purpose, consisting of the principles held by the company and in observance of which it intends to allocate resources for the conduct of its activity.”
The modifications are aimed at contributing to a much stronger integration of environmental law in the company governance, by highlighting the activity of companies with a genuine commitment to sustainable development.
Nevertheless, the question arises as to what extent a lack of knowledge of these obligations will create a risk of incurring liability for the company directors concerned.
The draft PACTE law will be examined by a Senate committee as from January 2019. We will keep you informed of the conditions for the effective implementation of the new measures.
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Decision by the Social Chamber of the Court of Cassation dated June 21, 2018
(Cass. Civ 2e. 21 juin 2018, n°17-15.984)As per a June 21, 2018 decision, the Court of Cassation answered the following question: Is a skiing accident during a company seminar considered a work-related accident?
Company seminars bringing together employees often give rise to various activities, in particular sports.
In this instance, an employee was attending a seminar in the mountains. A day of free time for relaxation was planned, during which the employees could do whatever activities they wanted to. This particular employee chose to go skiing and consequently bought a ski pass for the ski lifts since the employer did not cover the costs for any of the activities. As the employee was skiing down a slope, she was the victim of an accident. She considered that it was a work-related accident since it had occurred during the seminar, however the health care insurance fund (Caisse Primaire d’Assurance Maladie – CPAM) disputed that claim.
Yet, The Court of Cassation confirmed the Court of Appeal decision, ruling that employees participating in that day remained subject to the employer’s authority as the latter was announced in the seminar schedule, paid as working time and could therefore not be considered as a day off. As such, the skiing accident, which occurred within the free time designated for relaxation, must be considered as a work-related accident.
This legal precedent settles various Courts of Appeal hesitations regarding similar cases of accidents during company seminars. Indeed, certain Courts of Appeal have indeed judged that an accident in such circumstances fell within the employee’s private life.
Thus, with this ruling, the Court of Cassation has indicated that during a company seminar, by nature paid, employees which are paid remain subject to their employer’s authority even though they may have free time for relaxation, unrelated to their professional activity. Any accident that might occur during the seminar is considered a work-related accident.
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On October 9, 2018, the French National Assembly adopted, at first reading, the PACTE bill (Action Plan for Business Growth and Transformation).
Among the many measures in the bill, whose objective is to lower the obligations that weigh on companies, Article 55 is aimed at reinforcing the framework of foreign investments in France.
The current regime
Foreign investments in France are free as a matter of principle (Article L.151-1 of the Monetary and Financial Code). Nevertheless, investments in certain sectors, considered strategic, are subject to prior authorisation from the Minister of Economy (Article L.151-3 of the Monetary and Financial Code).
The authorisation procedure, established in 2005 and strengthened in 2014, currently concerns investments that foreigners wish to make in France and which might infringe upon public order, public security or the interests of national defence.
Initially, the list of sectors was narrow: gambling, private security, counterterrorism, equipment designed for wiretapping, IT security, companies entrusted with national defence secrets, weapons trade, companies dealing with the Defence Ministry.
However, in 2014, the list of sectors concerned was extended to also target energy and water supply, transportation and electronic communications networks, vital infrastructures and facilities as defined by the Defence Code, as well as the public health sector.
In the abovementioned sectors, a foreign investor must make a request to the Minister of Economy for an authorisation to invest. Once the audit has been made, the Minister can: (i) authorise the investment, (ii) deny the investment, if the investor is likely to commit a series of offences or if the investment risks infringing on national interests, or (iii) authorise the investment subject to certain conditions aimed at ensuring that the planned investment does not infringe on national interests.
In the event that the investor does not comply with the Minister’s decision, the latter may request the investor “not to follow through with the operation, to modify it or to re-establish the former situation at the investor’s expense“.
If that demand is not complied with, financial sanctions may be imposed, the amount of which may go up to “twice the amount of the irregular investment“.
The PACTE bill
The two main changes foreseen by the PACTE bill are as follows:
- 1. Extension of the business sectors concerned so as to better protect promising sectors. The list of activities would thus be extended to semi-conductors, the space industry, drones, and if related to national security, artificial intelligence, cybersecurity, robotics and mass data storage.
- 2. Stronger sanctions. The Minister will have a wider, more calibrated range of sanctions since he will be able, in the event of non-compliance with his decision and the conditions imposed on the investment, to define additional conditions not provided in the initial agreement or even order the investor to honour his commitments, subject to penalties. The Minister will also be able to take protective measures such as the suspension of voting rights or the investor’s right to receive dividends, or he can appoint an agent commissioned to ensure the protection of national interests within the company.
The regime of financial sanctions will also be modified. The fine determined by the Minister will not be able to exceed the highest of the following amounts: twice the amount of the irregular investment, 10% of the target company’s yearly turnover, €1 million for individuals and €5 million for legal entities.
The PACTE bill will be examined by a Senate committee as from January 2019. We will keep you informed of the conditions for the effective implementation of the new measures having a direct impact on foreign take-over operations of a French company.
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Aude Le Tannou specializes in Corporate law. Admitted to the Paris Bar since 2005, she holds two post-graduate degrees in Business Law (University of Paris II – Panthéon Assas) and in International Trade (University of Paris I – Panthéon Sorbonne), as well as an MBA from Sciences Po Paris.
After beginning her carreer at PDGB and Reinhart Marville Torre, in January 2014 she joined Schmidt Brunet Litzler (part of SBKG at the time) as an associate to work alongside Philippe Schmidt in the Corporate law department. She has assisted many entrepreneurs in the structuring, growth and optimization of their businesses, and also in defending their interests in disputes. She has advised French and international companies, managers and investment funds, in raising funds, private equity (growth capital and LBOs), mergers and acquisitions, and alliances (partial asset contributions, joint ventures, business transfers).
“We commend the remarkable work Aude has achieved over the last five years at the firm, and we are pleased to continue this journey with her as a partner, because she shares our standards of excellence and client satisfaction”, says Philippe Schmidt.
“I am pleased to continue contributing to the development of Schmidt Brunet Litzler along with the partners and dynamic teams with whom I share the same values, level of client service and involvement at the international level, and identify with their professional and personal commitment”, adds Aude Le Tannou.
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Decision by the Social Chamber of the French Supreme Court dated September 12, 2018
(Cass. Soc. 12 September 2018, n° 16-11.690)As per a September 12, 2018 decision, the French Supreme Court (called “Cour de cassation”) answered the following question: Can an employee who denigrates his/her employer in a limited and closed group on Facebook be dismissed for gross misconduct ?
In the case at hand, an employee created a closed group on Facebook entitled “Extermination des Directrices chieuses” (Extermination of Crappy Directors) in which the employee made insulting and threatening remarks about her immediate supervisor. Upon becoming aware of the remarks, the employer dismissed the employee for gross misconduct.
The Supreme Court confirmed the Court of Appeal decision, ruling that the dismissal was without good and sufficient cause, and therefore unjustified, as the remarks had been posted in a closed group to a limited number of people. In fact, the group had been set up by the employee and could only be accessed by people she had authorised, namely 14 people. As such, the Supreme Court ruled that it was a private conversation.
The Supreme Court clearly made a distinction between public remarks (open groups, large number of people) and private remarks (closed group, limited number of people) to justify a dismissal for gross misconduct.
This decision deserves credit for dispelling certain doubts that existed before, since this is the first time the Supreme Court has ruled on the legitimate character of a disciplinary dismissal for a cause such as this one. However, it gives rise to other questions.
Indeed, as the Supreme Court retained two cumulative conditions, both the closed group and the limited number of people, it is logical to wonder if the decision would have been the same if the closed group had been made up of a large number of members or if the group members had been the company’s employees.
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Bénédicte Litzler will attend to the 26th Conference of Avocats Conseils d’Entreprises, on the 27th and 28th of September in Antibes.
Member of the Social Law commission, she will be part of all Social Law Workshops.