Key Benefits:
Mr. President of the Republic,
TheArticle 10 of Act No. 2014-1 of 2 January 2014 With regard to the simplification and security of business life, the Government may take, by order, various measures to modernize the rules applicable to companies in which the State or its public institutions hold, either alone or jointly, directly or indirectly, a majority or minority participation.
These measures aim to equip the shareholder State with the tools that will enable it to bring its legal framework closer to that of shareholders of common law, especially in companies whose securities are admitted to negotiations on a regulated market that are subject to specific principles of corporate governance, while making it more efficient to manage its participations. They also aim, and above all, to simplify and modernize both the rules of governance and the rules relating to the operations on the capital of public participation companies, which are now too complex and sometimes unintelligible.
Title I defines the scope of the order.
Article 1 enumerates the scope of the order to commercial companies in which the State or national public institutions hold, alone or jointly, directly or indirectly, an interest in capital. Companies with state status do not enter this field and the governance rules in force remain applicable to them, in particular the Act No. 83-675 of 26 July 1983 on democratization of the public sector.
This section also recalls the application in principle to companies under this Order of Rules arising from Trade code. In particular, the special rules concerning the size of the councils and the duration of the mandates arising from the above-mentioned Act of 26 July 1983, whose rigidity could have adversely affected the primary role of the council, which is to be a decision-making body.
Section 2 specifies the definitions. With regard to the determination of the public character of a company, it is based on the current criterion of the uninterrupted chain of majority public participations and thus has no impact on the perimeter of the public sector.
The special provisions imposing a minimum threshold for capital detention of some of these companies by the State or its public institutions are also not affected by this order.
Title II is related to governance.
Chapter I deals with boards of administration and oversight.
Section 1 sets out in Article 3 the general framework for the composition of these councils by providing that they may be members of the State, members appointed by the competent body of the society, if any proposed by the State, and representatives of the employees.
Section 2 is related to the representative designated by the State.
Article 4 provides that the State shall designate a representative in all the companies in which it holds directly, alone or jointly with its public institutions, more than 50% of the capital. It is a simple faculty for the State in other companies with more than 10% of its capital. It may also be appointed as a member of the board by the competent bodies of the other companies where it holds an interest, which may permit it, if any, to be present in the subsidiaries of public sector companies deemed strategic. When the State's participations are held by holding companies, these participations are assimilated to the direct participation of the State in the application of these rules.
Article 5 provides that the representative of the State shall sit with the same rights and powers as the other members of the councils and that any remuneration that he receives due to the exercise of his mandate shall be paid to the budget of the State.
Section 3 deals with the members designated by the competent body of the corporation and aims, inter alia, to expand the pool of directors in order to benefit from the experience of people from both the public and private sectors.
Article 6 refers to those of the members designated by the competent body that have been proposed by the State and strengthens the role of the general meeting of shareholders. It provides that the shareholder State may make such a proposal in the societies in which it or its public institutions hold, directly or indirectly, an interest. In addition, in the companies in which it holds directly from 10% to 50% of the capital, one or more seats are reserved for it, within a number proportional to its participation.
The proposed members may or may not have the status of public officials of the State, whether they are heads of public, military, public servants or non-public officials, whether active or not. They are subject to the same rules as other directors, including the provisions of the articles L. 225-18-1 and L. 225-69-1 Commercial code.
The remuneration they receive for the exercise of their mandate exceeding a statutory limit is paid to the State budget. However, this remuneration is fully paid to the general budget of the State for members with the status of public officer.
Section 4 deals with the representatives of the employees and largely incorporates the provisions of the Public Sector Democratization Act.
Article 7 confirms the rule of one-third of employees' representatives in public sector boards.
Article 8 specifies the method of election and the status of employee representatives by referring to the law of democratization of the public sector.
Article 9 recalls that representatives of employees are not subject to the rules of Trade code with respect to parity in councils, a specific provision is provided by the law of democratization of the public sector, and reference to the statutes to determine the duration of their term in order to benefit from a harmonized rule between the various members of the councils.
Section 5 concerns the operation of the boards.
Section 10 provides that sections 11 to 13 are applicable unless expressly excluded by statutory provisions.
Article 11 allows, as in the Public Sector Democratization Act, to the councils of these companies to sit validly while some members were not designated and specifies that the irregularity of the designation of employee representatives does not result in the deliberations in council to which they could have participated.
Section 12 provides that the board of directors, the supervisory board or the deliberative body in place shall meet in an ordinary sitting on the convocation of the chair. It examines any issues on the agenda by the President or Council deciding by a simple majority. It also provides that the Board shall meet on the convocation of more than one third of its members or upon request of the Director General to the President on a specific agenda.
Section 13 adds the Board's ability to cooperate with one of its members in the event of a vacancy, death or resignation, as provided for by the Board Trade code.
Article 14 provides that the General Assembly may revoke, at any time, the members of the councils.
Section 6 deals with other provisions.
Section 15 provides that a government commissioner may be instituted with companies whose state is a member of the board of directors, supervisory bodies or the body in place. The section specifies the powers of the Commissioner of the Government, without prejudice to the specific provisions governing it. Through the legal creation of an ad hoc status, the Government intends to better distinguish the role of the shareholder State from its other functions, such as the client State or regulator.
Section 16 incorporates the existing provisions on the conditions under which staff representative institutions are consulted on the plan contracts of the Act of 29 July 1982 relating to the reform of the planning and business contracts of the Act of 15 May 2001 on new economic regulations.
Chapter II deals with the chairmanship and general management.
Article 17 opens the right to choose from public officials of the State the president in the event of a vacancy or in the societies of which the State holds all the capital. It also allows to designate the State as president or leader of companies that have the form of simplified shares societies, as permitted by the Trade code for legal persons.
Article 18 also opens the power to separate the functions of President and Director General from the anonymous board societies, of which more than half of the capital is held by the State and its public institutions, as in common law.
Article 19 specifies the rules for the appointment of directors of the companies, of which more than 50% of the capital is held directly by the State and takes into account the new faculty to separate the functions of president and director general and the case of commercial companies that do not have the form of anonymous society, including simplified share companies.
Article 20 takes over the provisions of the law of democratization of the public sector which provides that the leaders of the societies in which the State directly holds more than half of the capital are revoked by decree.
Article 21 fills a gap in the existing rules in terms of the internality of the heads of public enterprises by opening the faculty for the State to designate any person to ensure continuity of the management of the enterprise.
Title III of the order deals with the rules applicable to capital transactions.
It simplifies, clarifies and modernizes the rules applicable to state capital transactions that are currently contained in various texts whose articulation is often ill-advised: Act No. 86-793 of 2 July 1986 authorizing the Government to take various economic and social measures; Act No. 86-912 of 6 August 1986 on the modalities of privatization; Act No. 93-923 of 19 July 1993 Privatization.
Chapter I concerns the rules of authorization of operations. Section 1 deals with disposal operations and section 2 on acquisition transactions.
Article 22, I, provides that the transactions by which the State transfers to the private sector the ownership of the companies (i) owned directly by the private sector for more than half of the capital for more than five years and whose numbers or revenues, valued at the consolidated level of the groups, are greater than one thousand persons or 150 million euros and (ii) entered into the public sector.
Article 22 II provides that other privatization operations by the State are decided by decree, as well as disposal operations, when they have the effect of reducing the participation of the State to less than 66.67 per cent or 33.3 per cent. The introduction of this rule is intended to strengthen the disposal authorization rules for the crossing of strategic corporate control thresholds. The other disposal operations by the state are decided by the minister responsible for the economy.
The IV of Article 22 concerns the transfer operations to the private sector of companies "so-called second rank", i.e. the subsidiaries of public institutions of the State and companies themselves held by the State. The assignments decided by these companies are subject to the prior authorization of the Minister in charge of the economy when their numbers or sales, valued at the consolidated level of the groups, are respectively greater than one thousand people and 150 M€.
The V of Article 22 aims to provide a precise answer and legal framework to the question of the assignment of "essential" assets. It states that the disposal of an asset likely to be self-employed, representing more than 50% of the net accounting asset or the turnover or staffing of a corporation is assimilated to the disposal of that corporation. Similarly, participations held by all companies whose main purpose is to hold securities and whose entire capital belongs to the State are assimilated to direct participations. These measures aim to neutralize the effect of quasi-transparent companies.
Article 23 essentially incorporates the current exceptions to the rules of authorization, clarifying them.
Section 2 of Chapter I concerns the acquisition operations carried out by the State (excluding nationalizations) and creates a general framework that is only required by the current texts.
Section 24 provides that such transactions are decided by order when they result in the transfer of the majority of the capital of a corporation to the public sector and by the Minister in charge of the economy in the other cases.
Chapter II of Title III is related to heritage control, as is the set of valuation rules for the value of the companies concerned.
Section 1 is devoted to the Commission on Participation and Transfer (CPT).
Article 25 recalls the rules of composition of the commission. It provides for the rules of incompatibility relating to the functions of a member of the commission.
Article 26 refers to the jurisdiction of the commission. With respect to transactions carried out according to the financial market procedures, the Commission is seized when the transaction results in the transfer to the private sector of the majority of the capital of the companies as well as other transactions of transfer of direct shares representing at least 0.5% of the capital of the companies whose workforce exceeds one thousand persons or the consolidated turnover of €150 million. It is also seized of the transactions leading to the transfer to the private sector of the second-tier companies whose workforce exceeds one thousand people or the consolidated revenue of €150 million. With respect to out-of-market transactions, the commission is seized of all assignments to the private sector. The commission may finally be seized on an optional basis by the Minister responsible for the economy of any other assignment or acquisition transaction.
These measures aim to strengthen the control of significant transfer transactions, which do not exist today for the State's minority stakes or for those in the companies in which the State now holds less than 20% of the capital. They introduce, in the same spirit, the power of referral of the commission for the acquisition operations of the State.
Section 2 concerns evaluation procedures.
Section 27 specifies the office and prerogatives of the Commission on Participations and Transfers in each case of figure. With respect to transactions carried out outside the procedures of the financial markets, the Commission shall issue a notice in accordance with the terms and conditions of the procedure and the choice of the buyer(s) and finally on the terms and conditions of the assignment. The commission's evaluations and opinions are made public at the end of the operation.
Section 28 sets out a minimum framework for the assessment of transactions that have not been submitted to an assessment procedure by the Commission on Participations and Transfers.
Chapter III deals with the implementation of operations.
Article 29 provides that the price of operations decided or authorized by the State shall be fixed by order of the Minister in charge of the economy. It reiterates the principle that ownership of participation cannot be transferred to persons in the private sector for prices below their value. When the commission has been seized, the prices or wages fixed by the competent authority may not be less than the valuation.
Section 30 provides that the completion of assignments or acquisitions may take place from the date of the signature of the act that sets the terms and conditions of the transaction. Any transfer to the private sector carried out without the authorization provided for in section 22 is deemed null.
Section 31 provides that the statutes of any corporation whose transfer to the private sector or to the public sector has been decided shall be amended by an extraordinary general assembly held within six months of the transfer in order to, where appropriate, comply with the common law of the corporations or this order. If not, any statutory clause to the contrary is deemed unwritten.
Title IV of the order contains, in sections 32 to 42, various provisions, in particular the provisions of entry into force and transitional provisions. The provisions relating to capital transactions and sections 17 and 21 come into force immediately, whereas the provisions relating to governance come into force only on the date fixed by the competent body of each corporation and, in any event, before the date of the first ordinary general assembly that follows January 1, 2017. So companies will remain subject to the old governance texts until that date.
This is the subject of this order that we have the honour to submit to your approval.
Please accept, Mr. President, the assurance of our deep respect.
