Concerted action in French law: understanding its mechanisms and implications

Concerted action is a central concept in business law, often perceived as technical and reserved for large-scale financial transactions. However, it is a mechanism whose purpose and implications go far beyond the stock markets and touch the very heart of company law. Concerted action occurs when several individuals or legal entities coordinate their actions to implement a common strategy with regard to a company. Understanding this mechanism is essential for any manager or shareholder, as such a qualification carries significant legal and financial consequences, particularly in terms of transparency, security on the financial market and the acquisition of control. The difficulty often lies in identifying such behaviour, which is not always formalised in a written contract.

The aim of this article is to demystify concerted action, from its legal foundations to its practical effects. We will look at how the law understands this concept, what obligations arise from it and how its scope has gradually been extended.

Definition and basis of action in concert

In order to understand the concept of action in concert, we need to refer to its legal definitionIt is the combination of the texts and their practical application, enriched by current case law, that makes it possible to understand the situations in question. It is the combination of the texts and their practical application, enriched by current cases, that makes it possible to understand the situations in question.

Legal criteria under the French Commercial Code

The cornerstone of the legal definition of action in concert is Article L. 233-10 of the French Commercial Code. This apparently simple text is in fact extremely rich. It states that persons are deemed to be acting in concert if they have entered into an agreement to achieve a specific objective. This work of interpretation is the key. Two elements must therefore be present:

• An objective element: the agreement. The law aims to "an agreement entered into with a view to acquiring, disposing of or exercising voting rights".. It is important to note that French law does not require a formal written contract. The agreement can be tacit and deduced from a set of coordinated behaviours. This flexibility makes it possible to capture informal agreements that would otherwise escape regulation.
• A subjective element: purpose. The agreement must have a strategic purpose, which may be twofold. The parties must intend either to "implement a common policy towards society".or"obtain control of this company. A simple coincidence of votes at a general meeting is not enough; there has to be a shared intention and a concerted strategy.

It is the combination of these two elements, an agreement and a common purpose, that characterises acting in concert. The question of proof of this agreement, especially when it is tacit, is often at the heart of debates.

A concept shaped by case law

Faced with the difficulty of proving a non-formalised agreement, a long body of case law, consolidated by the law of 11 December 2001, has played a decisive role. The courts, and in particular the Cour de cassation, have accepted that the existence of concerted action can be established by a body of serious, precise and concordant evidence. The Sacyr/Eiffage case is emblematic in this respect. The judges recognised concerted action on the basis of coordinated share acquisitions, pre-existing business relations between the shareholders and a common policy and strategy aimed at destabilising the management of the target company at a general meeting. This ruling confirmed that an "organised collective approach" is sufficient to prove agreement, even in the face of denials by the persons concerned.

Legal presumptions: when agreement is presumed

To further facilitate proof, Article L. 233-10 of the French Commercial Code provides that a series of situations where action in concert is presumed. In these cases, it is not necessary to prove agreement, as the law itself presupposes it and a concert is deemed to exist. These presumptions, which are not irrebuttable, mainly concern links of power and control within a group. The existence of a concert is thus presumed between :

• A company, its Chairman of the Board of Directors and its Managing Directors or members of the Management Board.
• A parent company and the subsidiaries it controls within the meaning of article L. 233-3 of the French Commercial Code.
• Sister" companies, i.e. companies controlled by the same person or persons.
• The shareholders of a simplified joint stock company (SAS) with regard to the companies it controls.
• The **trustee** and the beneficiary of a trust contract, where the beneficiary is also the settlor and the object of the assets transferred is the ownership of the company's shares.

These presumptions aim to capture the economic reality of the power behind legal structures. They are a powerful tool for the Autorité des marchés financiers (AMF) and for the companies themselves.

Major legal and financial consequences

Classification as acting in concert is not neutral. It triggers binding obligations and engages the responsibility of its members. This is where the assistance of a banking and finance lawyer often becomes necessary to navigate the complexity of the rules applicable to corporate finance.

The obligation to declare the crossing of thresholds

One of the most direct consequences is the aggregation of shareholdings. When calculating the thresholds for holding capital or voting rights (5 %, 10 %, 30 %, etc.), the shares of all the members of the concert are added together. As soon as the group crosses one of these thresholds, whether upwards or downwards, it must notify the AMF and the target company. The aim is market transparency: to inform investors and management of the existence of a block of shareholders acting in concert. Failure to comply with this reporting obligation carries severe penalties. The main penalty, under Article L. 233-14 of the French Commercial Code, is the loss of voting rights attached to shares exceeding the threshold that should have been declared. Administrative and criminal penalties may also be imposed, and the directors may be held liable, an issue that directly affects their civil liability insurance.

Triggering a mandatory takeover bid

The most spectacular implication of the concerted action is undoubtedly the launch of a takeover bid. Under Article L. 433-3 of the French Monetary and Financial Code, a group of persons acting in concert that comes to hold (or a single member holding on behalf of the group) more than 30 % of the capital or voting rights of a company listed on a regulated market is required to file a draft public offer for all the company's shares. This critical threshold is designed to protect minority shareholders by offering them an exit route at a fair price when a change of control occurs. Refusal to file such a bid is, once again, sanctioned by the loss of voting rights for the entire shareholding exceeding this threshold.

Joint and several liability of concert performers

Article L. 233-10 III of the French Commercial Code sets out a fundamental principle: "Persons acting in concert are jointly and severally liable for the obligations imposed on them by laws and regulations. This means that each member of the concert may be prosecuted for the entire breach committed by the group. For example, if a shareholding threshold declaration is omitted, the AMF may sanction any member of the concert for the full amount of the fine. Similarly, the obligation to file a takeover bid applies jointly and severally to each member of the group. This solidarity, which lies at the heart of the criminal and administrative system, is a formidable weapon that encourages concert members to be extremely vigilant in complying with their obligations.

Concerted action in the context of a takeover bid: a specific regime

The legislator, aware of the particular dynamics at work during a takeover bid, created a specific regime with Article L. 233-10-1 of the French Commercial Code. This law applies exclusively during takeover bids and simplifies the identification of concerted action by focusing on the purpose of the agreement.

The offensive and defensive concert

This text distinguishes between two types of action in concert, which are symmetrically opposed:

• The offensive concert: it includes those who have entered into an agreement with the bidder with a view to obtaining control of the target company. These are the attacker's allies.
• The defensive concert: it brings together those who have agreed with the target company to defeat the bid. They are the defenders of the target company.

This binary distinction makes it easier for the AMF to identify the camps involved and to ensure compliance with the rules specific to the offer period, which is by nature a period of high strategic policy.

Reinforced information and abstention obligations

During a takeover bid, the members of these two types of concert are subject to strict obligations. In particular, they must report all transactions in the target company's shares to the AMF on a daily basis. They are also bound by abstention obligations, such as a ban on the bidder's camp acquiring shares at a price higher than the offer price. These rules are designed to ensure equality between shareholders and fairness in stock market discussions.

Extending the concept beyond stock market law

Originally conceived for stock exchange law, the influence of action in concert has gradually been extended to general company law, whether listed or not. This development has been marked by its inclusion in the definition of control.

The link with the concept of joint control

The law has incorporated action in concert into the very definition of joint control. Article L. 233-3 of the French Commercial Code states that "two or more persons acting in concert shall be deemed to jointly control another where they in fact determine the decisions taken at a general meeting".. This recognition is fundamental, as it makes action in concert a tool for analysing power in any company, and not just in listed companies. From this point of view, it makes it possible to qualify a situation of shared control, even in the absence of majority capital ties for each party, as long as a common strategy is implemented.

A tool for managing conflicts of interest

This extension of ordinary law opens up interesting prospects, particularly for managing conflicts of interest. In a company, whether it is a family-owned SME or a commercial start-up with several investors (sometimes via a joint venture), alliances can form. The notion of acting in concert, once a group has been formed, could be used to analyse these dynamics. For example, could a voting ban imposed on a shareholder with a direct interest in a regulated agreement be extended to his concert parties, who in fact share the same economic interest? Although case law is still cautious, such an approach would allow the corporate interest to prevail over group strategies that seek to circumvent it. This is a relevant area of analysis for any manager or partner concerned about the good governance of their company.

The classification of a situation as a concerted action is a delicate exercise based on an in-depth factual and legal analysis. This analysis is crucial. Given the far-reaching consequences of such a classification, it is advisable to seek legal advice to assess the risks, secure your investment transactions and anticipate any disputes or arbitration proceedings. Our firm is at your disposal to help you deal with these complex issues.

Sources

• Commercial Code, in particular articles L. 233-3, L. 233-7, L. 233-9, L. 233-10, L. 233-10-1 and L. 233-14.
• Monetary and Financial Code, in particular article L. 433-3.
• Penal Code, on the liability of managers and the associated criminal risk.
• General regulations of the Autorité des marchés financiers (AMF).
• Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (Takeover Directive).
• Directive 2013/35/EU (known as the Transparency Directive), replacing Directive 88/627/EEC of 12 December 1988.
• Case law on shareholder associations and groups of companies.
• Doctrinal discussions on the proposed 13th directive and its current status.