The announcement of a takeover bid triggers a period of high tension for the companies concerned, their directors and shareholders. At the heart of these strategic transactions lies a fundamental concept of stock market law: action in concert, which can exist even without a formal agreement. A misinterpretation of its mechanisms can have serious financial and legal consequences, including the obligation to launch a takeover bid of one's own. Acting in concert, i.e. coordinating with other shareholders to take joint action, transforms individual shareholdings into a collective force that the regulator monitors closely. To get the full picture of acting in concert, it is essential to understand its definition and how it interacts with the highly regulated framework of a takeover bid.
This article details the obligations and strategies that apply to concert performers when a company is the subject of an offer, a time when every action and every statement counts.
Concerted action criteria: agreement and common policy
Before analysing its effects during a takeover bid, it is important to understand what constitutes concerted action within the meaning of the law. Article L. 233-10 of the French Commercial Code sets out the definition. Case law and the doctrine of the Autorité des marchés financiers (AMF) have clarified its scope. The existence of a concert is based on two elements: an agreement between several people and a shared objective.
The agreement: the formal or informal basis for the concert
The first element is the existence of an "agreement". French law takes a broad view here. This agreement need not be a formal written contract. It can be tacit and inferred from the behaviour of the persons concerned. A body of serious, precise and concordant evidence may be sufficient to prove its existence. What matters is not the form of the agreement, but its reality. The key question is whether shareholders, investors or even a settlor and his trustee are deliberately coordinating their actions.
The objective: a common policy towards society
The second criterion is the purpose of the agreement. The persons concerned must have entered into an agreement to acquire, transfer or exercise voting rights in order to pursue a specific objective. The law identifies two such purposes: to implement a common policy towards the company, or to obtain control of it. This notion of a "common policy towards" the company is at the heart of the definition. It is not simply a one-off alliance, but a genuine concerted action with regard to the company. The aim may be to influence the company's management, dividend policy, social policy, commercial strategy or, more directly, to take power at general meetings.
The obligation to file a takeover bid: the consequence of crossing a threshold
The most spectacular consequence of concerted action is that it can trigger the obligation to file a takeover bid. This mechanism is designed to protect minority shareholders by offering them an exit route at a fair price when a change of control, including joint control, of the target company takes shape. The obligation is linked to the crossing of shareholding thresholds, calculated collectively for each member of a concert party.
Control threshold (30 % on Euronext, 50 % on Euronext Growth)
French law sets thresholds, the crossing of which constitutes a takeover. Any person, acting alone or in concert, who exceeds this critical threshold is required to file a takeover bid for all the shares in the target company. Article L. 433-3 of the Monetary and Financial Code sets this threshold at 30 % of capital or voting rights for a company listed on the Euronext regulated market. For companies listed on a multilateral trading facility such as Euronext Growth, the threshold is 50 % of capital or voting rights.
The assimilation of shareholdings for the calculation of the excess
The great strength of concerted action is that the regulator does not consider each member in isolation. Instead, it adds up their respective shareholdings to check whether, collectively, the control threshold has been crossed. This principle of assimilation, laid down in the French Commercial Code, is the cornerstone of the system. It prevents shareholders from circumventing the takeover bid requirement by secret association or coordination. In practical terms, if three partners or shareholders holding respectively 15 %, 10 % and 6 % of a company's capital on Euronext act in concert, they are deemed to hold together 31 %. Having collectively exceeded the 30 % threshold, they are in principle jointly and severally obliged to launch a takeover bid.
Exemptions granted by the AMF
The obligation to file a takeover bid is not automatic. The Autorité des marchés financiers (AMF) may grant a waiver where the crossing of a threshold does not constitute a genuine acquisition of control. Common cases include :
- No change of control : if a group of concert performers that already controlled the company sees its shareholding increase, the balance of power remains unchanged.
- Reclassification of investments : in the context of internal reorganisations within a group or family (via a holding company, for example), if ultimate control does not change hands. We saw this in the famous Hermès case.
- Passive or temporary crossing : if the threshold is exceeded as a result of an external event (e.g. a capital reduction) and the shareholder undertakes to sell shares in order to fall back below the threshold.
These exemptions are examined on a case-by-case basis by the AMF, which ensures that the transaction does not adversely affect minority shareholders.
Concerted action during a takeover bid: a specific regime
The Act of 31 March 2006 transposing the Takeover Directive introduced a definition of concerted action specific to the offer period. Article L. 233-10-1 of the French Commercial Code distinguishes between two types of concerted action formed in response to a takeover bid that has already been launched. The purpose of this distinction is to clarify the alliances that are formed in this context of great financial and strategic tension, an issue at the heart of the proposed 13th Takeover Directive.
The "offensive" concert around the initiator
There is a legal presumption that persons who have entered into an agreement with the initiator of a takeover bid are acting in concert. The objective is clear: to help the bidder gain control of the target company. This agreement may take the form of undertakings to contribute shares to the bid. The members of this "offensive" concert are then jointly and severally bound to the offeror and subject to the same obligations in terms of transparency and market behaviour. A perfect understanding of the constituent elements of the concert is essential.
Defensive" concert around the target company
Conversely, the law also targets people who have entered into an agreement with the target company to frustrate the bid. This "defensive" concert may bring together historical shareholders, allied investors ("white knights") or other partners who are organised around a common objective: to preserve the company's independence. Their coordinated actions (refusal to contribute shares, concerted acquisition of a stake in the company to block the bidder) bring them within the scope of this legal definition and the obligations that flow from it.
Obligations and strategies of concert performers during the offer
During the offer period, the members of a concert, whether offensive or defensive, are subject to strict obligations. Solidarity is the principle: as each member is bound by collective obligations, a fault on the part of one member may incur the liability of all. Compliance with these rules is fundamental, as any manoeuvre designed to distort the smooth running of the bid is severely punished. The advice of our expert lawyers in stock exchange law is often decisive in navigating this period.
Greater transparency: daily declarations
To ensure full market transparency, a principle strengthened by the Transparency Directive of December 2013, the AMF General Regulation requires "relevant persons" (the offeror, the target, their shareholders holding more than 5 %, and all persons acting in concert with them) to report all transactions in the target company's shares to the authority on a daily basis. This declaration, which is made public, enables all investors to monitor changes in the balance of power and make informed decisions. Failure to inform the market correctly can have serious consequences.
The principle of loyalty: prohibitions on intervention
Concert performers do not have a free hand. The AMF General Regulation imposes specific abstention obligations on them:
- Intervention price : The offeror and its concert parties may not acquire securities of the target at a price higher than the offer price.
- Sale of shares : They may not sell the target's shares during the offer period.
- Public communication : All public statements, the text of which must be sent to the AMF beforehand, are strictly regulated to prevent the dissemination of misleading information and to guarantee equal treatment for all shareholders.
These rules are designed to guarantee the integrity of the offer process and prevent any agreement that would distort the normal operation of the financial market.
The rights of the parties during a takeover bid
While the offer period imposes constraints, it also opens up specific rights, both for the company seeking to defend itself and for the offeror seeking to make a success of its operation. Concerted action can play a key role in exercising these rights.
The target's right to implement defensive measures
Since the so-called "Florange" law of 2014, the board of the target company has been free to take any action to frustrate the bid, provided that it respects the company's corporate interests. The board may thus seek a counter-offer ("white knight") or implement other defensive measures. This freedom is exercised by the Board of Directors and not by the executive alone. A defensive concert can then support these decisions with a united vote at the general meeting, if such approval is necessary to implement the strategy.
The initiator's right to neutralise statutory clauses
To facilitate the effective takeover after a successful takeover bid, the law allows the bidder (acting alone or in concert) to temporarily neutralise certain clauses in the articles of association. Article L. 233-38 of the Commercial Code provides that, at the first general meeting following the bid, the effect of clauses limiting voting rights or introducing double voting rights is suspended. This right enables a person who has just acquired a majority shareholding to fully exercise the control he has paid for, without being paralysed by pre-existing provisions in the articles of association.
The complexity of the rules governing concerted action during a takeover bid, illustrated by dense case law such as the Sacyr case, requires a detailed analysis. As the Commercial Division of the Cour de Cassation has repeatedly pointed out, each decision, declaration or failure to declare can have major repercussions on the outcome of the transaction and the liability of the parties involved. To secure your position and define a strategy tailored to your situation, this last point of view is essential: contact our law firm.
Sources
- French Commercial Code, in particular articles L. 233-9, L. 233-10, L. 233-10-1, L. 233-32 et seq.
- Monetary and Financial Code, in particular article L. 433-3.
- General regulations of the Autorité des marchés financiers (AMF), in particular the provisions relating to public offers (Book II, Title III).
- Law no. 2006-387 of 31 March 2006 on takeover bids.
- Law no. 2014-384 of 29 March 2014 aimed at reclaiming the real economy (known as the "Florange Law").
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