Proving the existence of a action de concert is often a delicate exercise. By its very nature, an agreement between several shareholders to implement a common strategy is rarely formalised by an explicit contract. In order to thwart creeping takeovers or guarantee transparency on the financial markets, the legislator has therefore had to devise a tool for revealing such implicit agreements. This is the background to the legal presumptions of concerted action, codified in Article L. 233-10, II of the French Commercial Code. Far from being a mere technical detail, this mechanism is a cornerstone of stock market and company law, with potentially far-reaching consequences for those concerned.
The principle of presumptions of agreement under Article L. 233-10, II of the French Commercial Code
Rather than leaving market authorities or judges with the difficulty of having to prove a secret agreement, the law has chosen to reverse the burden of proof in certain well-defined situations. It establishes that, where there is a special relationship between several people, their agreement to act in concert is presumed. This pragmatic approach is intended to facilitate the establishment of a concert by relying on the existence of a community of interests that makes the agreement probable.
Justification and scope of presumptions
The primary objective of these presumptions is to simplify proof. In stock market law, where speed and transparency are essential, it would be impossible to wait for the discovery of a secret pact before applying the rules on crossing thresholds or takeover bids. Presumptions therefore make it possible to aggregate the shareholdings of several shareholders considered to be acting in concert in order to check whether their combined shareholdings exceed a declaratory threshold.
These provisions are not just tools of proof; they have a preventive effect. By knowing that their family, capital or governance links expose them to the risk of being described as concerted action, shareholders are encouraged to be more vigilant and to be more transparent in their actions. The law is based on the principle that in certain situations, the interests of the parties are so closely linked that a common policy is an almost natural consequence of their relationship. It is this community of interests that gives rise to the presumption of an underlying agreement.
Simple or incontrovertible nature? the question of proof to the contrary
The French Commercial Code describes these cases as "presumptions". In legal theory, this means that they can be rebutted by evidence to the contrary. These are "simple" presumptions (or juris tantum), not "irrefutable" (juris et de jure). In practice, a person subject to one of these presumptions has the right to demonstrate that, despite appearances and links with others, he or she is not acting in concert with them.
However, overturning such a presumption is a difficult exercise. It is not enough to declare independence or deny the existence of an agreement. The person concerned must provide concrete and objective evidence of a real and lasting divergence of interests, or demonstrate the total absence of a common strategy vis-à-vis the company. The market authorities, and in particular the Autorité des marchés financiers (AMF), are particularly vigilant on this point and rarely agree to overturn these presumptions, considering that the links covered by the law are by nature very strong.
Analysis of the five cases of legal presumption
Article L. 233-10, II of the French Commercial Code lists five situations in which an agreement in concert is presumed to exist.
Between a company and its directors
The first presumption concerns links between a company, its chairman of the board of directors, its managing directors, the members of its management board or its managers. The logic is obvious: directors are required to act in the interests of the company they represent. Their interests are therefore, in principle, aligned. If a company acquires shares in another company, it is presumed that its directors who personally hold shares in that same company share the same strategy.
However, this list is restrictive. It does not cover ordinary directors or members of the supervisory board, whose role is more focused on control than active management. Nevertheless, an executive covered by this presumption may try to rebut it, for example by demonstrating that his personal investments are managed completely independently and pursue a patrimonial rationale distinct from the industrial strategy of the company he manages.
Between a parent company and the companies it controls ("vertical" concert)
This is undoubtedly the strongest presumption and the most difficult to challenge. The law presumes concerted action between a company and the undertakings it controls, within the meaning of article L. 233-3 of the French Commercial Code (ownership of the majority of voting rights, or power to appoint the majority of the members of the management bodies). A parent company and its subsidiaries form a group whose policy is by definition unified.
To imagine a subsidiary acting against the strategy of its parent company is contrary to the very logic of capital control. The shareholdings held by the parent company and all its subsidiaries in a third party company are therefore systematically aggregated. This presumption lies at the heart of the concept of a group of companies, and it can only be challenged in exceptional circumstances.
Between sister companies controlled by the same person ("horizontal" concert)
As an extension of the group logic, the law also presumes the existence of a concert between companies that are controlled by the same person or persons. These "sister companies" are subject to the same strategic will, that of their common shareholder.
If a person, whether natural or legal, controls companies A and B, and these two companies hold shares in company C, it is logical to consider that they are acting in concert in relation to C. Their actions are coordinated by the entity that controls them both. This presumption makes it possible to treat a group of companies as a homogeneous block, reflecting the economic reality of power.
Between the shareholders of an SAS and the companies it controls
This more specific presumption has been added to take account of the special features of the simplified joint stock company (SAS). The great freedom offered by the articles of association of a simplified joint stock company (SAS) allows its shareholders to organise their relations and the governance of the company in a very detailed way, often by means of a shareholders' agreement incorporated into the articles of association. This structure is frequently used as a vehicle for holding equity interests and organising a common strategy.
The legislator therefore considered that the very nature of the SAS, which is based on a strong agreement between its partners (intuitu personae), justified the presumption that they were acting in concert in relation to the companies controlled by the SAS. The presumption thus extends concert to the shareholders of the holding company, and not to the holding company itself. This view is particularly relevant to theapplication under ordinary company law.
Between the trustee and the settlor-beneficiary of a trust
Introduced more recently with the recognition of trusts in French law, the latter presumption concerns the agreement between a trustee and the beneficiary of a trust contract, where that beneficiary is also the person who set up the trust (the settlor). A trust is a mechanism whereby assets or rights are transferred to a trustee, who manages them for a specific purpose for the benefit of one or more beneficiaries.
Where the settlor is also the beneficiary, the trustee acts in reality on the settlor's behalf, following the settlor's instructions. The law therefore presumes that they are acting in concert with regard to the securities placed in the trust estate. This rule prevents the trust from being used as a screen to conceal concerted action.
Effective implementation of presumptions
The mere existence of these five cases is not enough. In practice, situations can be complex, involving a combination of several links.
Combining presumptions: the star concert
Legal presumptions are not mutually exclusive. They can be combined to create what has been called a "star concert". In this configuration, a central person may be linked to several others by different presumptions, which are themselves linked to others, thus forming a complex web of presumed concert players.
Case law has already dealt with such cases. For example, the Court of Cassation upheld the definition of a concert in the case of Hubert IndustrieIn this case, the links between companies in the same group and their respective directors were combined to establish the existence of an overall concert. The analysis is not made in isolation for each link, but by considering all the relationships that unite the protagonists.
Limits and the possibility of reversing presumptions
As we have seen, it is theoretically possible to rebut a simple presumption. The person concerned must prove that he or she is pursuing a specific and distinct policy, by demonstrating an opposition of interests or a non-aligned personal strategy. For example, the AMF has already accepted, in very specific cases, that a presumption of concerted action by the partners of a simplified joint stock company could be rebutted in the light of declarations to the contrary and the absence of a change of control.
However, such cases remain rare. The burden of proof is heavy, and the authorities' analysis is demanding. A simple assertion of independence is insufficient; it must be supported by objective and verifiable facts.
Going beyond presumption: proving "action" beyond "agreement
The classification of an action in concert rests on two pillars: an agreement (the objective element) and a common policy (the subjective element). The legal presumptions relate only to the first pillar: the agreement. They do not completely dispense with the need to demonstrate the second.
From presumed agreement to a concerted material approach
Even when an agreement is presumed, the most important consequences of acting in concert, such as the obligation to launch a takeover bid, are only triggered if a real "action" is carried out. The presumption facilitates the first stage of the reasoning, but is not always sufficient on its own.
We need to move on from presumed agreement to demonstrating a concrete, coordinated approach. General definition of an action in concert requires the "implementation" of a common policy. It is by observing behaviour that it will be possible to confirm that the presumed agreement has been translated into action.
The use of bundled evidence in case law
When presumptions do not apply or when a concrete action needs to be confirmed, case law and the AMF use the "bundle of evidence" method. In the absence of direct evidence, they assemble a set of concordant elements from which the existence of a concert can be deduced.
- Simultaneous or coordinated share acquisitions.
- Pre-existing business, family or financial relationships between individuals.
- Using the same advice or the same funding.
- Systematically identical votes at general meetings.
- Public statements or changes in the target company's governance following the acquisitions.
The case Eiffage is emblematic of this method, where the judges deduced a concert from a series of stock pick-ups by Spanish investors, despite their denials. Each piece of evidence taken in isolation may have been insufficient, but their accumulation forged the judges' conviction. Visit consequences for takeover bids can then be drawn.
Navigating the presumptions of concerted action requires a detailed understanding of the legislation and a practical analysis of the relationships between the parties involved. An incorrect classification can have significant effects, ranging from a simple obligation to declare to the need to launch a public offer. To assess your situation and anticipate the risks, it is often advisable to request a tailored analysis. If you have any questions on this subject, our law firm can bring its expertise to bear on your strategic decisions.
Sources
- French Commercial Code, Article L. 233-10
- French Commercial Code, Article L. 233-3
- French Commercial Code, Article L. 233-9
- General regulations of the Autorité des marchés financiers (AMF)
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