Concerted action is a key concept in stock market and company law. Often perceived as complex, it refers to the situation where several people, usually shareholders, coordinate to implement a common strategy with regard to a company. Understanding the origins and development of this concept is not just an academic exercise. It is essential for any manager or investor wishing to navigate the intricacies of shareholdings, public offers and transparency obligations. Far from being set in stone, the concept has followed a sinuous path, oscillating between stock market pragmatism and legal construction, before finally becoming more widely integrated into our company law.
The international roots of concerted action
Although firmly anchored in French law, the notion of acting in concert has its origins beyond our borders. It is the fruit of a dual influence, North American and European, which responded to a common need: to understand the reality of power in societies beyond the simple arithmetic of shareholding.
The influence of North American law and the Williams Act
The idea is often attributed to American law. The Williams Act The 1968 Takeover Act, the founding legislation on takeover bids, laid the foundations for regulations designed to inform and protect investors. American case law soon had to deal with situations where several investors, without individually holding a significant share of the capital, acted in a coordinated manner to take control of a target.
To thwart these strategies, the American judges came up with a flexible concept, that of the "agreement of the parties to act jointly". This qualitative approach made it possible to aggregate the shareholdings of several players in order to determine whether they crossed the mandatory reporting thresholds, thereby thwarting manoeuvres that would otherwise have slipped under the regulator's radar.
European Directive 88/627/EEC on the crossing of thresholds
The decisive impetus for French law came from Europe. Directive 88/627/EEC of 12 December 1988 on the disclosure of major holdings in listed companies marked a turning point. Its aim was to harmonise disclosure requirements for major holdings within the common market.
To this end, the Directive lays down a fundamental principle: in order to calculate whether a person is required to declare that a threshold has been crossed, the voting rights held by third parties with whom the person has entered into a written agreement must be assimilated to the person's own voting rights. This agreement must oblige the third party to adopt, through a concerted exercise, a lasting common policy with regard to the management of the company. The term was coined. Community law required us to look beyond the legal ownership of shares to identify the de facto alliances that structure power.
Empirical emergence in France before legal recognition
Even before the law took up the subject, French stock market practice had already identified the need for such a tool. The regulator at the time, the Commission des Opérations de Bourse (COB), was the first to use this concept empirically.
First applications by the Commission des Opérations de Bourse (COB)
As early as 1970, the COB used the term to describe the organised behaviour of a group of people in the context of a takeover bid. It sought to treat as a homogeneous whole players who, although legally distinct, were pursuing a common objective. This pragmatic approach aimed to re-establish the reality of the market behind the façade of apparently dispersed actions. In its successive annual reports, the COB has continued to refer to these "concerted actions", refining its analysis of group strategies.
Incorporation of stockbrokers' rules for takeover bids
The concept then gained in formality when it was incorporated into the legal framework for takeover bids by the rules of the Chambre Syndicale des Agents de Change in 1983. It became a technical tool for analysing takeover bids and the behaviour of the parties involved. However, at that stage, concerted action was still a concept used in stock market practice, identified and used by regulators, but not yet enshrined in law with a general scope.
The Law of 2 August 1989 and its objectives
The Act of 2 August 1989 on the security and transparency of the financial market is the true birth certificate of action in concert in French law. By transposing the 1988 Directive, the legislator not only adopted the concept, but also 'baptised' it and assigned it a dual mission.
Transposition of the directive and 'baptism' of the concept
The 1989 law transposed the European directive by formally introducing concerted action into the legislation. It did more than simply reiterate the Directive; it went further than the European text required. The French legislator saw the full potential of this tool for ensuring market integrity.
The dual objective: to improve information and prevent creeping takeovers
The legislator's motives were clear and pursued two distinct but complementary aims:
- Reinforcing information obligations : The existing rules on disclosure of major shareholdings were deemed insufficient. Listed companies complained that they did not know the real structure of their shareholding. By assimilating shares held by concert parties for the purposes of calculating thresholds, the law obliged groups of shareholders acting in concert to disclose their collective weight to the market.
- Combating "creeping" takeovers: The other objective was to prevent the gradual and discreet acquisition of shares on the stock market by several coordinated players, with the aim of obtaining control of a company without ever launching a takeover bid. By forcing the consolidation of shareholdings, concerted action made it possible to trigger the obligation to file a takeover bid as soon as the de facto control threshold was reached by the group.
As the then Minister for the Economy put it, the aim was to "restore the reality of concerted action behind the disguise of dispersed action".
Subsequent developments in legislation and case law
Since it was first established in 1989, the concept of acting in concert has continued to evolve. This has been driven by the stock market regulator, case law and the legislator itself, its precise legal definition has been refined, its scope has been clarified and its link with other company law concepts has been strengthened.
Clarifications from the stock market regulator
The stock market regulator (the COB, then the CMF and finally the AMF) has played a key role in developing the concept. In particular, it has used it as a central criterion in takeover bids (takeover bids). Crossing a threshold deemed to confer control of a listed company triggers such an obligation, and this threshold is calculated by taking into account the shareholdings of all concert parties. The regulator has therefore had to develop a detailed analysis of agreements and behaviour in order to detect the existence of a concert.
Amendments to the text of Article L. 233-10 of the French Commercial Code
The legislative text itself, now codified in article L. 233-10 of the French Commercial Code, has undergone several changes. These adjustments, sometimes seemingly minor such as moving a comma or deleting and then reintroducing an adjective, have had substantial repercussions.
For example, the initial text could have given the impression that the purpose of "implementing a common policy" applied only to agreements relating to the exercise of voting rights, and not to those relating to the acquisition of securities. After a period of hesitation and a clumsy correction in 2001, the legislator once again intervened to clarify that this purpose did indeed apply to both types of agreement. These successive changes show how difficult it is to capture a complex economic and strategic reality in a single text. Above all, they have enshrined the most logical interpretation, the one adopted by practice and case law: a concert exists whenever an agreement, whatever it may be, forms part of a common strategy with regard to the company.
The introduction of the "acquisition of control" objective
Finally, the Banking and Financial Regulation Act of 22 October 2010 provided an important clarification. Alongside the objective of "implementing a common policy", it explicitly added the objective of "obtaining control of the company". This addition is not a revolution, but a clarification. It enshrines the fact that the conquest of power is one of the most obvious illustrations, and often the ultimate objective, of concerted action.
This change also paved the way for its development under ordinary lawThe concept of concerted action is not confined to the stock market. The history of action in concert is that of a concept born of practice, imported into law, then shaped by the needs of regulation to become a legal tool of undeniable relevance. The complexity of its practical application often makes the advice of a financial lawyer essential for the shareholders and executives concerned.
If you have any questions about a possible concerted action situation or its implications in terms of reporting obligations and takeover bids, our firm is at your disposal to analyse your situation and define an appropriate strategy.
Sources
- French Commercial Code, in particular Articles L. 233-3, L. 233-7 and L. 233-10
- Law no. 89-531 of 2 August 1989 on the security and transparency of the financial market
- Council Directive 88/627/EEC of 12 December 1988 on the information to be published when a major holding in a listed company is acquired or disposed of
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