Late last year France introduced a new law that seeks to encourage the acquisition of businesses by their own employees. Under the new rules, before a small and medium sized enterprise can be sold to a third party, it must provide certain information to staff.
The new rules apply to companies with up to 249 employees.
Notice and information
Staff must be provided with “information to enable them to make an offer”, which includes a statement that (i) the seller wishes to sell the business; and (ii) the employees may make an offer to buy it. The information can be provided to the employees by any means, provided the enterprise can prove that they received the communication (for example, read receipts for emails, or signed delivery for letters etc.). The employees must keep the information confidential, although it is not clear what the consequences of breaching this requirement would be.
Employees must receive the information at least two months before the closing of the proposed transaction. For companies with fewer than 50 employees, if all employees confirm that they are not interested in making an offer before the two month period expires, the seller can continue with its existing plans to sell. For larger companies more time may be needed as works councils will be involved.
Not a pre-emption right
The obligation to provide information does not amount to a pre-emptive right of the employees. The enterprise is currently free to accept or refuse any staff offer. The ability to exercise free discretion may, however, become more restricted as time goes on.
Non-compliance with this rule can result in the cancellation of any proposed sale to a third party, so it is crucial to comply.
Acquisitions and disposals
This rule could affect both sellers and buyers of French enterprises. International businesses acquiring or disposing of French subsidiaries need to factor it in to their programmes and timelines.