French government amends corporate rules to help companies deal with COVID-19 crisis

Written on 30 Mar 2020

In the context of the covid-19 health crisis and the ensuing lockdown, on 25 March 2020 the French Government adopted two ordinances to adapt: (i) rules governing company shareholders’ and management bodies’ meetings; and (ii) the preparation and approval of financial statements and management forecast documents by giving extension periods.

The current covid-19 pandemic jeopardizes the ongoing preparation and audit of financial statements, as well as the organisation of companies’ AGMs, which were supposed to be held within six months of the end of the fiscal year (so, no later than 30 June 2020 for fiscal year ending on 31 December 2019).

Adjournment of these meetings might have a serious impact on the operation and continuity of companies’ business.

In this context, Emergency Law no. 2020-290 dated 23 March 2020 authorises the French Government to take by way of ordinance “any measure […]:

  • simplifying and adapting the rules under which the meeting of shareholders and management bodies of legal entities governed by private law and other entities may be held and deliberate, as well as corporate rules governing the meeting of shareholders“;
  • simplifying, specifying and adapting the rules on the drafting, adoption, audit, review, approval and publication of the financial statements and other documents which must be filed or published by legal entities governed by private law and other entities, including rules governing the deadlines as well as those adapting the conditions of allocation of profits and the payment of dividends”.

The French Government adopted two ordinances on 25 March 2020 relating to corporate law.

What are the interim measures?

  1. More flexible rules on the convening and organisation of shareholders’ meetings

Adaptation of rules on the notice of meeting and right to information

Pursuant to the first ordinance, shareholders’ meetings of listed companies can no longer be invalid for  a failure to send a notice of meeting by mail that is due to external circumstances: in particular, where the company was prevented from accessing its premises or preparing the necessary notices of meeting in the context of the covid-19 crisis.

The ordinance also  allows companies to answer a shareholder request for information by email.

Remote holding of shareholders’ meetings

The ordinance exceptionally allows companies, whatever their corporate form (including French sociétés anonymes (SA) and sociétés par actions simplifiées (SAS)) to hold remote shareholders’ meetings if the meeting is called in a location affected by an administrative lockdown measure on the date of notice of meeting or the date of meeting.

Facilitated use of alternative decision-making processes

In order to help shareholders participate in, and vote at, shareholders’ meetings held remotely, the ordinance eases, for all companies, the use of alternative decision-making processes such as conference call, videoconference or written consultation (the latter is however still not allowed in sociétés anonymes).  This is the case even if there is no clause or if there is a clause to the contrary in the company’s articles of association, and whatever the meeting agenda (including the approval of financial statements).

If applicable, the implemented technical means must ensure transmission of the attendees’ voice and satisfy technical features ensuring the continuous and simultaneous broadcasting of deliberations.

Shareholders’ meetings called before the entry into force of the ordinance

If the relevant management body of a non-listed company resolves to implement new measures by changing the venue or the decision-making process of a shareholders’ meeting after the notice of meeting has been sent out, shareholders must be informed by any means that ensures their effective information at least three business days before the meeting date, notwithstanding any outstanding formalities still to be carried out for calling the meeting in accordance with applicable law.

For listed companies, shareholders must be informed as soon as possible by way of a press release the full and effective release of which will be handled by the company, notwithstanding any outstanding formalities still to be carried out for calling the meeting in accordance with applicable law.

Any formalities already completed prior to such decision shall not be renewed, without the meeting being not lawfully called.

  1. More flexible rules on meetings of collegial management bodies

By way of derogation from the provisions of the French Commercial Code, the ordinance allows members of collegial management bodies to take certain actions remotely. The derogations apply even if there is no clause in the articles of association or in internal rules and whatever the purpose of the resolution. This applies in particular to boards of directors or supervisory board meetings of French sociétés anonymes called to vote, as applicable, on the approval or the review of financial statements.

The derogations allow members:

  • to attend meetings by conference call or videoconference ensuring their identification and effective participation; or
  • to pass resolutions by written consultation under conditions that ensure collegial decision.
  1. Amendment to the deadlines for approving financial statements and management forecast documents

Extension period for approving financial statements

The second ordinance dated 25 March 2020 relating to corporate law gives a three month extension period for companies to approve financial statements or to organise their AGM, without having to file any request for extension with the president of the relevant Commercial Court. Therefore, companies with a fiscal year ending on 31 December 2019 have until 30 September 2020 to approve their financial statements.

If the statutory auditor has already issued its report on the financial statements before 12 March 2020, the company cannot benefit from such measure.

Extension period for preparing management forecast documents

This ordinance also gives a two month extension period for management bodies to prepare management forecast documents, where required pursuant to article L. 232-2 of the French Commercial Code. Therefore, companies with a fiscal year ending on 31 December 2019 and required to prepare management forecast documents must prepare such documents by 30 June 2020 (instead of April 30, 2020).

Entry into force and term of the ordinances.

Ordinance amending rules governing shareholders’ and collegial management bodies’ meetings

The ordinance relating to company shareholders’ meetings and management bodies meetings has a retroactive effect and applies to all meetings held as from 12 March 2020 until 31 July 2020. The Conseil d’Etat can extend this period until 30 November 2020.

Ordinance amending rules relating to financial statements and management forecast documents

The ordinance relating to the preparation, review, audit and approval of financial statements applies as follows:

  • the extension period for approving financial statements applies to all companies with a fiscal year ending between 30 September 2020 and one month after the end of the state of health emergency, and
  • the extension period for preparing management forecast documents applies to all documents relating to financial statements or half-year ending between 30 November 2019 and one month after the end of the state of health emergency.