A Constitutional Review of the Draft 'Macron' Law Introducing Shareholder Eviction under French Law: The Revolution that Didn't Happen

Revue Banque 6 March 2015

11 Pages Posted: 7 May 2015 Last revised: 27 Sep 2017

See all articles by Sophie Vermeille

Sophie Vermeille

Droit & Croissance (Rules for Growth)

Jérémy Martinez

Droit & Croissance (Rules for Growth)

Frank-Adrien Papon

Independent

Date Written: March 6, 2015

Abstract

In a politically controversial attempt to modernize the French economy, French Minister of the Economy Emmanuel Macron passed a sweeping law earlier this year, reforming many areas of French business law, including bankruptcy law. For the first time under French law shareholder eviction will be available - under certain circumstances and without any breach of the shareholder’s duties - to remove them from decisions affecting the future of a distressed company. This law is a step in the right direction to force shareholders to absorb the company’s losses and allow new shareholders to invest fresh money. Unfortunately, the French government failed to use modern, world-class economic standards to govern a shareholder eviction under the new law. First, by retaining an antiquated trigger of liquidity crisis instead of actual insolvency, the law fails to consider the enterprise value of the company (the "going concern value") as the proper economic basis to recognize that shares have become worthless, an essential element to provide legitimacy for their eviction and avoid the risk of an unconstitutional violation of property rights. Second, by requiring that a judge justify the eviction by finding a "public necessity" to avoid a risk of "serious loss to the economy", the law offers a weak constitutional safeguard for property rights, a loosely defined public interest standard and little guidance for a judge to avoid arbitrary decisions and political interferences. This lack of economic and conceptual basis has unfortunately transformed a genuine attempt to reform French law into an inadequate and potentially unconstitutional new law.

Keywords: bankruptcy law, French law, cram down, eviction, constitutional right, property rights, going concern

Suggested Citation

Vermeille, Sophie and Martinez, Jérémy and Papon, Frank-Adrien, A Constitutional Review of the Draft 'Macron' Law Introducing Shareholder Eviction under French Law: The Revolution that Didn't Happen (March 6, 2015). Revue Banque 6 March 2015, Available at SSRN: https://ssrn.com/abstract=2603523 or http://dx.doi.org/10.2139/ssrn.2603523

Sophie Vermeille (Contact Author)

Droit & Croissance (Rules for Growth) ( email )

c/o Institut Louis Bachelier
29 place de la Bourse
Paris, 75002
France

Jérémy Martinez

Droit & Croissance (Rules for Growth) ( email )

Frank-Adrien Papon

Independent ( email )

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