French Monetary and Financial Code
In forceI. - This article applies to company mutual funds in which more than one third of the assets are made up of shares or securities issued by the company or by any company linked to it under the conditions set out in article L. 3344-1 of the French Labour Code.
II. - The fund rules specify the composition and procedures for appointing its supervisory board, which may be carried out either by election on the basis of the number of units held by each unitholder, or under the conditions provided for in the second paragraph of I of article L. 214-164. In the latter case, unless the purpose of the fund is to subscribe to a transaction provided for in articles L. 3332-18 to L. 3332-24 of the Labour Code and to merge into a pre-existing fund governed by this article, the employees representing the unitholders are elected from among all the employee unitholders on the basis of the number of units held by each unitholder and, for the exercise of the voting rights attached to the securities issued by the company, after discussion in the presence of the company representatives, the voting operations take place without the latter being present.
When the members of the Supervisory Board are exclusively representatives of unit-holders, elected on the basis of the number of units held and who are themselves employees of the company and unit-holders of the fund, the Board exercises the voting rights attached to the units or securities issued by the company or by any other company affiliated to it. It reports its votes, with reasons, to the unitholders.
Where the composition and appointment of the Supervisory Board is governed by the second paragraph of I of Article L. 214-164, the fund rules shall stipulate that the Supervisory Board shall exercise the voting rights attached to the units or securities issued by the undertaking or by any other company affiliated to it and that it shall report to the unitholders on the reasons for its votes. However, the regulations may provide that the voting rights attached to these units or securities are exercised individually by the unitholders and, in the case of fractional units, by the Supervisory Board. The Supervisory Board then provides the unitholders with the economic and financial information it holds on the company, covering the last three financial years.
In companies which have a works council, the Supervisory Board receives the information provided to the works council in accordance with articles L. 2323-10, L. 2323-12, L. 2323-13, L. 2323-15, L. 2323-17, L. 2323-28, L. 2323-60 and L. 2325-35 to L. 2325-42 of the Labour Code, as well as, where applicable, a copy of the report from the chartered accountant appointed in accordance with the same articles L. 2325-35 to L. 2325-42.
In companies which have not set up a works council, the Supervisory Board may be assisted by a chartered accountant under the conditions specified in articles L. 2325-35 to L. 2325-42 of the French Labour Code, or it may summon the company's statutory auditors to receive their explanations on the company's accounts. It may also invite the head of the company to explain any events that have had a significant influence on the valuation of the shares or securities.
The Supervisory Board decides on the contribution of shares or securities to offers of purchase or exchange. The fund rules specify the cases in which the Board must obtain the prior opinion of unitholders.
The Supervisory Board is responsible for examining the financial, administrative and accounting management of the fund. It may ask to meet with the management company, the custodian and the fund's auditor, who are obliged to comply with its request. It decides on mergers, demergers and liquidations. The fund rules specify the amendments to the rules that may not be decided without the approval of the Supervisory Board. Without prejudice to the powers of the management company referred to in article L. 214-24-35 of this Code and those of the liquidator referred to in article L. 214-24-45, the Supervisory Board may take legal action to defend or assert the rights or interests of unitholders.
The Supervisory Board adopts an annual report, the content of which is specified by the General Regulations of the Autorité des marchés financiers, which is made available to each unitholder. The Supervisory Board ensures that the company regularly distributes information to unitholders.
III. - Unitholders may opt to redeem fund units in cash.
The fund rules may provide for different classes of units.
In a company whose shares are admitted to trading on a regulated market, a fund in which a majority of the company's shares are held by employees or former employees must be managed by an independent intermediary.
The fund's supervisory board or a group of employees or former employees with rights to at least 1% of the fund's assets may apply to the courts for the management company to be disqualified on the grounds that it is not independent of the company whose shares are admitted to trading on a regulated market or of the company's directors. If the management company is disqualified as a result of legal action, the co-owners are entitled to damages.
Fractions of these rights resulting from fractional shares may be exercised by the management company, up to a maximum of 20% of the voting rights.
IV. - When the company is governed by law no. 47-1775 of 10 September 1947 on the status of cooperation, the company mutual fund may invest in the shares or securities issued by it, under conditions set by decree in the Conseil d'Etat and without prejudice to any specific provisions governing the subscription of such shares or securities by employees.
When the shares or securities issued by the company or by any company affiliated to it under the conditions set out in articles L. 3344-1 and L. 3344-2 of the Labour Code are not admitted to trading on a market mentioned in articles L. 421-1, L. 422-1 or L. 423-1 of this Code, the company mutual fund may be party to a shareholders' agreement in order to promote the transfer of the company, the stability of the shareholder base or the liquidity of the fund.
