French Monetary and Financial Code
In forceI. - For the assessment of the 50% quota set out in I of article L. 214-28 :
1° The numerator is made up of the subscription or acquisition price of the securities or rights in the portfolio and the book value of the other assets.
The denominator is made up of the paid-up amount of subscriptions to the fund. This amount is reduced by unit redemptions requested by unitholders and carried out under conditions such that the fund rules do not allow the provisions of VII of article L. 214-28 to be invoked against them, and increased by sums reinvested by unitholders in fulfilment of the reinvestment obligation set out in article 163 quinquies B of the General Tax Code;
2° When a company whose securities or rights are included in the 50% quota is wound up by court order, the cancelled securities or rights are deemed to be held as assets at their subscription or acquisition price for five years from the date of the judgment closing the liquidation. When a company whose securities or rights are included in the 50% quota is experiencing difficulties likely to jeopardise its ability to continue as a going concern within the meaning of article L. 234-1 of the French Commercial Code and is being wound up out of court under the conditions defined in articles L. 237-1 to L. 237-13 of the Commercial Code or a capital reduction followed by a capital increase under the conditions defined in Article L. 224-2 of the Commercial Code, the cancelled securities or rights are deemed to have been retained as assets at their subscription and acquisition price for a period of five years from the date of the decision by the company's governing bodies;
3° When securities, current account advances or rights included in the 50% quota are sold, reimbursed or repurchased, the securities, current account advances or rights sold, reimbursed or repurchased are deemed to be held as assets for their subscription or acquisition price or for the amount of the current account advance for a period of two years from the date of the sale, reimbursement or repurchase. After this period, when the fund distributes or redeems units for the proceeds of the sale, redemption or repurchase, the amount of the distribution or repurchase that has not been deducted under the provisions of 1° is deducted from the denominator up to the limit of the subscription or acquisition price of the securities, current account advances or rights sold, redeemed or repurchased. From the date on which the fund may enter a pre-liquidation period as defined in articles R. 214-40 and R. 214-41, the denominator may, where applicable, be reduced by the amount of the distribution of the sale price, the amount of the redemption or repurchase of securities, current account advances or rights not included in the 50% quota, up to the limit of the subscription or acquisition price of these securities or rights, or the amount of the current account advance, provided that the 50% quota has been reached before this date and that any new subscriptions paid up by the fund are used to cover costs or to make additional investments in securities or rights already included in the assets;
4° When securities or rights received in exchange for securities or rights included in the 50% quota are not themselves eligible for these quotas, the securities or rights delivered in exchange are deemed to be held in assets at their subscription or acquisition price for two years from the date of exchange or until the end of the period during which the management company has undertaken to hold the securities, current account advances or rights in the fund's assets, whichever is the longer;
5° New subscriptions to a fonds commun de placement à risques are taken into account from the closing balance sheet for the financial year following that in which they were paid up;
6° In the event of non-compliance with the 50% quota at the time of a half-yearly inventory, the fund is not deprived of its status if it rectifies the situation at the latest at the time of the next inventory, provided that the management company informs the tax department with which it files its income tax return within one month of the inventory showing that the quota has not been complied with, and provided that this is the first failure to comply.
For funds whose units are issued and redeemed on an ongoing basis at the request of unitholders, if a breach of the 50% quota occurs beyond the control of the fund's management company and is not the result of a financial instrument held by the fund reaching maturity, the fund is not deprived of its regime provided that the management company's priority objective is to rectify the situation, taking into account the interests of the unitholders.
II. - 1° For the application of III of article L. 214-28, the market capitalisation of a company is determined by multiplying the number of its equity securities admitted to trading at the opening of the trading day preceding that of the investment by the average opening price over the sixty trading days preceding that of the investment.
However, if the company's shares are admitted to trading for the first time during these sixty days, the average of the opening prices on the trading days from the day of admission to trading to the day preceding the day of the investment is used. The same applies in the event of a capital increase or a merger, demerger or partial transfer of assets carried out during these sixty days and resulting in the admission to trading of new equity securities of the acquiring or receiving company;
2° By way of derogation from the provisions of 1°, in the event of investment on the day of the first listing of a company's equity securities, its market capitalisation is determined by multiplying the number of equity securities thus admitted to trading by the price at which these securities are placed with the public, i.e. the price at which these securities are sold to the public prior to the first listing.
Similarly, in the event of an investment on the day when new equity securities of the company are admitted to trading following a capital increase or a merger, demerger or partial transfer of assets, its market capitalisation is determined by multiplying the total number of equity securities of the acquiring or receiving company admitted to trading following the transaction by the closing price on the last trading day prior to the admission to trading of these new equity securities;
3° The investment date referred to in 1° and 2° is the date of acquisition or subscription of the equity securities admitted to trading.
