France: The Financial Markets Authority Publishes New Guidelines on Disclosure of Inside Information, with No Major Changes for Issuers Undergoing Preventive ProceedingsAnker Sørensen, Partner, De Gaulle Fleurance & Associés, Paris, France
Preventive Proceedings (mandat ad hoc and conciliation) have existed in France for many years and have contributed to numerous successful turnarounds. Their efficacy relies inter alia on the maintenance of the statutory confidentiality of such proceedings,1 which to a certain extent conflicts with the duty imposed on listed issuers to disclose inside information, as per the General Regulation of the Financial Markets Authority ('General Regulation'). The author reviews recent changes in the applicable regulatory regime.
I. Past practice of the AMF – conflicting duties on an issuer
Over the last few years, the Autorité des Marchés Financiers, also referred to as the AMF, the French Financial Markets Authority, has taken the view that the commencement of Preventive Proceedings (i) was required to be brought to its attention, and (ii) would be kept confidential as per Article L 611-15 of the French Code of Commerce.
The AMF, however, also took the position in 2009 that issuers subject to Preventive Proceedings were required to regularly inform the public, as per Article 223-1 of the General Regulation, of 'any significant worsening of their cash situation and of any new facts impacting its business activity'. Furthermore, in several decisions, the AMF’s Sanctions Commission ruled that the commencement of Preventive Proceedings did not preclude the issuer from its duty to inform
the public about the difficulties encountered in raising further funding, obtaining bank guarantees required under a customer agreement, or linked to the increase of its short term debt.
This position and above decisions by the Sanctions Commission prompted some practitioners to question their relevance and compatibility with French preinsolvency legislation, given the clear conflict faced by an issuer under duty to provide information about the worsening of its cash and financial positions, and its statutory duty not to inform the public that it had commenced Preventive Proceedings in attempts to address the situation with the assistance of a court appointed body (the mandataire ad hoc, or the concilateur).
Hence the interest of the recent regulatory changes.