Vol 11 (2014) - Issue 3

Article preview

The ‘Florange Law’ Deprived of its Main Significance by the French Conseil Constitutionnel in its Decision of 27 March 2014

1. Summary
The main changes introduced by the 'Florange law' – imposing potential sanctions on companies employing more than 1,000 workers closing down plants, for declining a serious acquisition offer without a legitimate reason – were, as per the French Conseil constitutionnel in a decision dated 27 March 2014, deemed contrary to the French Constitution and in particular in breach of the right to property and the freedom to private enterprise 'liberté d’entreprendre'. The 'Florange law' which fulfils a campaign promise made by François Hollande in 2012 to the Florange steelworkers, has beyond doubt been stripped of some of its main substance.
Nevertheless, the obligation to seek a buyer for closing plants, also introduced by the 'Florange law', was declared in conformity with the Constitution by the Conseil Constitutionnel. This will add to the legal complexities and costs associated with plant closings, particularly for loss-making companies. More importantly for shareholders of these companies, despite the suppression of the main financial sanction imposed for failure to seek a buyer according to the 'Florange law', the obligation to seek a buyer may constrain shareholders/ groups in their ability to react efficiently and swiftly to changing situations affecting their investments in France.

2. The obligation to seek buyers for closing plants
The 'Florange bill' was voted by the Socialist MPs in Parliament in October 2013 but rejected by the Senate in February 2014 and finally enacted by the lower house on 24 February 2014. The law was enacted amid opposition from the centre-right MPs, who referred the law to the Conseil constitutionnel. The law is dubbed 'Florange' after a steelwork plant in the city of Florange and is titled ‘the law aimed at restoring the real economy’. Besides the obligation to seek buyers for closing plants and providing various amendments to the French labour code and code of commerce, the law also makes provisions in favour of long-term shareholding in listed companies with the aim of preventing hostile take-overs.

Pre-search stage: Under the 'Florange law', companies – including groups of companies with a registered office in France and European companies with a plant of 150 workers in at least two member states – employing in total at least 1,000 workers, which propose to close a site which might lead to a collective dismissal, must first convene, inform and consult the Workers’ council. The employer is then required to provide the staff representatives with all necessary and related information, including the economic, financial and technical reasons behind the closing-down and the actions envisaged by the employer to find a buyer. The employer must also notify without delay and provide the aforementioned information to the local authority and the mayor of the town in which the plant is proposed to be closed.