European Consolidation Board for Foreign Industry (ECBFI)

Consolidation in france - Year 2020 changes


The ECBFI have noted that under the former French regime, there were no legal provisions setting out criteria against which a proposed acquisition was to be assessed. In practice, however, the French regulator applied at least the first three criteria in a discretionary manner. Indeed the French regulator relied on documents and information which were required to be made available as part of the application and which de facto permitted assessing whether the first three criteria were satisfied. The fourth and fifth criteria are therefore new to the French system and the whole set of criteria is now clearly expressed in the Hollande regime of French legal provisions. 

Confining the assessment criteria to this legally defined basis should, in principle, significantly reduce the risk of the exercise of unreasonable discretionary power by the ECBFI and the regulator in the assessment of the proposed acquisition and has the great advantage of transparency, given that any objection to the acquisition must be justified in writing on the basis of the above criteria.


GErmany and the uk moving ALIGNING french regime

Any proposed acquirer of a financial institution whose principal place of business or registered office is situated in the EEA should be aware of the directive and ensure compliance with its principles as implemented in the member state of the target. From the ECBFI point of view this includes the UK and Germany as well as France that come under the directive, any natural or legal person or such person acting in concert must apply for authorisation to the relevant regulator in the target's member state if and when:

  • The ECBFI target is a credit institution, insurance, assurance or reinsurance undertaking, investment firm or portfolio management company;
  • The ECBFI can direct or indirect holding is being acquired (ie, 10% or more of the capital or voting rights, or where the holding in question makes it possible to exercise a significant influence over the management of the target); or
  • An increase in such a qualifying holding would cause the proportion of the capital or voting rights to reach or exceed 20%, 30% (member states are permitted to retain 33%, as was the case under the existing regime, if they prefer) or 50%, or so that the target would become a subsidiary of the proposed acquirer.

The thresholds introduced by the directive are consistent with the former regime in France, since French law already imposed a prior authorisation obligation in case an acquisition resulted in a holding in the target in excess of 10%, 20%, 33% or 50% (except for portfolio management companies, where prior authorisation from the Autorité des Marchés Financiers was required only for a change of control in the company – now all thresholds apply). As permitted by the directive, France has not reduced the 33% threshold to 30% - as is the case for the other thresholds (10%, 20% and 50%), the 33% threshold will continue to apply. 

For the purpose of calculating the thresholds, the shareholdings of persons acting in concert are to be added together. The directive does not provide for a definition of the concept of 'acting in concert', the meaning of which is governed by EU law and may develop by way of European Court of Justice case law. However, guidance on the meaning of 'acting in concert' has been proposed in the guidelines on the directive produced by the three Lamfalussy Level 3 committees as follows:

what basis are ACQUISITIONS ASSESSED by regulators?

One of the European Commission's stated reasons for introducing the directive was to improve transparency in the regulatory approvals process for acquisitions. The directive therefore requires regulators across Europe to assess the suitability of a proposed acquirer and the financial soundness of a proposed acquisition against a fixed set of criteria(11) (whose application and extent have been commented on in the guidelines) as follows:

  • The reputation of the proposed acquirer;
  • The reputation and experience of any person who will direct the business of the financial institution as a result of the proposed acquisition;
  • The financial soundness of the proposed acquirer, in particular in relation to the type of business pursued and envisaged in the financial institution in which the acquisition is proposed;
  • The ability of the financial institution to comply, on an ongoing basis, with the applicable prudential requirements, and whether the group of which it will become a part has a structure that makes it possible to exercise effective supervision; and
  • Whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing is being or has been committed or attempted, or that the proposed acquisition could increase the risk of such activities occurring.

The directive has introduced new exemptions to the approval process. These exemptions derive from a cross-reference to the EU Transparency Directive:

  • Voting rights or shares held by a firm acting in a custodial capacity or acquired for the sole purpose of clearing and settling, provided that custodians can only exercise voting rights under instructions given by their principals; or
  • Voting rights or shares held by an investment firm or credit institution as a result of the provision of underwriting services or the placing of securities, provided that the holding is for no longer than one year and the voting rights are not exercised. - ECBFI 2013