Under French law and as far as shareholders are concerned, they would not be entitled to bring a class action against Company under the terms of article L. 423-1 of the French consumer code as such action could only be brought to Court by a consumer protection association.
However, company shareholders could form an association to represent their interests and initiate an “ut singuli” action before the Court, pursuant to article L. 225-1201 and article L. 225-252 of the French Commercial Code2). Article L. 452-1 of the French Monetary and Financial Code3 grants the same right to authorised shareholder defence associations of publicly traded companies.
It will be necessary for the sharehaolder to prove that he suffered a personal loss in relation to the breach committed by the company’s directors. Pursuant to French case law in this matter, the loss suffered by the shareholder in relation to the breaches committed by the company’s directors must be distinct from the company’s loss (see for example Cour de Cassation, Commercial Section, 15 January 2002, n°97-10886).
1 Article L. 225-120 of the French Commercial Code:
I- In companies whose shares are admitted to trading on a regulated stock market, shareholders whose shares have been registered for at least two years and who hold at least 5% of the voting rights may form associations to represent their interests within the company. In order to exercise the rights to which they are entitled under Articles L. 225-103, L. 225-105, L. 823-6, L. 225-231, L. 225-232, L. 823-7 and L. 225-252, such associations must have notified the company and the French Financial Markets Authority [Autorité des Marchés Financiers] of their legal status.
II. - Where, however, the company's capital exceeds 750,000 Euros, the share of voting rights to be represented pursuant to the preceding paragraph is reduced according to the number of the voting rights relating to the capital, as follows:
1° 4% over 750,000 Euros and up to 4,500,000 Euros;
2° 3% over 4,500,000 Euros and up to 7,500,000 Euros;
3° 2% over 7,500,000 Euros and up to 15,000,000 Euros;
4° 1% over 15,000,000 Euros.
2 Article L. 225-252 of the French Commercial Code
The directors and managing director shall have individual or solidary responsibility to the company or third parties either for infringements of the laws or regulations applicable to limited companies (sociétés anonymes), or for breaches of the constitution, or for tortious or negligent acts of management. If more than one director, or more than one director and the managing director, have participated in the same acts, the court shall determine the share to be contributed by each of them to the compensation awarded.
3 Article L. 452-1 of the French Monetary and financial Code :
“Properly declared associations having as their explicit purpose, as defined in their company constitutional documents, the defence of investors in financial securities or financial products may bring legal proceedings before any court, even though the filing of civil actions, in relation to facts which cause direct or indirect prejudice to the collective interests of investors in general or to certain categories of investors.
Said associations are:
- approved associations, as determined by decree after seeking the opinion of the Public Prosecutor and the Autorité des Marchés Financiers, where they can prove six months' existence and, throughout said period, at least two hundred members paying their contributions individually and where their executives meet conditions of respectability and competence determined by decree;
- associations which meet the criteria for holding voting rights defined in Article L. 225-120 of the Commercial Code, if they have sent their company constitutional documents to the Autorité des Marchés Financiers.
Where a practice contrary to the laws or regulations is likely to compromise the rights of investors, the shareholders' associations referred to in the first paragraph may apply to the court for an order compelling the individual or legal entity responsible to comply with said provisions and end the irregularity or eliminate its effects.
The application shall be brought before the presiding judge of the regional court having jurisdiction at the place where the company has its registered office, who shall give an immediately enforceable summary ruling. The presiding judge shall be competent to hear and determine objections of illegality. He may, even without consultation, take any protective measure and impose a coercive fine payable to the Trésor public for execution of his order.”