17 February 2014
In France, when the sale of a company is contemplated (or any other transaction that may affect the legal or economic situation of the company), if it has a works council, it must consult that works council prior to making any commitment or taking any action regarding the implementation of that transaction. The works council must then issue an opinion, which can be either positive or negative.
A negative opinion has no impact on the transaction process, while the absence of an opinion prevents the process from moving forward. In an acquisition process, the seller cannot sign any promise to sell the company or an asset, even if subject to the condition of obtaining the opinion of the works council, until the works council has issued its opinion, otherwise it would be committing a criminal offense (délit d’entrave).
Up to now, there has been no specific timing for the works council to issue its opinion; the sole legal reference was that the works council needed to have a “sufficient time period”, which was left at the discretion of the courts.
Even though this concept is maintained in the new article L2323-3 of the French labour code, it is now provided that the time period will be fixed by mutual agreement between the employer and the works council, with a minimum of 15 days.
If there is failure to reach such an agreement, the provisions of articles R2323-1 and R2323-1-1 of the French labour code shall apply as follows:
- General consultation of the works council: one month
- In the event that an expert is appointed: two months
- In the event that there is a request for the advice of the health and safety committee (CHSCT): three months
The works council is deemed to have been consulted and to have issued a negative opinion at the expiry of the related time period.
The time period starts running from when the employer first communicates the information set forth in the labour code.
This new regulation should be viewed as very good news for all investors as the acquisition process will no longer be delayed for four to six months because of the works council consultation.