France: Corporate Governance

In France the organisation of companies is essentially governed by the French Commercial Code, the Civil Code and the companies’ corporate statutes. The law n°66-537 of 24 July 1966 as amended and codified in the Commercial Code is the primary source for corporate rules and governance. The provisions apply to all companies, regardless of whether they are listed on the French stock exchange or not. Certain other provisions are contained in the Monetary and Finance Code, such as provisions relating to regulations of financial markets.

French law grants large powers to the general meeting of shareholders which deliberates on the most important decisions. Corporations then have a choice to adopt their form of management. They may therefore opt for a unitary or a two-tier board system or for the separation or combination of the roles of president and managing director.

In recent years, corporate governance and financial markets regulations have seen the increasing impact of soft law developed under the influence of professional organisations.

Companies may therefore choose to adopt the provisions of a governance code. For companies listed on a financial market, the Commercial Code provides that they must specify in the annual management report submitted to the shareholders whether they voluntarily refer to a code of governance and if they do not intend to refer to any such code, they must explain the reason for such deviation (the so-called “comply or explain” principle). To that effect, non-binding governance codes have developed such as:

  • the AFEP-MEDEF Code destined for public companies (last revised in 2013) provides for a set of recommendations relating to the board of directors, the role of independent directors, specialised committees and the remuneration of directors and managers. The last revision of the Code reinforces the “comply or explain” principle in so far as the explanation must be adapted to the particular situation of the company and give details of the alternate rules followed. It also contains provisions relating to remuneration of directors by introducing a shareholders’ vote on remuneration (“say on pay”) and limiting the number of offices directors may hold.

The High Committee on Corporate Governance created in 2013 can be consulted by boards of directors on the interpretation of the Code. It also publishes an annual report on the enforcement of the recommendations by companies;

  • the Middlenext Code applies to small and medium sized listed companies. The structure and scope of the Code is similar to that of the AFEP-MEDEF Code;
  • the Code of Governance for Middle Sized Companies (“Code de Gouvernance des Moyennes Entreprises Françaises”) established by the Association of French independent directors and administrators and published in 2015 includes a series of 50 recommendations relating for example to incorporation, remuneration of directors, internal control procedures or creation of financial committees.

The French Financial Markets Authority (AMF) also publishes an annual report on corporate governance and makes periodic recommendations to improve transparency and to support the implementation of corporate governance standards.


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