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Modifications in the remuneration of corporate officers of listed companies

Order No. 2019-1234 and Decree No. 2019-1235 of 27 November 2019

Order no. 2019-1234 and Decree no. 2019-1235 of 27 November 2019 transpose EU Directive 2017/828 of 17 May 2017, which aims to promote long-term commitment of shareholders, and reorganize the obligations relating to the remuneration of corporate officers in listed companies.

Order n°2019-1234 and Decree n°2019-1235 of 27 November 2019 are the results of the authorization given by the PACTE Act of 22 May 2019 to the Government in order to transpose Directive (EU) 2017/828 of 17 May 2017 and to put in place "a unified and binding framework for the remuneration of corporate officers of listed companies".

The companies concerned by these new provisions are the French sociétés anonymes, the sociétés en commandite par actions and the sociétés européennes whose shares are admitted to trading on a regulated market. It should be noted that only "shares" admitted to trading are mentioned and not the "securities" of a company. Thus, if a company owns only listed bonds, it will not be affected by this new regulation.

It is reminded that the Sapin II law of 9 December 2016 had set up an "ex-ante" and "ex-post" control by the shareholders on the remuneration of the corporate officers of listed companies.

Order n°2019-1234 and Decree n°2019-1235 amend the existing regulation. In particular, the scope of application of such provisions on remuneration is now extended to all corporate officers, including directors (“membres du Conseil d’Administration”), who were not previously concerned by the procedure of Article L.225-37-2 of the French Commercial Code.

The decree clarifies and densifies the content of the remuneration policy. It is now required to present to shareholders "the manner in which it respects the social interest and contributes to the company's business strategy and sustainability". This criteria may give rise to debate, given the very subjective assessment that can be made of it. Finally, Article R.225-29-1 of the amended Commercial Code details a list of 8 points that must be included in the remuneration policy.

In addition, the invalidity of payments or other commitments that do not comply with the remuneration policy approved by the shareholders is now expressly provided, as well as the possibility for the Board of Directors to temporarily depart from this policy in the event of "exceptional circumstances" if this is necessary to ensure the company's continued existence.

In addition, the new Article L.225-100 of the French Commercial Code provides that in the event of a negative vote by shareholders, payment of compensation is suspended until the revised compensation policy is approved.

These provisions will be applicable as from the general meeting ruling on the first financial year ending after the date of publication of the order, i.e. as from 2020 for companies ending their financial year on 31 December 2019.

For further information: directive (UE) 2017/828 of 17 mai 2017

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