Joint ventures (JVs) in France are used in all sectors and in every market. They are frequently used in sectors in the real estate, infrastructure, and financial sectors and in industrial and transport projects.

Cross-border JVs can be created between members of the EU, as a European Economic Interest Grouping (EEIG) or as a European public limited company (SE).

Cross-border JVs can also be created between a French company and a third-country party.

There are two types of JVs in France:

Factors affecting the choice of the structure depend on the interests at stake and on the tax implications.

Before entering into JV transactions, the parties often conclude:

Depending on the choice of legal structure, due diligence may be advisable, to review legal, financial, tax, or technical aspects before entering into the JV.

Conditions precedent are common, and usually relate to obtaining antitrust clearance, foreign investment clearance, or both.

Listed companies are subject to numerous public disclosure rules, including the requirement to disseminate accurate, precise, and fair information to the public (particularly under Articles L. 451-1-2 and following of the Monetary and Financial Code (in French) (Code monétaire et financier)). If the JV is listed in France, it will also be subject to these obligations and must therefore publish its annual revenue, results, and a financial report.

The advantages of a corporate JV are, in particular:

There are some administrative requirements. Various details (for example, the address of legal representatives, the name of the first shareholders, and the beneficial owners) must be filed in the commercial and companies register (registre du commerce et des sociétés). Some of these corporate details are easily accessible through public databases.

Corporate JVs, like any other company, must be registered with the commercial and company registry, infogreffe (in French).

There is no specific legal framework for JV companies. The principal company law rules are set out in the Commercial Code (in French) (Code de commerce) and Civil Code (in French) (Code civil).

All articles of association (articles) (statuts) and documents to be filed with the commercial and company registry must be in French.

Documents that do not need to be filed with an official registry can be drafted in a foreign language even if they are subject to French law. If they are disputed before a French court, a sworn translation of the documents is required, which can trigger costs and may lead to misunderstandings. This situation can be avoided by having the parties agree a French translation at the start of the process, or by agreeing to refer disputes to arbitration.

Any financial documents which must be filed or published must use the euro as the reference currency (Article L. 123-23, Commercial Code).

All types of JV can be set up without the use of a notary (notaire) (French notaries are state-appointed officials, required to certify certain instruments).

However, notarisation is required:

Shares (or other equity interests) in the JV company can be issued in return for the contribution of assets or services to the JV company. This results in no advantageous tax treatment.

A party can provide working capital through a shareholder's loan to the JV. It can take security for the loan, for example a bond.

JV participants can make equity contributions in cash, assets, or in kind. In-kind contributions may include knowledge, workforce, or service (apport en industrie).

In-kind contributions must be precisely set out in the articles and follow specific rules:

A shareholders' agreement is not legally required, but is usually put in place to cover certain points which the articles may not cover, and which the participants wish to keep confidential. The shareholders' agreement is usually private, but in rare circumstances must be registered/filed with the French financial markets authority (Autorité des Marchés Financiers) (for example, where the corporate JV is in the financial sector).

The main points covered in a shareholders' agreement are:

The articles are the constitutional documents. These are registered with the tax authorities for tax purposes and with the commercial and companies registry, and are publicly available.

JVs are usually set up to carry out projects which require the JV to rely on rights or assets owned by the participants. As a result, JVs require an extensive framework of contracts with their participants, not with respect to their governance but to their operation (see also Question 34).

The shareholders in the JV company are parties to the shareholders' agreement.

The provisions of the shareholders' agreement bind the shareholders. It is current practice to have the JV company acknowledge the shareholders' agreement. As a result, directors cannot act in a way that is contrary to its provisions.

The shareholders' agreement can be amended by a rider and may provide for the terms of amendments. Amendment of the agreement is simpler than amendment of the articles because it requires fewer formalities (neither convocation nor registration).

If there is a conflict between the articles and the shareholders' agreement, the articles usually prevail because they are public and can be relied on and enforced by third parties.

It is possible for both instruments to include a provision that the shareholders' agreement prevails in the case of conflict with any other instrument; however, this clause has a limited effect if it would override a mandatory French law provision.

In the event of a breach of the shareholders' agreement, the agreement itself provides for remedies. Shareholders' agreements often contain a conflict of interest clause which can, for example, prevent a board member from voting in matters where they have a conflict of interest.

Agreements concluded between a company, its shareholders, or its director are regulated agreements (conventions réglementées), and subject to specific legal provisions. In an SAS, the statutory auditors must provide a specific report on these agreements which must be approved during the shareholders' general meeting which approves the annual accounts. See also Question 15, Company Indemnification of Directors.

Corporate JV shareholders can freely regulate the organisation and operation of the JV in the company's articles. This can include provisions:

The articles and shareholders' agreement can include provisions regulating a JV participant's change of control.

There are no other restrictions on share transfers.

There are no specific rules on shareholders' meetings, except that a meeting must be held to approve the company's yearly financial statements.

The articles provide for a minimum notice period to hold a meeting. Meetings are generally held at the registered office (when held physically), but the articles can (and now usually do) provide for the ability to hold the meetings at any other location or to hold them by phone or video communication.

The language of meetings usually depends on the nationality of the shareholders (though resolutions which are to be published need to be in French (see Question 4, Language Requirements).

There are no statutory requirements in an SAS. Quorum and voting/approval requirements are set out in the articles. The articles of an SAS can permit the shareholders to adopt written unanimous resolutions.

The articles can provide for specific additional rules on recording decisions, but resolutions must be printed in the company's official minutes books. Resolutions must be kept for five years (Article 2224, Civil Code).

There are no differences for JV company meetings.

Distribution of dividends is prohibited when:

There are no other restrictions.

Shareholders can only decide to distribute a dividend after having both:

The shareholders must approve the distribution of dividends; this is generally done during the annual ordinary meeting, or through an extraordinary meeting if an interim dividend is proposed.

In an SAS, the president is equivalent to a CEO and has full management powers. An SAS cannot have co-presidents. A board of directors can be put in place to assist the president, but this is not mandatory. Managing directors with the same (or restricted) powers can also be appointed.

In an SAS, the powers in relation to representation and decision-making are set out in the Commercial Code and are as follows:

The articles (and the summary certificate of incorporation) indicate the identity of the directors. A person or a company may be deemed to be a de facto director if they act, or have been allowed to act, as a representative of the company.

Directors can be held liable on three grounds:

The matters reserved to the shareholders are:

(Article L. 227-9 al.2, Commercial Code.)

However, reserved matters are usually more extensively provided for in the shareholders' agreement.

The articles must provide for:

Board meetings are typically held at the registered office, but can also be held virtually if provided for in the articles.

The statutory auditors (if any) must be invited to all board meetings at which the annual or interim financial statements are reviewed or approved.

There are certain statutory provisions for board meetings for certain companies, in particular public limited companies (sociétés anonymes) (SAs).

In an SAS, written resolutions can be used if provided for in the articles. DocuSign (the electronic signature process) is now used extensively for this.

A board meeting can be held virtually if provided for in the internal regulations (Article L. 227-9, Commercial Code). The articles may limit the nature of the decisions that can be adopted virtually and provide for a right of opposition if a certain number of directors are against it.

In an SAS, there are no legal requirements for quorum and majorities. These rules are determined in the articles.

In an SA the quorum and majority requirements are that:

The president typically chairs a meeting, but the articles can provide for other arrangements if the president is not present.

Board meetings must be minuted. Companies must retain their minutes for the life of the company plus five years (Article 2224, Civil Code).

The president of an SAS (and the directors, if a board has been provided for in the articles), are appointed by the shareholders as set out in the articles.

The articles can set out the conditions for the continuation or dismissal of a president or directors. The articles can also provide for their term of office.

A judicial procedure for dismissal or removal, which allows a shareholder to request that a director's appointment be terminated, is also available, where there are vexatious or serious circumstances.

Directors do not have specific legal duties to the JV company other than those due to any company from its directors, except when explicitly provided for in the articles (see Question 11, Limits on Distribution, Capital Maintenance Rules, and Directors' Powers to Declare a Dividend).

See Question 15, Age, Nationality, Identity, Bankruptcy Status, Mental Capacity for the limitations on directors.

There are specific regulations governing agreements which are concluded between the company, its shareholders, or directors. In an SAS, the statutory auditors must provide a specific report on these agreements which must be approved during the general meeting which approves the annual accounts. (In an SA, these agreements must be approved by the board prior to their execution.) See also Question 15, Company Indemnification of Directors. In addition to these corporate rules, it is standard in JV shareholders' agreements to have specific clauses governing conflicts of interest.

The key limitations relate to:

SAS (and SA) directors can be a legal or natural person.

The remuneration of SAS directors, and the parameters for determining that remuneration, are freely determined by the shareholders.

Indemnification of directors must be authorised in accordance with the procedure for regulated agreements (conventions réglementées). For an SAS, this means indemnification must be approved by the shareholders.

The statutory auditor must prepare a report on the regulated agreements and present it to the shareholders. No time limit is provided by French law for notifying the statutory auditor of the conclusion of these agreements. The articles generally require notification within one month of their conclusion. The articles can freely determine the conditions under which the shareholders decide on regulated agreements. In Sas, the board must be informed of the regulated agreement and must approve it prior to execution. If the board approves the agreement, it must notify the statutory auditor within one month. The statutory auditor must send a report to the shareholders, for their majority approval.

The combination of the functions of a director with an employment contract in the same company is possible, but subject to certain conditions, in particular, the director's effective performance under the employment contract.

Preferred shares can be created with specific voting rights (for example, double voting rights) or without voting rights.

Preferred shares can also be created with specific pecuniary rights, for example, a priority dividend over ordinary shares, cumulative dividend (that is, a dividend deducted from future profits when the profits of a year do not allow it to be paid), and progressive or degressive dividend depending on the company's results.

However, shares with specific voting rights cannot represent more than half of the share capital of the company.

Specific voting shareholder approvals are required by the Commercial Code for key corporate actions. For example, the reduction of shareholders' rights or increase of their commitments requires unanimous shareholder approval.

Shareholders' agreements often contain:

The shareholders' agreement may contain:

Specific dispute resolution processes in the event of deadlock are usually included in the shareholders' agreement (see Question 6, Shareholders' Agreement).

There are no remedies for deadlock imposed or available by law.

Put options and call options can be put in place in advance, to be used in a deadlock. A compulsory transfer of shares or assets clause can also be put in place.

These clauses must be drafted very carefully to ensure their smooth enforceability and to avoid any risk of challenge by any of the parties involved. The conditions that trigger the application of the compulsory transfer clause, and the price mechanism attached to it, should be precisely agreed.

Depending on the purpose of the JV, the parties usually enter into a fixed-term agreement with a renewal or termination process. An indefinite term agreement can be terminated at any time, subject to any notice period, and provided that termination is not abusive.

A corporate JV can be dissolved through:

In France, JVs created as limited liability partnerships are treated as incorporated entities rather than partnerships.

There are two principal types of unlimited liability partnership:

A partnership with unlimited liability may be suitable for JVs in the real estate sector, where the parties want a tax-transparent vehicle and to establish profit-sharing arrangements without incorporating a limited liability partnership.

An SEP is a highly flexible vehicle. Its partners are generally free to agree its purpose, governance, and operating procedures in the articles.

An SNC, despite having a separate legal personality, does not carry any obligation to file accounts, so they can remain private. The partners of an SNC are not obliged to immediately pay up all or part of the capital contributions.

The disadvantages are:

See Question 19, When Are They Used?

A contractual JV is preferred to a corporate vehicle when:

The advantages are that:

The disadvantages are that:

A contractual JV can be categorised as a de facto partnership (société créée de fait) if the parties have in fact acted between themselves and towards third parties as if they are partners (Articles 1872-1 and 1873, Civil Code). If a contractual JV is categorised as a de facto partnership, any partner of that de facto partnership can be held liable for the JV's liabilities.

In principle, a sale or contribution to a JV does not trigger specific rules. The applicable tax regime may differ depending on the JV's form and tax residence.

Transfer of assets. The sale of assets (except shares, see below, Transfer of shares) into a JV by a French tax resident corporate entity triggers corporate income tax for the transferor (if liable to corporate income tax (CIT)), calculated on capital gains arising from the transfer (the difference between the market value of the assets transferred and the net book value (or tax value if any) of those assets in the transferor's financial accounts).

Those capital gains are subject to CIT at the standard rate of 25% for fiscal years since 1 January 2022 (a social surtax of 3.3% assessed on the CIT amount may apply) or a reduced CIT rate of 15% for small and medium-sized enterprises (SMEs) on their first EUR42,500 of taxable profits.

Transfer of shares. The transfer (except as contribution) of shares into a JV by a French tax resident corporate entity can also trigger capital gains on the disposal of shares by the transferor. However, the transferor may be exempt from most of the liability to CIT on those gains, through the participation exemption regime. For this to apply:

If these requirements are met, capital gains realised on disposal of the shares are exempt from CIT on 88% of their amount. As a result, the effective tax rate is 25 x 12% = 3% (about 3.1% for companies subject to the social surtax), assuming that capital losses do not exceed capital gains in a given fiscal year, otherwise the add-back does not apply.

In addition, the standard CIT rate applies to capital gains derived from the sale of shares, whether they are held for more than two years or not:

Contribution. If a transfer of assets by a French tax resident corporate entity is made for the benefit of a JV subject to CIT, that transfer may benefit from the preferential tax regime on mergers if the assets:

The transferor can defer the charge to taxation on any latent capital gains triggered by the transfer (provided specific conditions are fulfilled).

A contribution of participation shares (see above, Transfer of shares) to the JV can also benefit from the preferential tax regime on mergers, if the shares contributed:

Where the assets of a French company are transferred to a non-resident company, the special tax regime may apply but only if the transferred assets are effectively attached to the French permanent establishment of the non-resident company.

The transfer of assets (other than shares) into a JV is, in principle, subject to VAT at a 20% rate calculated on the selling price of these assets. However, no VAT is due if these two conditions are met:

The transfer of shares to a JV is not subject to VAT.

If the assets qualify as a going concern, transfers are subject to transfer tax at:

The following are also subject to these rates:

Sale of property is subject to a registration duty the effective rate of which is 5.09% or 5.8% for certain departments.

An assignment of exploited patents only gives rise to a fixed registration duty of EUR125.

However, no transfer tax is payable if the assets are contributed to the JV in exchange for the issuance of shares.

No transfer tax applies on the issuance of shares.

Transfer taxes on the transfer (except contributions) of shares depend on the nature of the company whose shares are transferred. A transfer of French shares:

The sale of shares in a non-quoted real estate company gives rise to registration duty at 5%. A real estate company is a company, whatever its form and nationality, with assets which consist for more than 50% of immovable property or immovable property rights located in France. For the assessment of the percentage of real estate, the immovable property used by the company for its own operations are taken into account (contrary to what is provided for the capital gains regime). The assessment is made for the year of the transfer or at any time during the year preceding the transfer.

No transfer tax or stamp duty is due in contributions of shares (that is, in exchange for the issuance of shares) to the JV.

Assuming that the JV is set up in the form of a corporate entity (SARL, SA, or SAS), it is subject to CIT on net profits derived from its French activity. Worldwide profits are also taxed in France if the JV does not have any permanent establishment in the country where business is carried out. Where the JV is structured as a corporate entity, the participants in the JV are not liable to CIT in France on their share of the profits made by the JV (but any dividends they receive from the JV entity may be taxable (see Question 25).

If the JV is set up in the form of an SEP, it may be regarded as a transparent entity for tax purposes and may be not treated as liable to CIT (from a French perspective, assuming that shareholders are all indefinitely liable and their names and addresses have been communicated to the administration).

Dividends paid by a resident JV company to domestic corporate shareholders are not subject to any withholding of any kind.

Unless an applicable double tax treaty provides otherwise (which is often the case), dividends paid to foreign corporate shareholders are subject to a withholding tax at the applicable corporate income tax rate (increased to 75% for dividends paid to corporate shareholders located in a non-co-operative state).

The payment of dividends by a resident JV company is not tax deductible.

Dividends received by a French company are subject to corporate income tax at the standard rate. However, a resident parent company can potentially elect for the participation exemption regime if it fulfills the following conditions:

(Article 145, Tax Code.)

Under the participation exemption regime, dividends are almost exempt at the level of the parent company: a lump sum of 5% (1% in specific situations) of the gross dividends must be added back to the taxable income and is taxed at the standard rate of CIT. The position is the same for dividends paid by a foreign company JV participant to a JV company resident in France (if the conditions above are satisfied).

Interest payments are in principle tax deductible if the debt is incurred for the business purposes of the company. Specific mechanisms limit the tax deductibility of interest paid by French corporate entities. Interest payments to related entities can be deducted only if:

Interest payments made by a JV to a JV participant under a loan arrangement must also comply with the general transfer pricing rules.

The transfer of employees is regulated by Article L. 1224-1 of the Labour Code (in French) (Code du travail). If an employer's legal situation changes, especially as a result of a succession, sale, merger, transformation of the funding or incorporation of the company all employment contracts on the day of the transfer are automatically transferred to the new employer.

The JV must comply with any collective agreement applicable to the transferred employees for a certain period of time.

A JV participant with 50 or more employees transferring employees to a JV must provide information to and consult with its work council (comité social et économique) (CSE) in advance (Article L. 2312-8, Labour Code). The CSE must issue an opinion within one month of receiving all the relevant information, or two months if the CSE decides to be assisted by an expert. Contracts cannot be executed before this information provision and consultation is completed. If the participant has less than 50 employees no information provision or consultation is required.

The transfer of a business into a JV may trigger the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE). Under TUPE, all rights and obligations arising from the employment contracts of those transferred employees, or from the employment relationship more broadly, are transferred to the JV. A TUPE transfer cannot be avoided by the JV participant implementing redundancies prior to the relevant transfer. If a TUPE transfer is not triggered, employees' prior consent is required to transfer their employment contract to the JV.

France provides a wide range of protections for employees including entitlement to a minimum wage, restrictions on working hours, overtime pay, minimum holiday and paid time off, and protection from discrimination and dismissal.

If pension and share schemes are based on a company agreement, it will cease to apply after a maximum survival period of 15 months. If, at the expiry of this period, no substitution agreement has been negotiated and concluded, the employees will benefit from a compensation guarantee (Articles L. 2261-9 to L. 2261-14-4, Labour Code). If pension and share schemes are based on a unilateral decision of the employer (DUE), the company must be revoke them according to internal procedures with a sufficient notice period (usually three months).

If the transfer is not subject to TUPE it is voluntary. This implies that the original employer, JV, and employee must agree to the transfer and that the JV and the employee must agree on the terms and conditions of the new employment contract. The collective status and benefits (including pension rights, medical costs, death/disability insurance, and collective company agreements) in the JV are directly and solely applicable to this employment relationship.

Pension and share scheme rights transfer under a TUPE transfer but not automatically.

Secondments to JVs are not frequently used, employees are most likely to be transferred.

French secondments are governed by Article L. 8241-2 of the Labour Code. In summary:

French law gives various rights to foreign employees posted in France, guaranteeing them equal treatment with employees working in French companies in the same branch of activity.

During the 12 first months of their secondment, foreign employees benefit from specific rights, including working time and compensation. After 12 months, their employer must comply with all provisions of the Labour Code except specifically excluded rights including termination.

In a transfer, the employee's contract is transferred to the JV. In a secondment, the JV participant remains the employer. The employer remains responsible for all aspects of employment, for example, disciplinary decisions, salary, compensation, and benefits, while the secondee JV provides day-to-day instructions to the employee.

The creation or acquisition of joint control over an existing business of one of the participants is subject to merger control provided that several cumulative conditions are met:

Joint control over the JV. To fall under merger control, the JV must be a jointly controlled JV within the meaning of competition law. A 50-50 shareholding in a JV usually leads to the conclusion that there is joint control, as it is usually accompanied by 50-50 voting rights.

However, a minority or even very minority shareholding (for example, 10%) can be controlling under competition law if it is accompanied by veto rights or rights that give the shareholder the ability to otherwise block (through the governance rules) the JV's strategic decisions concerning its market position. Joint control by a minority shareholder may also result from, among other factors:

A full-function JV. The creation or the acquisition of a JV is subject to merger control, only if the JV is full-function. Whether the JV is full-function will depend on:

French merger control thresholds. The creation or takeover of a JV is subject to merger control by the French Competition Authority (FCA) if all the following conditions are met:

In the creation or takeover of a JV, the parties are the JV itself and the groups to which the JV's parent companies belong.

Foreign-to-foreign concentrations also fall within the scope of French merger control provisions provided that the above thresholds are met, even if the purchaser does not achieve any turnover in France.

EU merger control thresholds. The creation or takeover of a JV is subject to merger control by the European Commission when it has a community dimension under the EU Merger Regulation (139/2004/EC). EU merger thresholds may be met in either of the two following situations:

When the concentration is deemed to have a community dimension, the concentration must be notified at the EU level to the European Commission. In both situations, an EU dimension is not present if each of the firms achieves more than two-thirds of its EU-wide turnover within one and the same member state.

Where the JV is full-function and meets the FCA or the European Commission triggering conditions (see above, Triggering Events/Thresholds), prior authorisation from the FCA or the European Commission is mandatory. Parties intending to acquire joint control over the JV must file a joint notification.

The parties must obtain a clearance decision before implementing the merger (before closing). Both French and European competition law impose a standstill obligation until that clearance is obtained.

In exceptional circumstances, the FCA may grant a derogation from this stand-still obligation, but this essentially concerns the takeover of a target in insolvency proceedings.

The European Commission may also grant a derogation from the stand-still obligation. That derogation may be granted subject to conditions and obligations in order to ensure effective competition. It may be applied for and granted at any time, before notification or after the transaction (in case of a public bid or operations on the stock exchange).

The FCA and the European Commission carry out the same substantive test. The substantive test to obtain authorisation is common to all transactions. The concentration is approved if it is not likely to significantly restrict competition in the relevant market(s) especially by creating or strengthening an individual or collective dominant position or purchasing power. Unilateral effects (where, as a result of the merger, the JV can profitably raise prices due to the loss of competition between its parent companies), even without a dominant position, are considered by the FCA or the European Commission. Evidence or indicators of the likelihood of unilateral effects can lead to a merger being prohibited.

If a significant risk of restriction to competition is identified, the FCA or European Commission assesses whether the concentration contributes sufficiently to economic and social progress to offset the potential harm to competition.

A market share of more than 40% post-transaction is usually the alert threshold that leads to thorough discussions with the competition authorities.

Ancillary restraints. Some agreements or arrangements that potentially restrict competition are deemed ancillary to a concentration if they are directly related and necessary to the implementation of the concentration. Notifying parties must individually assess whether restraints to competition (for example, non-compete obligations) can qualify as ancillary restraints. The clearance decision is deemed to cover ancillary restraints.

In the creation of a JV, non-compete obligations between the controlling parent undertakings and the JV may be considered directly related and necessary to the implementation of the concentration. The geographical scope of those clauses must be limited to the area in which the parents offered the relevant products or services before establishing the JV. The non-compete clauses must also be limited to products and services that constitute the JV's economic activity. The same principles apply to non-solicitation and confidentiality clauses.

Restraints to competition that are not directly related and necessary to the implementation of the transaction will be assessed under the rules prohibiting anticompetitive agreements (see Question 30).

Filing for FCA or European Commission authorisation can take place as soon as the JV participants are in a position to present a project that is sufficiently mature to enable a detailed filing (for example, once they have reached an agreement in principle, signed a letter of intent, or as soon as a public offer has been announced). Standard notification forms are available at FCA: Merger control (in French) and European Commission: Competition Policy.

Except in very straightforward cases, an informal pre-notification phase, although optional, is usual in practice. It helps speed up the official notification procedure by anticipating any missing information or potential problems to ensure that the notification will be considered complete on the day of its filing.

Notification to the FCA: Phase 1. Phase 1 starts once a complete formal notification is filed. The Phase 1 assessment lasts up to 25 working days from filing. If the parties present commitments to the FCA, there may be a 15 working days extension to the initial period.

To analyse the transaction's impact on competition, the FCA may:

If significant competition concerns emerge during the Phase 1 assessment, the FCA opens a Phase 2 assessment thereby initiating an in-depth investigation. The parties can propose commitments to avoid the opening of Phase 2.

The FCA can clear the transaction with or without conditions, depending on whether it raises competition concerns. Should the FCA decide to clear the transaction after Phase 1, the French Minister for Economy may still request a Phase 2 assessment is opened within five working days from the adoption of the FCA decision.

Notification to the FCA: Phase 2. Phase 2 can last up to 65 working days, but can be extended by an 20 extra working days if the parties present commitments.

During the Phase 2 assessment, the FCA can:

The FCA submits a report to which the parties can respond in writing, and then a formal hearing is held, during which third parties' contributions (including customers and experts, among others) can be heard in the absence of the notifying parties.

In its final decision, the FCA can clear the merger with or without commitments proposed by the parties, and can also impose conditions not proposed by the notifying parties.

If the transaction raises major competition concerns and no remedies would be sufficient to address them, the FCA can issue an incompatibility decision and prohibit the merger.

The Minister of the Economy has 25 extra working days after a Phase 2 decision by the FCA to reconsider the case and make a final decision on general interest grounds.

Stop the clock before the FCA. Under the stop-the-clock mechanism, the FCA can suspend the procedure (in Phase 1 or Phase 2) for reasons related to the parties (for example, failure to communicate a significant new fact or failure to communicate information requested by the FCA within the set time limit). The running of the clock resumes as soon as the cause of the suspension has disappeared.

Parties may also ask for a suspension of the procedure in exceptional circumstances, mainly to finalise their commitments.

Phase 1 before the European Commission. Phase 1 starts when the notification is complete. The European Commission has 25 working days to either clear the transaction or decide to initiate a more in-depth Phase 2 investigation. This period may be extended to 35 working days if the parties offer commitments or if a request for referral to an EU member state is made.

Phase 2 before the European Commission. Phase 2 assessment takes place within 90 working days following the date on which the decision to initiate Phase 2 proceedings was given. This assessment period may be extended by either or both:

If both extensions apply, the maximum time period for assessment in Phase 2 is 125 working days.

Stop the clock before the European Commission. When the parties fail to inform the European Commission of changes in the facts, or new information relating to the transaction, the time limit is suspended until the Commission receives complete and accurate information.

Confidentiality. The FCA and European Commission publish a public announcement on the notification within five days of receipt of the formal filing. The content is based on a non-confidential summary provided by the parties.

The procedures are otherwise strictly confidential.

Non-compliance with procedure before the FCA. If the parties fail to notify the transaction or carry it out without prior FCA clearance (gun jumping), the FCA can order the parties to return to the situation prior to the JV and also impose a fine of:

Where the notification omits information or contains inaccurate statements, the FCA can also impose a financial penalty on notifying parties of up to 5% of the French turnover of the companies responsible for the filing.

In cases of failure to notify, the FCA can also order the parties to notify the transaction or restore the situation prevailing prior to the transaction, subject to daily penalty payments. In determining the amount of the fine, the FCA must take into account, in particular, the circumstances leading to the omission or the inaccurate statement, and the conduct of the undertakings concerned during the procedure.

Non-compliance with procedure before the European Commission. For transactions subject to EU merger control, the parties incur a fine of 10% of their aggregate turnover for implementing a concentration prior to the European Commission clearance decision.

The European Commission can impose a fine up to 1% of the aggregate turnover of the undertaking or association of undertakings concerned when the information supplied was incorrect.

The main restrictive practices potentially relevant in the context of a JV are anticompetitive agreements prohibited by Article L. 420-1 of the Commercial Code and Article 101 of the Treaty on the Functioning of the European Union (TFEU). These prohibit companies from distorting competition by co-ordinating their decisions:

When the JV is not full-function (see Question 29, Triggering Events/Thresholds: A full-function JV), it is examined under these rules prohibiting anticompetitive agreements. The JV may be considered as a vehicle for co-ordinating behaviour between two or more companies (usually the companies controlling it). The JV will be subject to competition law scrutiny of its:

When assessing whether a JV constitutes an anti-competitive agreement, the FCA examines whether the creation of a JV has the object or effect of directly or indirectly restricting (actually or potentially, and appreciably) competition in France or in the EU.

The block exemption mechanism is based on a presumption that below a certain level of market power, the positive effects of agreements outweigh any negative effects on competition, subject to the existence of hardcore restrictions.

Certain agreements between companies are not prohibited by competition law if the parties can justify that they are based on objective reasons of economic efficiency and that they allow consumers a fair share of the resulting benefit (efficiency gain) (Article 101(3) TFEU and Article L. 420-4, Commercial Code).

Specific regulations exempt certain categories of agreements, mainly at an EU law level. These include block exemptions for:

The European Commission's Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements (soon to be revised) usefully detail the EC's approach to agreements between competitors.

Under French law, only two exemption decrees have been enacted, specifically for the agricultural sector:

When the JV participants plan to pool existing IP assets (background IP) into the JV, or envisage that the JV will generate IP (IP results), it is important to:

It is important to:

Clear provisions are necessary for the protection of IP results while the JV is ongoing (for example, detailed drafting around any patent filings required).

Clear provisions are necessary to determine how IP results should be addressed at the termination stage. This can include, for example, cross-licensing provisions, and options to purchase.

Articles 433-1 and 131-38 of the Penal Code (in French) (Code pénal) prohibit corruption (whether active or passive, private or public) and influence peddling. They apply to:

These offences are punishable by:

Law 2016-1691 of 9 December 2016 (in French) (Sapin II Law) on transparency, anti-corruption, and economic modernisation imposes requirements where a company both:

The president, CEO, and managers of a company that meets these thresholds must take measures to prevent and detect the commission (whether in France or abroad) of acts of corruption or influence peddling in accordance with procedures the company must have established (for example, an anti-corruption code of conduct, a whistleblowing procedure, risk mapping, and third-party due diligence).

Where a company prepares consolidated financial statements, these obligations under the Sapin II Law apply to the company itself and to all its subsidiaries or controlled entities (defined in Article L. 233 of the Commercial Code).

It is standard practice to include anti-corruption provisions in JV agreements, making failure to prevent bribery or more broadly any breach of legal anti-corruption obligations a breach by the failing party, and, in some instances, a trigger for termination of the JV agreement.

Compliance due diligence is standard practice (including verification of the background of the contemplated JV partner, assessing its reputation, expertise, the maturity of its anti-corruption programme, and identifying any potential or actual conflicts of interest).

The Sapin II Law provides protection for whistleblowers acting in good faith and reporting concerns of which they have personal knowledge. It does not have cross-border application. This protection includes the company's obligation to maintain strict confidentiality regarding the whistleblower's identity, and a prohibition of any form of retaliation against the whistleblower. Therefore, a whistleblower cannot be dismissed, sanctioned, or discriminated against for having reported facts.

Anti-corruption warranties are standard practice. The Sapin II Law requires companies with revenues of EUR100 million and above and more than 500 employees to set up a corruption prevention and detection system.

There are no anti money laundering rules or counter terrorism financing rules that may apply in the context of a JV with a foreign participant.

JVs are usually set up to carry out projects which require the JV to rely on rights or assets owned by JV participants. As a result, JVs require an extensive framework of contracts between the participants, not with respect to their governance but to their operation. For shareholders' agreements and constitutional documents, see Question 6.

There is no specific legislation regarding foreign investment through JVs, but there is general legislation controlling foreign investments.

Foreign investment control is triggered when:

There are some restrictions on the foreign ownership of companies operating in very specific sectors. For example, in the media sector, foreign operators cannot make an acquisition that would result in them holding, directly or indirectly, more than 20% of the share capital or voting rights in a company which holds an authorisation for a terrestrial radio or television service provided in French.

When foreign investment control is triggered, advance authorisation from the French Ministry of Economy (MoE) is required.

This authorisation has a 75-day maximum timescale, from filing of the application. The period is divided in two parts:

Specific information concerning this process is available at Ministry of Finance Economy and Industrial and Digital Sovereignty: The conditions of a transaction subject to prior authorisation (in French).

There are no residency requirements.

There are no restrictions on investment levels.

There are no foreign exchange controls.

There are no economic or financial incentives for foreign direct investments in a JV.

Parties can freely decide to set up a contractual JV under a foreign law and foreign jurisdiction. Where the JV is structured as a corporate entity, it must be created under French law but parties can submit the rules related to the creation and the existence to French law whereas some other rights and obligations can be governed by a foreign jurisdiction. This is of course not recommended and a single seat of jurisdiction is likely to be the best option.