First-step analysis: Legal and regulatory framework for financial services M&A in France

Legal and regulatory framework


What primary laws govern financial services M&A transactions in your jurisdiction?

In France, M&A transactions are mainly governed by contract law and corporate law, which are laid out in the French Civil Code and the French Commercial Code, respectively.

In the banking and financial sector, the provisions of the French Monetary and Financial Code tend to have an important impact on M&A transactions as they govern the activities and functioning of financial institution such as credit institutions, investment firms, payment institutions or e-money institutions. The General Regulation of the French Financial Markets Authority also contains provisions that apply to certain entities, such as portfolio management companies, in the context of M&A transactions.

In the insurance sector, insurance undertakings are mainly governed by the French Insurance Code, although some types of institutions are governed by other codes, such as the French Mutuality Code for mutualist entities.

In addition to French national statutes and regulations, financial institutions are governed by European regulations that are directly applicable in France.

Instructions and Guidelines issued by competent supervisory authorities at national level (Autorité de contrôle prudentiel et de resolution (ACPR) for the banking and insurance sectors and the Autorité des marchés financiers (AMF) for the investment management sector) or at European level (European Central Bank, European Securities and Markets Authority, European Insurance and Occupational Pensions Authority, European Banking Authority) may have an impact on financial services M&A transactions.

Regulatory consents and filings

What regulatory consents, notifications and filings are required for a financial services M&A transaction? Should the parties anticipate any typical financial, social or other concessions?

In the financial sector, transactions are, in most cases, subject to the prior approval or non-opposition of competent supervisory authorities (ie, the AMF for investment management companies, the ECB for credit institutions (it being specified that the application is first processed by the ACPR) and the ACPR for other banking sector entities and insurers). Pre-closing notification requirements may also apply.

For instance, in the banking sector, if the proposed acquirer decides, individually or acting in concert with another person or persons, to acquire or increase a ‘qualifying holding’ in a French credit institution, it must submit a request for prior authorisation to the ACPR if, following the transaction, one or more of the following criteria is met:

  • the fraction of the capital or voting rights held, directly or indirectly, by such person exceeds one-tenth, one-fifth, one-third or half;
  • the credit institution becomes the subsidiary of such person; and
  • the transaction has the effect of giving this person a significant influence on the management of the credit institution.


This obligation applies similarly to direct and indirect proposed acquirers, which means that each entity or individual in the holding chain in respect of which any of the three criteria above is met must file an application for prior authorisation. The ultimate holder may submit the request in the name and on behalf of the entities it controls, provided that it includes all the relevant information concerning them.

From a procedural standpoint, the proposed acquirers must file an application for authorisation with the ACPR. Once the application is deemed complete, competent authorities then have 60 working days to assess the proposed transaction. The ACPR has the option to ask for additional information, which stops the clock for a period that may not exceed twenty working days (30 days where the acquirer is established outside of the EEA or is not subject to supervision by a European authority). The final decision is taken by the ECB. The ECB may set a deadline for the completion of the proposed acquisition and, if appropriate, extend it.

In the case of mergers where the target credit institution is to be absorbed by another entity and therefore ceases to exist, it is also required to apply for a withdrawal of authorisation. The supervisory authority’s assessment period regarding a withdrawal of approval is not limited in time.

Broadly similar rules and procedures apply for other financial institutions subject to the supervision of the ACPR or the AMF, although the final decision is taken by one of these authorities and not the ECB, and the procedural rules may vary.

For certain types of institutions, such as insurance undertakings or asset management companies, the sale or decrease of a qualified holding may also require prior authorisation or non-opposition from the competent supervisory authority. In the case of insurance companies, the ACPR has a period of 60 working to decide that, in view of the need to ensure sound and prudent management and to protect the interests of policyholders, this operation calls into question the conditions to which the insurance undertaking’s authorisation is subject.

European supervisory authorities have published Joint Guidelines on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector, which explain, inter alia, how to calculate indirect qualifying holdings, how to determine whether acquirers are acting in concert and whether the holding would enable the proposed acquirer to exercise a significant influence over the management of the target. These Guidelines also describe the main criteria used by supervisory authorities for assessing proposed acquisitions:

  • reputation of the proposed acquirer in relation to its integrity and professional competence;
  • reputation and experience of those who will direct the business of the target undertaking;
  • financial soundness of the proposed acquirer;
  • compliance with prudential requirements of the target undertaking; and
  • suspicion of money laundering or terrorist financing by the proposed acquirer.

Ownership restrictions

Are there any restrictions on the types of entities and individuals that can wholly or partly own financial institutions in your jurisdiction?

There are no restrictions on the types of entities and individuals that can wholly or partly own financial institutions in France, provided that the proposed acquirer meets certain conditions.

Indeed, legal and natural persons that intend to acquire a qualifying holding in a financial institution are subject to an assessment of their appropriateness by supervisory authorities. To obtain authorisation to acquire a qualifying holding, they must be in a position to demonstrate that they possess, inter alia, the integrity and skills required as shareholders of said financial institution.

Directors and officers – restrictions

Are there any restrictions on who can be a director or officer of a financial institution in your jurisdiction?

There are no restrictions on who can be a director or officer of financial institutions in France, provided that the proposed officer or director meets certain conditions.

Individuals that are appointed (or reappointed) as directors or officers of a financial institution are subject to an assessment of their fitness and propriety by supervisory authorities. As an example, in the banking sector, the institution shall notify the ACPR of the appointment, together with all the information that will enable the ACPR to assess the good repute, knowledge, skills and experience of the person concerned, as well as their availability. The notification must be made at the latest five or 15 days following the appointment, depending on the type of institution. The review period is two months from the date of receipt of the complete file; for credit institutions that also provide investment services, this period is extended to three months, with the AMF having one month to conduct its own review.

Several criteria are taken into account, such as the experience, reputation, independence of mind and absence of conflicts of interest, time commitment and collective suitability of the applicants. The European Securities Markets Authority and the European Banking Authority have published Joint guidelines on the assessment of the suitability of members of the management body. These Guidelines also address the issue of gender-balance of staff in management.

In addition, the French Monetary and Financial Code provides that persons that were convicted of certain criminal offences in the past 10 years (eg, money laundering, corruption, drug trafficking) are forbidden from becoming officers or directors of a financial institution.

Directors and officers – liabilities and legal duties

What are the primary liabilities, legal duties and responsibilities of directors and officers in the context of financial services M&A transactions?

Under French law, directors and executive officers have a duty to act at all times in the best interest of the company, while taking into consideration the social and environmental stakes of its activity.

The company’s best interest must be determined at the level of the legal entity and may therefore differ from that of its shareholders, employees, the directors and officers themselves or other stakeholders.

Directors and executive officers may be held liable in three cases: (1) if they are guilty of offences under applicable company law, (2) if they violate the company’s articles of association or (3) if they commit a management error (faute de gestion) (ie, if their behaviour deviates from that of a conscientious, honest director or officer who respects the normal rules of management of commercial companies).

In addition, in the context of M&A transactions, French law provides for a mandatory information or consultation of the employee representative bodies of, depending on the impact of the proposed transaction, the target, seller or purchaser. The opinions rendered by the employee representative bodies are consultative only. Failure to complete any required information or consultation process in a timely manner is a criminal offence.

Foreign investment

What foreign investment restrictions and other domestic regulatory issues arise for acquirers based outside your jurisdiction?

In France, foreign investment in sensitive business sectors require prior authorisation from the Treasury Department of the French Ministry of Economy and Finances. Sensitive business sectors are those whose activities could affect public order, public safety or national defence interests or whose activities contribute to the exercise of public authority (eg, weapons manufacturing, telecommunications, energy production, etc).

Financial services sectors such as banking, investment services and insurance are not specifically considered as sensitive business sectors and therefore do not directly fall within the French foreign investment regime.

However, the list of sensitive sectors also covers activities essential to the integrity, security or continuity of operation of an institution, facility or structure of vital importance. Operators of vital importance (OIV) operate infrastructures, the deterioration, unavailability or destruction of which could seriously affect a war or economic potential, the security or the survival capacity of the French nation or seriously endanger the health or life of the population. The OIVs are designated by the French state. Their names are kept secret. About 15 companies in the financial sector (banks and insurance companies) are OIVs and, as such, fall under the regulations governing foreign investments in France.

Competition law and merger control

What competition law and merger control issues arise in financial services M&A transactions in your jurisdiction?

Financial services M&A transactions do not involve specific issues relating to merger control.

Generally speaking, concentrations (ie, mergers, takeovers or creations of joint ventures) are either (1) governed by French law and subject to the control of the French Competition Authority or (2) governed by European law and subject to the control of the European Commission, depending on whether certain turnover thresholds are met.

The calculation of turnover of financial institutions and insurance companies is subject to specific rules under article 5.3 of EU Regulation No. 139/2004. Therefore, the calculation of turnover may require lengthy adjustments.

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