In France, the regulation of related party transactions (RPTs) involves three steps following the notification to the board of an RPT. First, the board gives its prior authorisation to the transaction. Those who are self-interested do not take part in the vote. Secondly, auditors prepare a report on RPTs.
This rather burdensome procedure often proved artificial and ineffective. Anti-tunnelling laws may have been unproductive because demand for them and shareholder protection more generally had traditionally been low in a culture where top management was a closed club. However, the addition of AMF recommendations in 2012 and legislative modifications in 2014 have increased the quality and quantity of information passed on to auditors and shareholders. The implementation of the 2017 Directive on Shareholders’ Rights may be the occasion to introduce further useful adjustments, such as a legislative clarification of the scope of French RPT law.
This paper is forthcoming as a chapter in Luca Enriques and Tobias Tröger (eds.), The Law and Finance of Related party Transactions (Cambridge University Press).