American-based multinationals that want to take over a French company in an all-stock transaction can do it — but there are high hurdles to clear, says attorney David Freedman, who heads Baker & McKenzie’s projects, finance and capital markets group in its Paris office.

An American acquirer would become subject to French securities law, which means meeting French and U.S. securities rules simultaneously. It’s not easy, says Freedman. While basic principles of disclosure are similar in the two countries, the mechanics are different. Just to send out an earnings release in France, for example, a company needs approval from the Commission des Op�rations de Bourse, one of the country’s two market authorities. Unlike the U.S. Securities and Exchange Commission, the French commission asks questions about the release before the document is made public.

After the release is approved, companies must make sure that its contents get into the marketplace in a timely fashion. If a release is not picked up by the newswires, the company must buy space in a national financial newspaper. Full-page ads typically run around $15,000. And foreign companies must have their ads translated into French.

“That’s the kind of thing that will drive an American nuts,” says Freedman, “because it’s a big waste of time and money.”

BANKRUPTCY: St�phanie Chatelon, Deloitte & Touche Juridique et Fiscal

French bankruptcy law doesn’t have much sympathy for creditors, according to St�phanie Chatelon, a Paris-based partner at Deloitte & Touche Juridique et Fiscal (the law firm affiliated with the U.S.-based accounting firm Deloitte & Touche). The main goals of the law — and there are basically only three, though there’s quite a lot of regulatory language to explain them — are to revive the activity of the business, to save jobs and, lastly, to pay back creditors.

Creditors, even secured ones, have a slim chance of recovering their money once a bankruptcy proceeding begins, Chatelon says. “When a company goes bankrupt [in France], they are often too deep in difficulties and their assets have already been pledged,” she explains.

Chatelon therefore advises creditors that the minute there’s word that a company may be in financial difficulty, they should pursue their claims as aggressively as possible. Generally, once a French bankruptcy proceeding starts, liabilities are frozen for an “observation period” of six to 20 months. (The United States does not have a comparable rule, but there is a cooling-off period in which the debtor has 180 days to propose and confirm a plan. The judge may extend that time.) During this time a court-appointed receiver tries to reorganize the company so that it can continue operating. Legal fees incurred after the bankruptcy filing, employee compensation and limited groups of creditors all have priority on the debtor’s assets. The court-appointed receiver can even force current creditors to keep doing business with the debtor.

“That’s a big difference [from American bankruptcy law],” says Chatelon. “For Americans, it’s quite unacceptable that you’ve already lost money with a company and someone from the court imposes the continuation of the contract you have with the bankrupt company.” Even though French law is designed to save companies, Chatelon notes, 90 percent of companies that go into bankruptcy in France wind up liquidating. “The idea of the law was very good,” laments Chatelon, “but the results have been very poor.”

INTELLECTUAL PROPERTY: Nathalie Hadjadj-Cazier, HSD Ernst & Young

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