A Constitutional Review of the Draft 'Macron' Law Introducing Shareholder Eviction under French Law: The Revolution that Didn't Happen

Abstract

In a politically controversial attempt to modernize the French economy, French Minister of the Economy Emmanuel Macron passed a sweeping law earlier this year, reforming many areas of French business law, including bankruptcy law. For the first time under French law shareholder eviction will be available - under certain circumstances and without any breach of the shareholder’s duties - to remove them from decisions affecting the future of a distressed company. This law is a step in the right direction to force shareholders to absorb the company’s losses and allow new shareholders to invest fresh money. Unfortunately, the French government failed to use modern, world-class economic standards to govern a shareholder eviction under the new law. First, by retaining an antiquated trigger of liquidity crisis instead of actual insolvency, the law fails to consider the enterprise value of the company (the "going concern value") as the proper economic basis to recognize that shares have become worthless, an essential element to provide legitimacy for their eviction and avoid the risk of an unconstitutional violation of property rights. Second, by requiring that a judge justify the eviction by finding a "public necessity" to avoid a risk of "serious loss to the economy", the law offers a weak constitutional safeguard for property rights, a loosely defined public interest standard and little guidance for a judge to avoid arbitrary decisions and political interferences. This lack of economic and conceptual basis has unfortunately transformed a genuine attempt to reform French law into an inadequate and potentially unconstitutional new law.