At Renault Proxinvest challenges the validity of the State voting for its recently acquired covered shares

In view of the Renault general meeting, for which the Research report is available as usual on the  , following the unexpected rise of the State stake in order to impose the double voting rights,  Proxinvest wrote to RENAULT  and to the AMF on  the vakidity of the State vote on covered shares.

                                                                                                                                                             Paris, Wednesday, April 29, 2015


Under the implementation of the  Florange law Renault  intending to oppose the  double voting right provision  presented a resolution No 12 for the general meeting of 30 April maitaining the “one share one vote” principle. On April 8, the French Ministers of Economy and Finance jointly announced “the acquisition of up to 14 million Renault shares (approximately 4.73% of the capital) to provide the means to support the adoption double voting rights by Renault.” This massive investment of 1.2 billion euros was confirmed April 22, 2015  with an announcement  that teh State  had raised its participation of 15,01% to 19,74% of the capital.

This press release added: “It is reminded that the State holds fixed price put options on 14 million Renault shares and sold call options with a fixed price of 14 million Renault shares. The contractual maturities of these options range between 7 October and 28 December 2015. ” The State  also confirmed its desire to “defend its interests as a shareholder, weighing in favor of the introduction of double voting rights in the governance of Renault, and the strategic nature it attaches to its participation in the capital of this great company. / .. In line with its objectives the rise of the  State in Renault’s capital is only temporary. “

This development was followed by a debate between the Board and the Minister of Finance, with the first starting April 16 publicly maintained its position worrying for the consequences of such  rise in capital and double voting rights for the the balance of the alliance with Nissan. It should be however reminded that the French State in 1999 owned over 45% of the capital and voting rights of Renault.It had then agreed to be diluted by Nissan’s entry to 37,21%, then gradually reduced its stake in Renault to 15%, before this announced temporary increase to 20%.

A question arises for the protection of savings invested in shares of French companies and for the good functioning of financial markets, which seems to us, as to the AMF undermined by the double voting rights [1 ] just as by some market manipulation that have little to do with the long-term financing of the economy.  Indeed, the question for us today arises whether the voting rigt associated withe the shares underlying call options sold by the State agency for over 14 million Renault shares are not lost to the State as a shareholder , and if the vote of such Securities by the option seller would not make irregular  for fictitious subscription part of the State participation.

We noted that the Paris Court of Appeal [2] ruled [3] that an assignment in available white to full promise of sale transfers the right to vote as well as in the transferee had decided the Criminal Chamber of the Supreme Court in a ruling [4] delivered on 21 January 1960.

Proxinvest, as advisor of minority shareholders, has long requested that the law or regulations deny any voting right on those securities duly promised for resale for usurpation of a shareholder vote.

The vote of “borrowed” or, more accurately, promised for resale shares, or of  shares  underlying sold call options, here by the French State, is a fairly common manipulation nowadays, with generally occult OTC contracts. But this does not prevent the Regulators to recognize that the lack of economic risk on the asset, or reduction of risk in the case of sold options, constitutes a breach of the affectio societatis creating a real malfunction, made public here, of the financial markets, because the vote corresponding  to such shares is a form of usurpation of a shareholder quality.

We thank you in advance for your insights on these issues and ask you, Gentlemen, to receive the expression of our best regards.

                                                                                         Pierre-Henri Leroy                             Loic Dessaint


P.S. : see also the FT column*

[1] Note in passing the examination before the Parliament the Florange law text in 2014, the Financial Markets Authority (AMF) had it, assured that “the automatic application of double voting rights would, at best, no significant real effect, and at worst, could lead to negative or perverse effects “, a reform may affect the image of the Paris” already known for making sprains commonly accepted principles of shareholder democracy, the principle of equality between shareholders in particular. »

[2] Source: Madame Renée Kaddouch thesis on voting rights of the associate;

[3] CA Paris 11 May 1993, RTD com. 1994 p. 67, obs. Y. REINHARD; Gas. PAL 1993, 2, p. 576, obs. JP MARCHI

[4] In this case, the Court of Cassation judges approve the fund to have a person sentenced on the basis of Article 13 of the Law of 24 July 1867, reproduced in Article 242-9, 2 ° on the basis that the acquisition of shares was purely fictitious. The accused, in his defense, excipait of the existence of a dealer agreement he had reached with a company. According to him, this contract does not confer the rights to pecuniary dealer, therefore, he alone was a shareholder and therefore holds the right to vote. Nevertheless, the Court of Appeal and the High Court have not been sensitive to his reasoning, considering the disputed contract as implausible and contrived. Therefore, only the company could participate in the meeting, the accused is guilty of the crime of simulation as a shareholder.

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