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Partner Nicolas Brooke and Marie-Agnès Nicolas, Counsel at Hughes Hubbard & Reed, discuss the French Supreme Court’s milestone decision on 25 November 2020, holding that a target company’s criminal liability could be transferred to the acquiring entity as a result of a “merger by acquisition”. They further examine how the Court acknowledged the existence of an “economic and operational continuity” between merged companies and suggests how the latter should get themselves in working order, in Revue Internationale de la Compliance et de l’Ethique des Affaires.

Nicolas and Marie-Agnès’ article was published in Revue Internationale de la Compliance et de l’Ethique des Affaires, February 2021, and can be found here.

On November 25, 2020, the French Supreme Court issued a milestone decision holding that a target company’s criminal liability could be transferred to the acquiring entity as a result of a “merger by acquisition”. In doing so, the Cour de cassation reversed a well-established body of precedents according to which Article L. 121-1 of the French Criminal Code – which establishes that one cannot be held liable for a third party’s misconduct – prevented an acquiring company from being prosecuted for offenses committed prior to the merger by the acquired company, which was dissolved as a result of the merger. Indeed, the Court acknowledged the existence of an “economic and operational continuity” between merged companies. While various signals made such an evolution foreseeable, its practical consequences remain to be assessed. This comment suggests how companies should get themselves in working order.