#MARCH 2017 – SAPIN II LAW

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The law on transparency, combatting corruption and the modernisation of the economy, better known as the Sapin II Law, was published on 10 December 2016.

The law introduces new constraints on companies with a view to reinforcing the battle against corruption and tax evasion.

Most notably, the law introduces the following provisions:

– Implementation of measures against corruption and influence peddling;
– Protection of whistle-blowers; and
– Information on effective beneficiaries.

IMPLEMENTATION OF MEASURES AGAINST CORRUPTION

Who is impacted ?

This obligation applies to chairmen, CEOs, boards of directors (depending on their roles) and managers.

Measures

The following measures must be taken and the following procedures implemented:

• Preparing and implementing a Code of Conduct that defines and illustrates the different acts that may be characterised as instances of corruption or influence peddling. Such Code of Conduct must be included in the company’s internal policy, and thus be subject to the staff representative consultation procedure;
• Implementing an internal alert mechanism to allow employees to notify conduct or situations contrary to the Code of Conduct (whistleblowing);
• Establishing a risk map in the form of documentation consistent with the activity of the company, which is regularly updated and intended to identify, analyse and rank the risk exposure of the company to external solicitations for the purposes of corruption;
• Implementing procedures for (i) evaluating clients, suppliers and intermediaries, particularly in light of the established risk map; and (ii) internal and/or external accounting review;
• Putting in place a training programme intended for managers and other staff members who are most exposed to the risk of corruption and influence peddling;
• Putting in place a tailored disciplinary regime in the event of an employee’s failure to comply with the Code of Conduct; and
• Putting in place an internal supervision and evaluation mechanism for the above-listed measures.

Timeframe

These obligations will enter into force on 1 June 2017.

Risks

Compliance with these obligations will be supervised by the French Anti-Corruption Agency. In the event of an established breach, and after having given the person in question the opportunity to present their observations, the Agency may issue a warning to the company and potentially bring the matter before the Sanctions Commission.

The Sanctions Commission will be able to (i) order the company and its representatives to adapt the internal compliance procedures in line with its recommendations, within a set period of time that may not exceed three years; (ii) to issue a financial penalty of up to €200,000 for management and € 1.000.000 for the company; and/or order the publication, disclosure or posting of the decision of injunction or financial sanction or an extract of it, as directed.

It is important to highlight that independently of the liability of the managers as natural persons, the company is also liable as a legal person in the event of a breach of the above obligations.

The law also creates an additional penalty applicable to legal persons proven guilty of either active or passive corruption, influence peddling or equivalent offences in the form of a requirement to submit, under the supervision of the French Anti-Corruption Agency, to a compliance programme to ensure the implementation of the various measures for the detection and prevention of acts of corruption.

To be noted

If the offences are committed abroad by a French national or a person habitually resident in France or performing all or a part of his/her economic activity on French soil, then French courts will have jurisdiction in all circumstances.

DEFINITION AND PROTECTION OF WHISTLE-BLOWERS

The law creates a protective framework for whistle-blowers.

Who is impacted ?

A whistle-blower is a disinterested individual who acts in good faith to reveal or signal :

– a crime or offence,

– a serious and manifest violation of an international obligation ordinarily ratified or approved by France, a unilateral act of an international organisation undertaken on the basis of such an obligation, a law or regulation,

– a serious threat or prejudice to public interest, of which he/she has personal knowledge.

Facts, information and documents covered by military secret, medical confidentiality or lawyer-client privilege are however excluded from the alert procedures.

Measures

The procedure to be followed by a whistle-blower is comprised of the following three steps:

(i) The alert must be brought to the attention of the direct or indirect supervisor, the employer or the person appointed by the employer for this purpose.

(ii) Should the above person fail to react within a reasonable period, the judicial or administrative authorities or a professional body must be alerted.

(iii) If the alert is not taken into consideration within three months, it may then be made public.

Nevertheless, in the event of serious and imminent danger or where there is a risk of irreversible damage, the judicial or administrative authorities or a professional body may be alerted directly and the alert may be made public.

More concretely, the protection of whistle-blowers will require companies with at least 50 employees to put in place procedures to collect whistle-blowing notifications from their staff or external or occasional consultants.

These procedures must ensure that the identity of the whistle-blower remains strictly confidential, as well as the identity of those implicated by him/her, and that the information collected by the alerted party also remains confidential.

In addition, a person who makes a notification in accordance with the above requirements may not be subject to criminal sanctions or disciplinary or discriminatory measures or be dismissed.

Timeframe

How these procedures will work will be further detailed in a decree expected to appear later this year.

ESTABLISHMENT OF A REGISTER OF EFFECTIVE BENIFICIARIES

In the context of combatting tax evasion and transposing of the European anti-money laundering directive n°2015/849 of 20 May 2015, the Sapin II Law obliges companies and groups required to register with the Trade and Companies Register to provide certain information on effective beneficiaries.

Who is impacted ?

The new measure applies to the following:

• Companies or economic interest groups with their headquarters in a French department and with legal personality;
• Commercial companies that have their headquarters outside of a French department and that have an established presence in such a department; and
• Other legal persons who are required to be registered by legal or regulatory provisions.

Measures

The companies and groups listed above have an obligation to provide certain information regarding their effective beneficiary or beneficiaries to the Trade and Companies Register upon their incorporation as well as regularly during the course of their existence in order to update the information.

The notion of an effective beneficiary found in the Sapin II Law echoes a definition already present in the French Monetary and Financial Code, which refers to a natural person(s):

(i) Who ultimately control, directly or indirectly, the company or group, meaning the natural person or persons who (a) either hold, directly or indirectly, more than 25% of the share capital or voting rights in the company; or (b) exercise, by any other means, the power to control the management or administration bodies or board of directors of the company or the general meeting of its shareholders.

(ii) For which a transaction is executed or an activity is .

Timeframe

From a practical perspective, this new obligation will not become effective until 1 April 2017 and the information to be provided, as well as how it will be communicated, updated and stored will be set out in a decree which is also expected to be published in April 2017.