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Concerns over Florange law may be overblown, says expert

Concerns about a new law that critics say gives too much power to the French state may be overblown, an expert has said. 02 Mar 2015

According to press reports 19 investors have written to France's largest companies asking them to 'opt out' the 'Florange' law, which was passed last year and which gives investors who have held stock for over two years double voting rights. In the past, companies could choose to introduce double voting rights, but the new law makes this automatic, the Financial Times reported.

However, investment expert Christophe Clerc of Pinsent Masons, the law firm behind said such concerns may be overblown.

Nineteen investors, with combined assets of €2.3 trillion (US$2.6 trillion), have written to the 40 largest companies in France to ask them to alter their articles of association so that this does not apply. The French state has shares in many French companies and can often control voting rights over the wishes of smaller investors, the Financial Times reported.

"The government is effectively changing the law to create an enhanced share class to protect France so it can influence the way France is governed," Neil Dwane told the Financial Times. He is chief investment officer for European equities at Allianz Global Investors, which is one of the 19 investors.

Clerc, who was closely involved in the discussions relating to the drafting of the new law, said: "Loyalty shares raise more concerns than they should. Studies show that companies with loyalty shares perform as well as others on average; some are better than their peers, other are worse – there is no clear pattern. Investors should thus check on a case-by-case basis whether they should have a concern instead of taking a general view on this subject."

Other signatories to the letter include Aberdeen, Robeco, PGGM and TIAA-CREF, the Financial Times said.