BREXIT: Much ado about nothing?

The Macron law: What are the impacts on posting workers to France by foreign employers?

Piercing of the corporate veil.

BREXIT: Much ado about nothing?.

There is no doubt that the success of the referendum held last 23 June, in which the UK voted in favour of leaving the European Union, has caught many of us off guard. Never before a State Member had voted to leave the EU and ineluctably the absence of precedents has created a strong climate of uncertainty.

We must firstly clarify the first of many doubts: what is the legal effectiveness of the British referendum? The referendum was only consultative and thus lacks any legal effects. The UK Parliament could, at least initially, turn a blind eye to its result. Indeed, all EU regulations remain directly in force and until the English Parliament does not formally initiate the proceedings set out in article 50 of the EU Treaty, the brexit will not be effective. At this stage, a new round of negotiations would start between the UK and Europe.

Despite the complexity to predict the specific effects of the brexit on the different law fields, we put forward below some considerations:

• Commercial and Tax Law

The break of the EU single market will imply the establishment of trade borders.

In terms of customs duties, the UK will lose the benefits of the applicable rates for being a State Member within the trade agreements framework between the EU and third-party countries, which will cause an increase of the final cost of many goods. All antidumping duties or anti-subsidies imposed by the EU will not be any longer applicable after the brexit. Consequently, the UK will be obliged to be provided with antidumping laws and its own customs code. In these circumstance, import and export of goods from or to the UK currently exempted from any charges, would be subject to new customs duties.

• Contracts and M&A

As regards the commercial agreements currently in force, certain termination or force majeur clauses may hardly have an immediate terminating agreement; on the one hand, because from a practical point of view it is unlikely that the parties can – or want- to interrupt the existing exchange of goods and provision of services, even in the case of an excessive unexpected burdensome due to the brexit and on the other hand, because the voting is not included within the usual events of force majeure provided by law. Notwithstanding the foregoing, the long-term contracts executed as of this date will mandatorily require the adoption of precautionary measures against the brexit consequences, such as new trading rates, fluctuations in the exchange rates, tax modifications, etc.

Within the acquisitions and major commercial transactions framework, an exponential reinforcement of the due diligence requirements will be appreciated. A certain number of M&A proceedings, such as cross-border mergers, transfers of insurers or EEIG, are based on European regulations that will cease to apply, so that more transactions will be subject to control by the regulatory authority of the markets and the UK competition (CMA).

As regards the commercial agreements currently in force, certain termination or force majeur clauses may hardly have an immediate terminating agreement(…)

• Intellectual Property

Two areas will be particularly affected: the Community trademarks and the proposal of unitary patent.

Trademarks, drawings and models registered before the Intellectual Property Office of the European Union after the brexit will have no protection in the UK. Transitory provisions are likely to be enacted to allow the registration in the UK of the existing EU trademarks as national trademarks. For any new applications, it is advisable to submit the application of protection both in the EU and the UK.

As regards patents after brexit, the UK is an independent signatory of the European Patent Convention, so that the brexit will have no impact on the capacity of patent holders to obtain protection in the UK as a European Patent (GB) by means of the ordinary proceeding before the European Patent Office (EPO). However, the UK will lose the right to participate in the proposal of unitary patent and the project will be discontinued until new agreements are adopted.

*With collaboration of the law firm Martínez-Novebaci-Alessia Placchi.

The Macron law: What are the impacts on posting workers to France by foreign employers?.

FRENCH DESK

In 2015 – 2016, we have seen a significant implementation of new rules and regulation related to French Labour Law, among other areas, notably Macron and Rebsamen laws.

While we are waiting for the final version of the El Khomri law to be passed, we wanted to provide you with a summary of one of the significant changes of the Macron Law.

In fact, french law n°2015-990 of 6 August 2015 relating to growth, activity and equality in economic opportunities has modified the legal provisions applying to the posting of workers in France by foreign employers.

DEFINITION OF A POSTING: WHAT HAS CHANGED

Before the new law, French legal provisions governing the posting of employees did not apply when the foreign employer’s activity:

• was entirely directed towards France,

• was conducted in premises or with infrastructures located in France from which its activities were conducted on a regular, stable and continuous basis,

• included searching and prospecting for customers or hiring employees in France.

In such cases, the employer was subject to the provisions of the French Labour Code (Code du travail) applicable to companies located in France.

If the rules on post work are applicable, posting workers will only be subject to the French Labour Code, and specifically article L.1262-4.

Under the law as modified, French legal provisions governing postings do not apply when the foreign employer:

• conducts activities in the country where such employer is established that solely relate to internal or administrative management,

• conducts its activities in France on a regular, stable and continuous basis.

The former provisions are no longer applicable.

This significant change is likely to broaden the circumstances in which a company established in another Country is no longer deemed to be providing a service in France, and will consequently become subject to the provisions of the French Labour Code applying to companies established in France.

These provisions became effective on 7 August 2015.

DECLARING THE POSTING ONLINE

Declaring the posting to the Labour Inspector for the place where the service is performed is currently permitted by any means that establish that the notification was made on a certain date. When the relevant new provisions become effective, the declaration must be made online. The manner in which the declaration must be made will be set forth in a decree. Until then, the old notification provisions continue to apply.

ADMINISTRATIVE FINES

With respect to the posting employer, the amount of administrative fines remain unchanged, i.e., up to €2,000 per posted worker, and up to €4,000 in the case of a repeat offence occurring within one year commencing on the date the first fine was notified.

However, the total amount of the fine, which was previously limited to €10,000, has been increased to €500,000 under the new provisions.

This provision became effective on 7 August 2015.

INCREASED LIABILITY OF COMMISSIONING PARTIES AND PRIME CONTRACTORS

1. Obligations relating to declaring the posting

Prior to the new law, if the commissioning party or prime contractor did not ensure that the employer of a posted employee complied with its obligations to declare the posting and appoint a representative in France, such commissioning party/prime contractor could have been liable for an administrative fine of up to €2,000 per posted employee (up to €4,000 for repeat offences), capped at a maximum amount of €10,000.

Under the new law, the fine amounts remained unchanged. However, the cap on the fine has been raised from €10,000 to €500,000 per employee and per proceeding.

2. Failure to furnish the posting declaration

Under the new provisions, if the foreign employer does not provide the commissioning party or prime contractor with a copy of the posting declaration, such commissioning party or prime contractor must file a declaration with the local Labour Inspectorate within 48 hours following the commencement of the posting.

The failure by the commissioning party/prime contractor to make the above-mentioned declaration may result in an administrative fine (up to €500,000.

These provisions, which did not exist prior to the new law, became effective on 20 January 2016.

3. Injunction to cease the illegal conduct

The new provisions provide that a commissioning party or prime contractor that is notified in writing by the labour inspectorate that a posted employee has not been paid his/her legal or contractually agreed minimum salary, in full or in part, must immediately enjoin the relevant French contractor and its immediate instructing party, in writing, to cure the situation without delay.

Prior to these new provisions, the French Labour Code did not contain such a requirement.

Within seven days from the date the injunction is received, the posting employer and, as the case may be, its instructing party must inform the commissioning party/prime contractor of the measures it has taken to address the situation.

Upon receipt of a response, the commissioning party/prime contractor must send the relevant information to the Labour Inspectorate that notified it of the failure to pay. If no response is provided within the deadline, the commissioning party/prime contractor shall so inform the relevant Labour Inspectorate.

If the failure to pay has not been cured by the employer and the prime contractor/commissioning party does not renounce its service contract with such employer, the prime contractor/commissioning party shall be jointly and severally liable with the employer to pay the relevant wages, indemnities and charges.

These provisions became effective on 20 January 2016.

SUSPENDING PERFORMANCE OF THE SERVICE

The measures described below are new and apply as of the effective date of the new law.

• Identification of a breach by the employer

If the Labour Inspectorate identifies a breach by the employer , it shall enjoin such employer in writing to cease the illegal conduct within three days as from the date of the injunction. This period may be reduced in exceptional circumstances but may never be less than one day.

• Suspending the activity

The DIRECCTE may notify the employer’s representative of a reasoned decision to issue a temporary suspension given the seriousness or repeated nature of the identified breaches. This notice must state:

• The duration of the suspension (up to one month maximum),

• Appeal procedures and time limits.

This suspension may not result in the termination or suspension of the posted workers employment contract, or any financial prejudice to the relevant employees .

• Termination of the suspension in the event the employer cures the illegal situation

• Absent a cure, there is a risk of an Administrative fine in the event the suspension is not complied with

The applicable fine is up to €10,000 per relevant employee.

This sanction must be applied within two full years as of the day the breach occurred .

These provisions became effective on 4 December 2015.

*With collaboration of the law firm Racine – Alessia Alde - Dufour

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Piercing of the corporate veil.

LATINAMERICA DESK

If you are about or interested in doing business in Brazil, some basic information is mandatory.

Companies established in Brazil are endowed their own legal personality, i.e. they acquire autonomy in relation to their partners, thus being subject to rights and obligations, and they may enter into legal transactions and legal acts in general, in their own name.

The existence of autonomy in relation to the partners, shareholders and legal representatives of the company covers, in addition to the assets held by the company, even if initially originated from contributions from investors or arising from the exploitation of a business activity, if applicable.

In Brazil, with the exception of some legal entities arrangements, such as general partnerships, the owners’ equity, i.e. the company’s assets shall not be confused with the assets of the partners, as a general rule. Consequently, the debts of the company neither will reach the assets of the partners, nor will the debts of the company reach the company’s assets.

(…) the owners’ equity, i.e. the company’s assets shall not be confused with the assets of the partners, as a general rule.

However, there are situations where the legislation provides, on a special basis, for the possibility of removal of the existing distinction between the legal personality of the company and the personality of its partners. In these cases, the distinction between the owners’ equity and the partners’ equity is disregarded.

The removal of the distinction between the personalities and the assets of the company and of the partners aims to prevent abuse of right, namely, misuse of a right against others.

The abuse of right materializes in misuse of the company’s purpose, namely in improper and abnormal use of the company to achieve purposes outside the scope for which it was established.

The abuse of right can also materialize in the equity confusion between the company and partners. A review of the accounting records or of the handling of the company’s funds may show that the company pays debts of partners or that partners receive credits from the company, for example, characterizing the confusion of goods.

Under these assumptions, the piercing of the corporate veil has legal provisions in the Brazilian Civil Code. The provision allows the court, at the request of the party or of the Prosecution Office, to decide that the effects of certain obligations taken out by the company shall fall upon the personal assets of the directors or partners of the company.

Regarding consumer law, piercing can also take place in the event of bankruptcy, state of insolvency, closing or inactivity of the company, caused by mismanagement, i.e. by acts of incompetent management, leading to direct liability to consumers of one who committed such acts.

Upon piercing, the legal personality and the equity autonomy of the company are removed/disregarded, enabling accountability of partners and/or of the director for damage caused to third parties as a result of abuse of right as determined.

The piercing of the corporate veil, however, is not restricted to issues of Civil, Commercial and Consumer Law, having specific rules when due to labor, tax and environmental disputes.

Despite the existence of legal provisions for piercing of the corporate veil, it is important to keep in mind that this piercing shall be applied exceptionally, only in cases of evidence of diversion of the company’s purpose, of equity confusion between company and partners or occurrence of the events contemplated in the law that protects Brazilian consumers.

*With collaboration of the law firm Nascimento & Mourão – Alessandra Nasimento.