Appointment, powers and incompatibilities
How the name enters the issue contract or the final terms, what the representative may do alone, and who article L. 228-49 rules out. Written in French.
Bondholders’ and Noteholders’ Representative
Massalis is a French company whose sole activity is to act as representative of the noteholders under Articles L. 228-46 et seq. of the French Commercial Code, in issues governed by French law: EMTN programmes, structured notes, Euro PP private placements, convertible bonds. Appointed in the terms and conditions or in the final terms of each series, it remains in office until the notes are redeemed.
- L. 228-46
- Noteholders of the same issue are grouped automatically, for the defence of their common interests, in a body with legal personality.
- Final terms
- On an EMTN programme, the appointment is made in the final terms of each French law series.
- L. 228-49
- Incompatibilities affecting the issuer, its guarantors and their officers, statutory auditors and employees.
The role
What the noteholders’ representative does
Under French law, the holders of notes of the same issue are grouped automatically, for the defence of their common interests, in a body with legal personality. That body acts through its representative.
Unless restricted by the general meeting of noteholders, the representative has the power to take, on behalf of the noteholders, all management acts for the defence of their common interests (Article L. 228-53). It convenes and chairs general meetings, receives and accepts any security granted for the noteholders’ benefit, and brings proceedings on their behalf where authorised to do so.
The representative is appointed in the terms and conditions of the notes or, failing that, by the general meeting of noteholders (Article L. 228-51). Where the notes are offered to the public, the first representatives must be named in the terms and conditions themselves, save for offers reserved to qualified investors or to a restricted circle of investors. On an EMTN programme, the appointment is made series by series, in the final terms of each French law tranche.
Article L. 228-49 prohibits the appointment of the issuer, its guarantors, any company holding at least one tenth of the issuer’s share capital or in which the issuer holds at least one tenth of the share capital, and the officers, statutory auditors and employees of those companies. Market practice is therefore to entrust the role to an independent third party, whether a legal entity or an individual.
The representative may be an individual or a legal entity. A dedicated company remains in office for the whole life of the notes, which may exceed fifteen years, without the documentation having to be amended on the unavailability or succession of an individual.
The mandate
From appointment to redemption
The mandate runs from appointment until the notes are redeemed in full. It covers three sets of duties.
01
Representing the noteholders
Taking, on behalf of the noteholders, the management acts provided for in Article L. 228-53 and dealing with the other parties to the issue.
- Appointment in the terms and conditions or in the final terms
- Management acts taken on behalf of the noteholders
- Acceptance, renewal and release of security
- Dealings with the security agent and the fiscal agent
02
Convening the noteholders
Any amendment to the terms and conditions is a matter for a collective decision of the noteholders, taken in general meeting or, where the documentation so provides, by written decision. The representative convenes and chairs.
- Convening and chairing general meetings of noteholders
- Written decisions where the documentation provides for them
- Agenda, voting forms, quorum, minutes
- Waivers and amendments to the terms and conditions
03
Monitoring the notes
Between collective decisions, the representative receives the information due to the noteholders and monitors the issuer’s undertakings.
- Receipt of compliance certificates, monitoring of covenants
- Information of noteholders in private placements
- Convening a general meeting on a credit event
- Appointment as alternate representative, provided for from the outset
The company
Why Massalis
A sole activity
Massalis carries on no activity other than acting as noteholders’ representative. It provides no advisory services to issuers, arrangers or noteholders, and holds no interest in the companies whose noteholders it represents.
The incompatibilities in Article L. 228-49 can therefore be verified at documentation review: no shareholding, no corporate office, no business relationship with the issuer or its guarantors other than the terms and conditions themselves.
A legal entity
The law allows an individual to be appointed, and a number of mandates are today held in a personal capacity. That exposes the issue to the risks inherent in an individual appointment: unavailability, change of employer, succession, on notes whose term may exceed fifteen years.
A legal entity remains in office for the whole life of the notes, with no amendment to the documentation. Massalis may also be appointed as alternate representative where the terms and conditions provide for succession from the outset.
French and English
EMTN programme documentation and final terms are drafted in English; the formal acts of the noteholders, such as notices of meeting, minutes and registers, are in French.
Massalis works in both languages, with the teams that document issues from Paris, London or Luxembourg.
Counterparts
Who we work with
EMTN and structured products desks
Programme issuers, French and foreign. The representative is appointed in the final terms of each series, as principal or as alternate.
Law firms and arrangers
They hold the pen on the documentation. Massalis provides the appointment clause to be inserted and the documents required for onboarding.
Issuers
Mid-sized companies, property companies, listed companies, first-time issuers in private placements.
Noteholders and investors
A named contact for the exercise of collective rights: information on the issue, convening of general meetings, written decisions.
Questions
In practice
When is the representative appointed?
In the terms and conditions of the notes or, failing that, by the general meeting of noteholders (Article L. 228-51 of the French Commercial Code). Where the notes are offered to the public, the first representatives must be named in the terms and conditions. On EMTN programmes, the appointment appears in the final terms of each French law series. In private placements, the terms and conditions organise the appointment freely.
How is the representative remunerated?
The remuneration is borne by the issuer and set by the terms and conditions or by the general meeting of noteholders and, failing that, by the court (Article L. 228-56 of the French Commercial Code). Our fee proposal is provided on request.
Can the representative be replaced during the mandate?
Yes. The general meeting of noteholders may remove the representative and appoint another (Article L. 228-52), and the terms and conditions may provide for succession, in particular by appointing an alternate representative from the outset.
Resources
On the French law regime
Holding a general meeting of noteholders
Notice, agenda, quorum, majorities, minutes. And the cases where a written consultation is enough to carry the decision. Written in French.
The 100,000 euro denomination threshold
Article L. 213-6-3 of the French Monetary and Financial Code allows the statutory regime to be set aside above a given denomination. What it changes for the issuer. Written in French.
Contact
Get in touch
Tell us about the transaction and we will send you a fee proposal. Four details are enough:
- the type of notes: EMTN series, Euro PP, convertible bonds, plain vanilla bonds
- the expected closing date
- whether the notes are offered to the public or admitted to trading
- for a programme, the number of series expected per year