This memorandum briefly summarises (I) the definition of a public offering of securities under French law and (II) the criteria under French law which may be used to structure an offering of securities as a private placement.


While there is no single legal definition, French law sets forth certain criteria for the determination of what constitutes a public offering.

(i) The main criterion for determining whether an offering of securities constitutes a public offering is the number of investors. Under COB Regulation No. 92.02, the "diffusion" (distribution) of securities beyond a circle of 300 persons is deemed a public offering.

The regulation refers to the "diffusion" of securities to more than 300 persons and therefore does not prohibit the offering of securities to more than 300 persons; however, the COB has indicated in one case that an offering of securities is not a public offering if less than 300 investors are contacted (See II below). Therefore, offering securities to more than 300 persons, even if less than 300 persons actually purchase such securities, increases the risk of the offering being considered a public offering by the French regulatory authorities.

Please note that with respect to eurobonds (see "Bonds Offerings in France"), a private placement is defined as a placement with a small number of pre-determined investors who are non-French residents and who hold the eurobonds for a certain period of time (Comite des Emissions Regulation of June 28, 1993).

(ii) An offering of securities may also constitute a public offering (even if there are less than 300 investors) if the issuer uses publicity or "demarchage" for the placement of its securities. However, under certain conditions, an offering of securities made by way of "demarchage"( but not by way of publicity) may nevertheless constitute a private placement (See II below).

"Demarchage" is defined as the solicitation of investors at home, at work or in public places.

Publicity includes press releases and advertisements to the public generally, but excludes the publication of information required by law and general information relating to the issuer's activity or results, provided, however, that no reference to any offering of securities is made. However, the issuer should be careful if such general information is published shortly before any offering of securities.

Conducting roadshows, as such, does not compel a conclusion that a public offering is involved, provided the invitations themselves do not constitute prohibited publicity and the other guidelines for private placements (as described in II below) are followed (e.g. there are less than 300 institutional investors at such meetings). As a practical matter, these meetings should not be held in public places (such as hotels), but rather at a bank's offices, for example. No journalists should attend.

Arranging for an announcement of the offering before it is closed on a Reuters or Telerate screen or similar medium, on the other hand, would probably constitute publicity.

(iii) An offering of securities may also constitute a public offering (even if there are less than 300 investors) if the issuer uses a financial intermediary (such as a bank, a financial institution or a broker) for the placement of its securities. However, under certain conditions, an offering of securities made by a financial intermediary may nevertheless constitute a private placement (See II below).

(iv) An offering of securities may also constitute a public offering (even if there are less than 300 investors) if the securities are newly issued securities to be listed on a stock exchange. However, this rule does not apply to the listing of euro-franc bonds on the "compartiment international" of the "Cote Officielle" of the Paris Bourse, to the extent such listing is compulsory (See "Bonds Offerings in France").


There is no definition of a private placement under French law. However, the COB issued guidelines in 1985 providing that an offering is not deemed a public offering if:

(i) the telex and the prospectus which are sent at the request of institutional investors indicate that (x) the information contained therein may not be delivered to the public, and (y) the securities should not be resold in France;

(ii) the institutional investors are pension funds, insurance companies, "Caisse des Depots" or credit institutions acting for their own account;

(iii) there are less than 300 such investors; and

(iv) no subscription form is attached to the prospectus.

Please note that these criteria should not be construed as absolute standards for private placements. Such criteria were issued in 1985 in a specific context (U.K. privatisations), and practice has evolved since. Any proposed placement should be considered on a case by case basis.

The COB has recently issued a proposal to modify the definition of public offerings. This proposal will have to be submitted to the Parliament and, if enacted, would be followed by new COB regulations. Among the modifications proposed by the COB is a definition of private placement. The COB has indicated that such definition would be immediately applicable even though the Parliament has not adopted the new bill. Under this new definition, a private placement is an offering (whether primary or secondary) of securities to a "limited public" and no means of publicity are used. The COB could consider that the legal presumptions described above in paragraphs (ii) (with respect to demarchage only), (iii) and (iv) of Section I if the placement is targeted to a limited number of investors and is not aimed at distributing securities into a "large public".

Such private placements would then only require the preparation, and approval by the COB, of a prospectus if new securities are issued and listed on a French exchange. Issuance of new securities (without listing on a French exchange) and sale of existing securities (whether listed or not on a French exchange) would not require preparation, and approval by the COB, of a prospectus; the COB indicated, however, that prior COB approval would be required to effect a private placement. Please note that the newly proposed requirement of obtaining COB approval for a private placement has no legal ground and could not be enforced by the COB; however, such approval will give comfort to the issuer or sellers of securities in France.

The COB has further indicated that investors in a private placement must act for their own account, and that the COB may in the future consider the possibility of imposing on such investors that they hold their securities for a certain period (such as two or three years).

For further information contact please contact Herve Letreguilly on +33 1 44 71 17 17, or enter a text search 'Shearman and Sterling' and 'Business Monitor'.