Not for the first time, proof of share ownership is being used to stymie shareholder engagement and activism. This time it's France where Franco-American Financier and Activist Guy Wyser-Pratte is attempting to bring about changes at Lagardère SCA.

With echoes of Apache v Chevedden, following a series of wrangles about two shareholder proposals, the protaganists met in Commercial Court in Paris on Wednesday to resolve their differences. In a press statement it was announced that the French Court had rejected Lagardère SCA's attempts to delay the vote by by requiring that Wyser-Pratte's shareholder proposals be published in the BALO before consideration at the Company's April 27th, 2010 AGM/EGM and that proof of ownership be demonstrated.

At the heart of the fight is the legal structure of Lagardère SCA which is currently constructed as a limited partnership with shares. An SCA, or "societe en commandite par actions" allows for two different categories of shareholders and has given power to the chairman, Arnaud Lagardère, to control the group even though he owns only 9.62 percent of the shares. Wyser-Pratte, which owns 0.53 percent, has argued that the structure is out-dated and creates a drag on performance.

Although Lagardère is now largely known for its media activities, its roots were in defence manufacturing, a link it maintains through EADS, the Franco-German defence group. Speaking to the Financial Times the so-called "corporate raider" Wyser-Pratte described Lagardère's structure as “archaic and undemocratic. It is like a medieval castle – all that is lacking is the moat around the headquarters with a few crocodiles.”

Proof of ownership would be a non-issue in a dematerialised share register based market such as Australia or the UK but the French bearer share system makes shareholder ID a tortuous process.

The Court's ruling means that Wyser-Pratte not only has the right to put the company structure to the vote but also Guy Wyser-Pratte's nomination as a director. Jean Veil, a lawyer acting for Lagardère, told Reuters on Wednesday that Wyser-Pratte had been given an extended deadline to provide supporting documents. "The judge noted that they had not yet proven that they held the 0.53 percent stake and told them that it was up to them to do so," said Veil. He said that although the resolutions would be published on the proxy statement, but would only become effective once the supporting documents were provided.

Commenting on the Court's decision Wyser-Pratte said: "I am very encouraged by the Court's decision, it will now be up to shareholders to decide the fate of their company and not the general partner owning less than one-tenth of Lagardère. I urge all shareholders to help us move the Company away from a legal structure that limits growth and toward one that provides opportunity to maximize value for all owners."

In the past 15 years, Wyser-Pratte has been involved in over 70 activist projects in 10 jurisdictions globally. Notable examples in France include Taittinger S.A., Vivarte S.A., Strafor Facom S.A., and most recently Valeo, S.A.  In Germany, recent examples include Vossloh AG, Kuka AG, Balda AG and CeWe Color Holding AG.

Further Reading

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