Consultation of the Works Council (CSE) in Cross-Border Merger & Acquisition Transactions

Introduction

Why works council consultation should be factored into the transaction timetable from the outset.

In a cross-border M&A transaction involving a French company, consultation of the works council (Comité social et économique – CSE) should not be treated as a mere HR matter. It can become a critical factor in determining the transaction timetable.

The works council does not grant an authorisation comparable to merger control clearance from the French Competition Authority (Autorité de la concurrence) or to the authorisation granted by the French Minister for the Economy under the foreign investment screening regime. Its opinion is advisory. As a matter of principle, the works council cannot therefore, by itself, prevent the transaction from being completed.

This should not, however, lead the parties to underestimate the risks involved. Where consultation is required, it must be conducted properly, in a timely manner and on the basis of sufficiently detailed information. A consultation process that is initiated too late, is incomplete or is merely perfunctory may result in urgent interim proceedings (référé), requests for additional information, the suspension of certain implementation measures, a requirement to conduct a further consultation process or, in the most serious cases, criminal liability for unlawful interference with the works council’s functions (délit d’entrave).

The key point is therefore straightforward: works council consultation does not give employee representatives a right of veto, but proper compliance with the consultation process is essential to managing the employment-law and operational risks associated with the transaction.

1.First identify the relevant thresholds and employee representative bodies

The first step is to map the headcount and the employee representative bodies in place within the target company.

A works council must be established in companies with at least 11 employees where that threshold has been met for 12 consecutive months. In companies with at least 50 employees, the works council has broader economic information and consultation rights. In particular, it must be informed and consulted on matters relating to the organisation, management and general operation of the company, including measures affecting staffing levels, changes to the company’s economic or legal organisation, employment conditions and working conditions.

This distinction is important. In companies with between 11 and 49 employees, a works council must be in place, but it does not have the same general economic information and consultation rights as a works council in a company with at least 50 employees. The obligations applicable to companies with 50 or more employees should therefore not automatically be applied to smaller companies. In practice, the applicable statutory provisions, collective bargaining agreements, any established company practices and the precise nature of the proposed transaction must all be reviewed.

Where a company operates through several establishments, it is also necessary to identify the central works council (CSE central) and the establishment-level works councils (CSE d’établissement). The central works council is responsible for measures concerning the company as a whole. Establishment-level works councils may also have to be consulted where the proposed transaction involves specific implementation or adaptation measures affecting one or more establishments.

Finally, in an international group, it is necessary to determine whether there is a group committee (comité de groupe), a European Works Council or a European-level information and consultation procedure. A European Works Council may need to be involved where the proposed transaction has a transnational dimension and affects employees in more than one Member State.

2. Determine whether the M&A transaction triggers a consultation requirement

Consultation of the works council is required where the proposed transaction affects the organisation, management or general operation of the company. M&A transactions may therefore trigger a consultation requirement, particularly where they involve a change in the company’s economic or legal organisation, a restructuring, a transfer of business activities, a site closure, a reduction in headcount or a material change in working conditions.

Transactions that are particularly likely to require consultation include mergers, demergers, partial transfers of assets (apports partiels d’actifs), disposals of business units, transfers of business activities, transactions qualifying as concentrations for merger control purposes, acquisitions involving an integration plan and transactions undertaken in preparation for a post-closing reorganisation.

Share deals require a more nuanced analysis. A transfer of shares does not necessarily result in a change of the employees’ legal employer. It may nevertheless trigger an information and consultation requirement where it is accompanied by a change in strategy, a foreseeable reorganisation, a change in the group to which the company belongs, or concrete effects on employment, sites or working conditions.

In practice, the more significant the transaction is for the structure and organisation of the French target, the more important it is to assess carefully whether the statutory consultation requirements are triggered. The position must therefore be assessed on a case-by-case basis.

3. Organise a complete and properly documented information and consultation process

The procedure involves two distinct stages: information and consultation.

The employer must first provide the works council with sufficiently detailed, written information. This information must enable employee representatives to understand the proposed transaction, its timetable, its economic rationale and its foreseeable consequences for the company and its employees. The works council must also receive a reasoned response to any observations it raises.

For companies with at least 50 employees, the Economic, Social and Environmental Database (base de données économiques, sociales et environnementales – BDESE) plays a central role. It contains the information required for recurring information and consultation procedures and must be consistent with the documentation provided to the works council in connection with the transaction.

The information package provided to the works council should include, in particular:

• the identity of the purchaser;
• the structure of the transaction;
• the anticipated timetable;
• the economic and strategic rationale for the transaction;
• the foreseeable impact on employment, sites, job functions and work organisation;
• any known intentions of the purchaser;
• relevant financial information, subject to the applicable confidentiality requirements; and
• the environmental consequences, where the proposed transaction falls within the scope of measures for which such information is required.

The consultation process should not be reduced to a mere presentation meeting. Employee representatives must be given an opportunity to ask questions, request additional information and issue an informed opinion. The employer should maintain a complete documentary record of the process, including meeting notices, agendas, documents provided, questions raised, responses given, minutes and the works council’s opinion.

4. Manage the consultation timetable

Unless a collective bargaining agreement or an agreement between the employer and the works council provides for different time limits, the works council is deemed to have been duly consulted and to have issued an unfavourable opinion upon expiry of a one-month period. This period is extended to two months where an expert is appointed by the works council. It is extended to three months where one or more works council-appointed experts are involved in a consultation process conducted at both central works council level and the level of one or more establishment-level works councils.

These time limits run from the date on which the necessary information is provided to the works council or made available through the BDESE, as applicable. It is therefore essential to establish with certainty when the consultation period begins to run. If the information initially provided is materially incomplete, this may give rise to proceedings challenging whether the works council was provided with sufficient information to conduct a meaningful consultation.

If the works council considers that it has not been provided with sufficient information, it may apply to the President of the competent French civil court (tribunal judiciaire) under the expedited procedure on the merits (procédure accélérée au fond). Such an application does not automatically extend the consultation period. However, the court may extend the period where there are particular difficulties in obtaining access to the information required for the consultation.

5. Manage the appointment of an expert

In certain circumstances, the works council may appoint an expert to assist it. In an M&A context, this possibility is particularly relevant in companies with at least 50 employees and where the transaction qualifies as a concentration for merger control purposes.

Where a company is party to a concentration within the meaning of the French Commercial Code (Code de commerce), the employer must convene the works council in accordance with the requirements of the French Labour Code (Code du travail). The works council may then appoint an independent accountant acting as ist expert.

The allocation of the expert’s fees depends on the statutory basis for the appointment. In some cases, the expert’s fees are borne entirely by the employer. In others, 80% of the fees are borne by the employer and 20% by the works council out of its operating budget, subject to specific rules where the works council’s budget is insufficient.

From a transaction-timing perspective, the appointment of an expert is a critical issue. It should not be identified only at a late stage of the process. The acquisition agreement should factor this possibility into both the target closing date and the long-stop date.

6. Coordinate works council consultation, merger control and foreign investment screening

In a cross-border transaction, three separate timetables may run in parallel.

The first is the employment-law timetable associated with the works council consultation process. The second is the French merger control timetable. Where the transaction is subject to a notification requirement, clearance must be obtained from the French Competition Authority before the transaction can be completed. Phase I generally lasts no more than 25 working days. Where an in-depth review is required, a Phase II investigation may be opened, involving an additional period of 65 working days.

The third timetable relates to foreign investment screening in France. Where the target carries out a sensitive activity falling within the scope of the French Monetary and Financial Code (Code monétaire et financier), the foreign investor must obtain prior authorisation from the French Minister for the Economy. The review process comprises an initial period of 30 working days from receipt of a complete application, followed, where necessary, by an additional review period of 45 working days.

These three procedures are legally distinct. Merger control clearance does not replace the works council consultation process. Similarly, foreign investment approval does not dispense with the requirement to consult the works council. Conversely, the works council’s opinion does not constitute regulatory approval.

In 2026, account must also be taken of the increase in the French merger control thresholds introduced by the Economic Simplification Act (loi de simplification de la vie économique). The new thresholds apply to transactions notified to the French Competition Authority on or after 1 September 2026. In particular, the general thresholds increase from €150 million to €250 million for the parties’ combined worldwide turnover and from €50 million to €80 million for the turnover generated in France by at least two of the undertakings concerned.

7. Draft the acquisition agreement consistently with the works council process

The acquisition agreement should accurately reflect the role of the works council.

Closing should not be made conditional upon the works council issuing a favourable opinion. The works council’s opinion is advisory, and an unfavourable opinion does not, in itself, prevent the transaction from proceeding.

However, where consultation is legally required, it is both possible and often appropriate to provide that the works council information and consultation process must be completed before closing. The relevant condition should not relate to the substance of the works council’s opinion, but rather to the due and proper completion of the procedure: either the works council has issued its opinion or it is deemed to have done so upon expiry of the applicable consultation period.

The acquisition agreement should therefore address:

• representations by the seller regarding the existence of the works council and historical compliance with applicable consultation requirements;
• a seller warranty that there are no material undisclosed disputes relating to the works council;
• a covenant by the seller to initiate and conduct the consultation process in a timely manner;
• a covenant requiring the purchaser to cooperate with the consultation process;
• an obligation to ensure consistency between the information provided to the works council, the business plan and the purchaser’s known post-closing intentions;
• a mechanism providing for the automatic postponement of closing where necessary;
• a long-stop date that takes into account the potential appointment of a works council-appointed expert, merger control clearance and foreign investment screening;
• a specific indemnity in respect of any pre-closing breach attributable to the seller; and
• clear provisions governing any post-closing consultations required in connection with decisions taken by the purchaser.

The safest approach is therefore to treat works council consultation as a material procedural requirement of the transaction, rather than as an approval whose outcome must be favourable.

8. Anticipate sanctions and litigation risks

A defective consultation process may have a number of consequences.

The works council may request additional information and may bring proceedings before the competent court. The court may order the disclosure of documents, extend the consultation period in certain circumstances, or suspend the implementation of certain measures until the consultation process has been properly completed.

Where collective measures are implemented without proper consultation, they may be exposed to legal challenge. This is particularly relevant in the context of restructurings, collective redundancies for economic reasons or employment safeguard plans (plans de sauvegarde de l’emploi – PSE).

Criminal liability must also be taken into account. Unlawfully interfering with the establishment or proper functioning of the works council constitutes a criminal offence under the French Labour Code (délit d’entrave). Interference with the establishment of the works council or the free appointment of its members may be punishable by up to one year’s imprisonment and a fine of €7,500. Interference with the proper functioning of the works council is punishable by a fine of €7,500.

In practice, the principal risk is often not that the M&A transaction itself will be rendered invalid, but rather that post-closing integration measures may be delayed, challenged or otherwise jeopardised.

9. Practical checklist

Seller

Review the relevant headcount thresholds, identify the competent employee representative bodies, update the BDESE, prepare the information package, duly convene the works council, manage the potential appointment of an expert, respond to questions and properly document the works council’s opinion.

Purchaser

Review the target’s employment-law and employee relations history, examine the works council meeting minutes, identify any existing disputes or proceedings, ensure that the purchaser’s business and integration plans are consistent with the information provided to employee representatives, anticipate any post-closing consultation requirements and negotiate appropriate contractual protections.

Transaction team

Prepare an integrated transaction timetable covering the works council consultation process, merger control, foreign investment screening, financing, signing, closing and integration. This timetable should be actively managed from the letter-of-intent stage onwards.

CONCLUSION

Works council consultation does not give employee representatives a right of veto. It is, however, a key component in managing legal and execution risks in cross-border M&A transactions involving a French target.

A well-structured transaction should identify the competent employee representative bodies at an early stage, determine whether consultation is required, prepare a comprehensive information package, anticipate the potential appointment of an expert and incorporate the employment-law timetable into the acquisition agreement.

The key takeaway is straightforward: works council consultation should be treated as a core component of deal execution, alongside merger control, foreign investment screening, financing and the conditions to closing.