In a decision dated September 12, 2024, the French Administrative Supreme Court (Conseil d’Etat) applied the principles established a year ago by the same court in the veterinary sector. The ruling was made in a summary proceeding, meaning that it should not be read as changing the established precedent. Nonetheless, this ruling is interesting as it relates to physicians, the most regulated healthcare profession, as well as radiology, a sector of great interest to investors.
The case at the heart of this ruling has developed into a saga:
Following the acquisition of a 25 percent stake in Imapôle (a medical imaging center) by an external commercial partner (Imaone), the local unit of the French Medical Board delisted Imapôle from the register of authorized healthcare professionals in November 2023. The Board had concluded that the by-laws and shareholders' agreement prevented practicing physicians from having effective control of the company.
In an initial decision dated January 4, 2024, the Conseil d’Etat suspended the execution of this decision in summary proceedings. Subsequently, the Medical Board repealed its decision and initiated a new instruction.
Although Imapôle subsequently agreed to provide further information and to implement remedies, the Medical Board once again delisted Imapôle on the grounds that:
- Imapôle did not provide the Medical Board with a document that was essential for checking the conditions for registration on the physicians board register.
- The combination of the allocation of 99.9 percent of Imapôle’s distributable profits to Imaone and other (extra-)statutory provisions of the company did not respect the professional independence of the physicians.
Imapôle lodged an administrative appeal with the regional Medical Board against this delisting decision and requested its immediate suspension.
The Conseil d’Etat granted this suspension on September 12, 2024, on the basis that there was an emergency, as the decision prevented the healthcare center to open, as well as due to serious doubts as to the legality of the delisting decision.
This decision provides the necessary clarity on the interpretation of the precedent laid down by the Conseil d’Etat in July 2023 in the veterinary sector (July 10, 2023, no. 442911, 442925, 455961 and 452448).
For context, the Conseil d’Etat had validated the delisting of several veterinary clinics on the grounds that the by-laws and shareholders agreements provisions that meant the majority would de jure be held by vets were superseded by other provisions such as veto, reserved matters, drag along, de facto depriving the vets from having an effective control of their clinic.
The question however remained as to whether, taken individually or in a smaller subset, those provisions which are instrumental to the minority shareholding of investors, were compatible with the effective control that must be exerted by healthcare professionals.
In order to assist the regional board ruling on the merits of the appeal, the summary proceeding already provides clear guidance on this question.
The Conseil d’Etat has ruled that the combination of the allocation of 99.9 percent of Imapôle’s dividends to Imaone and the setting of a quorum of 80 percent on first call and 20 percent on second call, at ordinary and extraordinary general assembly, were not such as to deprive the practicing physicians of effective control of the company.
This was all the more the case as the Conseil d’Etat did not identify other governance measures depriving physicians from the effective control of the company.
Interestingly, to do so, the Conseil d’Etat confirms its case law stating that the effectivity of the control must be assessed through various means, including on the basis of side letters, and even up to inspection reports by health agencies. But at the same time, the Conseil d’Etat clarifies that the investigation power of the local boards is limited to what is necessary to demonstrate a willingness to circumvent the regulation.
Imapôle has therefore once again been granted a stay of execution. It remains to be seen whether the solution adopted in the summary proceedings will be followed by the Regional Board ruling on the merits, or whether it will be necessary that the Conseil d’Etat confirms its decision on the merits.
The effective implementation of this case law is even more necessary following a recent report, drafted by the Senate, which calls for further amendments to the law that aim to restrict financial influence on healthcare centers.
