IDI’s inception as a standalone investment corporation was rather unique in that it came from a privatisation process back in 1988 when France put an end to its vision of socialism. The then and still CEO saw an opportunity to list IDI and organise for himself to become a reference shareholder.
One legal device was to set up in 1990 a commandite par actions (SCA), i.e. a partnership limited by shares. The Associés Commandités are the general partners: they have the power and shoulder all risks (rather a nominal concept these days). This legal set up in effect splits the economic interests and the decision-making process as the voting rights held by the ‘associés commanditaires’ provide them with no leverage to unseat the management/general partners. French ‘commandites’ are very robust/difficult to break. So that the value of voting rights is essentially nil with no simple formula to assess how much of a discount this creates on the valuation. As for anything listed, the lack of voting rights is only relevant when the going gets rough and when markets are risk averse.
When money is cheap and the sky is blue, hope reigns supreme and voting rights do not matter. The point here is really that the SCA structure is a negative but that it need not have a great impact in current market conditions. A limited number of occurrences, spread over decades, whereby an SCA becomes a limited company (SA) does not provide much light on the implied discount of holding a share in an SCA as opposed to a SA.
At IDI, the Associés Commandités (general partners) take the form of a corporation named Ancelle et Associés. The control of Ancelle provides the control of IDI. Ancelle as the Associé Commandité will provide limitless guarantees to debtors of IDI while other shareholders’ risk are limited to their ownership. The indefinite risk of Ancelle is obviously a very limited one in real life as IDI’s business is indeed not to pile up debt and risks at the corporate level. Obviously, as well, the fact that the general partner is a corporate entity means that risks are also absorbed at this level.
See Governance section to review this dimension
