Share warrant (BSA)

A share warrant (bon de souscription d’actions, BSA) is a security that gives its holder the right to subscribe for shares in the issuing company during a period and at a price set in the issue agreement. Joint stock companies (sociétés par actions) issue securities giving access to capital under article L. 228-91 of the French Commercial Code. The extraordinary general meeting that reserves the issue for designated persons cancels the shareholders’ preferential subscription right and sets the price or the conditions for setting it on the statutory auditor’s report; the issue takes place within eighteen months (article L. 225-138). In private debt, the BSA serves as additional remuneration for the lender (equity kicker). Mezzanine debt takes the form of a loan with standalone BSAs, bonds with share warrants (OBSA) or convertible bonds. Venture debt uses it in the same way. While the warrants are outstanding, the company protects their holders: in the event of a capital increase with preferential rights, a distribution of reserves or the creation of preference shares, it adjusts the subscription terms or allows them to exercise their rights (article L. 228-99). It does not change its legal form or its corporate purpose without authorisation in the issue agreement or from the holders’ meeting (article L. 228-98). For the company, the negotiation covers the percentage of the capital accessible, the exercise price and period, and the adjustments provided for in the issue agreement.

A mid-sized company raises €40m of mezzanine debt over eight years. In addition to interest, the mezzanine lender receives BSAs giving the right to 5% of the share capital at the price of the last capital increase. When the company is sold, the lender exercises its warrants and sells the shares obtained.

• The share of the capital accessible by exercising the warrants.
• The exercise price and the period during which the warrants can be exercised.
• The adjustments in the event of capital transactions (article L. 228-99).
• The restrictions on changes to the company’s form and purpose (article L. 228-98).