Form 20-F 2005

Decreases in Share Capital
According to French law, we may decrease our share capital only with our shareholders’ approval at an extraordinary general
meeting. In the case of a capital reduction, other than a reduction to absorb losses or a reduction as part of a program to purchase
our own shares, all holders of shares must be offered the possibility to participate in such a reduction. There are two ways by
which we may reduce our share capital: by decreasing the nominal value of our outstanding shares or by reducing the number of
outstanding shares. We may reduce the number of outstanding shares either by exchanging shares or, if the reduction is not due
to losses incurred by us, by repurchasing and canceling shares. Holders of each class of shares must be treated equally unless
each affected holder agrees otherwise.
Preferential Subscription Rights of shareholders
Under French law, current shareholders have preferential subscription rights to subscribe on a pro rata basis for issuances of new
shares or other securities giving rights, to our share capital issued by us for cash. These preferential subscription rights require us
to give priority treatment to our shareholders. Shareholders may waive their preferential rights in respect of a particular offering,
either individually or as a group at an extraordinary general meeting. During the subscription period relating to a particular offering
of shares, shareholders may transfer their preferential subscription rights, if they have not previously waived these rights. Also,
during this period, preferential subscription rights may be listed on Euronext Paris or any relevant stock exchange.
A two-thirds majority of the shares entitled to vote at an extraordinary general meeting may vote to waive preferential subscription
rights with respect to any particular offering. French law requires that our Board of Directors and our independent auditors present
reports that specifically address any proposal to waive preferential subscription rights. In the event of a waiver, the issue of securities
must be completed within the period prescribed by law. Shareholders may also decide at an extraordinary general meeting to give
existing shareholders a non transferable priority right (délai de priorité) to subscribe to the new securities, during a limited period of
time set by French law, or to delegate to the Board of Directors the power to provide for such priority right. Shareholders may also
notify us that they wish to waive their own preferential subscription rights with respect to any particular offering if they so choose.
For additional information, see “Item 3. Key Information—Risk Factors—Risks Related to our Shares and to our ADSs”.
Ownership of ADSs or Shares by Non-French Residents
Under French law, there is no limitation on the right of non-French residents or non-French shareholders to own or, where applicable,
to vote securities of a French company.
A French law dated February 14, 1996 abolished the requirement that a person who is not a resident of the European Union obtain
an autorisation préalable (prior authorization) prior to acquiring a controlling interest in a French company.
However, pursuant to the French decree No. 2003 196 of March 7, 2003, the acquirer/investor must file a déclaration administrative
(administrative notice) with French authorities in connection with certain cases of foreign investments, direct investments and indirect
foreign investments in any French company. Under existing administrative rulings, ownership of more than 33.33% of a French
company’s share capital or voting rights is regarded as a direct investment subject to a déclaration administrative.
96 Form 20 - F 2005 - Rhodia