All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

Abuse of minority rights is established when the attitude of minority partners harms the corporate interest by preventing the completion of an essential operation for the company, with the sole aim of favoring their personal interests to the detriment of all other partners. These two conditions are cumulative: thus, the abuse is not characterized when only one of them is met .

1) Contrary to comp …

Principle

Abuse of minority rights is established when the attitude of minority partners harms the corporate interest by preventing the completion of an essential operation for the company, with the sole aim of favoring their personal interests to the detriment of all other partners. These two conditions are cumulative: thus, the abuse is not characterized when only one of them is met .

Like majority abuse, minority abuse can be characterized when the attitude of one or more minority shareholders harms the corporate interest by preventing the completion of an essential operation for the company. To establish abuse, it must be based on a decision made with full awareness of the company's situation and the essential nature of the operation submitted to the shareholders' vote. Indeed, when an essential operation for the company is considered, shareholders must, in accordance with their right to information, have all the necessary information to assess its appropriateness. Consequently, a shareholder's opposition to a resolution cannot constitute minority abuse when they have not been enabled to make an informed vote, due to the lack of prior communication of information about the difficulties of the group companies involved and the necessity of the financing mentioned for the proposed restructuring . Similarly, a shareholder who does not have information allowing them to make an informed decision on the reasons, importance, and usefulness of the proposed accordion operation in light of the company's future prospects cannot be accused of minority abuse for refusing to vote in favor of this resolution .

When the decision is made knowingly, minority abuse is characterized by the refusal of two minority partners to vote in favor of paying rent in exchange for the occupation, by one of them, of a building owned by the company, and for the remunerated management of this building, an operation essential to the financial survival of the company, as such a refusal constitutes both an infringement of the corporate purpose and the general interest of the company . Similarly, the refusal of a minority partner to vote, twice, for a capital increase when it is a condition for the company's survival constitutes minority abuse as it is contrary to the corporate interest . The same applies, in the context of a participative franchise, to the refusal of the minority partner, representing the franchisor, to modify the corporate purpose to allow a change of brand, when this measure is essential to ensure the continuity of operations after the termination of the franchise agreement . Minority abuse cannot be excluded solely on the grounds that the partner in question holds a significant stake, as long as it remains minority and may have the effect, given the majority rules, of opposing an essential operation for the company . Conversely, the fact that a minority partner opposes the vote of a decision does not constitute minority abuse as long as their attitude is justified by the corporate interest .

2) Willingness to favor one's own interests to the detriment of those of other partners

In order to characterize an abuse of minority rights, the attitude of the minority shareholder must be motivated by a desire to favor their own interests to the detriment of those of the other shareholders. Indeed, the refusal of a minority shareholder to vote for a capital increase essential to the survival of the company, with the aim of hindering its operation as a retaliatory measure against their removal from the board of directors and to favor a third-party company in which they have interests, constitutes an abuse of minority rights as long as this decision only aims to favor their own interests . Similarly, the refusal of the minority shareholder to vote, twice, for a capital increase when it is a condition for the company's survival constitutes an abuse of minority rights as long as it was only intended to force the majority shareholders to bear alone the risks of an operation from which they would have benefited in case of success and not to hinder their own project of opening a competing establishment .

On the other hand, when it is not established that the decision of a minority shareholder pursues the sole aim of favoring their own interests to the detriment of other partners, minority abuse is not characterized . This is the case when the minority shareholder has not only personal reasons to oppose the adoption of resolutions presented by the management but also legitimate reasons drawn from the company's interest and the measures to be taken for its survival . Similarly, a minority shareholder cannot be accused of minority abuse for refusing to vote for a capital increase, as long as, with their 22% participation in the share capital, they do not alone hold a blocking minority, and the existence of collusion with other minority shareholders to obstruct the vote of the resolution solely to protect their own interests is not established .

Cass. com., 20 March 2007, LawLex202200005121JBJ, considering that a partner who refuses to vote for a capital increase, which appears, in the presence of difficulties, as the only measure in line with the company's interest, cannot be reproached for minority abuse if it is not also established that their decision is based solely on the intent to favor their own interests to the detriment of all other partners; 31 January 2006, LawLex202200005122JBJ, affirming that opposing a capital increase essential to the proper functioning of the company is not sufficient to characterize minority abuse in the absence of proof of the minority shareholder's intent to favor their own interests to the detriment of the other partner.

CA Douai, 16 March 2023, LawLex202300009087JBJ.

Cass. com., 4 December 2012, LawLex202200005120JBJ.

Paris, 23 November 2001, LawLex202200009249JBJ.

CA Bordeaux, 7 December 1989, LawLex202300002904JBJ.

Cass. com., 20 March 2007, LawLex202200005121JBJ.

Cass. 3e civ., 16 December 2009, LawLex202200009320JBJ.

Cass. com., 18 June 2002, LawLex202200006571JBJ; Also see, Cass. com., 22 November 2023, LawLex202300014022JBJ, JCP E 2024, No 1116, obs. TEHRANI, holding that the refusal of minority shareholders to vote in favor of a reverse stock split constitutes an abuse of minority rights when it obstructs the implementation of financial restructuring measures deemed essential for the company's recovery and, consequently, its survival.

Cass. com., 13 March 2024, LawLex202400002239JBJ, JCP G 2024, No 414, obs. GIBIRILA; D. 2024, 856, obs. DISSAUX; Contrats Conc. Consom. 2024, No 77, obs. MATHEY; RDC 2024/2, 72, obs. HEINICH; LEDICO April 2024, 3, obs. GRIMALDI.

Cass. com., 9 March 1993, LawLex202200005119JBJ, holding that the act of minority shareholders obstructing the vote on a capital increase does not constitute an abuse of minority, in the absence of contradiction to the corporate interest, as long as the results are good and the company is thriving; Cass. com., 15 July 1992, LawLex202200009221JBJ, specifying that a shareholder who systematically abstains from participating in decisions affecting the company's life and thereby prevents the transformation of the company into an SA cannot be accused of an abuse of minority if it is not established that their behavior is contrary to the general interest of the company and solely aims to favor their own interests to the detriment of all other shareholders; Paris, 4 December 2007, LawLex202300002826JBJ, affirming that a vote opposing a merger does not constitute an abuse of minority as long as it does not present an essential interest for the company in question and is even likely to prevent its disappearance as a legal entity.

Cass. com., 5 May 1998, LawLex202200009222JBJ.

Cass. com., 18 June 2002, LawLex202200006571JBJ.

Company Law (en cours)

195. Principle

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195. Principle

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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