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

Company Law (en cours)

Article L. 225-123 of the Commercial Code provides that a double voting right compared to that conferred on other shares, with regard to the portion of share capital they represent, may be granted by the statutes to all fully paid-up shares for which proof of registration in the name of the same shareholder for at least two years is provided. Furthermore, in the event of a capital increase by incorporation of reserves, profits, or share premiums, the double voting right may be granted, from their issuance, to registered shares allocated free of charge to a shareholder based on old shares for which they benefit from this right. In companies whose shares are admitted to trading on a regulated market, the double voting rights provided for in the first paragraph of Article L. 225-123 are mandatory, unless otherwise stipulated by the statutes adopted after the promulgation of Law No 2014-384 of 29 March 2014 aimed at reclaiming the real economy, for all fully paid-up shares for which proof of registration in the name of the same shareholder for two years is provided. The same applies to the double voting right granted from their issuance to registered shares allocated free of charge pursuant to the second paragraph of Article L. 225-123 .

The allocation of double voting rights is, however, prohibited in professional practice companies in the form of a public limited company, simplified joint-stock company, or partnership limited by shares, whose shares are held by shareholders other than professionals practicing within the company . This prohibition does not extend to partners who do not practice in a multi-disciplinary professional practice, provided it does not result in any breach of the ethical principles applicable to each profession or the integrity of the professionals' duties related to the status of public and ministerial officer .

In accordance with Article L. 225-124, any share converted to bearer or transferred in ownership loses its double voting right. However, the transfer due to inheritance, liquidation of community property between spouses, or inter vivos donation to a spouse or a relative in the line of succession does not result in the loss of the acquired right and does not interrupt the two-year period. The same applies, unless otherwise stipulated in the statutes, in the case of a transfer due to a merger or demerger of a shareholder company. Finally, the double voting rights in third-party companies enjoyed by the absorbed or demerged company are maintained, in the event of a merger or demerger, for the benefit of the absorbing company or the beneficiary company of the demerger or, as the case may be, for the benefit of the new company resulting from the merger or demerger operation.

Holding double voting rights can present a disadvantage for beneficiary partners as it may lead them to cross critical thresholds . The obligation to declare the crossing of a threshold and, if applicable, to submit a public offer applies to any person, acting alone or in concert, regardless of the origin and circumstances under which they come to hold a sufficient number of shares or voting rights, even if this holding results from the automatic allocation of double voting rights after holding the same shares in registered form for two years . Therefore, the acquisition of double voting rights, due to holding shares in registered form for four consecutive years, which causes the shareholder to cross the 30% voting rights threshold, is unlawful when it has not been declared to the Financial Markets Authority, even if the beneficiary has not used them, since only the holding of voting rights matters for the calculation of crossing the threshold and not their use .

To avoid this situation, the shareholders concerned may request the conversion of their registered securities into bearer securities. Indeed, case law considers it "legal and common practice" for a shareholder to transfer securities from registered to bearer form to avoid acquiring double voting rights attached to registered shares and not crossing certain voting rights thresholds . Consequently, the mere fact of conditioning the repurchase of a stake on the conversion of the company's registered securities into bearer form, which causes them to lose their double voting rights by operation of law, cannot be deemed fraudulent .

Finally, a double voting right may be granted, in general meetings, to the usufructuary and the bare owner, pursuant to Article 1844, para. 4, of the Civil Code, without this double use of the same shares constituting fraud .

Law No 90-1258 of 31 December 1990 on the practice in corporate form of liberal professions subject to legislative or regulatory status or whose title is protected and on financial holding companies of liberal professions, Art. 8, para. 2.

In accordance with Article L. 433-3, I of the CMF, the general regulations of the Financial Markets Authority (Articles 234-2 and 234-5) set the conditions under which any natural or legal person, a shareholder of a company whose registered office is established in France, and whose shares are admitted to trading on a regulated market of a Member State of the European Union or another State party to the agreement on the European Economic Area, acting alone or in concert within the meaning of Article L. 233-10 of the Commercial Code, who comes to hold, directly or indirectly, more than 30% of the capital or voting rights, or holds, directly or indirectly, a number between 30% and half of the capital or voting rights and who, within less than twelve consecutive months, increases their holding in capital or voting rights by at least 1% of the capital or voting rights of the company, is required to immediately inform the Financial Markets Authority and to file a public offer project to acquire a determined quantity of the company's securities. Failing to make this filing, the securities held by this person beyond three-tenths or beyond their increased holding by the aforementioned fraction of one-hundredth of the capital or voting rights are deprived of voting rights.

CA Paris, 22 January 2015, LawLex202300000897JBJ.

Paris, 18 March 2021, LawLex202300002840JBJ, previously cited.

Paris, 10 March 1992, LawLex202300002954JBJ; 18 March 2021, LawLex202300002840JBJ, approved by Cass. com., 4 January 2023, LawLex202300002976JBJ.

Cass. com., 29 November 1994, LawLex202300002853JBJ.

Cass. 3e civ., 2 March 1994, LawLex202300002855JBJ.

Ordinary law of joint stock companies

STORCK and de RAVEL d’ESCLAPON, Should double voting rights shares be abolished in French law?, BJS 2009, 92.

183. Ordinary law of joint stock companies