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Company Law (en cours)

One of the accepted modifications to the free transferability of shares in a SA consists of stipulating approval clauses in the company's statutes. For some of the doctrine, the approval clause allows for the reintroduction of a hint of intuitus personae in a company that is essentially devoid of it . For obvious practical reasons, it can only be stipulated in non-listed companies.
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Mechanism

One of the accepted modifications to the free transferability of shares in a SA consists of stipulating approval clauses in the company's statutes. For some of the doctrine, the approval clause allows for the reintroduction of a hint of intuitus personae in a company that is essentially devoid of it . For obvious practical reasons, it can only be stipulated in non-listed companies.

Before the adoption of the ordinance of 24 June 2004 , approval clauses could not apply to transfers between shareholders . Such a solution not corresponding to practical needs, the texts were amended so that they could cover both transfers to third parties and between partners. The case law now considers that Article L. 228-23 of the Commercial Code allows, but does not require, the submission of share transfers between shareholders  to approval.

The approval clause implies that a potential transferee of shares must, prior to entering the company, be authorized by the other partners . Regarding the scope of the clause, it should be noted that it extends to the merger by absorption of a company, as long as this results in the transfer of its shares to the beneficiary company . However, the approval procedure established by the Commercial Code for share transfers in SAs only concerns the transfer of the company's own shares and not those of the shareholders who make up its capital . Nevertheless, attempts to circumvent the clause through successive transfers are not permitted. In fact, the transfer of shares of a holding company to a shareholder, whose entire capital is subsequently bought by a third party, is unenforceable against the company if such an arrangement aims to fraudulently evade the approval obligation established by the statutes in the event of share transfers to third parties . The approval clause applies even in the event of collective proceedings of the company whose shares are transferred. Therefore, the court-appointed administrator, responsible for executing all acts necessary for the transfer of the debtor's business, is required to comply with the company's statutes clause that subjects the share transfer to the prior approval of the board of directors .

When an approval clause is stipulated, the request for approval, which indicates the name, first name, and address of the transferee, the number of capital shares or securities giving access to the capital whose transfer is envisaged, and the offered price, must be notified to the company. The notification to a SA of a request for approval is valid even if it only mentions a provisional price, as long as the approval mainly concerns the person of the transferee and not the price, that the price is real and sincere, and that the revision clause in the protocol, based on accounting data beyond the parties' control, makes the final price objectively determinable at the date of the transfer . Similarly, the mentions in a request for approval of the form and name of the transferee company as well as the address of its registered office are sufficient, without the transferor having to provide further details on its economic situation .

The body competent to grant approval is designated in the statutes. It is generally the board of directors  and, more rarely, the assembly . The approval of a transferee by the designated body must be unconditional. The conditions set by the board of directors authorized to approve the transfer are therefore deemed unwritten .

Approval results either from a notification or from the lack of response within three months from the request. If the company does not approve the proposed transferee, the board of directors, the executive board, or the managers, as the case may be, are required, within three months from the notification of refusal, to have the capital securities or securities giving access to capital acquired, either by a shareholder or a third party, or, with the consent of the transferor, by the company for the purpose of reducing the capital . In the absence of agreement between the parties, the price of the capital securities or securities giving access to capital is determined within the framework of the expertise provided for by Article 1843-4 of the Civil Code . The transferor may at any time renounce the transfer of their capital securities or securities giving access to capital. If, at the expiration of the three-month period, the purchase is not completed, approval is considered granted . The three-month period for the exercise of the shareholders' preemption right runs from the notification of the refusal of approval and not from the date of the general meeting that decides on this refusal . It may be extended by court decision at the request of the company  and extended, for example, from three to eight months . The interim order appointing an expert to determine the price of a share transfer and which, granting the parties' request for approval, extends the expert's mission, while failing to concurrently pronounce the extension of the period provided, in the absence of approval, for the repurchase of the shares, must be considered, due to its ambiguity, as extending both periods . Abuse of the right of approval is sanctioned: a public limited company, which, by its procrastination in granting approval, given more than four years after the transfer of shares, deprives the transferor, during this entire period, of the remuneration of the capital produced by the transfer, commits a fault for which it owes compensation .

The last paragraph of Article L. 228-23 of the Commercial Code provides that any transfer made in violation of an approval clause in the statutes is void. However, it should be noted that only the company or the shareholders whose approval is required to authorize a share transfer can invoke it, to the exclusion of the transferee . But, in certain cases, the transfer is deemed concluded even in the absence of the required approval. Indeed, a manager who has committed to transfer their shares subject to the transferee's approval by the company cannot later invoke the absence of approval to challenge the transfer, as long as they themselves refrained from notifying the company of the transaction .

CACHIA, The decline of anonymity in joint stock companies, Mélanges Kayser, PUAM, 1979, vol. 1, 213; ROBLOT, Approval of new shareholders, Mélanges Bastian, Librairies techniques, 1974, vol. 1, 283.

Ord. No 2004-604 of 24 June 2004 on the reform of the regime of marketable securities issued by commercial companies and the extension to overseas territories of provisions that have amended commercial legislation.

Cass. com., 26 April 1994, LawLex202300005584JBJ.

Cass. com., 24 February 1975, LawLex202300012001JBJ, holding that no incompatibility or incapacity prevents a member of the board of directors from participating in the decision to approve the transfer of shares of the joint stock company when it concerns the sale of its own securities.

Cass. com., 12 May 2004, LawLex202300003363JBJ, considering that the power to approve the transfer of shares, when it was vested in the board of directors, necessarily falls to the general meeting of shareholders after the dissolution of the company, which ended the board's functions, and not to the liquidator.

Cass. com., 17 January 2012, LawLex202200002708JBJ, RTD civ. 2012, 334, obs. GAUTIER; BJS 2012, 310, obs. DONDERO; D. 2012, 2688, obs. HALLOUIN, LAMAZEROLLES and RABREAU; RTD com. 2012, 141, obs. LE CANNU and DONDERO; RTD civ. 2012, 312, obs. FAGES; Rev. sociétés 2012, 370, obs. LE CANNU; RLDA 2012/69, No 3899, obs. PARACHKEVOVA; D. 2012, 719, obs. MOURY; Dr. sociétés 2012, 64, obs. GALLOIS-COCHET; D. 2012, 279, obs. LIENHARD; JCP E 2012, 1777, No 3, obs. DEBOISSY and WICKER; Dr. et patr. May 2013, 93, obs. PORACCHIA; Banque et Droit March-April 2012, 45, obs. RIASSETTO.

Cass. com., 17 October 1989, LawLex202300012002JBJ, considering that the repurchase of the transferor's shares by the company, when it has refused to approve the proposed transferee, is completed within three months if an agreement on the object and the price is reached during this period, even if the formal authorization for the repurchase is given by the extraordinary general meeting of the company only after its expiration.

Cass. com., 8 April 2008, LawLex202200006510JBJ, considering that the mere appointment of an expert to assess the buyback price of the shares of the transferor who was denied approval does not make the transfer perfect as long as the shares have not been repurchased within the three-month period.

Cass. com., 6 May 2003, LawLex202200006220JBJ, holding that the transferee has the interest and standing to have it adjudicated that the transfer that took place between him and the transferring shareholder is perfect due to the absence of the company's repurchase of the shares in question within three months from the notification of the refusal of approval, and to request the necessary consequences; 24 February 1975, LawLex202300012001JBJ, considering that the transfer of shares of an SA to a third party cannot be criticized on the grounds of majority abuse, in the absence of fraud, as long as the board of directors, within the limits of its powers and in compliance with them, has regularly granted its approval without compromising the corporate interest, and that the transferee's purchase offer was made under the same conditions to all shareholders.

Cass. com., 18 May 1993, LawLex202300005586JBJ.

Cass. com., 8 April 2008, LawLex202200006510JBJ, considering that the agreement given by the transferor to extend the deadline granted to the expert to evaluate the repurchase price of their shares does not exempt the company from applying to the court to obtain an extension of the deadline to proceed with this repurchase.

Cass. com., 6 May 2003, LawLex202200006220JBJ.

See, Cass. com., 22 October 1956, LawLex202300002867JBJ, holding that an amendment to the statutes of the SA to subject any transfer of shares, including between shareholders, to the approval of the board of directors is valid, as long as it neither limits the number of votes proportional to the possession of certain shares, nor affects the affectio societatis, nor hinders the principle of free revocability of directors.

Cass. com., 7 March 1995, LawLex202300012003JBJ.

Cass. com., 26 May 2004, LawLex202300012000JBJ; 25 February 1992, LawLex202300012004JBJ.

Cass. com., 14 December 2004, LawLex202300000010JBJ.

Cass. com., 27 March 1990, LawLex202300005583JBJ.

Cass. com., 15 March 2023, LawLex202300005899JBJ, RJDA 2023, No 380.

Cass. com., 26 April 1994, LawLex202300005584JBJ, holding that the existence of a preemption clause, which does not render the shares it covers non-transferable, does not prevent a shareholder of an SA from submitting to the company's approval an offer from a third party.

Cass. com., 6 May 2003, LawLex202200006220JBJ, considering that the statutes of a company stipulating that “the transfer of any share or investment certificate to a third party who is not a shareholder is subject to the approval right of the board of directors” must be interpreted as subjecting any form of transfer of securities, such as merger by absorption, to approval, and not only inter vivos transfers. - See also Cass. com., 15 May 2007, LawLex202300005582JBJ, considering that the application of an approval clause can be extended beyond share transfers to merger operations.

Cass. com., 13 December 1994, LawLex202300001684JBJ.

Cass. com., 27 June 1989, LawLex202200008485JBJ, Defrénois 1990, 1223, obs. HONORAT; BJS 1989, 815, obs. LE CANNU; D. 1990, 314, obs. BONNARD; RTD com. 1990, 50, obs. REINHARD; RTD civ. 1989, 530, obs. MESTRE; RDBB 1989, 176, obs. VIANDIER et JEANTIN.

Cass. com., 31 January 1995, LawLex202200008534JBJ, Rev. sociétés 1995, 320, obs. LE NABASQUE; Defrénois 1995, 696, obs. HOVASSE; D. 1995, 426, obs. PARLEANI; LPA 2 August 1995, 24, obs. COURTIER; BJS 1995, 342, obs. COURET; RPC 1995, 163, obs. SOINNE; JCP G 1995, II, 22460, obs. GUYON; JCP E 1995, I, 455, No 6, obs. PETEL; JCP E 1995, II, 678, obs. GUYON; Bull. Joly 1995, 953, obs. DAIGRE.

Cass. com., 11 January 2017, LawLex202200006221JBJ.

Company Law (en cours)

471. Mechanism

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471. Mechanism

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