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

Company Law (en cours)

The legislator does not set any quorum rules for the decision-making of associates. Again, it is up to the statutes to determine the conditions, except in the situation where the simplified joint-stock company proceeds with an offer of financial securities and instruments admitted for crowdfunding purposes. The same applies to majority rules, regarding decisions for which the legislator does not r …

Absence of mandatory quorum or majority

The legislator does not set any quorum rules for the decision-making of associates. Again, it is up to the statutes to determine the conditions, except in the situation where the simplified joint-stock company proceeds with an offer of financial securities and instruments admitted for crowdfunding purposes. The same applies to majority rules, regarding decisions for which the legislator does not require unanimity.

When the statutes provide for a quorum, compliance with it is required for the meeting to deliberate validly . Consequently, a general meeting of an SAS must be annulled if the partners present or represented do not hold enough shares to reach the quorum necessary for the adoption of the resolutions submitted to the vote, even if they hold more than one-fifth of the shares with voting rights .

Except for decisions that must be made unanimously by the shareholders, the articles of association of an SAS may opt for the majority rule for certain decisions . Statutory freedom allows the calculation, for certain votes, of the majority of voting rights per shareholder, regardless of their capital holding, so that a majority shareholder in capital may not have the majority of votes for these decisions . Violation of the majority rules provided in the articles of association of an SAS may result in the nullity of the adopted decision. Indeed, an extraordinary general meeting of an SAS must be annulled if a resolution has not been adopted by 95% of all shareholders, as required by the articles of association, even if it was voted by the unanimity of those present or represented . Conversely, a resolution concerning the approval of regulated agreements cannot be annulled for being adopted by a 2/3 majority of votes, as long as the SAS articles of association do not require unanimity for such a resolution , or a resolution concerning the appointment of the statutory auditor, which does not entail a statutory amendment, when it has been adopted by a simple majority .

In SAS, the legislator requires the unanimous consent of all partners for making important decisions, such as those concerning the adoption or modification of statutory clauses of inalienability  and changes in control of the associated legal entity , capital increase by raising the nominal amount of capital securities , transformation of the SAS into a general partnership  or a limited partnership or partnership limited by shares . More generally, in accordance with Article 1836 of the Civil Code, the articles of association can only be amended, in the absence of a contrary clause, by the unanimous agreement of the partners .

The mere fact that an article of the statutes of an SAS does not include statutory amendments in the list of decisions to be made unanimously is not sufficient to consider it a "contrary clause" within the meaning of Article 1836 of the Civil Code, and such a decision cannot be made by majority . Furthermore, under no circumstances can a member's commitments be increased without their consent . Finally, the extension of the company must be decided unanimously by the members, or, if the statutes provide, by the majority required for their amendment .

Before the law of 9 July 2019 , amending Article L. 227-19 of the Commercial Code , exclusion clauses for a partner could only be adopted or modified unanimously by the partners . Since then, the new Article L. 227-19 no longer requires unanimity for the adoption or modification of these clauses, although it can be provided for in the statutes . By allowing the adoption or modification of an exclusion clause to be decided without the unanimous agreement of the partners of an SAS, the legislator intended to avoid deadlock situations, which may result from the opposition of the concerned partner to such a clause . However, no text requires a unanimous vote for the removal of a clause that establishes a preemption right in favor of the partners of an SAS .

The statutes of an SAS may stipulate that other decisions, apart from those provided by the legislator, will be made unanimously by the shareholders. In this case, any decision adopted in violation of such a provision is tainted with irregularity. This is the case for SAS resolutions related to the approval of accounts and the allocation of results, adopted by a 2/3 majority, which are not regularly made and must be annulled, as the statutes require a unanimous vote . Similarly, a resolution concerning an approval clause must be annulled if only a three-quarters majority was obtained, whereas such a clause can only be removed or modified unanimously by the shareholders according to the statutes . A resolution regarding a capital increase in an SAS adopted by a majority of votes is also irregular and must be annulled, as it requires a decision made unanimously by the shareholders .

When a decision is made unanimously, it cannot constitute an abuse of majority . Conversely, the fact that shareholders with equal shares in an SAS intended to subject all their decisions to the rule of unanimity, and accepted the possibility of a disagreement leading to a deadlock in the company's operation, or even to the disappearance of the affectio societatis, is not sufficient to exclude the existence of an abuse of equality .

In special company law, Article L. 235-1 of the Commercial Code  distinguishes the invalidity of acts that amend the articles of association from the invalidity of other acts or resolutions. The former can only result from an express provision of Book II of the Commercial Code relating to commercial companies and economic interest groupings or the laws governing the invalidity of contracts. The latter can only result from the violation of a mandatory provision of Book II of the same code, except for the first sentence of the first paragraph of Article L. 225-35 and the third sentence of the first paragraph of Article L. 225-64, or the laws governing contracts, except for the last paragraph of Article 1833 of the Civil Code, all relating to the management of the company in its corporate interest, taking into account the social and environmental issues of its activity.

It follows from the fourth paragraph of Article L. 227-9 of the Commercial Code that decisions made in violation of the formal, quorum, and majority rules provided in the statutes may be annulled at the request of any interested party . Although statutory clauses do not constitute mandatory provisions, case law holds that in SAS, the ordinary law regime for the nullity of acts or resolutions of companies also applies to decisions made in violation of statutory clauses, and allows any interested party to seek annulment when such violation is likely to affect the outcome of the decision-making process .

Decisions taken in violation of the second paragraph of Article L. 227-9 of the Commercial Code, which states that decisions regarding capital increase, amortization, or reduction, merger, spin-off, dissolution, transformation into a company of another form, appointment of statutory auditors, annual accounts, and profits must be made collectively by the associates, are also subject to nullity . Consequently, resolutions that excluded associates of the SAS must be declared null, even if they did not participate in the meeting, as long as it was specified in their notice of meeting that they would not have the opportunity to vote .

See for an illustration, Versailles, 6 July 2021, LawLex202300008342JBJ, considering that the quorum necessary for voting on a resolution in an extraordinary general meeting of an SAS (presence of at least half of the holders of shares composing the capital) is necessarily met as soon as a shareholder representing 95% of the share capital is present.

CA Aix-en-Provence, 5 November 2020, LawLex202300008345JBJ.

Commercial Code, Art. L. 225-245, para. 1, applicable by reference from Article L. 227-1, para. 3.

Commercial Code, Art. L. 225-245, para. 2, applicable by reference from Article L. 227-1, para. 3.

Aix-en-Provence, 17 December 2020, LawLex202300007809JBJ, confirming that the amendment of the statutes of an SAS must obtain the unanimous consent of the shareholders, unless a contrary clause allows for a derogation from this rule.

CA Versailles, 17 June 2021, LawLex202300008344JBJ.

Law No 2019-744 of 19 July 2019 on the simplification, clarification, and updating of French Company Law, OJ of 20 July 2019.

See for illustrations, Cass. com., 8 April 2014, LawLex202300001701JBJ, specifying that the decision made in an extraordinary general meeting that modifies statutory exclusion provisions to establish an exit penalty is void when it has not been made unanimously; In the same case, Poitiers, 15 January 2013, LawLex202300008852JBJ; Douai, 15 September 2011, LawLex202300008870JBJ, holding that it is not within the powers of the president of an SAS to unilaterally modify a statutory provision, as such a modification requires the unanimous agreement of the partners.

See for an illustration, CA Aix-en-Provence, 6 January 2022, LawLex202300007585JBJ, holding that the exclusion of a shareholder from an SAS is valid, as long as it has been unanimously voted by the associates present or represented at the general meeting, and not by all the associates of the company, in accordance with the statutes.

Grenoble, 4 June 2015, LawLex202300008808JBJ, emphasizing that a clause in the statutes providing for a qualified majority of 75% for the dismissal of a Chief Executive Officer does not derogate from any fundamental right; Also see, Paris, 15 September 2020, LawLex202300008355JBJ, holding that the decision to exclude a shareholder of an SAS or to dismiss the Vice President, which does not result in a modification of the statutes, can be made by a simple majority.

Cons. constit., 9 December 2022, LawLex202200011040JBJ, JCP G 2023, No 5, obs. PACLOT; JCP E 2022, No 1412, obs. DONDERO; BRDA 2/23, 32, obs. COURET; RJDA 2023, No 93; LPA March 2023, 50, obs. VINCENT; JCP E 2023, No 1085, No 8, obs. DEBOISSY and WICKER; RDC 1/2023, 73, obs. CAFFIN-MOI; Gaz. Pal. 14 March 2023, 68, obs. STOCLET; JCP E 2023, No 1222, No 14, obs. BUCHBERGER.

CA Limoges, 28 March 2012, LawLex202300008348JBJ.

CA Montpellier, 12 November 2019, LawLex202300008816JBJ.

See Cass. com., 8 November 2023, LawLex202300013562JBJ, specifying that a decision granting a bonus to the majority shareholder and director of an SAS cannot constitute an abuse of majority, as it was made unanimously, with the minority shareholder having consented.

Cass. com., 21 June 2023, LawLex202300008403JBJ, JCP G 2023, No 1101, obs. MORTIER; D. 2023, 1628, obs. DUCHESNE; LPA October 2023, 57, obs. GIBIRILA.

"The invalidity of a company or an act amending the articles of association can only result from an express provision of this book or the laws governing the invalidity of contracts. Regarding limited liability companies and joint stock companies, the invalidity of the company cannot result from a defect in consent or incapacity, unless it affects all the founding partners. The invalidity of the company also cannot result from clauses prohibited by Article 1844-1 of the Civil Code."

The invalidity of acts or resolutions other than those provided for in the preceding paragraph can only result from the violation of a mandatory provision of this book, except for the first sentence of the first paragraph of Article L. 225-35 and the third sentence of the first paragraph of Article L. 225-64, or the laws governing contracts, except for the last paragraph of Article 1833 of the Civil Code.

Commercial Code, Art. L. 227-9, para. 4. - See, for an illustration, CA Aix-en-Provence, 5 November 2020, LawLex202300008345JBJ, specifying that a general meeting of an SAS during which neither the quorum rules nor the majority rules were respected must be annulled.

Cass. com., 15 March 2023, LawLex202300004241JBJ, JCP E 2023, No 1093, obs. DONDERO; RJDA 2023, No 263; RDC 2023/3, 48, obs. CAFFIN-MOI; LPA July-August 2023, 65, obs. LEQUET; contra, Saint-Denis de la Réunion, 23 May 2014, LawLex202300009387JBJ, holding that an extraordinary general meeting that carried out a capital reduction and increase cannot be annulled for abuse of majority when the operation allowed for the financial stabilization of the company and therefore does not harm the corporate interest.

CA Orléans, 21 February 2019, LawLex202300007652JBJ.

CA Douai, 23 September 2010, LawLex202300007321JBJ.

See, for an illustration, CA Aix-en-Provence, 5 November 2020, LawLex202300008345JBJ.

Commercial Code, Art. L. 227-19, para. 1.

Commercial Code, Art. L. 225-130, para. 2, applicable by reference from Article L. 227-1, para. 3; See

Company Law (en cours)

588. Absence of mandatory quorum or majority

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588. Absence of mandatory quorum or majority

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