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

Company Law (en cours)

No text specific to simplified joint-stock companies mentions the financial rights of the company's associates. Nevertheless, they benefit, by reference to the third paragraph of Article L. 227-1, from the same financial rights as the associates of public limited companies .

1) Right to profits

Shareholders of simplified joint-stock companies enjoy, like any partner, the right to a share of the  …

Principle

No text specific to simplified joint-stock companies mentions the financial rights of the company's associates. Nevertheless, they benefit, by reference to the third paragraph of Article L. 227-1, from the same financial rights as the associates of public limited companies .

Shareholders of simplified joint-stock companies enjoy, like any partner, the right to a share of the company's profits. According to Article 1844-1, first paragraph, of the Civil Code, each partner's share in the profits is determined in proportion to their share in the corporate capital. The share of a partner who has only contributed their services is equal to that of the partner who has contributed the least, unless otherwise stipulated. Paragraph 2 of the same article deems unwritten any provisions that allocate the entire profit generated by the company to one partner or exempt them from all losses, as well as those that completely exclude a partner from profit or assign them all the losses.

Distributable profit is obtained after establishing the necessary depreciation and provisions, deducting, if applicable, previous losses and amounts to be reserved pursuant to the law or the statutes, and taking into account retained earnings . On pain of nullity of any contrary resolution, in joint stock companies, a deduction of at least one twentieth is made from the profit for the fiscal year, reduced, if applicable, by previous losses, allocated to the formation of a reserve fund called the "legal reserve" . The latter ceases to be mandatory when the reserve reaches one tenth of the share capital .

The exercise of shareholders' right to profits is subject to a dual condition: firstly, the company's result must be profitable, and secondly, the shareholders' meeting, after approving the annual accounts and confirming the existence of distributable sums, must determine the portion allocated to shareholders in the form of dividends . The fact that a shareholder voted in favor of allocating the SAS's results to retained earnings does not exclude their claim to a dividend distribution, as long as it can be made from this account . A refusal to distribute dividends may constitute an abuse of majority when it is not justified by the company's situation, results in depriving the minority shareholder of any participation in profits, and exacerbates the statutory provisions that prevent them from recovering the fruits of their involvement as a shareholder through a transfer of shares . Similarly, a shareholder of the SAS, whom the company delayed in registering on the shareholders' register and who could not participate in the general meetings during which dividends were distributed, suffers a prejudice that the company must remedy . However, in the context of a portage operation in which the holder refused to return the titles to the principal upon request, the right to dividends of the latter is not linked to their status as a shareholder of the SAS, but arises from the fault of the holder .

The proportional distribution of profits follows the law of equality. However, since the rule is not mandatory, shareholders can always waive it and provide for a different distribution . In fact, several possibilities can be considered, some of which are provided for by the legislator itself. In particular, Article L. 228-11 of the Commercial Code provides that during the formation of the company or during its existence, preference shares may be created, with or without voting rights, accompanied by special rights of any kind, either temporary or permanent. Similarly, Article L. 232-14 indicates that an increase in dividends may be granted by the statutes to certain shareholders.

The shareholder of a simplified joint-stock company has a right over the company's assets, which manifests in several ways. First, they have a right over the reserves, which is exercised differently depending on their nature. It is necessary to distinguish between mandatory reserves , which can only be distributed upon the dissolution of the company, statutory reserves , which can be distributed by decision of the partners, and free reserves, which can be withdrawn at any time. Furthermore, upon the dissolution of the company, after settling liabilities and realizing assets, shareholders may claim reimbursement of their contributions and the distribution of the liquidation surplus. Article L. 237-29 of the Commercial Code provides that, unless otherwise stipulated in the statutes, the distribution of the remaining shareholders' equity after reimbursement of the nominal value of shares or ownership interests is carried out among the partners in the same proportions as their participation in the share capital. Finally, a shareholder of an SAS has a priority in the event of a capital increase, which is realized through the allocation of a preferential subscription right.

When the statutes of a simplified joint-stock company do not specify the procedures for modifying the rights attached to preference shares, the individual consent of the holders of these shares is required to proceed with such a modification .

Commercial Code, Art. L. 232-12, para. 2.

Cass. com., 10 July 2024, LawLex202400005244JBJ.

Commercial Code, Art. L. 232-12, para. 1.

Paris, 14 September 2023, LawLex202300012291JBJ.

CA Paris, 10 November 2015, LawLex202300010312JBJ.

Cass. com., 20 September 2016, LawLex202200007225JBJ.

See, for an illustration, Chambéry, 1 June 2021, LawLex202300010836JBJ, considering that the clause of a shareholders' agreement which provides that the shares of a manager dismissed for gross misconduct will be repurchased at their subscription value, with a 20% discount, does not have a leonine character as long as it applies in the same way to all its signatories and finds its cause in the reciprocity of their potential waiver of benefits.

Company Law (en cours)

580. Principle

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580. Principle

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Les notions juridiques connexes

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