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

Company Law (en cours)

The right of withdrawal characterizes the ability granted to a partner to leave the company in exchange for the reimbursement of their rights. Such an ability arises from the law or the articles of association. Indeed, Article 1869 of the Civil Code expressly provides that a partner may withdraw totally or partially from the company, under the conditions provided by the articles of association  or …

Right not to remain indefinitely associated

WALLET, The judicial withdrawal of a partner from a civil company for just grounds, Bull. Joly 1985, 597; FELIX, Capital reduction and partner withdrawal in civil companies, JCP N 1993, I, 111.

The right of withdrawal characterizes the ability granted to a partner to leave the company in exchange for the reimbursement of their rights. Such an ability arises from the law or the articles of association. Indeed, Article 1869 of the Civil Code expressly provides that a partner may withdraw totally or partially from the company, under the conditions provided by the articles of association  or, failing that, after authorization given by a unanimous decision of the other partners. This withdrawal may also be authorized for just grounds by a court decision . Strictly personal, the right of withdrawal cannot be exercised by a third party on behalf of a partner: a creditor cannot act in withdrawal, through the exercise of the oblique action, to obtain the repayment of a partner's debt through the proceeds from the repurchase of their shares .

Contractual stipulations contrary to the right of withdrawal guaranteed by law or the statutes, such as a non-reinstallation clause contained in the internal regulations of a non-trading private company, which impose significant restrictions on the free exercise of their right of withdrawal by the partners, cannot obstruct this right, especially when the company's statutes have the exclusive purpose of facilitating the exercise of each member's activity . However, the clause that requires the withdrawing partner to contribute to the fixed costs incurred by the company during the year following their departure is not considered to prevent the exercise of their right of withdrawal when it is justified by the absence of a non-compete clause and when the amount of the contribution to fixed costs, based on the extent of the activity conducted by the withdrawing partner up to the day of their departure, does not apply to all the expenses borne by the structure .

When withdrawal is neither provided for by law nor by the articles of association, partners who wish to exercise their right may petition the court, provided they can invoke just grounds. Article 1869 of the Civil Code does not prohibit the court from relying on elements related to the personal situation of the partner to grant their request for withdrawal . A partner in a real estate civil company (SCI) formed with their in-laws may thus withdraw after a divorce, without having to prove a disagreement among the partners that would lead to a dysfunction of the company . The withdrawal of a partner is also based on just grounds when the absence of affectio societatis among the partners leads to the deterioration and devaluation of the sole asset of a real estate civil company  or results in the need to initiate several procedures to address the company's difficulties and appoint an ad hoc representative to appoint a new manager . Furthermore, the failure to convene a partner to general meetings for more than seven years, the non-compliance with their rights to information, and the making of corporate decisions without their knowledge establish that they have been excluded from the management of the company in violation of their rights as a partner and constitute just grounds for withdrawal . Conversely, the withdrawal request submitted by a partner of a dissolved civil company in the process of liquidation must be rejected as the resulting operations are unrelated to the needs of the liquidation .

A partner who withdraws from the civil company is entitled to reimbursement of the value of their shares, whether or not they have paid their share of the capital . When a withdrawal procedure with buyback by the company has been initiated and accepted by the company, the withdrawing partner must carry it through to completion and cannot, under penalty of invalidity, substitute it with a transfer of their shares to a third party . In the absence of an amicable agreement with the company, Article 1869 provides that the valuation of the withdrawing partner's shares will be determined in accordance with Article 1843-4 . According to the Court of Cassation, the application of the procedure provided by this latter text does not violate the right of access to a court guaranteed by Article 6 § 1 ECHR, even if the judge's decision is without possible appeal, except for abuse of power, and if the valuation carried out by the expert binds the parties and the judge and can only be annulled in the case of gross error, as such interference is justified by the legitimate aim of allowing the withdrawing or excluded partner to be quickly informed of the amount of reimbursement due to them and the company and other partners to know this amount, without having to endure the uncertainties of a classic judicial procedure, involving ordinary appeals during the different phases of the process . Similarly, if such a procedure can be considered an interference with the right to property guaranteed by Article 1 of Protocol No 1 to the ECHR since the expert is free to choose the valuation method, without being bound by the rules provided by the company's statutes, it is justified by the legitimate objective of seeking a fair price, which could be compromised, especially in the case of withdrawal or exclusion of a minority partner, by the application of clauses relating to the valuation of shares, designed by the majority group or modified by them during the company's life .

The value of the withdrawing partner's shares must be determined at the date closest to their reimbursement  and not at the date when the intention to withdraw was expressed, nor at the date of the court decision authorizing it , nor even at the date of the expert report . The valuation of these rights is not, in the absence of assimilation of the withdrawal to liquidation, subject to rescission for lesion . The right to reimbursement of the value of the withdrawing partner's shares includes the contribution made, except in cases of loss, but is not necessarily limited to it .

As long as he has not obtained full reimbursement of the value of his shares, the withdrawing partner retains his proprietary rights , even if his actual departure from the company occurs beforehand , unless the statutes provide that the distribution of profits is based on services rather than capital contributions . Except for this scenario, in the interval between the notification of withdrawal and the reimbursement of his ownership interests, the withdrawing partner retains the status of partner, and consequently, the capacity to initiate legal action to contest the allocation of profits to reserves  or to seek judicial dissolution of the group .

For an illustration, See Aix-en-Provence, 1 February 2024, LawLex202400001728JBJ, ruling ineffective the withdrawal that was not carried out, in accordance with the statutory provisions, by registered letter with acknowledgment of receipt, or that originates from persons who are no longer associates of the company due to the transfer of their ownership interests to SELARLs established for the exercise of their profession.

See, Cass. com., 20 March 2007, LawLex202300002222JBJ, emphasizing that when the statutes require the exercise of withdrawal to be subject to a prior offer made to the other partners to transfer the shares concerned, a partner cannot directly refer the matter to the court.

Cass. com., 12 February 2013, LawLex202300001439JBJ.

Cass. com., 10 February 2015, LawLex202200003086JBJ.

Cass. 3e civ., 25 May 2023, LawLex202300007303JBJ, JCP E 2023, No 1223, obs. LEBEL.

Orléans, 20 June 2024, LawLex202400004808JBJ, holding that since the partners do not agree on the valuation of the company's shares, the withdrawing partner is entitled to obtain the appointment of an expert to determine the value of their ownership interests.

Cass. com., 8 November 2023, LawLex202300013333JBJ and LawLex202300013730JBJ.

Cass. com., 15 January 2013, LawLex202300000393JBJ; 4 May 2010, LawLex202300001449JBJ.

Cass. com., 9 November 2022, LawLex202200010034JBJ, JCP E 2022, No 1404, obs. DONDERO; Gaz. Pal. 14 March 2023, 66, obs. MEZACHE; JCP E 2023, No 1222, No 5, obs. BUCHBERGER.

Cass. 3e civ., 15 January 1997, LawLex202300009764JBJ.

Cass. com., 4 December 2012, LawLex202300001434JBJ.

Cass. 1re civ., 9 April 2025, LawLex202500002886JBJ: the notary, who exercises his right of withdrawal, retains his proprietary rights as long as he has not received full reimbursement of the value of his shares and is therefore entitled to the remuneration of his capital contributions and his share of the distributed profits as long as he remains the holder of his shares.

Cass. 1re civ., 16 April 2015, LawLex202300001450JBJ; Cass. 3e civ., 12 June 2002, LawLex202300009713JBJ.

Cass. 1re civ., 8 January 2020, LawLex202300000740JBJ.

Cass. com., 17 June 2008, LawLex202200006085JBJ.

Cass. com., 17 June 2008, LawLex202200006086JBJ.

Cass. com., 1 March 2011, LawLex202200004053JBJ.

Cass. 1re civ., 8 January 2020, LawLex202300000740JBJ; 16 April 2015, LawLex202300001450JBJ.

Cass. 1re civ., 27 February 1985, LawLex202300001441JBJ.

Cass. 3e civ., 11 February 2014, LawLex202300010468JBJ.

Cass. 3e civ., 28 March 2012, LawLex202300000383JBJ.

Cass. 3e civ., 27 September 2006, LawLex202200003078JBJ.

Paris, 14 May 2024, LawLex202400003667JBJ.

Company Law (en cours)

662. Right not to remain indefinitely associated(1)

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Les notions juridiques connexes

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