In May 2001, an anesthetist bought shares in a clinic, operating under the form of an SA (societe anonyme – Limited Liability Company) and started working in that company. In order to secure the investment, the anesthetist negotiated an offer to purchase (“promesse d’achat”) granted by the company to him pursuant to which all shares owned by the anesthetist in the company would be re-purchased by the company at the time of his withdrawal, should the anesthetist decide to leave (opting-out right), at an agreed price.

In a recent case law dated 15 November 2010 (n°09-69.308), The French High court refused to enforce such agreement although written in clear words and rejected the anesthetist appeal. The Court refers to art. L. 225-207 and art. L. 225-17 of the French commercial code which states that French SA are prohibited from subscribing to its own shares, either directly or through a person acting in their own name but on the company’s behalf (art. L. 225-206) except in limited circumstances pursuant to the terms indicated in articles L. 225-207 to L. 225-217 (1. capital reduction not motivated by losses authorized by the board of directors or the executive board, 2. purchase by companies which allot shares to their employees in the context of a profit-sharing scheme or 3. purchase of shares by a company whose shares are admitted to trading on a regulated market, authorized by the board of directors or the executive board).

This case law is criticized in France as some lawyers have considered that nothing prohibits such non-statutory arrangements. Pursuant to article L. 235-1 of the commercial code, the nullity of non-statutory acts or deliberations other than those amending the articles of association (“engagements extra statutaires”) may result only from the breach of a mandatory provision in the commercial code or in the acts governing contracts. However, no mandatory provision in the commercial code prohibits a company to offer to re-purchase its own shares should one shareholder opt out. Failing such mandatory provisions, the above mentioned agreement was said valid.

The Court’s decision could be grounded on article 1142 of the French civil code which states that “Any obligation to do or not to do resolves itself into damages, in case of non-performance on the part of the debtor.”. Moreover, the judge under French law has no authority to determine the price of shares should this price be argued in relation with a share transfer. In this situation and in all cases considering the assignment of a shareholder’s rights in the company, the value of those rights shall be determined by an expert appointed, either by the parties, or failing an agreement between them, by order of the president of the court who shall decide by way of interim relief proceedings and whose judgment shall be final.

Conclusion: anyone should be very cautious when drafting a shareholder agreement in France, especially when it organizes the re-purchase of shares by the company. Opting outright may not be valid, even if clearly understood by the parties.


Co-Founder, Partner & Solicitor -
International Corporate Law & Litigation

Benoît, Delcade’s co-founder, is a Paris Bar lawyer and UK Solicitor (London).

Advisor for various embassies, working closely with the firm's team, Benoît offers his services to French and foreign companies requiring cross-cutting strategic and legal support in business law.

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