FRANCE Law and Practice Contributed by: Sophie Vermeille, Vermeille & Co
• A 2024 reform now allows multiple voting rights in listed companies at the time of an initial public offering, subject to strict safeguards, including a mandatory sunset clause. It remains to be seen how widely this practice will be adopted in France. • French law automatically grants double voting rights to shareholders who have held their shares in registered form for at least two years, unless expressly disallowed in the company’s by-laws. In practice, these “loyalty shares” are rarely disal- lowed – the main exceptions being large-cap com- panies without a controlling shareholder that seek to attract foreign investors. As a result, the regime tends to reinforce the position of French control- ling shareholders, which remain common in listed companies (including the French State in certain strategic issuers). For foreign institutional investors, the benefit is largely illusory: because they typically hold shares through custodians and not in regis- tered form, they do not qualify for double voting rights. This asymmetry is a major concern for many cross-border investors. The rights attaching to shares are set out in the French Commercial Code and in the company’s articles of association. 1.4 Variation of Shareholders’ Rights Shareholders’ rights may only be varied through an amendment to the company’s articles of associa- tion, approved by at least a two-thirds majority of the votes. However, unlike in common law jurisdictions, the scope for such variation is more limited. • Many shareholders’ rights in an SA are mandatory under French law, such as the right to participate in general meetings, voting rights and basic informa- tion rights. These rights are statutory in nature and cannot be waived or overridden by the articles of association. • Flexibility exists primarily in relation to preference shares ( actions de préférence ). Their financial or voting rights may be customised, but any modifi- cation requires not only the extraordinary general meeting’s approval but also the consent of the affected class of shareholders, voting separately. • Where rights arise from a shareholders’ agree- ment (typically in an SAS), they may only be varied
with the individual consent of the contracting shareholder(s). 1.5 Minimum Share Capital Requirements For an SA, the minimum share capital is EUR37,000. For an SAS, there is no significant statutory minimum, but the legal requirement is EUR1. 1.6 Minimum Number of Shareholders For an SA, the minimum number of shareholders is two for unlisted companies and seven for listed com- panies. For an SAS, there is no statutory minimum beyond one shareholder (single-shareholder SAS are permit- ted). French law does not require any shareholders to be resident in France for either form. 1.7 Shareholders’ Agreements/Joint Venture Agreements In France, shareholders’ agreements are widely used for private companies, particularly in joint ventures and private equity transactions. In practice, there is a tendency to include as little as possible in the arti- cles of association and as much as possible in the shareholders’ agreement, for confidentiality reasons. However, for enforceability against third parties, cer- tain provisions – notably transfer restrictions – must be included in the articles of association. 1.8 Typical Provisions in Shareholders’ Agreements/Joint Venture Agreements Typical provisions include transfer restrictions, exit arrangements (tag-along/drag-along rights), govern- ance rights, financing clauses, non-compete and confidentiality undertakings, and dispute resolution mechanisms. Shareholders’ agreements are generally enforceable between the parties. However, French courts exer- cise substantive control over certain clauses and may strike down provisions deemed contrary to mandatory corporate law or public policy. In particular, the French Supreme Court ( Cour de cassation ) has consistently invalidated so-called “leonine” clauses – for example,
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