FRANCE Law and Practice Contributed by: Sophie Vermeille, Vermeille & Co
cannot be altered by the company’s articles of asso- ciation. • Ordinary resolutions (eg, approval of annual accounts, appointment/removal of directors, divi- dend distribution) are adopted by a simple majority of votes cast (ie, more than 50%). • Extraordinary resolutions (eg, amendments to the articles of association, capital increases, merg- ers, demergers or dissolution) require a two-thirds supermajority of votes cast. In non-listed companies, notably SAS, the regime is more flexible. The articles of association may freely determine which matters require shareholder approv- al (subject to a limited list of matters that the law reserves to shareholders, such as approval of annual accounts, capital changes, mergers, and transforma- tion of the company). They may also set the type of resolution and voting thresholds for adoption, includ- ing the possibility of requiring higher thresholds than those provided by law. However, the Cour de cassation has recently made clear that this flexibility has limits. The articles of asso- ciation cannot authorise a minority of shareholders to adopt collective decisions; decisions must always be grounded in a majority rule principle, even if the definition of “majority” may be contractually adapted. 2.8 Shareholder Approval In SAs, the allocation of powers between the board of directors (or management board and supervisory board) and the shareholders is strictly prescribed by the French Commercial Code and constitutes a matter of public policy. Courts enforce this separation rigor- ously: • matters reserved to the shareholders cannot be usurped by the board; and • matters within the board’s remit cannot be decided by the shareholders. Typical shareholder approvals include: • ordinary matters (approved at the AGM by a simple majority of votes cast) – approval of the annual accounts, allocation of profits (including dividends),
appointment or removal of directors, and appoint- ment or renewal of statutory auditors; and • extraordinary matters (approved at the EGM by a two-thirds majority of votes cast) – amendments to the articles of association, mergers, demergers, capital increases or reductions, or dissolution of the company. In SAS, by contrast, the law grants shareholders broad contractual freedom to organise decision-mak- ing through the articles of association. This flexibility allows: • the allocation of decision-making either to the gen- eral meeting or to management; • veto rights for specific categories of shareholders (often reinforced by shareholders’ agreements); and • bespoke voting thresholds tailored to the investor base. Limits to Flexibility Despite this contractual freedom, a core set of funda- mental matters must always be decided collectively by shareholders under the Commercial Code. These include approval of accounts, allocation of profits, capital increases or reductions, mergers, changes of corporate form, and dissolution. 2.9 Voting Requirements In listed SAs, shareholders must evidence ownership of their shares two business days prior to the meeting (the statutory “record date”). By contrast, in unlisted SA, proof of shareholding is assessed on the date of the meeting itself, unless the articles of association provide for an earlier reference date. Shareholders who cannot attend may vote in advance (by mail or electronically if authorised in the by-laws) or appoint a proxy. Proxies may either designate a specific person (who must be a shareholder or the shareholder’s spouse) or be sent to the company with- out naming a proxy holder, in which case the proxy votes in line with the board’s recommendations.
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