Shareholder, get a lawyer to accompany you

Investing in a company is an exciting experience! The life of a partner or shareholder is far from being peaceful. The partner invests in the shares of a civil (SCI, société civile immobilière) or commercial (SARL, société à responsabilité limitée) company. The shareholder buys shares in a commercial company such as a SAS (simplified joint stock company) or SA (joint stock company).

The shareholder may have a majority or a minority share in the company’s capital. The distribution of the share capital and voting rights is provided for in the articles of association and/or in the shareholders’ agreement. The shareholder or partner may also be an officer of the company or not. If he accepts a corporate mandate, his effective role becomes preponderant regardless of his financial participation. Finally, the shareholder may also be an employee of the company.

A business law firm at the side of the shareholder

Thus, beyond the financial investment, the shareholder can invest personally in the company. A corporate lawyer can then anticipate future problems and draft the right documents. By accompanying the shareholder on a daily basis, the business lawyer prevents the settlement of frequently encountered disputes:

• conflict between partners on the strategy of the company or on the investment of each one ;
• legal action to have an abuse of minority or majority rights recognized;
• acting against abuse of corporate assets if a director tends to confuse his personal assets with the company’s assets;
• summary proceedings to convene a general meeting or to obtain an injunction to communicate essential information;
• judicial dismissal of the director;
• appointment of an ad hoc representative;
• dissolution of the company due to disagreement between the partners, in the most serious cases.

Goldwin’s business law firm offers its transversal expertise to shareholders, partners and founders of all types of companies. It accompanies them throughout their corporate investment and provides simple answers to questions such as

• How to prevent a conflict thanks to a shareholders’ agreement?
• What procedure to follow to recognize an abuse of majority?
• How to defend the rights of a minority shareholder?

We study the situation of each shareholder in its context in a pragmatic way. This allows us to propose effective and perfectly adapted strategies. The defense of the shareholders’ interests is carried out in parallel with the interests of the company.

Defense of the minority shareholder

Every minority shareholder has rights, first and foremost the right to information. Without communication of documents relating to the management of the company, the minority shareholder cannot usefully vote at general meetings.

Some actions require a simple majority vote (50% plus one vote), a qualified majority (66% or 75%) or unanimity for the most serious facts. A blocking minority is therefore interesting for certain decisions. It can be obtained alone or in consultation with other shareholders. The blocking minority can then be the object of bitter negotiations. The presence and the advice of a business lawyer are judicious.

Each shareholder has the right to obtain the various documents provided for in article L 225-115 of the French Commercial Code for public limited companies: accounts, remuneration of certain persons, regulated agreements, text of resolutions presented to the general meeting, etc.

Minority shareholders can form a shareholders’ association to increase their weight in the company’s shareholding. This can enable them to act by asking written questions at a general meeting. The written questions may concern facts that could jeopardize the continuity of the business.

Several actions are available to minority shareholders to exercise their right to information:

• summary proceedings to convene a general meeting when the directors are unable or unwilling to do so;
• judicial injunction in summary proceedings and under penalty to obtain the communication of information;
• appointment of an ad hoc representative to proceed with the communication of the information.

In addition to this right to information, minority shareholders may also act to replace a manager deemed to be in default or to guarantee the continuity of the company. Thus, the shareholder can ask the president of the commercial court to appoint an auditor or an agent.

Requesting a management assessment from the court

A management report or minority report is also possible. The shareholder then asks the court to appoint an expert. The latter’s mission is to verify a specific management point or a specific operation of the company. The business lawyer working alongside the shareholder usefully clarifies the context and provides the elements to define the relevant scope of the expert’s mission.

The shareholder can request an expert opinion if he holds :

• more than 5% of the share capital of a SAS or SA,
• more than 10% of the share capital of a SARL.

In a SAS, the minority shareholder must first put the director on notice. If he fails to do so, he risks the dismissal of his summary proceedings before the president of the commercial court. This formal notice requires answers on specific management operations. One month after an unsuccessful formal notice, the shareholder may bring the matter before the court. The action is in summary proceedings and is brought on the merits. The director of the company will therefore be summoned.

On which management operations can a request for an expert opinion be made?

The shareholder must show to the court the existence of a presumption of irregularity or the risk of damage to the company’s interest. The management operation must emanate from an officer of the company. The president of the commercial court determines the mission and the powers entrusted to the appointed expert.

The expert draws up a report on the management operations concerned. If he points out irregularities, this can serve as a basis for a liability action against the directors.

Accompany the shareholder in the drafting of the extra-statutory agreement

At the time of the company’s creation, the founders draft the published articles of association. The shareholding of the company may then evolve and, very often, a new minority shareholder will not pay much attention to the signed articles of association.

However, the company’s articles of association and the shareholders’ agreement, an optional confidential document, define the rights and obligations of the partners. With certain legal forms, such as the SAS, the law grants a great deal of contractual freedom to the shareholders. The corollary of this freedom is the need to carefully draft the articles of association and the shareholders’ agreement. This is why a shareholder, even a minority shareholder, should entrust the review of the shareholders’ agreement to a lawyer who is an expert in corporate law.

The resolution of disputes is notably provided for in these documents. Anticipating disagreements between shareholders is essential to avoid paralysis of the company’s operations.

In this respect, the shareholders’ agreement organizes the relations between the signatories. It is a confidential document that cannot be used against third parties. Various clauses organize the governance of the company, the distribution of the share capital and voting rights, the operational functioning.

What are the important clauses for the shareholder?

• the exclusion clause is only possible for a shareholder who holds a corporate mandate.
• the bad leaver or good leaver clause determines the obligation to sell one’s shares at a determined or determinable price in the event of termination of one’s functions.
• non-competition: if the shareholder is also an employee, a non-competition clause may be provided for when leaving the company. This clause is highly regulated by the courts to avoid depriving the
• employee shareholder of any possibility of working.

A lawyer specializing in corporate law assists shareholders in the drafting of bylaws, agreements and employment contracts, if applicable. He ensures that the balance between the parties and the interests of the company are respected.

Accompanying the shareholder in the amicable resolution of conflicts

The Goldwin law firm assists shareholders in the first disputes with the management or other shareholders. If a mediation clause is provided for in the articles of incorporation, our firm will arrange for a mediator.

It can also request conciliation or arbitration, other alternative methods of resolving conflicts between shareholders.

A lawyer for shareholders has a daily advisory role. He takes care to preserve the shareholder’s interest and the company’s interest. He tries to reconcile the sometimes contradictory interests of the various shareholders. To do so, he uses all the means at his disposal, taking into account the necessary speed and efficiency. Shareholders sometimes generate conflicts related to issues of personality and affect.

A lawyer specialized in the management of shareholder conflicts is very useful. His role is indispensable even before taking legal action to prevent such conflicts. This avoids the publicity of disputes between shareholders, which can be detrimental to the company. The lawyer’s expertise and objectivity make him a necessary partner for shareholders in disagreement.

A lawyer to act in case of abuse of minority or majority rights

Abuse of rights is sanctioned in a broad way in French law. The courts have thus created different cases of abuse in the exercise of a right.

An action for abuse of minority rights can be brought against a minority shareholder. The shareholder’s behavior must block the completion of an essential transaction. He must be motivated by his personal interest in disregard of the company’s interest. The survival of the company is at stake and not only its development. For example, preventing the arrival of investors by blocking a capital increase may or may not constitute an abuse of minority rights. Everything depends on the legal analysis of the situation by the judges. If the survival of the company depends on this increase, the abuse of minority will probably be retained.

An action for abuse of the majority is just as reprehensible. The majority shareholder(s) makes a decision contrary to the company’s interests in order to further his or her own interests. For example, voting for an increase in the remuneration of the managing shareholders while the results are in decline. Putting large sums of money in reserve for many years can constitute an abuse of the majority.

The action for abuse of majority aims at obtaining the cancellation of the decision. The statute of limitations is 3 years.

The expertise of Goldwin, lawyer for shareholders

Maître Bellaiche and his associates advise numerous shareholders in Paris. The most diverse sectors of activity are represented through SAS, SA, SARL and SCI. Goldwin’s attorneys have developed an in-depth expertise in all aspects of corporate law, business law and criminal business law.

This allows them to develop relevant strategies for shareholders:

• Advice: drafting of articles of association and shareholders’ agreements, shareholder defense strategy, negotiation of shareholders’ agreement clauses, etc.
• Litigation: summary proceedings before the president of the commercial court. Action for abuse of minority or abuse of majority, injunction to communicate legal information, request for management expertise, liability action against corporate officers, etc.

Our lawyers, who are members of the Paris Bar, have a perfect understanding of the issues at stake in a company. Also registered with the New York Bar, the lawyers of our business law firm have mastered international cases.

They do everything possible to preserve the interests of the company and the interests of the partners. Thus, they try to avoid the dissolution of the company due to disagreement between the partners. In the event of profound disagreement between shareholders, the sale of the entire company is a solution that favors the continuation of the business and preserves jobs. The support of an expert business law attorney is necessary to avoid paralyzing the operation of the company.

Goldwin’s corporate lawyers are creative. They analyze the situation of the shareholders and the rights of the minority shareholders with regard to the regulations, the articles of association and the agreements concluded. They then develop the most effective strategy for defending the shareholders, whether it be amicable or contentious. Our lawyers can initiate liability actions against majority shareholders or managers.