A business lawyer works with shareholders and partners on a daily basis. They prevent conflicts, anticipate difficulties and resolve disputes. Conflicts between partners, fund-raising, company difficulties, conflicts with management bodies, drafting a partnership agreement, etc.
Investing in a company is an exciting experience! The life of a partner or shareholder is far from peaceful. The partner invests in the shares of a non-trading company (SCI, société civile immobilière) or a trading company (SARL, société à responsabilité limitée). The shareholder buys shares in a commercial company such as a SAS (société par actions simplifiée) or SA (société anonyme).
Shareholders may hold a majority or minority stake in the company’s share capital. The distribution of share capital and voting rights is set out in the articles of association and/or the shareholders’ agreement. The shareholder or partner may or may not also be an officer of the company. If they accept a corporate mandate, their actual role becomes predominant, regardless of their financial stake. Lastly, shareholders may sometimes be employees of the company.
A firm of business lawyers at the shareholder’s side
In addition to their financial investment, shareholders may also become personally involved in the company. A corporate lawyer can help anticipate future problems and draft the right documents. By providing day-to-day support for the shareholder, thebusiness lawyer can prevent the resolution of frequently encountereddisputes:
- disputes between partners about the company’s strategy or each partner’s investment ;
- taking legal action to have an abuse of minority or majority rights recognised;
- taking action against misuse of company assets if a director tends to confuse his personal assets with company assets;
- summary proceedings to convene a general meeting or to obtain an injunction to provide 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 puts its cross-disciplinary expertise at the service of shareholders, partners and founders of all types of company. We support them throughout their investment in the company and provide straightforward answers to questions such as :
- How can a shareholders’ agreement prevent a conflict?
- What is the procedure for recognising an abuse of majority voting rights?
- How do you defend your rights as a minority shareholder?
We take a pragmatic approach to each shareholder’s situation. This enables us to propose effective and perfectly adapted strategies. We defend the interests of shareholders alongside those of the company.
Defending minority shareholders
Every minority shareholder has rights, first and foremost the right to information. Without being provided with documents relating to the management of the company, minority shareholders cannot vote effectively 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 cases. A blocking minority is therefore useful for certain decisions. It can be obtained alone or in consultation with other shareholders. In this case, the blocking minority may be the subject of tough negotiations. The presence and advice of a business lawyer is a good idea.
Each shareholder has the right to obtain the various documents provided for inArticle L 225-115 of the 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 shareholder base. This can enable them to take action by asking written questions at a general meeting. Written questions may relate to matters that could jeopardise the company’s continued operation.
There are several ways in which minority shareholders can exercise their right to information:
- summary proceedings to convene a general meeting when management is unable or unwilling to do so;
- an interim injunction, subject to a fine, to obtain information;
- appointment of an ad hoc representative to obtain the information.
In addition to this right to information, minority shareholders may also take action to replace a director deemed to be in default or to ensure the continuity of the company. In this way, shareholders can ask the president of the commercial court to appoint an auditor or an agent.
Applying to the court for a management report
A management report or minority report is also possible. In this case, the shareholder applies to the court for the appointment of an expert. The expert’s task is to verify a specific aspect of the company’s management or a specific transaction. A business lawyer working alongside the shareholder will provide useful background information and define the relevant scope of the expert’s assignment.
Shareholders may request an expert opinion if they hold :
- more than 5% of the share capital of a SAS or SA,
- more than 10% of the share capital of a SARL.
In an SAS, the minority shareholder must first give formal notice to the director. Failure to do so may result in the dismissal of his application for interim relief by 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, but is referred to the merits of the case. The company director will therefore be summoned.
What management operations can be the subject of a request for an expert opinion?
The shareholder must show the court that there is a presumption of irregularity or a risk of harm to the company’s interests. The management transaction must emanate from an officer of the company. The President of the Commercial Court determines the mission and powers of the appointed expert.
The expert draws up a report on the management transactions in question. If the expert identifies any irregularities, this may form the basis of a liability action against the directors.
Assisting the shareholder in drafting the extra-statutory agreement
When the company is set up, the founders draw up the published articles of association. The company’s shareholder base may subsequently change, and a new minority shareholder will often pay little attention to the Articles of Association that have been signed.
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 gives shareholders considerable contractual freedom. The corollary of this freedom is the need to draw up the articles of association and shareholders’ agreement in detail. 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 company law.
These documents include provisions for resolving disputes. Anticipating disagreements between shareholders is essential to avoid paralysis in the running of the company.
The shareholders’ agreement governs relations between the signatories. It is a confidential document that cannot be invoked against third parties. Various clauses govern the governance of the company, the distribution of share capital and voting rights, and operational procedures.
Which clauses are important for shareholders?
- The exclusion clause is only possible for shareholders who hold a corporate office.
- the bad leaver or good leaver clause sets out the obligation to sell shares at a fixed or determinable price if the shareholder ceases to hold office.
- Non-competition: if the shareholder is also an employee, a non-competition clause may be included when leaving the company. The courts impose strict conditions to avoid depriving the employee shareholder of any possibility of employment.
A lawyer specialising in company law will assist shareholders in drafting the company’s articles of association, agreements and employment contracts, where applicable. He will ensure that the balance between the parties and the interests of the company are respected.
Helping shareholders to resolve disputes amicably
The Goldwin law firm assists shareholders with their first disputes with management or other shareholders. If a mediation clause is included in the company’s articles of association, our firm will organise recourse to a mediator.
It can also request conciliation or arbitration, other alternative methods of resolving disputes between shareholders.
A lawyer for shareholders has a day-to-day advisory role. They ensure that the interests of the shareholder and the interests of the company are protected. They try to reconcile the sometimes conflicting interests of the various shareholders. To do this, he uses all the means at his disposal, bearing in mind the need for speed and efficiency. Shareholders sometimes generate conflicts linked to issues of personality and affect.
A lawyer specialising in managing shareholder disputes is extremely useful. His or her role is essential even before taking preventive legal action. This avoids publicising disputes between shareholders, which can be damaging to the company. The lawyer’s expertise and objectivity make him a necessary partner for shareholders in disagreement.
A lawyer to take action for abuse of minority or majority rights
Abuse of rights is widely sanctioned under French law. The courts have created various cases of abuse in the exercise of a right.
An action for abuse of minority rights allows the minority shareholder to be attacked. His behaviour must block the completion of an essential transaction. He must be motivated by his own personal interests to the detriment of the company’s interests. The survival of the company is at stake, not just its development. For example, preventing the arrival of investors by blocking a capital increase may or may not constitute an abuse of minority rights. It all depends on the judges’ legal analysis of the situation. If the company’s survival depends on this increase, abuse of minority rights will undoubtedly be upheld.
An action for abuse of the majority is just as reprehensible. The majority shareholder or shareholders take a decision that is contrary to the company’s interests in order to further their own interests. For example, voting to increase the remuneration of executive shareholders when results are down. Putting large sums of money in reserve for many years may constitute abuse of the majority.
An action for abuse of majority voting seeks to have the decision overturned. The limitation period is 3 years.
The expertise of Goldwin, lawyers for shareholders
Maître Bellaiche and his team advise many shareholders in Paris. The most diverse business sectors are represented through SAS, SA, SARL and SCI companies. Goldwin’s lawyers have developed in-depth expertise in all aspects of company law, business law and criminal business law.
This enables them to develop relevant strategies for shareholders:
- advice: drafting of articles of association and shareholders’ agreements, shareholder defence strategy, negotiation of shareholders’ agreement clauses, etc.
- litigation: summary proceedings before the president of the commercial court. Actions for abuse of minority rights or abuse of majority rights, injunctions to disclose legal information, requests for management reports, liability actions against company officers, etc.
Our lawyers, who are members of the Paris Bar, have a thorough understanding of the challenges facing companies. Our lawyers, who are also members of the New York Bar, are experts in international cases.
They do everything in their power to protect the interests of the company and its partners. For example, they try to avoid 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 favours the continuation of the business and preserves jobs. The support of an expert business lawyer is necessary to avoid paralysing the company’s operations.
Goldwin’s corporate lawyers are creative. They analyse the situation of shareholders and the rights of minority shareholders in the light of regulations, by-laws and agreements. They then devise the most effective strategy for defending shareholders, whether out of court or in litigation. Our lawyers can bring liability actions against majority shareholders or directors.
