The French Supreme Court has just clarified the procedures for implementing the statutory clauses for the exclusion of shareholders from a simplified joint-stock company (SAS).
In this case, a shareholder had been excluded from a SAS on the grounds that he was working for a competing company. The statutory clause authorizing exclusion on these grounds stipulated that, prior to the vote at the General Meeting, the shareholder targeted by the measure must be notified of the reasons for the exclusion and invited to an explanatory meeting.
The excluded shareholder brought an action against the SAS seeking annulment of the exclusion decision. He claimed that he had not been able to present his defense because the letter of notification did not specify (i) the identity of the competing company, (ii) the nature of the activity carried out, (iii) the evidence held by the company.
By a ruling dated 12 February 2025, issued under Article L. 227-16 of the French Commercial Code, the French Supreme Court overturned the appeal ruling that had annulled the exclusion decision and ordered the reintegration of the excluded shareholder.
The decision states that the aforementioned Article L. 227-16 authorizes exclusion clauses in the articles of association of simplified joint stock companies (SAS) without defining their content, and that it therefore leaves it up to the shareholders to determine the conditions of its implementation, the only restriction being that the shareholder subject to the exclusion measure must be able to participate in the vote.
