Can We Completely And Definitively Remove The Voting Rights Attached To Certain Shares? Summary After The So Called PACTE Law No. 2019-486 Of May 22, 2019.

Author:Ms Dominique Dumas
Profession:Dumas Structure Avocats

French Company law, behind an apparent simplicity, is very technical since the rules can considerably vary from one type of company to another depending on its corporate form and since legal provisions sometimes contradict each other. The issue as to the possibility of removing the voting rights is a good illustration thereof.

The question arises differently in simplified joint stock companies (sociétés par actions simplifiées so called "SAS") and in other joint stock companies such as joint stock companies (sociétés anonymes so called "SA") and limited partnerships by shares (sociétés en commandite par actions so called "SCA"). It also arises differently depending on whether the shares of these companies are listed (admitted to trading on a regulated market or on a multilateral trading system) or not, being here reminded that the shares of the SAS cannot be listed.

  1. In SAS

    Since the PACTE Law of May 22, 2019, which brought major changes to French company law and in particular modernized the preferred share regime, the voting right attached to shares issued by an SAS can be suppressed using the preferred share mechanism (L. 228-11 of the Commercial Code).

    Indeed, the French Supreme Court (Cour de cassation, Chambre commerciale, 9 February 1999 - n° 96-17.661, Cass. com., 23 Oct. 2007, n° 06-16.537, P+B+R+I , d'Hem v/ Lacquay: Juris-Data n° 2007-041010), making an extensive reading of article 1844, paragraph 1 of the Civil Code which states "Every shareholder has the right to participate in collective decisions", and going beyond the literal meaning of the text, considers that "each shareholder has the right to participate in collective decisions and to vote and that the Articles of Association may not derogate from these provisions unless provided for by law".

    Since the reform of 22 May 2019, Article L. 228-11 of the Commercial Code now provides without ambiguity for the possibility of completely and definitively abolishing the voting rights attached to shares.

    Prior to the Law of 22 May 2019, Article L. 228-11 of the Commercial Code contained a double contradiction, since:

    - the first subparagraph contained in itself a first contradiction by indicating that preferred shares without voting rights could be created, temporarily or permanently, but in compliance with Articles L. 225-122 to L. 225-125 of the Commercial Code. And these texts impose restrictions that seem to prohibit this total abolition of the voting rights. Indeed, Article L...

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