Publications

15 Apr 2016

Voting right and nullity of decisions from general meetings under French law

As provided under Article 1844 paragraph 1 of the French Civil code, "every shareholder has the right to participate in collective decisions".
 
On the other hand, to what extent is a general meeting resolution valid when voted upon also by a non-shareholder?
 
Pursuant to former case law, such voting by a non-shareholder was not considered as a ground for nullity as long as the quorum and majority set for adoption of the resolutions were reached after discarding any irregular vote (French Supreme court, Civil chamber, decision of 31 December 1913, D.1917 I p.143).
 
One should stress the restrictive nature of the rules governing nullity of general meetings under French law, which aims to reserve nullity for exceptional cases.

Yet, by way of its decision dated 3 July 2015 (Nr.13.27-248) the 3^rd Civil chamber seems to have made a shift.

In this case, the heirs of a deceased shareholder, without being first approved by the other shareholders as provided for in the SCI’s Articles of association, took part in a general meeting and voted on a resolution regarding the appointment of a new Managing director.
 

One of the shareholders subsequently brought an action to have the general meeting declared invalid.

The Supreme Court decided to grant this request on the ground "that pursuant to Article 1844 of the French Civil code, only the shareholders have the right to participate in the company’s collective decisions; that, having noted that the heirs of Charles X..., though not approved as laid down in the Articles of association, unable to put forward any implied approval and without any shareholder status in the SCI, participated in the general meeting and in the Managing director’s election, the Court of appeal (...) rightly concluded that the irregular general meeting was to be declared invalid".

This solution appears to be also applicable to commercial businesses, which fall within the scope of Article 1844 of the French Civil code.

It is uncertain, though, whether the Supreme Court’s Commercial chamber will opt for a similar solution or not.

In the meantime, it is highly recommended to check that each and every voting participant has a voting right, failing which the general meeting could be held invalid.