Court Rejects Statutory Clause Depriving Associate of Right to Vote

Extract

[...] Thus, the Court estimates that the statutes of a company cannot deprive an associate of his right to vote without legal authorization and this even in SAS. Any contrary clause is deemed not written. This judgment produces a limitation in the exercise of contractual freedom, the high magistrates expressing the limits they intend to impose on statutory freedom, which is enriched by this decision, edifying the first paragraph of Article 1844 of the Civil Code as a quasi-absolute principle. This judgment is part of the continuity of the Château D'Yquem judgment and extends its jurisprudence on the prohibition of any statutory clause derogating from the right to vote of any shareholder in simplified joint-stock companies. [...]

[...] Court of Cassation, Commercial Chamber October 2007, n°06-16.537 - Must the associate of a SAS participate in the collective decision regarding his exclusion? The Court of Cassation in this ruling dated 23 October 2007 revisits the difficult articulation between the contractual freedom in the matter of simplified joint-stock company (SAS) and the right to vote attached to the quality of associate. In this case, an associate was subject to an exclusion procedure from an SAS in accordance with its statutes, providing that an associate may be required to transfer his shares if this measure is subject to a collective decision of the associates, of which the latter cannot participate in this decision and vote on the proposal to exclude him. [...]

[...] Thus, the judges of the Court of Appeal had reasons to think that the statutes could stipulate that the associate whose exclusion was being considered could not participate in the vote. In addition, the judgment presented a solid argument, confirmed by the Court of Cassation, based on « the context of contractual freedom that characterizes the simplified joint-stock company », the purpose of the stipulation being clearly defined as being that of « rto resolve certain conflict of interest situations between the company and the shareholders », and the Douai Court of Appeal in this context had recalled « all shareholders have freely consented to it upon signing the articles of association ». [...]

[...] Although this right to vote of the associates is of public order, on May the Pact Law came to specify the question of the possibility of suppressing the right to vote. This provision stipulates that, depending on the social form of the company, this possibility is modulable and the rules can vary from one social form to another. In this way, Article L. 228-11 of the Commercial Code provides that the right to vote attached to the shares issued by the SAS can be suppressed using the mechanism of preference shares. [...]

[...] 227-16 of the Commercial Code enunciate the fundamental rights of associates, but to what extent can the statutes derogate from these provisions, particularly by restricting the voting right of an associate concerned by an exclusion measure? The problem raised concerns the balance by the judges of the Court of Cassation between contractual freedom and the protection of the rights of associates within a SAS. Therefore, the Court of Cassation, in the first place, highlights its willingness to institutionalize the right of all associates to participate in collective decisions as a principle and, in the second place, its rejection of the legitimacy of statutory clauses depriving an associate of the right to vote (II). I. [...]