Share Transfer in SNC and SARL: Nullity and Unanimous Approval

Extract

[...] Thus, notification constitutes an essential and public order step, marking the beginning of the approval process. According to Bruno Dondero's formula, this judgment illustrates and recalls it sufficiently, 'notification is not a simple mode of information for associates but rather an indispensable step in the approval procedure which is of public order' or to put it another way, notification is indeed 'the inaugural act of the approval process'4 Com., May No. 16-16.498, published in the bulletin - Lack of unanimous approval for the transfer of shares in a general partnership (SNC) Case Law In partnerships, l'intuitu personae plays a fundamental role, in particular in limited liability companies where the transfer of shares is strictly regulated by the need for unanimous approval of the partners. [...]

[...] In addition, they argued that the transfer of shares, due to the lack of unanimous approval, was null and could not be qualified as simply inapplicable. In this context, the question posed to the Court of Cassation was whether the absence of unanimous approval of the partners during the transfer of shares in a general partnership (SNC) would result in the nullity of the transfer or if the latter would simply be inapplicable to the partners and the company. The Court of Cassation rejected the main and incidental appeals, stating that the absence of unanimous approval of the partners did not result in the nullity of the transfer, but made it simply inapplicable to the SNC and the partners. [...]

[...] The Court of Cassation rejected the appeal. It recalled that the transfer of shares to a third party outside the SARL can only take place in strict compliance with the conditions set out in Article L. 223-14 of the Commercial Code, including the obligation for the transferring shareholder to notify the project of transfer to all shareholders. However, the Court of Appeal had noted that one of the shareholders had not received this notification and that no receipt had been produced. [...]

[...] The proceedings began with an action by the bank before the commercial court, followed by an appeal by the physical person, who raised the exception of nullity of the loan contract. The court of appeal upheld their exception, which led the bank to appeal to the Court of Cassation. The means raised by the bank aim to contest the admissibility of the exception of nullity raised by the physical person and upheld by the court of appeal, asserting that the partial repayment by a third party (the company) rendered this exception inoperative. [...]

[...] The transferring shareholder and the purchasing company then appealed to the Court of Cassation. The applicants in the appeal argued that the transfer was regular in light of the third paragraph of Article L. 223-14 of the Commercial Code, which provides that if the company refuses to consent to the transfer, the shareholders have a three-month period to acquire or have acquired the shares at a price fixed in accordance with the provisions of Article 1843-4 of the Civil Code. [...]