France: Majority rule applies to all SAS decisions

In this case, Article 17 of the Articles of Association of an SAS provided that collective decisions were to be adopted by a “majority” of one-third of the voting rights. On this basis, a capital increase was approved in 2015 by 46 percent of votes in favor and 54 percent against.

In a first attempt to overturn the decision, the Court of Cassation repealed the Paris Court of Appeal's rejection, ruling that decisions to be taken col​​lectively by the shareholders of an SAS cannot be adopted by a number of votes less “than a simple majority of the votes cast” (first ruling dated 19 January, 2022 (19-12.696 FS-D)​.

This principle was intended to ensure consistency in collective decision-making, by preventing resolutions from being adopted by a minority. The case was therefore reopened in 2023 (for a new ruling in this matter), but the Court of Appeal did not follow the solution of the Chamber of Commerce.

On 4 April, 2023 (No° 22/05320), the Paris Court of Appeal ruled that “article L. 227-9 of the French Commercial Code provides that the shareholders of an SAS are free to determine, in the bylaws, - in the ab-sence of express provisions – that not only no majority rule is required to adopt resolutions in the matters it lists, but also to define the conditions under which decisions must be taken collectively, whether in matters defined by the bylaws or referred to in paragraph 2 thereof”.

The Court therefore opted for a literal interpretation, giving precedence to the legislator'​​s freedom to determine the rules for adopting collective decisions in SASs. This is the “liberal”^[2​]​ view, according to which article L. 227-9 grants shareholders complete freedom to set the forms and conditions of collective decisions.

In support of this view, it should be noted that the legislator who passed Act no. 94-1 of 3 January, 1994, creating the SAS, removed from the bill the principle that certain decisions had to be taken at a shareholders' meeting by „a majority that may not be less than an absolute majority of the votes cast.“

As Advocate General Lecaroz points out, if the legislator had wanted to limit the contractual freedom of associates, he would have done so expressly, as in the case of participative financing or cross-border transactions.

This situation therefore justified a referral to the plenary session of the Cour de Cassation. Such a referral may in fact be ordered when a case raises a question of principle, and must be ordered when, after an initial ruling has been quashed, the decision handed down by the referring court is challenged on the same grounds (Article L. 431-6 of the French Judicial Organization Code).

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The French Cassation Court was due to rule, in plenary session, on the possibility for the bylaws of a SAS to provide for collective decisions to be taken by a minority of the votes cast.

It should be noted that a new question had also arisen after the 19 January, 2022 ruling: does the majority requirement for the adoption of a collective decision by SAS shareholders apply only to collective decisions covered by article L. 227-9, paragraph 2 of the French Commercial Code?

In its ruling of 15 ​November, 2024, the plenary session of the Court of Cassation answered both questions:

” [...] 10. A collective decision of associates can only be deemed to have been adopted if it obtains the greatest number of votes in its favor.

11. Any other rule would lead to the conclusion that the shareholders as a whole may adopt two contrary decisions in the same ballot.

12. The contractual freedom which governs the SAS can only be exercised in compliance with the rule set out in paragraph 10.

13. It follows that a collective decision of the members of a SAS, whether provided for in the articles of association or imposed by law, can only be validly adopted if it obtains at least a majority of the votes cast, any clause in the articles of association to the contrary being deemed unwritten. [...] “

The Court of Cassation adopts a “restrictive”^[3​]​ approach, according to which setting the threshold for approval lower than the majority of votes cast is likely to lead to potentially contradictory decisions.

Thus, the collective decision of the shareholders of an SAS, whether provided for in the articles of association (article L. 227-9 paragraph 1) or imposed by law (article L. 227-9 paragraph 2), can only be validly adopted if it obtains at least a majority of the votes cast.

Consequently, any clause in the bylaws contrary to this principle is deemed unwritten.

It should be noted that the ruling resolves another ambiguity: the Articles of Association of a SAS may well provide for a majority rule calculated on the basis of voting rights present/represented, or on the basis of all existing votes in the company (in which case, votes “for” must exceed the total of votes “against”, abstentions, blank and void votes, and voting rights of those absent). A coherent, common-sense decision.​

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