For a foreign founder entering a French company, the most expensive mistake is often not choosing the wrong company form. It is signing a vague shareholders’ agreement and discovering, at the first disagreement, that the document does not say who may vote, who must sell, how the price is calculated or how a deadlock is ended. This risk is particularly acute in a société par actions simplifiée (SAS), the French simplified joint-stock company: its flexible governance is useful for international founders, but that flexibility makes drafting decisions decisive.
A French shareholders’ agreement, known in practice as a pacte d’associés or pacte d’actionnaires, is a private contract. It complements the company’s articles of association; it does not automatically replace them. The articles are the constitutional rules of the company, while the pact usually records confidential promises between some shareholders. A founder living in the United States, the United Kingdom, Singapore or the Middle East must also plan for remote signatures, currency conversion, a bilingual document, accession by a future investor and the enforcement of a French-law obligation outside France.
This article answers the practical question: what should foreign founders put into a French shareholders’ agreement so that an exit, a disagreement or a change of control remains manageable? The answer combines the articles, the pact, a precise valuation mechanism and an escalation process. It also takes account of the Cour de cassation’s recent decision of 11 March 2026 on the duration of a pact, which makes an express term and a renewal mechanism especially important.
I. What should a foreign-founder shareholders’ agreement secure in a French SAS?
A. Which promises belong in the articles and which belong in the pact?
The first drafting decision is institutional. The parties should list each rule and decide whether it must bind every shareholder, the company itself, a future purchaser of shares or only the founders who sign the document. That classification prevents a common cross-border misunderstanding: a confidential pact can be contractually powerful between its signatories, yet still be invisible to a third party who acquires shares without joining it.
The starting point is Article 1103 of the French Civil Code, which states that “Les contrats légalement formés tiennent lieu de loi à ceux qui les ont faits.” In English, a validly formed contract binds the parties as their law. The current official text is available in Article 1103 of the French Civil Code. Article 1104 adds that contracts must be negotiated, formed and performed in good faith, and makes that requirement mandatory; the official wording is in Article 1104 of the French Civil Code. Those provisions support confidentiality, information rights, voting commitments and transfer promises, but they do not turn every pact provision into a corporate rule enforceable against non-signatories.
The articles of association should carry the rules that need corporate effect. For an SAS, Article L. 227-9 of the French Commercial Code leaves the articles to determine which decisions are taken collectively and in what form; the official text appears in Article L. 227-9. The articles can therefore identify reserved matters, voting thresholds, consultation procedures, the appointment and removal of the president, and the conditions for approving annual accounts. The French word président means the legal representative of an SAS; it does not mean the president of a country.
Transfer protections also deserve a careful split. The articles may provide for inalienability for up to ten years under Article L. 227-13 of the Commercial Code. They may submit any transfer of shares to prior company approval under Article L. 227-14. They may also provide, under Article L. 227-16, that a shareholder can be required to transfer shares in conditions determined by the articles. These provisions are not interchangeable with a private promise in a pact. A drag-along mechanism intended to bind all shareholders, including a future investor, should normally be reflected in the articles as well as in the pact, with matching wording.
The private pact is usually the better home for confidential matters: the founders’ working commitments, enhanced reporting, a business plan, a financing timetable, a non-solicitation promise, a detailed process for appointing a replacement director, or a negotiated exit waterfall. It can also include “reserved matters” that the signatories promise not to approve without a specified majority. The drafting must say whether a breach gives the other signatories damages, a contractual penalty, a put or call option, an obligation to vote in a particular way, or a right to seek an order for performance.
A foreign founder should not assume that a clause in the pact automatically overrides inconsistent articles. If the articles permit a transfer but the pact prohibits it, the signatories may have a contractual dispute; the transfer may not be automatically void against the purchaser. Conversely, a statutory transfer restriction can have a corporate sanction. The Cour de cassation explained this distinction in its Commercial Chamber decision of 21 June 2023, nos. 21-25.952 and 22-12.045. It stated: “Ce texte ne régissant pas l’exclusion d’un associé et la cession forcée de ses actions qui en résulte, la nullité qu’il prévoit vise uniquement à sanctionner la violation de toute clause statutaire ayant pour objet la cession d’actions librement consentie par leur titulaire.” The decision and its official record are available on Cour de cassation, 21 June 2023, nos. 21-25.952 and 22-12.045. The practical lesson is to align the corporate mechanics and the personal promises rather than relying on one document alone.
Language and execution need their own clause. A bilingual English-French pact should identify which version prevails, how defined terms are translated and whether a French translation may be produced in court. The parties should use the same names, company numbers, passport details and addresses as the company’s incorporation file. A Kbis is the official extract showing key information about a French company; it is issued through the company-registration system and is commonly requested by banks, counterparties and public bodies. The greffe is the registry office that historically receives or processes court and company filings. Since the French one-stop formalities system operates through the official Guichet unique, the pact should not use an old filing route as if it were still the only channel.
Other acronyms often appear in a founder’s checklist but do not administer the pact itself. INPI means the Institut national de la propriété industrielle, the body associated with the French business-formalities and intellectual-property systems. RNE means Registre national des entreprises, the national register of businesses. URSSAF means Union de recouvrement des cotisations de sécurité sociale et d’allocations familiales; it deals with social contributions, not the validity of a shareholders’ agreement. BODACC means Bulletin officiel des annonces civiles et commerciales; it publishes certain civil and commercial notices, but a private pact is not made public merely because the company is registered. Explaining those terms in the document or an annex avoids confusion for an overseas board or investor.
Finally, the pact should contain an accession deed. Every incoming shareholder, holding company or investment vehicle should sign a short document by which it joins the relevant provisions before receiving shares. The accession should cover confidentiality, voting, transfer restrictions, dispute resolution, the valuation formula and the duration of the pact. Without that step, a carefully drafted founder agreement may stop at the first financing round.
B. How should drag-along, tag-along and valuation clauses work?
A transfer chapter should start with vocabulary. A tag-along, or right of co-sale, protects a minority shareholder when a majority shareholder sells: the minority can require the buyer to acquire its shares on the same economic terms, subject to the agreed conditions. A drag-along, or forced joint sale, protects the seller and the investor by allowing a qualifying majority sale to require the remaining shareholders to sell as well. A pre-emption clause gives specified shareholders priority to buy before an outside purchaser. An approval clause gives the company or a designated body a power to accept or refuse a proposed transferee. A call option lets one party buy; a put option lets another require a purchase.
These mechanisms should not be described by their label alone. A foreign founder should ask the drafting lawyer to specify:
- the percentage of capital or voting rights that triggers the drag-along;
- whether the trigger requires a bona fide offer from an independent third party;
- whether the buyer must offer identical price, currency, completion date and form of consideration;
- how non-cash consideration, earn-outs, escrow and deferred payment are allocated;
- which warranties each seller gives, and whether liability is several or joint;
- how notice is served on a founder who lives abroad;
- what happens if a shareholder fails to sign the transfer instrument;
- whether a minority may exercise a tag-along before or after the drag-along notice;
- how a later investor becomes bound by the mechanism; and
- which provisions survive completion, including confidentiality and non-solicitation.
A clause that merely says “the majority may drag the minority at fair value” leaves too many disputes open. “Fair value” should be converted into a method. The parties can define enterprise value, net debt, cash, working capital, preferred returns, dilution, currency conversion and the treatment of shareholder loans. They should decide whether the valuation date is the offer date, the notice date or the completion date. They should identify the financial information the expert may inspect and set a timetable for objections.
Article 1843-4 of the Civil Code is important when French company law or the parties’ agreement sends valuation to an expert. The official provision states that, when the value of social rights is disputed, the expert is appointed by the parties or, failing agreement, by the president of the competent judicial or commercial court; the expert must apply existing valuation rules in the articles or in a convention binding the parties. Read the current text in Article 1843-4 of the French Civil Code. A pact for an international group should name the valuation currency, the treatment of foreign accounts and the mechanism for choosing an expert who can understand both French accounting and the group’s reporting standard.
The expert’s role and the transfer obligation should be separated. If the parties want the transfer to close first and the price to be adjusted after an expert decision, they must say so. If the price must be agreed before completion, the clause should identify the consequence of a disagreement. In its Commercial Chamber decision of 13 January 2021, no. 19-11.726, the Cour de cassation approved the reasoning that a price disagreement did not necessarily defeat the primary obligation to transfer at first demand where the pact provided for expert valuation. The Court recorded that “le désaccord sur le prix n’est pas de nature à remettre en cause l’obligation principale” to transfer the shares. The official decision is available at Cour de cassation, 13 January 2021, no. 19-11.726. This is not a licence to draft vaguely: it is a reason to state clearly whether valuation is a condition to completion or a later adjustment.
A foreign founder should also distinguish a transfer of shares from a transfer of control of a shareholder. If a French SAS is owned by a foreign holding company, a sale of that holding company may change the economic control without a direct transfer of the French shares. The pact can include a change-of-control clause requiring notice, approval or a call option. It should define control by reference to voting rights, appointment rights or economic ownership, and should address reorganisations within the same group so that a routine internal restructuring does not trigger an unintended forced sale.
Article 1844-1 of the Civil Code provides the default rule for each shareholder’s share in profits and contribution to losses, subject to a contrary clause, while prohibiting a clause that gives one shareholder all profits or all losses or excludes another entirely. The official text is in Article 1844-1. That rule matters when a pact combines preferred returns, liquidation preferences, a ratchet or an exit waterfall. A foreign investor should ask whether the economic promise changes voting rights, distributions or liquidation proceeds in a way that must also be reflected in the articles and reviewed for mandatory-law limits.
The parties should address the relationship between the pact and the company’s transfer provisions in one priority clause. The clause can require the shareholders to vote for a corresponding amendment to the articles, subject to the statutory decision rules. It can also state that a signatory’s failure to vote is a contractual breach, while acknowledging that the company cannot be ordered to act beyond the powers granted by its articles and mandatory French law. This drafting honesty is more useful than a broad sentence claiming that the pact prevails over every other instrument.
II. How can foreign founders prevent a deadlock and enforce the pact?
A. What must the deadlock, leaver and dispute clauses say?
A deadlock is not simply a disagreement. It is a defined failure to take a decision that the company needs, after the agreed voting procedure has been used. A useful clause identifies the decisions covered, the number of failed meetings, the period during which the parties must attempt a resolution and the event that starts the exit mechanism. Without those details, the phrase “material disagreement” invites a second dispute about whether a deadlock exists.
The articles should set a workable governance baseline. In an SAS, the parties can reserve certain decisions to a supermajority or unanimity, but they should not make ordinary operations impossible when a founder is abroad or a board member is unavailable. The pact can add a confidential list of matters requiring consultation or a special majority between the signatories. That list should cover, at a minimum, a new share issue, material borrowing, a sale of essential intellectual property, a change of business, a related-party transaction, a change of registered office, a distribution outside the agreed policy, a group service agreement and the appointment or removal of the legal representative.
A practical escalation sequence can use five stages:
- the president sends a written deadlock notice identifying the decision, the votes and the relevant clause;
- the founders hold a meeting, in person or by video, within a short fixed period;
- senior representatives of the foreign parent or investors attempt a negotiated solution;
- an independent mediator or expert addresses the technical issue, with a defined scope and fee allocation; and
- if the deadlock continues, a buy-sell, put, call, third-party sale or dissolution mechanism applies.
The final mechanism must be capable of operation. A “Russian roulette” or buy-sell clause should state who makes the first offer, whether the recipient buys or sells, how the price is calculated, how long the recipient has to respond and what happens if the price is not funded. For parties using different currencies, the clause should specify the central-bank or commercial reference rate and the relevant conversion date. For founders with different tax residences, the clause should state that each party takes its own tax advice and should not make completion dependent on an undefined tax clearance.
Dissolution is a last-resort remedy, not a substitute for a deadlock process. Article 1844-7, 5° of the Civil Code expressly identifies serious grounds, including a disagreement between shareholders that paralyses the company’s operation, as a basis for judicial early dissolution at the request of a shareholder. The official text is in Article 1844-7 of the Civil Code. A contract should not promise that a private expert can dissolve the company or that one founder automatically loses all rights when French law reserves a matter to the court.
Duration is now a central drafting point. Article 1210 of the Civil Code prohibits perpetual commitments and provides that a party to an indefinite contract may end it under the rules applicable to that type of contract; see the official text in Article 1210. Yet the Cour de cassation’s Commercial Chamber held on 11 March 2026, no. 24-21.896, that the absence of an express term in a shareholders’ pact did not automatically make it freely terminable. The Court stated: “Un pacte d’associés non assorti d’un terme exprès est, en l’absence d’éléments intrinsèques ou extrinsèques contraires, réputé avoir été conclu pour la durée restant à courir de la société dont les parties sont associés, de sorte que ces dernières ne peuvent y mettre fin unilatéralement.” The official, Bulletin-published decision is available at Cour de cassation, 11 March 2026, no. 24-21.896.
This recent decision should change the drafting habit of leaving duration blank. The pact should state its start date, initial term, renewal procedure, events of early termination, effect of a shareholder’s departure, and what happens after a financing round. It should distinguish termination of the contract from termination of one shareholder’s obligations. It should also identify whether provisions on confidentiality, dispute resolution, non-solicitation and accrued payment rights survive expiry. An express term does not remove every risk, but it gives a court a text to interpret instead of a silence to fill.
Leaver provisions require the same precision. A good-leaver event might include death, permanent incapacity, a mutually agreed departure or removal without cause; a bad-leaver event might include fraud, serious breach, unlawful competition or resignation in a defined situation. The clause should state who decides that an event occurred, what evidence is required, whether the affected founder may be heard and how the price is adjusted. A foreign founder should avoid labels that make the result automatic without defining the underlying event, especially when the founder is also an employee or director and the employment relationship is governed by different rules.
Dispute resolution should be usable from abroad. The pact can choose French law, identify the competent French court or an arbitration seat, define the language of the proceedings and permit notices by email plus a reliable service address. The parties should check whether an arbitration clause binds the company if it did not sign the pact. They should also define the interim-relief route: a shareholder may need a French court order to preserve a vote, prevent a transfer or protect company records before the merits are decided.
The pact should connect the deadlock procedure to the company’s practical documents. If the company has a registered office in France, its official correspondence, Kbis and bank records may still show the departing director. If a foreign founder resigns, the parties need a timetable for the corporate decision, the INPI filing, the update of the Kbis and the notice to the bank. A shareholders’ agreement is not the filing itself. It is the obligation that should make the filing happen.
B. What can you do if an associate breaches the agreement?
Enforcement starts with evidence. Preserve the signed version, the accession deed, the cap table, board and shareholder notices, voting records, emails, video-meeting invitations, valuation reports and the foreign founder’s proof of authority. A company may have one version of the articles and the shareholders may have another version of the pact. The claimant should identify the exact promise, the person bound by it, the notice that triggered it and the remedy requested.
Article 1217 of the Civil Code lists the main responses to non-performance: suspension, specific performance, price reduction, termination and damages, with compatible sanctions capable of being combined. Its official text is available in Article 1217 of the Civil Code. Article 1221 adds that, after formal notice, the creditor may seek performance in kind unless performance is impossible or there is manifest disproportionality between its cost for a debtor acting in good faith and the creditor’s interest; see Article 1221. A pact should not promise a remedy that the governing law cannot grant, but it should identify the contractual route before a dispute begins.
Interim relief can be decisive. Article 873 of the Code of Civil Procedure allows the president of the commercial court, in the relevant circumstances, to order conservatory or restorative measures and, where the obligation is not seriously contestable, to order performance even when it is an obligation to do. The official text appears in Article 873 of the Code of Civil Procedure. A foreign founder may need that route to stop an imminent transfer, preserve access to accounts or require a signatory to complete a defined corporate act. The application must still satisfy procedural requirements and should be prepared with evidence rather than relying on a general assertion that the company is in crisis.
The 2021 decision cited above illustrates why the price process matters in an urgent application. If the pact makes the transfer obligation primary and sends only the price to an expert, a disagreement about value may not stop the transfer. If the pact makes valuation a condition precedent, the court may face a different question. The document should therefore say whether the expert determines, adjusts or merely reports the price; whether the expert’s decision is binding; and how a manifest error can be challenged.
For a statutory transfer restriction, Article L. 227-15 of the Commercial Code provides that a transfer made in breach of the articles is void; read the official provision at Article L. 227-15. The 2023 Cour de cassation decision shows the limit of that sanction: the text addresses a transfer freely consented to in breach of a statutory clause and does not automatically govern every exclusion or forced transfer mechanism. A breach of a private pact may instead lead to damages, a contractual penalty or an order for performance, depending on its wording and the applicable facts. The claimant should not plead “nullity” by reflex.
Article 1104’s mandatory good-faith rule matters during enforcement as well as negotiation. A majority should not manufacture a drag-along offer to strip a minority of value, and a minority should not use a technical notice objection to defeat a genuine sale after receiving the promised price. The pact should include an anti-abuse process: a minimum information package, independent valuation safeguards, a reasonable notice period, equal economic terms and a mechanism to challenge a conflicted buyer.
A foreign founder should also consider the corporate-versus-contract boundary. If the president votes in breach of a pact, the other signatories may sue that president or the relevant shareholder for contractual relief, but a corporate decision may remain effective if the statutory requirements were met. If the articles require approval and the company refuses it, the remedy may follow company law rather than only the pact. If an investor did not sign, the investor may not be bound by a private obligation. The identity of the defendant and the remedy must follow the document’s architecture.
A disciplined pre-signing checklist can reduce that risk:
- map every shareholder, beneficial owner and holding company, including the person authorised to sign for each foreign entity;
- compare the proposed pact line by line with the articles and the incorporation documents;
- decide which governance and transfer rules must be copied into the articles;
- define the language hierarchy, notices, electronic signatures, addresses and evidence of authority;
- write the reserved-matters list with thresholds that still permit day-to-day operation;
- draft tag-along, drag-along, pre-emption, approval and change-of-control provisions as a single system;
- set out the valuation formula, expert appointment, currency, timetable and funding consequences;
- define deadlock, good-leaver and bad-leaver events without relying on labels alone;
- choose the governing law, court or arbitration seat, language and interim-relief route;
- require accession before any new shareholder receives shares; and
- store the final signed version with the cap table and corporate records so that a future court can identify the operative text.
These steps also help with a future financing. A new investor will want to know whether the foreign founder can block a capital increase, whether a drag-along is enforceable against the investor, whether the valuation can be challenged, and whether a dispute is likely to be heard in France or elsewhere. The company’s French company-formation and corporate-law page is a useful starting point for mapping those choices, while a specific pact still needs a review of the founders’ facts and the proposed investment documents.
When a breach has already occurred, the first letter should be narrow and operational. It should identify the clause, attach the relevant evidence, state the required act, give the contractual deadline, reserve interim relief and avoid making allegations that cannot be proved. If the issue is a proposed share sale, request the offer, buyer identity, consideration, warranties and completion timetable. If it is a deadlock, request the meeting required by the pact and preserve the voting record. If it is a leaver event, identify the contractual trigger and start the valuation process. A clear record makes settlement more likely and makes the eventual procedure more efficient.
For international groups, enforcement also has a practical cost. A French court may require translations, evidence of the foreign company’s authority, apostilled or legalised corporate documents and service outside France. Those requirements should not be improvised after a dispute. The pact can identify an address for notices, require the foreign shareholder to maintain an authorised representative for service and provide that corporate documents must be supplied in a usable format. These provisions do not eliminate procedural law, but they reduce avoidable delay.
Conclusion
A French shareholders’ agreement for foreign founders should be designed as a working governance system, not as a generic template. Put rules that need corporate and third-party effect into the SAS articles; use the pact for confidential commitments between identified signatories; and require every future investor or holding vehicle to accede before receiving shares. Align the drag-along, tag-along, approval and exclusion mechanisms instead of giving each document a different trigger.
The agreement should also contain an exact valuation method, a usable deadlock sequence, a carefully defined leaver regime, a clear duration and renewal clause, and a dispute process that works for shareholders living outside France. The Cour de cassation’s decision of 11 March 2026 makes silence on duration particularly risky. A foreign founder who checks these points before incorporation or the first financing will have a far stronger position if the relationship later becomes difficult.
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