{"id":2104109,"date":"2026-08-22T01:07:44","date_gmt":"2026-08-21T23:07:44","guid":{"rendered":"https:\/\/kohenavocats.fr\/2026\/08\/22\/french-shareholders-agreement-foreign-founders-deadlock-exit-clauses\/"},"modified":"2026-08-22T01:07:44","modified_gmt":"2026-08-21T23:07:44","slug":"french-shareholders-agreement-foreign-founders-deadlock-exit-clauses","status":"publish","type":"post","link":"https:\/\/kohenavocats.fr\/en\/2026\/08\/22\/french-shareholders-agreement-foreign-founders-deadlock-exit-clauses\/","title":{"rendered":"French Shareholders\u2019 Agreements for Foreign Founders: How to Enforce Deadlock, Exit and Transfer Clauses"},"content":{"rendered":"

A foreign founder can incorporate a French company, sign the articles of association in English and still discover that the most important promises between the founders are difficult to enforce. The document usually called a pacte d\u2019associ\u00e9s<\/em> or shareholders\u2019 agreement is a private contract. It can organise voting, information, financing, transfers, deadlock procedures and an orderly exit, but it does not automatically replace the company\u2019s articles of association. That distinction is decisive when one signatory refuses to vote, sells shares to a third party or ignores a buy-out mechanism.<\/p>\n

The practical question is therefore not simply whether a shareholders\u2019 agreement is valid. It is whether the proposed clause is placed in the right document, signed by every person who must be bound, triggered by an objectively provable event, supported by a workable price mechanism and connected to a remedy that a French court can order. The SAS (soci\u00e9t\u00e9 par actions simplifi\u00e9e, or simplified joint-stock company) framework<\/a> gives founders substantial freedom, while the French Commercial Code, Article L. 227-5<\/a>, leaves the conditions of management to the articles. A foreign founder should also distinguish the Kbis<\/em>, the official extract from the Registre du commerce et des soci\u00e9t\u00e9s<\/em> (RCS, the French Commercial and Companies Register), from the underlying contract and corporate records. This article explains how to design and enforce the arrangement.<\/p>\n

I. Is a French shareholders\u2019 agreement binding, and where should each clause sit?<\/h2>\n

A. What the agreement binds, and what it cannot change<\/h3>\n

Under Article 1103 of the French Civil Code<\/a>, \u201cLes contrats l\u00e9galement form\u00e9s tiennent lieu de loi \u00e0 ceux qui les ont faits.\u201d In English, a contract lawfully formed binds the parties as their law. This is the starting point for a shareholders\u2019 agreement. If two founders agree that neither will sell shares without first offering them to the other, that promise can create a contractual obligation. If they agree to vote together on a defined list of reserved matters, a signatory who votes contrary to the undertaking may incur contractual liability, even if the resulting corporate resolution remains valid under the articles.<\/p>\n

Article 1193 of the Civil Code<\/a> adds that \u201cLes contrats ne peuvent \u00eatre modifi\u00e9s ou r\u00e9voqu\u00e9s que du consentement mutuel des parties, ou pour les causes que la loi autorise.\u201d This matters for a foreign founder joining a French company after incorporation. An investor who signs an accession deed becomes bound by the agreement\u2019s existing rules, but a person who merely purchases shares and never accedes may remain outside the pact. The agreement should therefore identify the signatories precisely, require every incoming shareholder to sign a short accession instrument and state whether the company itself is a party.<\/p>\n

The company\u2019s signature is often useful, but it does not solve every problem. A company can undertake to provide information, register a transfer when the legal conditions are met or support a valuation process. It cannot, by a private contract alone, make a corporate decision valid if mandatory company-law rules have not been followed. The French term greffe<\/em> means the registry office attached to the competent commercial court. The greffe records the company\u2019s formal corporate filings; it does not police the private promises in every shareholders\u2019 agreement.<\/p>\n

In a French SAS, the articles determine how the company is directed. Article L. 227-5 of the Commercial Code<\/a> states: \u201cLes statuts fixent les conditions dans lesquelles la soci\u00e9t\u00e9 est dirig\u00e9e.\u201d Article L. 227-9<\/a> likewise gives the articles the task of determining which decisions must be taken collectively and the forms and conditions of those decisions. A foreign founder who places a veto only in the pact must understand its reach: it may bind the signatories to vote in a particular way, but it may not automatically invalidate a resolution adopted in accordance with the articles by shareholders who never signed the pact.<\/p>\n

This is why the document allocation should be deliberate. The following distinction is more useful than the labels \u201cstatutory\u201d and \u201cextra-statutory\u201d used in isolation.<\/p>\n\n\n\n\n\n\n\n\n\n
Issue<\/th>\nBest location<\/th>\nWhy it matters<\/th>\n<\/tr>\n<\/thead>\n
Who may represent the company and sign contracts<\/td>\nArticles, plus a shareholders\u2019 undertaking where appropriate<\/td>\nThe articles organise corporate authority; the pact can add personal commitments between founders.<\/td>\n<\/tr>\n
Reserved matters and voting consultation<\/td>\nArticles for corporate effectiveness; pact for additional voting promises<\/td>\nThe articles reach the company and future shareholders; the pact normally reaches only its signatories.<\/td>\n<\/tr>\n
Pre-emption, approval or transfer restrictions<\/td>\nArticles if the sanction of statutory nullity is required; pact for confidential obligations<\/td>\nThe legal consequence differs sharply depending on whether a transfer violates the articles or only a private contract.<\/td>\n<\/tr>\n
Deadlock escalation and mediation<\/td>\nPact, with a matching statutory decision rule where necessary<\/td>\nThe pact can preserve confidentiality, but its trigger and remedy must be capable of proof and execution.<\/td>\n<\/tr>\n
Exit price and valuation process<\/td>\nBoth documents if an enforced transfer is contemplated<\/td>\nThe expert mechanism under Article 1843-4 of the Civil Code is not a substitute for a badly drafted trigger or price formula.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The distinction is visible in Article L. 227-15 of the Commercial Code<\/a>: \u201cToute cession effectu\u00e9e en violation des clauses statutaires est nulle.\u201d The text speaks of clauses in the articles. It does not say that every breach of a private pact automatically makes the transfer void. In its decision of 21 June 2023, nos. 21-25.952 and 22-12.045<\/a>, published in the Bulletin, the Commercial Chamber explained: \u201cCe texte ne r\u00e9gissant pas l’exclusion d’un associ\u00e9 et la cession forc\u00e9e de ses actions qui en r\u00e9sulte\u201d. The court distinguished the statutory nullity mechanism from an exclusion and forced transfer mechanism created by the parties.<\/p>\n

The same decision is important for founders who use a pact to organise a forced exit. The court held that a statutory exclusion clause and a private promise of sale are not interchangeable. A clause can be contractually enforceable without being treated as a statutory exclusion, but the drafting must say exactly which mechanism is intended. If the business needs the transfer itself to be protected against a later challenge, the relevant restriction should be reflected in the articles and in the pact, with consistent definitions and procedures.<\/p>\n

B. Which clauses protect foreign founders: governance, transfers and exit<\/h3>\n

A shareholders\u2019 agreement should begin with the business problem rather than a list copied from a model. Foreign founders often have unequal information, different time zones, different holding companies and different expectations about who will operate the French subsidiary. The pact should say who prepares budgets, who receives monthly management information, which decisions require prior consent and how a founder\u2019s absence affects voting. It should also distinguish a personal founder from a corporate shareholder. A foreign parent company may need a board resolution, authorised signatory evidence or a power of attorney before it can approve a transfer or sign an accession.<\/p>\n

For governance, define \u201creserved matters\u201d by objective thresholds. Examples include a new borrowing above a stated amount, a material change in the business plan, the acquisition of a business, a related-party transaction, a change in the French company\u2019s registered office, a new share issue, a change in the chief executive, the creation of a subsidiary and a sale of substantially all assets. A clause saying that the parties must agree on \u201cimportant matters\u201d invites a future dispute about what was important. A clause listing the decision, the threshold, the required notice and the voting consequence is easier to apply.<\/p>\n

For transfers, separate at least four concepts. A pre-emption right gives a named shareholder priority to buy. An approval or agr\u00e9ment<\/em> clause makes a transfer subject to the consent specified in the articles or agreement. A tag-along<\/em> clause, called a right of joint exit, lets a minority shareholder sell on the same terms when a majority shareholder sells to a third party. A drag-along<\/em> clause, called an obligation of joint exit, requires minority holders to sell when a qualifying buyer offers to acquire the agreed percentage of the company. A good or bad leaver clause links a founder\u2019s departure from operational duties to a purchase option, but it must define the departure event, the notice, the price and the treatment of disputed allegations.<\/p>\n

In a French SAS, Article L. 227-16 of the Commercial Code<\/a> states that \u201cles statuts peuvent pr\u00e9voir qu’un associ\u00e9 peut \u00eatre tenu de c\u00e9der ses actions\u201d. The articles can also provide for suspension of non-pecuniary rights while the transfer has not occurred. That statutory option is materially different from a pact-only promise. It is therefore prudent to use the articles for the core legal power to require a transfer and the pact for confidential mechanics: notice, negotiation, calculation, information rights, escrow, undertakings to sign the order of movement and the allocation of costs.<\/p>\n

The deadlock clause deserves its own architecture. \u201cDeadlock\u201d should not mean any disagreement. It should mean a defined event, for example two properly convened meetings at which a reserved matter fails to obtain the required majority, followed by a written notice identifying the unresolved decision. The clause can then require a short executive negotiation, mediation, a cooling-off period and, if still unresolved, a buy-sell process. Possible mechanisms include a put option, a call option, reciprocal offers, a sealed bid, a sale to a third party or appointment of an independent director. The document should state who may trigger the mechanism and whether the trigger can be used more than once.<\/p>\n

A foreign founder should add an implementation layer that generic French-language guides often omit. State the controlling language, identify the address and email for formal notices, specify how a notice is deemed received across time zones, confirm whether electronic signatures are accepted, require certified corporate authority for a foreign company and describe the translation standard for a court filing. If an English version and a French version are signed, state which version controls. That clause does not remove the need to comply with French procedural requirements, but it reduces a dispute about what the parties actually signed.<\/p>\n

The agreement should also deal with accession and confidentiality. A new investor should not be able to acquire shares while remaining outside the transfer restrictions. The company should retain an updated register of holders and signed accessions. The pact should identify whether a breach allows disclosure to the company, auditors, lenders, insurers or a court. It should address the survival of confidentiality, non-solicitation and intellectual-property obligations after a founder exits. A short agreement that says \u201call parties will act in good faith\u201d is not a substitute for a process that produces a decision, a price and a person responsible for signing.<\/p>\n

For the wider company-formation sequence, a founder can connect the pact to the firm\u2019s French company formation and corporate-law page<\/a> and to the existing guide on choosing between an SAS and a SARL<\/a>. SARL means soci\u00e9t\u00e9 \u00e0 responsabilit\u00e9 limit\u00e9e<\/em>, or limited liability company. The two forms do not offer identical transfer, management or approval mechanics. A foreign founder should not sign a SAS template for a SARL simply because the commercial vocabulary looks familiar.<\/p>\n

II. How should a foreign founder enforce deadlock, exit and transfer clauses after a breach?<\/h2>\n

A. How to document the breach and choose the remedy<\/h3>\n

The first action after a suspected breach is evidence preservation, not an angry message. Keep the signed pact and every accession; the current articles and previous versions; the cap table; board or shareholder notices; meeting invitations; voting records; emails and messaging exchanges; the transfer offer; the order of movement; the Kbis; and proof of the foreign shareholder\u2019s authority. The Kbis proves the company\u2019s registered information, but it does not prove that a private pact was signed or that a price trigger occurred. The RCS and the Registre national des entreprises<\/em> (RNE, the National Business Register) are filing systems; they are not substitutes for the contract file.<\/p>\n

Map the facts against the trigger in the clause. Was the required notice sent? Was the decision one of the listed reserved matters? Was the quorum met? Did the parties fail to reach the required majority the number of times stated? Did the buyer\u2019s offer contain a price, consideration and completion date? Did the leaver event actually occur, or is it only alleged? These questions determine whether the dispute is about contract interpretation, a corporate resolution, a transfer or valuation. They should not be mixed into one broad allegation of \u201cbad faith\u201d.<\/p>\n

If the pact requires a mise en demeure<\/em>, meaning a formal notice placing the debtor in default, send it in the contractually required form and preserve proof of delivery. If the contract contains a resolutory clause, Article 1225 of the Civil Code<\/a> requires that \u201cLa clause r\u00e9solutoire<\/a> pr\u00e9cise les engagements dont l’inex\u00e9cution entra\u00eenera la r\u00e9solution du contrat.\u201d The notice must expressly mention the clause if the parties have not agreed that the breach alone is sufficient. A notice that merely says \u201cyou are in breach\u201d may fail to activate the remedy drafted in the pact.<\/p>\n

The general contractual remedies appear in Article 1217 of the Civil Code<\/a>. The text provides that the non-defaulting party may \u201cpoursuivre l’ex\u00e9cution forc\u00e9e en nature de l’obligation\u201d, obtain a price reduction, seek resolution or claim compensation, subject to compatibility. Article 1221<\/a> adds: \u201cLe cr\u00e9ancier d’une obligation peut, apr\u00e8s mise en demeure, en poursuivre l’ex\u00e9cution en nature\u201d. Article 1231-1<\/a> supports damages for non-performance or delay, and Article 1240<\/a> states: \u201cTout fait quelconque de l’homme, qui cause \u00e0 autrui un dommage, oblige celui par la faute duquel il est arriv\u00e9 \u00e0 le r\u00e9parer.\u201d The correct remedy depends on the clause and the company-law consequence, not on the claimant\u2019s preferred label.<\/p>\n

Four decisions illustrate the difference between a contractual promise and a statutory transfer restriction. In the Commercial Chamber\u2019s decision of 27 June 2018, no. 16-14.097<\/a>, the court held, in the verified wording, that \u201cla r\u00e9vocation unilat\u00e9rale de la promesse et, par suite, la cession litigieuse constituaient une violation du pacte d’associ\u00e9s<\/a>\u201d. The court treated the attempted revocation and subsequent transfer as a breach with consequences under the parties\u2019 structure. The lesson is practical: a promise to sell cannot be drafted as if it were a non-binding expression of future intent.<\/p>\n

In the decision of 27 September 2017, no. 16-13.112<\/a>, the court considered reciprocal purchase and sale promises and stated that \u201cles promesses d’achat et de vente que s’\u00e9taient consenties les parties \u00e9taient synallagmatiques\u201d. The decision further reasoned that the sale was complete when the option was exercised because the promises had the same object and terms and the price was determinable. For a foreign founder, this means that a buy-sell clause should state the offer mechanics, the price or valuation formula, the option period and the documents required at completion. A clause that leaves those elements open may generate a valuation and interpretation dispute rather than a clean exit.<\/p>\n

The 21 June 2023 decision, nos. 21-25.952 and 22-12.045<\/a>, gives the complementary warning. The court distinguished the statutory nullity of a transfer violating the articles from the forced transfer resulting from an exclusion. A pact may support an order for performance or damages, but the claimant must show the legal route by which the court can order the transfer. Where the articles contain a different exclusion procedure, a drafter should not assume that a private clause can silently bypass it.<\/p>\n

Before issuing proceedings, prepare a remedy matrix. If a party refuses to vote as promised, the immediate objective may be an order for performance or damages. If a party sells in breach of a statutory approval or transfer restriction, nullity may be relevant under Article L. 227-15. If a party refuses to sign after a valid option is exercised, the claimant may seek enforcement, a substitute signature where procedurally available, or damages. If the dispute is about the price, a valuation procedure may be the central step. If the company is paralysed, interim relief, mediation or a negotiated exit may preserve value better than a slow merits action.<\/p>\n

B. How valuation, completion and cross-border execution should work<\/h3>\n

Price clauses are often the weakest part of an otherwise sophisticated pact. \u201cFair market value\u201d is not a complete formula. The parties should define the valuation date, whether the company is valued on a going-concern basis, treatment of cash and debt, minority or control adjustments, treatment of shareholder loans, currency conversion, tax liabilities, extraordinary items and the information the valuer may request. They should identify the independent expert, the appointing authority, the timetable, the documents to be delivered and the consequences if a party refuses to cooperate.<\/p>\n

Article 1843-4 of the Civil Code<\/a> provides a statutory expert route when the law refers to it for the price of a transfer or buy-back of social rights. The current text begins: \u201cDans les cas o\u00f9 la loi renvoie au pr\u00e9sent article pour fixer les conditions de prix d’une cession des droits sociaux d’un associ\u00e9\u201d. It also requires the expert to apply existing valuation rules in the articles or an agreement binding the parties. The text is not a general licence to ask an expert to repair an incomplete bargain. The trigger must fall within the provision or the contract must expressly create an effective valuation procedure.<\/p>\n

The 18 November 2020 decision, no. 19-13.402<\/a>, published in the Bulletin, is a useful safeguard. The verified passage states that \u201cil appartient \u00e0 l’expert de d\u00e9terminer lui-m\u00eame, selon les crit\u00e8res qu’il juge appropri\u00e9s \u00e0 l’esp\u00e8ce\u201d. The court also held that the provision can apply to transfers of social rights imposed by the articles or internal rules. The result is not that the expert can ignore the contract. The current Article 1843-4 expressly requires the expert to apply existing valuation rules where they exist. The practical drafting objective is therefore to give the expert a coherent framework without pretending that a fixed price will remain fair in every future scenario.<\/p>\n

For a foreign founder, the valuation clause should also deal with evidence held outside France. State whether financial statements may be provided in English, whether a French translation is required, who pays translation and expert costs, how foreign currency is converted and how a foreign parent\u2019s related-party transactions are treated. If a party is in default, state whether the expert may proceed on the basis of the information supplied by the other side. If a founder is leaving because of a disputed allegation, separate the question of whether the leaver trigger occurred from the question of the price. Combining both questions in one undefined \u201cbad leaver\u201d clause creates avoidable leverage for the party who controls the records.<\/p>\n

Completion also needs a document sequence. The sequence can require a transfer notice, a response or option exercise, an expert appointment if needed, signature of the transfer instrument, delivery of identity and authority documents, payment or escrow, updating of the company\u2019s shareholder records and filing of any change that must be made public. The official Service Public guide to transferring SAS shares<\/a> is a useful administrative reference, but it does not replace the contractual analysis of the pact.<\/p>\n

Do not confuse the private transfer contract with the post-completion formalities. The INPI, the Institut national de la propri\u00e9t\u00e9 industrielle<\/em>, operates the French one-stop shop for many business formalities. Its official preparation guidance<\/a> explains that changes affecting a business can require a modification filing. The public record may then show a change in the company\u2019s legal information. A Kbis is evidence of the registered position at the time of issue; it is not the entire history of the pact, the valuation or the negotiations. Preserve the signed originals and the proof of each notice even after the public filing is complete.<\/p>\n

A workable cross-border checklist is short enough to use before signing:<\/p>\n