Sale of shares: partners, even minority shareholders, are jointly and severally liable to the purchaser

Transferring shares in a company to a buyer is known as a "cession de part sociales". Whether you are a majority or a minority shareholder, this operation engages the responsibility of all the sellers. Recently, the French Supreme Court (Cour de cassation) clarified this solidarity between partners.

The facts

In this case, three partners in a SARL together held all 3,000 shares in a company. One of the partners held an overwhelming 99.93% majority stake, while the other two each held just one share. In 2017, they sold their shares to a company for a price of 380,000 euros, on which the company paid a deposit of 300,000 euros. It was stipulated that the price, based on the company's balance sheet, could be revised upwards or downwards depending on its interim accounting position at December 31, 2016.

The financial statements, drawn up by a charteredaccountancy firm, showed negative shareholders' equity of 963,999 euros, prompting the purchaser to submit a final price proposal of 1 euro to the sellers, and to demand repayment of 299,999 euros corresponding to the remainder of the deposit paid.

The two minority shareholders did not comply with this request, considering that they were not legally responsible for the majority shareholder.

Solidarity between selling partners

At first instance and on appeal, the selling partners were ordered to repay the sum claimed by the purchaser. The latter challenged the Court of Appeal's decision on the grounds that joint and several liability cannot be presumed. They added that the fact of having granted a contractual guarantee on the occasion of a transfer of control of a company does not entail passive joint and several liability between them, insofar as the shares transferred are not useful for the transfer of the majority of the shares. Another argument put forward: the transfer of shares is a civil act which can only be qualified as a commercial act if the non-traders have a personal interest in it. However, according to the associates, the mere fact that the transfer enabled them to leave the company does not constitute such an interest.

The judges of the French Supreme Court (Cour de cassation) disagreed with the selling partners, pointing out that in the event of a transfer of all the company's shares, all the partners, even those in the minority, are jointly and severally liable to the purchaser. In aruling handed down on August 30, 2023, the French Supreme Court (Cour de cassation) upheld the commercial nature of the transfer deed to justify its decision. It thus deduced the obligation to return part of the deposit paid to the transferee, which is incumbent on all the transferors by virtue of the price clause in the deed.

Good to know: it should be noted that the deed of sale may contain a clause expressly excluding joint and several liability. In this case, however, there was no such clause. Consequently, the Cour de cassation dismissed the appeal lodged by the transferring partners and ordered them to pay the costs.