Thanks to the SAS, associates can freely determine the prerogatives granted to them, a freedom which is not, however, without limits. In a ruling handed down on November 15, 2024, the French Supreme Court (Cour de cassation) specified that a collective decision can only be validly adopted by the shareholders of an SAS if it obtains at least a majority of the votes cast.
Decision-making in a simplified joint-stock company
In an SAS, certain decisions must be taken collectively by the partners. This applies in particular to a capital increase or reduction, approval of the annual financial statements or appropriation of profits, dissolution, or conversion into another form of company. The nature of the decision influences the procedure: when a decision impacts the Articles of Association, it is taken at an Extraordinary General Meeting, while other decisions are taken at an Ordinary General Meeting.
The SAS bylaws set out the majority rules and any quorums (minimum number of persons present or represented for a vote or decision to be valid) required for decisions to be valid.
On the other hand, certain decisions require unanimous approval: the adoption or modification of special clauses, such as those relating to the approval or exclusion of associates, or those temporarily limiting the transfer of shares. Special rules may also govern changes in control of the company.
Majority of votes required
Theruling handed down by the French Supreme Court on November 15, 2024 was eagerly awaited. In this case, the shareholders of a simplified joint stock company (SAS) had challenged the decision to increase the company's capital, taken on the basis of the minority clause (one-third majority of voting rights), and decided to sue the company, its chairman and its shareholders for annulment of the decision.
Initially, the Court of Appeal rejected their request, stating that the procedure used to increase the capital of the SAS complied with the provisions of the articles of association. Dissatisfied with the verdict, the partners decided to appeal to the Court of Cassation.
The French Supreme Court then ruled in their favor, overturning the appeal decision. It ruled that collective decisions taken by the shareholders can only be adopted if they receive the highest number of votes. This means that any contrary provision in the bylaws is deemed unwritten.
This ruling contrasts two visions of SAS governance. On the one hand, the "restrictive" view favors strict compliance with the majority rule, to avoid inconsistent or arbitrary decisions. On the other, the "liberal" approach defended by the Court of Appeal encourages the freedom of the partners to set the decision-making procedures in their articles of association. In ruling in favor of the first approach, the Cour de cassation reaffirmed a key rule of corporate law: the pre-eminence of the majority in collective decision-making.
This jurisprudence applies not only to decisions concerning capital increases, but also to all decisions that fall within the competence of the shareholders. It serves as a reminder that, despite the flexibility offered by the SAS framework, the fundamental principles of corporate law, such as majority rule, remain inescapable.