On the eve of Valentine’s Day, the Cour de Cassation was particularly generous, rendering no fewer than 8 rulings with potential repercussions for companies.
These rulings dealt with a variety of issues, and in particular the burning (no), thorny (still not) surprising (it’s not wrong) question of dividends distribution, taken from the retained earnings of a previous financial year outside the general meeting called to approve the accounts (Cass. Com., 12 February 2025, no. 23-11410).
Without wishing to spoil the reading of this important ruling, such a distribution is null and void!
On 12 February this year, the Cour de Cassation also handed down a ruling on the transfer of company shares and the repayment of a shareholder’s current account that we feel should be of particular interest to you.
In this case (Cass. Com., 12 February 2025, no. 23-17483), the Court issued a salutary reminder of what happens to the current accounts of shareholders who sell their company shares.
It points out that, “in the absence of a stipulation to the contrary, any shareholder [is] entitled to demand repayment of the balance of his current account at any time, regardless of the grounds for his request, since the advance thus granted constituted a loan for an indefinite period and […] in the absence of a stipulation to the contrary, the obligation to pay the price of the shares being bought back and the obligation to repay the current account [are] independent of each other”.
This ruling thus shows that the seller of shares – the holder of a current account – is entitled to request repayment of the account at any time.
On the other hand, the ruling specifies that a shareholder who has sold his shares without obtaining repayment of his current account is not entitled, unless otherwise stipulated, to seek rescission of the sale of his shares.
Although this ruling is legally consistent and contains no major surprises, it nevertheless serves as a reminder of a number of fundamental principles:
- A shareholder who has sold his shares may remain the holder of a current account: the sale of shares does not de facto result in the repayment of the current account;
- An outgoing shareholder who still holds a current account may, unless otherwise stipulated in the share transfer agreement or the current account advance agreement, request repayment of the sums advanced to the company at any time and on any grounds;
- Failure by the company to repay its current account to the outgoing partner may not, unless otherwise provided, justify termination of the sale: the ex-partner who has not been repaid may not therefore seek to be ‘reintegrated’ into the company’s capital.
It is therefore essential to ensure that the terms and conditions governing the repayment of shares by a partner holding a current account in the company’s accounts are expressly provided for when the shares are sold. A resolutory clause must be included if this is the wish of the parties – in particular the lending partner wishing to sell his shares.