Corporate law, corporate and mergers and acquisitions
Lawyer drafting shareholders' agreement to avoid deadlock and organize exit
A shareholders' agreement is a confidential contract, signed in addition to the articles of association. It governs decisions, the transfer of shares, and the exit of shareholders. The value of an agreement lies in its effectiveness in the event of a disagreement. Our lawyers draft it, negotiate it with investors, and enforce it in case of a dispute.
- The firm will get back to you within 48 hours.
- Aliant LawInternational Network of Independent Law Firms
- Romain Picard, Lead Lawyer, Partner, Paris Bar
How does a shareholders' agreement change the articles of association?
The articles of association establish the company's framework. They are public and subject to mandatory rules. The shareholders' agreement, on the other hand, is a contract between shareholders. It remains confidential and its content is flexible, within the limits of company law.
This freedom comes with a price. The agreement only creates obligations between its signatories (Article 1199 of the Civil Code). A clause that contradicts the articles of association therefore exposes the partners to risk: the company and third parties can adhere to the articles of association.
Our conviction can be summed up in one sentence. A pact protects less through its restrictions than through its exits. Partners sign it to stay together, and reread it the day one of them wants to leave.
Statutes
- audiences
- imperative rules
- bind all the partners
Pact
- confidential
- free content
- obligations between signatories
In the articles of association or in the pact, where should each clause be placed?
The question changes the penalty. In a simplified joint-stock company (SAS), the articles of association may subject any transfer of shares to the company's approval (Article L. 227-14 of the French Commercial Code). They may also stipulate that shares are inalienable for up to 10 years (Article L. 227-13). A transfer made in violation of a provision in the articles of association is void (Article L. 227-15).
A clause contained only in the agreement does not have this effect. Its breach most often gives rise to damages. For a right of first refusal, the judge may annul the transfer concluded with a third party who was aware of the agreement and the beneficiary's intention to exercise it (Article 1123 of the Civil Code). For other clauses, the remedy is generally compensation for the damages.
Should everything then be written into the articles of association? No. The articles of association are public and binding on all partners, including those who did not want the clause. We include in the articles of association the provisions that would allow for the annulment of a transfer. We keep in the shareholders' agreement what must remain confidential or concerns only certain partners.
This rule has its limits. A non-transferability clause is only valid if it is temporary and justified by a serious and legitimate interest. An agreement that promises an exit within three years, while the articles of association prohibit any transfer for ten years, fuels the dispute.
Should the clause be able to invalidate a transfer?
How long does a shareholders' agreement last, and can it be terminated?
Pact without express term
Law prior to 2016, Cass. com., March 11, 2026
Agreement concluded since 2016
Articles 1210 and 1211
Many agreements remain silent on their duration. However, an open-ended contract can be terminated at any time, with reasonable notice (Article 1211 of the Civil Code). A partner could therefore expect to leave with a simple letter.
The Court of Cassation ruled on March 11, 2026 (Cass. com., No. 24-21.896). An agreement without an express term is deemed to be concluded for the remaining term of the company, unless otherwise stipulated. This ruling applies to agreements concluded under the law in force before 2016. The signatories cannot unilaterally terminate such agreements.
The duration of a company is limited to 99 years (Article 1838 of the Civil Code). The commitment can therefore be very long. The ruling is based on the former Article 1134 of the Civil Code. A partnership agreement concluded since 2016 falls under Articles 1210 and 1211: the safest course of action is therefore to stipulate its duration in writing.
This presumption protects the founder who relied on the stability of his shareholding. It traps the partner who thought they could leave with a simple letter. The term clause is no longer a mere formality. It must be in writing and include an exit clause.
Is your agreement silent on its duration? Have it reviewed before a partner challenges it.
What to do in case of a deadlock between partners?
Two partners with equal shares who disagree on strategy paralyze the company. Without a pre-established mechanism, the only remaining option is legal action. The court can order dissolution for just cause (Article 1844-7, 5° of the Civil Code). It will not do so for a simple disagreement: it must paralyze the company's operations.
The agreement offers a faster solution. The buy-or-sell clause works as follows: one partner proposes a price, and the other buys or sells at that price. The Court of Cassation confirmed its validity on February 12, 2025 (no. 23-16.290). It requires objective triggering conditions and implementation in good faith.
The choice between these options depends on each party's resources. A buy-or-sell arrangement benefits the partner who can finance the acquisition. Between partners of unequal financial strength, we prefer a valuation by a third party or prior mediation. If the deadlock leads to the company's insolvency, other rules apply: see our page on insolvency lawyers.
The contentious departure of a partner raises the same question of pricing. Good leaver and bad leaver clauses must define the valuation method for the shares in advance.
buy or sell clause
Partners of unequal strength
No mechanism provided
What mistakes should be avoided before signing?
- Copy a template without linking it to the statutes, to the point of creating clauses that contradict each other.
- Ignore the duration and let silence decide the partners' commitment.
- Lock down without planning an exit : an inalienability without an exit clause locks each person in with the other.
Three simple actions can help avoid most of these pitfalls:
- list the disagreements that the partners really fear, before choosing the clauses;
- to determine in advance the method for valuing the securities;
- review the agreement at each fundraising round and each time a new partner joins.
The situations we deal with
Equally owned founders
Two partners, each holding half the capital, are no longer in agreement. We are seeking a solution within the partnership agreement and the articles of association before considering legal action.
Fundraising
An investor acquires a stake in the company and requests an agreement. We negotiate governance, exit rights, and protection against dilution, for both the founders and the investor.
Operating partner who is leaving
A managing partner is leaving the company. Does the shareholders' agreement stipulate the repurchase of their shares, at what price, and within what timeframe? We are reviewing the clause and its application.
Old or disputed pact
A partner wants to withdraw from an agreement signed years ago, or is contesting one of its clauses. We analyze the duration, the validity of the clauses, and the available legal options.
How does our support work?
Reading the documents and objectives
We read the existing statutes and agreements, then we identify what each partner wants to protect.
Drafting and negotiation
We draft the agreement, then we negotiate it with the partners or investors, clause by clause.
Alignment with the statutes
We decide what goes into the statutes and what remains in the pact, and we prepare the necessary statutory amendments.
Monitoring and implementation
We update the agreement with each new shareholder or partner, and we intervene in the event of a dispute over its application.
What clauses should be included in a shareholders' agreement?
The content depends on the partners and their power dynamics. Here are the clauses we encounter most often.
| Clause | What is it used for? | For whom |
|---|---|---|
| Governance and strengthened majorities | Subjects strategic decisions to prior agreement or a right of veto | Minority shareholder, investor |
| Pre-emption | Give partners priority to buy back the shares of a partner who wants to sell | All partners |
| Approval | Makes the entry of a new partner subject to the agreement of the others | Founders, core group |
| Inalienability | Transfer of securities prohibited for a limited period | Founders, investor who is betting on the team |
| Joint exit | Allows the minority shareholder to sell under the same conditions as the majority shareholder who is selling | Minority shareholder, investor |
| Forced exit | It forces the minority shareholder to sell when a third party buys out the entire company | Majority shareholder, purchaser |
| Good leaver and bad leaver | Sets the buyback price for the shares of a partner who is leaving the company, according to the circumstances of their departure | Founders, operational partners |
| Non-competition | The departing partner is prohibited from competing with the company for a defined period and scope | Company, partners |
| Buy or sell | Resolves a disagreement: one partner sets a price, the other buys or sells at that price | Equal partners |
| Anti-dilution | Protects the investor against a capital increase at a lower price | Investor |
No clause is useful in isolation. A pre-emption without approval allows a third party to enter through another avenue.
Frequently asked questions about shareholder agreements
Is a shareholders' agreement mandatory?
No. The law requires articles of association, not a shareholders' agreement. A shareholders' agreement is an optional contract, signed to supplement the articles of association. It quickly becomes useful when there are multiple partners, an investor, or founders who do not hold the same shares. Without a shareholders' agreement, only the articles of association and the law can resolve a disagreement.
Is the shareholders' agreement confidential?
Yes, in principle. The articles of association are public, while the agreement remains between its signatories. A confidentiality clause specifies what information can be disclosed, particularly to an investor or a buyer conducting a legal audit.
Listed companies are an exception. Certain preferential transfer clauses must be transmitted to the company and to the Financial Markets Authority (Article L. 233-11 of the Commercial Code).
Can a shareholders' agreement be terminated at any time?
Not always. An agreement without an express term is deemed to be concluded for the remaining term of the company, unless otherwise stipulated (French Supreme Court, Commercial Chamber, March 11, 2026, No. 24-21.896). This ruling is based on the former Article 1134 of the French Civil Code. The signatories cannot then unilaterally terminate the agreement. Withdrawal requires what the agreement stipulates: a term, an exit clause, or the agreement of all signatories.
What are the risks for a partner who violates the agreement?
He incurs contractual liability: the judge may order him to pay damages, and the agreement may provide for other sanctions. In the case of a right of first refusal, the judge may annul the assignment concluded with a third party who was aware of the agreement and the beneficiary's intention to exercise it (Article 1123 of the Civil Code).
For other clauses, the penalty is generally compensation for damages. In a simplified joint-stock company (SAS), however, a transfer contrary to a clause in the articles of association is void (Article L. 227-15 of the French Commercial Code). The fate of the clause therefore depends on where it is written.
How much does it cost to draft a shareholders' agreement?
The cost depends on the number of partners, the presence of investors, and the number of clauses to be negotiated. A partnership agreement between two founders requires different work than a fundraising agreement. We will provide you with a cost estimate after an initial consultation.
Content prepared by the Corporate Law and M&A Department of Arst Avocats. Lead lawyer: Romain Picard, Partner, Paris Bar. Rules verified using official sources (Legifrance, service-public.fr). Updated October 2026.