This article provides:
“Where there is provision for a partner's rights to be transferred or redeemed by the company, the value of such rights shall be determined, where the parties fail to agree, by an expert designated either by both parties or, failing that, by order of the competent court through summary proceedings”.

In the present case, the shareholders' agreement provided that the shareholder concerned, manager and general director, committed himself, by “irrevocable and firm” promise, to sell to the company a part of his shares, for their nominal value in the event of resignation or dismissal for misconduct.
At the shareholders’ meeting, the shareholder concerned was dismissed for serious misconduct.

The company had taken advantage of the promise contained in the shareholders’ agreement. It had requested the enforcement of the promise, but, following the refusal of the shareholder to act, the company deposited the amount corresponding to the agreed purchase price.

The former shareholder contested his dismissal in court, the application of the transfer clause of the shares and the price for the forced divestiture.
He based his action on the application of Article 1843-4 of the French Civil Code to dispute the transfer price.

The Grenoble’s Court of Appeal ruled in favour of the applicant.
According to this decision, the share value must be fixed by a technical expert, because article 1843-4 concerns public policy and it has a general application in case of transfer or redemption provided by law or the articles of association, but also by statutory and extra-statutory shareholders’ agreement.
The Grenoble’s Court of Appeal complied with the former Precedent of the Supreme Court. The last decision in this way was made on December 4, 2012 (n°10-16.280) and the background was similar. The Supreme Court decided that the author of the promise could rely on the provisions of Article 1843-4 of the French Civil Code despite the fact that the stakeholders had not intended to appoint an expert.

However, the Commercial Chamber of the French Supreme Court reversed its position in the decision dated March 11, 2014.

It overturns the Court of Appeal’s decision, stating as follows : “The provisions of article 1843-4 are intended to protect the transferor’s interests, and do not apply to the transfer or redemption of a shareholder’s rights by the company resulting from a unilateral promise to sell “freely consented”.

Even if the new precedent strengthens the prevailing legal doctrine, which disagreed with the Supreme Court’s position until this decision, Professor Alain COURET limits the significance of this decision in time, underlining two points.
First of all, Article 1843-4 of the French Civil Code will be changed by a bill of law which should be adopted and ratified at the end of this year. This text could resolve any possible difficulties for the future by returning to the origin of the text and consequently, limit the impact of this Precedent.
Furthermore, Professor Alain COURET underlines the fact that the decision does not give any information about the extent of the expert’s involvement in the current state of legislation.

He asks critical questions  :
 “Is “freely consented” a synonym of “contractual”? When the promise arises from a statutory provision, could it be “freely consented”?
However in his opinion, the Supreme Court was still voluntary unclear about the extent of the expert’s involvement on account of the approach of a new text which may “temper the extent of the involvement of the expert mentioned in article 1843-4”.

Nevertheless, it remains that this decision must have a wide availability (it is mentioned FS P+B+R+I ) and prevails over the previous case law.
Thus, Article 1843-4 of the French Civil Code is not intended to apply to mere contractual agreements, except if its application had been voluntary chosen by the parties.

¹ « Article 1843-4 of the French Civil Code can be applied in the case of a unilateral promise to sell consented by a shareholder ” Alain Couret, La Semaine Juridique Entreprises et Affaires n°13, 27 mars 2014, 1159, LexisNexis

² - “ P ” means that this decision will be published in the Bulletin of the French Supreme Court (monthly)
- “ B ” means that this decision will be mentioned in the Information’s  Bulletin of the French Supreme Court (bi-monthly)
- “ R ” means that this decision will be commented in the Annual Report of the French Supreme Court
- “ I ” means that this decision will be broadcast on the French Supreme Court’s network.