Abuse of majority rights: when a majority decision can be challenged

Majority rule is the starting point. A shareholder holding 30 % of the capital knows, on the way in, that decisions will be taken without him, and a court does not step into the general meeting's shoes to say what would have been more sensible.

What the law prohibits is something else. Article 1833 of the French Civil Code provides that a company is formed in the common interest of its shareholders and managed in its own corporate interest. The majority therefore exercises a power, not a right of ownership over the company: it votes for the company, not merely for itself. Abuse begins where that limit is crossed.

In practice the question almost always arises too late, in a company where nothing is discussed any more. It is far better settled beforehand, while there is still time to set out the exit rules in the cold light of day — valuation method, cross-options, tag-along. A useful shareholders' agreement does not organise the harmony: it organises the break-up.

Abuse of majority rights requires two cumulative conditions, laid down by the Commercial Chamber of the Cour de cassation on 18 April 1961 (no. 59-11.394), in the decision known as Schuman-Piquard. A company there carried its profit forward year after year, while its reserves already stood at two and a half times its share capital.

1. The decision is contrary to the corporate interest: it impoverishes the company, deprives it of a resource, commits it to a transaction that does not serve it.
2. And it was taken for the sole purpose of favouring the majority at the expense of the minority. That is the breach of equality between shareholders, and it is the condition on which most claims fail.

The word “sole” is not decorative. As soon as a decision can be justified by a reason unconnected with the majority's own interest, the classification falls away. That is what the Cour de cassation restated on 26 November 2025 (no. 23-23.363, reported): incorporating a subsidiary had a financial cost for the company, but it protected a property asset worth more than thirty million euros. The advantage the majority derived from it did not contradict that interest. The corporate interest is therefore not reduced to a balance of gains and losses over one financial year — and abuse is assessed as at the date the decision was taken, not in the light of what is known today.

The judgment does more than that: it carries the reasoning across to decisions of the board of directors, which may be annulled for abuse of powers on the same conditions. Scrutiny no longer stops at the general meeting.

Four configurations cover most cases. None is abusive in itself: each becomes so when the two conditions are met.

Systematically retaining profits in reserves

That was the 1961 case, and it has not aged. A company is perfectly entitled not to distribute: building up reserves is a normal management decision, and often a sound one. What makes it suspect is repetition without a reason — no identifiable investment, no cash-flow pressure, and a minority shareholder who never receives anything while the majority is paid another way. What has to be shown is the pattern, not one financial year.

The pay of the majority shareholder-manager

The manager votes himself pay the company cannot carry, or pay bearing no relation to the work done. The profit disappears before it can be distributed: the majority takes in salary what it does not share in dividends. The difficulty here is evidential — what is needed is a disproportion, not a disagreement over the figure.

Value flowing to a company owned by the majority

Services invoiced by a structure he controls, rent on premises he owns, the sale of an asset at a favourable price. Value leaves the company where the minority shareholder is present and enters a company where he is not. The extreme case is the sale of the business itself to a company owned by the majority — in which case it is worth knowing what the sale of a going concern actually carries with it, since the transaction empties the first company of its substance without making it disappear.

Capital transactions that dilute

A capital increase subscribed by the majority alone reduces the minority's stake. The transaction is lawful, and the company often has a genuine need for funds: it becomes abusive only where the need is manufactured and the dilution sought for its own sake. The rules governing such transactions are not covered here.

Annulment of the decision

Since Ordinance no. 2025-229 of 12 March 2025, a company decision may be annulled only for breach of a mandatory provision of company law or on a ground of nullity applying to contracts generally (article 1844-10 of the French Civil Code). Breach of the articles of association alone is no longer enough.

To that is added a three-part test, laid down by the new article 1844-12-1 of the French Civil Code. Annulment may be ordered only where, cumulatively:

Annulment is therefore no longer the automatic consequence of an irregularity once established: it is argued on its merits as a remedy, and the court may in addition defer its effects where retroactivity would produce manifestly excessive consequences. For a minority shareholder that shifts the work towards proving personal loss — and it is better to know that before issuing proceedings.

Damages

They are claimed from the majority shareholders who voted the abuse, and compensate the minority shareholder's personal loss. They are cumulative with annulment, or replace it where setting the decision aside no longer serves any practical purpose.

A claim against the manager is a separate action, and requires a management fault of his own — article L. 223-22 of the French Commercial Code for the gérant of a SARL. The two are not to be confused: the majority answers for its vote, the manager for his management, and it is often the same person without it being the same fault.

What a court will not do, on the other hand: it will not vote in place of the general meeting, it will not order a dividend to be paid, and it will not compel anyone to buy out the minority's shares. Anyone who wants out is looking for a price, not a judgment.

Two points matter more than the figures. First: the reduction from three years to two is recent, and many sources still give the old period. Second: concealment postpones the starting point. A flow of value that does not appear in the accounts does not start time running while it stays hidden — that is the limb of the provision that saves cases discovered late, and the one people forget to read.

In most small companies, litigation between shareholders costs more than it recovers. Three steps come first.

• Written questions, put to the manager about one or more specific management transactions. In a société anonyme, a shareholder holding 5 % of the capital is entitled to ask them and the manager has one month to reply (article L. 225-231 of the French Commercial Code).
• The expertise de gestion. A court-appointed expert reports on specified transactions. The threshold is one tenth of the capital in a SARL (article L. 223-37) and 5 % in a société anonyme (article L. 225-231). It is the tool that produces the evidence a minority shareholder does not have, because he has no access to the documents.
• A mandataire ad hoc, or a provisional administrator, appointed in interim proceedings where the company is genuinely deadlocked and at risk.

There remains judicial dissolution for disagreement between shareholders paralysing the company (article 1844-7, 5° of the French Civil Code). It exists, it is sometimes granted, and it destroys precisely what one set out to defend. It is a point of leverage in an exit negotiation, rarely an objective.

In cases of this kind, the difficulty almost never moves onto the law. It moves onto three points, always the same ones.

1. Voting for the decision you mean to challenge. Approval, however reluctant, weakens the challenge for good. A vote against should be reasoned, and recorded in the minutes.
2. Waiting. Two years go quickly when you are hoping the situation will settle, and time runs from the decision, not from the day you decide to act.
3. Issuing proceedings before you have the documents. An abuse is shown by a pattern — accounts, minutes, related-party agreements, remuneration. The minority shareholder does not hold them: obtaining them is the first step, not the second.

Composite example, for illustration only. No real case. Two shareholders, 70 / 30, in a services company. For four financial years the whole profit is placed in reserves. The majority shareholder, who is also the manager, increases his pay and invoices part of the services through a second company he owns alone. The minority shareholder waits, hoping for an amicable settlement, then discovers the related-party agreements on reading the accounts. The question that decides everything is not whether the abuse is made out: it is on what date the facts came to light.

We begin by classifying the situation, which is no formality: many situations experienced as abuses are not abuses. That means reading the articles of association, the shareholders' agreement if there is one, the minutes and the accounts for the last few years, and then saying what can be shown and what cannot.

Next comes the choice of route: access to information, negotiating an exit at a figure, or proceedings. That choice is made with the client, never for him.

Finally we draft what prevents a repeat — exit clauses, a valuation method fixed in advance, governance rules. Of the three, it is the least spectacular work and the most profitable.

The scope is written down before we start, and the amount is announced before the work begins. We give no undertaking as to the outcome of proceedings: our professional rules forbid it, and no one can seriously give one.

If you do not know whether what you are experiencing is an abuse or simply majority rule, that is what a first conversation establishes.