The term of a shareholders' agreement may be equal to the duration of the company. A shareholders' agreement entered into for the duration of the company is lawful and constitutes a fixed-term contract.
In 2007, the French Supreme Court considered that a shareholders' agreement entered into for the duration of the status of shareholder of his signatories was a contract of indefinite duration, which could therefore be terminated unilaterally by the signatories, subject to reasonable notice period.
This approach of the French Supreme Court had led practitioners to set a fixed duration in the shareholders' agreements, generally between 10 and 20 years, in order to preserve the stability of the company and to avoid that the signatories unilaterally terminate the shareholders' agreement.
On 25 January 2023, the French Supreme Court established the principle that the conclusion of a shareholders' agreement whose duration is aligned with the duration of the company, i.e. 99 years in most cases, is lawful and does not breach the principle of perpetual commitments. Moreover, the French Supreme Court has ruled that a shareholders' agreement entered into for the duration of the company, which contributes to the stability of the company, is a fixed-term contract, which can therefore only be terminated at the end of its term.
Practitioners will now be able to fix the duration of the shareholders' agreement with the duration of the existence of the company, without risking that one of the signatories unilaterally terminate it before its term, the French Supreme Court considering that the said agreement is fixed for a definite period. However, this case law does not deal with the hypothesis that the initial duration of a company can be extended indefinitely.
0+
