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Commercial Law — Company law — Minority shareholders

Date Citation Note
18.06.2002 Com. Bulletin 2002 IV No.108 P 116 Aplication for Review No. 99-11999 Case ADAM et autres v. l’Amy This case concerns not only the rights of minority shareholders but also a technique for reorganising the capital of companies known as the “accordion deal” (“coup d’accordéon”), and the conflict between the interest of the company as an independent entity and that of the shareholders. The “accordion deal” consists of reducing the capital of a company by a specified amount (in this case the entire amount of the capital), writing the same amount against accumulated losses and simultaneously increasing the capital by an injection of new funds or assets. In this case it was also used as a technique for transferring control from one group of shareholders to a new investor, since the increase of capital was reserved exclusively for them. The minority shareholders (supported by an association for the defence of minority shareholders known as ADAM) brought an action for damages against the company on the grounds that they had been wrongly dispossessed of their shares and that disproportionate account had been taken of the corporate interest of the company (i.e. its survival) rather than of their individual interest as shareholders. The court held otherwise, holding that all shareholders were equally affected and that the loss (the capital invested by the shareholders) merely represented the risk shareholders take in making their investment.
10.12.1973 Com. 355 Application for Review No. 72-12.238 Case Société d’Alimentation de Provence (S.A.P.) v. Groupement des Actionnaires de la Société d’Alimentation de Provence This case is part of a long and continuing battle by groups of minority shareholders to obtain information from, and influence, the management of public companies. Article 226 of the French Companies Law (24 July 1966) as it was in force at the time provided that one or more shareholders representing at least 10% of the capital of a public company (“société anonyme”) could bring an action for the appointment of an expert to report on one or more transactions carried out by management. Certain shareholders holding more than 10% of the capital of the plaintiff company grouped themselves into an association for this purpose. The court held that the association had no standing to bring such an action; only the shareholders themselves could do so.
The position is somewhat different now; Article 226 of the law has been modified and is now Article L225-231 of the Monetary and Financial Code, which enables approved associations and individual shareholders, representing 5% of the capital, to ask written questions of the Chairman about management transactions of the company or its subsidiaries, and, in case of failure to reply or to provide satisfactory information within one month, to bring action for the nomination of a reporting expert .