To contact specialized
French Business Attorneys
Call us
E-library Corporate Law Call option agreement (French business law)

Call option agreement (French business law)

12 Feb 2012

A call option agreement, or simply labelled a call, is a contract entered into by a potential purchaser of company shares or securities (the “Purchaser”) with the holder of such securities (the “Seller”), whereby the Seller undertakes to sell to the Purchaser all or part of its securities if the Purchaser so requires. Whereas the Purchaser does not have an obligation to purchase, the Seller has an obligation to sell if the Purchaser exercises the call.

Call options are frequently used to secure the purchase of:

  • stock options or equity incentives from executives or employees who decide to leave the company,
  • equity participations of minority shareholders upon the occurrence of certain events.

To be valid under French law, a call option must specify:

  • the number and type of securities which the Seller must sell upon exercise of the call by the Purchaser, and
  • the price payable for the purchase of such securities (or a mechanism allowing for its determination).

It should be noted that specific performance of a call option under French law is subject to controversy. Indeed, according to French civil law, breach of a contractual obligation to sell may only be sanctioned by damages, and not by its forcible enforcement.

Consequently, great caution should be taken while drafting call option agreements to:

  • ensure that all conditions for their validity are met, and
  • provide for specific performance mechanisms and dissuasive sanctions in the event that the Seller decides not to comply with its obligation to sell.

In certain cases, a call option may be accompanied by a put option.

French Company Registration
Previous article
Put option agreement (French business law)
Following article
Contact a French business lawyer
Call us or fill in the form below. A French attorney will contact you within 6 to 24h
Call us at + 33 (0) 1 84 88 31 00
for a free quote
Who we are is the 1st online legal support solution which helps you find information and obtain specialized legal advice on French business law. entertains a network of experienced French business attorneys, who provide customized legal advice on French business law to clients in France and abroad. est le 1er site d’informations et de conseils juridiques en droit des affaires, animé par des avocats d’affaires. entretient un réseau d’avocats d’affaires expérimentés, qui fournissent un conseil personnalisé et sur mesure, tant en France qu’à l’étranger.

To receive our newsletter, information memoranda and news on French business law, please enter your email address.
Copyright © 2012 - 2013 All rights reserved.