Excluding a Shareholder from a French SAS: How Exclusion Clauses Actually Work

Forcing a shareholder out: the exclusion clause under Art. L 227-16

A French SAS without an exclusion clause is structurally locked into its existing cap table — no shareholder can be forced to leave, whatever they do or whatever their position becomes. An exclusion clause (clause d'exclusion) in the bylaws reverses that default: under Art. L 227-16 of the Commercial Code, a shareholder can be required to transfer their shares in the conditions the bylaws determine. The mechanism gives the company a structural way to remove a shareholder whose presence has become incompatible with its interest — a competing activity, a serious breach, a court-ordered insolvency, a director's disloyalty — and the Conseil constitutionnel has confirmed that the regime passes constitutional muster (decision 2022-1029 QPC, 9 December 2022).

This guide covers what the clause does and how it differs from a leaver buy-back, the legal basis and why the bylaws are its only effective home, the triggers French practice installs and the courts' control over them, the decision body and the one design mistake the Cour de cassation strikes down — depriving the affected shareholder of their vote — the procedure and the rights of the defence, the buy-out and price mechanics, the good-leaver/bad-leaver split, and the adoption rules, which since 21 July 2019 no longer require unanimity. For the neighbouring transfer controls, see our guides to approval clauses and to founder lock-ups.

What an exclusion clause does in a French SAS

The clause allows the company to force a shareholder to transfer their shares against payment, in defined circumstances and through a defined procedure. The transfer of the shares carries the shareholder's departure — the exclusion is the exit itself, organised in advance. The sequence runs: a trigger occurs; the competent body opens the procedure and notifies the shareholder; the shareholder responds and is heard; the body decides; the buy-out runs; the shareholder leaves the table against the price.

Two design families coexist. Decided exclusion — the body assesses a trigger (a breach, a competing activity, a disloyalty) and votes. Automatic exclusion (exclusion de plein droit) — the shareholder no longer meets a condition the bylaws or the law attach to being a shareholder (a professional qualification, an employee status, membership of a family circle), and the exclusion follows a formal notice to cure that has gone unanswered. The automatic route removes the discretionary vote but still needs the procedure and the buy-out organised.

Two distinctions keep the analysis clean. The exclusion clause is not a leaver clause: leaver mechanics (usually in the pacte, tied to vesting) buy back a departing manager's shares when the operational role ends; the exclusion clause reaches any covered shareholder caught by a trigger, whether or not they work in the company — the two can coexist and should be coordinated. And exclusion is not agrément or pre-emption: those clauses control voluntary transfers the shareholder initiates; the exclusion clause forces a transfer the shareholder has not chosen. One practical overlap deserves attention: where the company and the shareholder being excluded are bound by commercial contracts, the exclusion does not end those contracts unless they are tied to shareholder status — the drafting should settle their fate, because an unresolved supply or licence relationship can become the real obstacle to the exit.

The legal basis — and why the bylaws are the only effective home

Art. L 227-16 is deliberately open: « in the conditions they determine, the bylaws can provide that a shareholder may be required to transfer their shares ». The bylaws choose the triggers, the deciding body, the procedure, the buy-out and the price method. The same article's second paragraph lets the bylaws suspend the excluded shareholder's non-pecuniary rights until the transfer happens — a suspension the law reserves to the bylaws and that cannot start before the exclusion decision itself.

The statutory home matters because of the enforcement machinery attached to it. A transfer made in violation of the bylaws' clauses is null (C. com. Art. L 227-15) — so a shareholder under procedure cannot defeat it by selling to a third party first. A pacte can validly promise a forced sale — the Cour de cassation has enforced a pacte obliging a director removed for just cause, or resigning, to sell their shares to the majority shareholder (Cass. com. 22 September 2021, n° 19-23958) — but the pacte route binds only its signatories, carries no L 227-15 nullity against outside buyers, and gives no handle on the shareholder's statutory rights while the dispute runs. Structural removal power belongs in the bylaws; the pacte layers confidential or bilateral leaver detail on top.

Adoption is the point on which much published commentary is out of date. Since 21 July 2019, an exclusion clause is adopted or modified by a collective decision taken at the majority the bylaws set for it (C. com. Art. L 227-19, al. 2, as amended by law 2019-744 of 19 July 2019). Before that date, unanimity was required — which is why clauses in older bylaws are rare and why adding one used to be nearly impossible after a fundraise. The residual objection — that a new exclusion clause increases shareholders' commitments and so needs each shareholder's consent under Art. 1836 of the Civil Code — has been answered by the ANSA: the special rule of L 227-19 displaces the general rule, so the clause can be adopted or modified in the bylaws' conditions even where it increases the shareholders' commitments (ANSA, legal committee, 6 November 2019, n° 19-059). Careful drafters still treat a mid-life adoption with respect: the decision must follow the bylaws' forms exactly, and a clause voted in to target one identified shareholder invites an abuse-of-majority challenge.

The triggers French practice installs — and the courts' control

The clause must describe with precision the events that can lead to exclusion. The repertory practice draws on:

• Management fault or disloyalty — a shareholder-director's mismanagement or act of disloyalty toward the company;
• Competing activity — carrying on or participating in a business competing with the SAS, including unfair-competition conduct;
• Breach of the bylaws — violation of a statutory clause, the inalienability clause being the classic example;
• Concealment of a change of control — a corporate shareholder failing to disclose a change in its own majority, where the bylaws impose that disclosure;
• Criminal sanction or prohibition — a conviction or professional prohibition touching the shareholder;
• Insolvency of the shareholder — a gravely impaired financial situation, or the shareholder's own redressement or liquidation judiciaire, a trigger the Cour de cassation has accepted (Cass. com. 8 March 2005, n° 02-17692);
• Chronic absenteeism — repeated absence from shareholder meetings can validly ground an exclusion clause (Cass. com. 14 October 2020, n° 18-19181);
• Loss of a qualifying status — the shareholder no longer meets a condition attached to being a shareholder: a regulated-profession qualification, or an employee status where the structure ties equity to employment — a clause providing that employee-shareholders lose their shareholder standing on leaving employment has been upheld as a lawful eviction clause (Cass. com. 29 September 2015, n° 14-17343, for an SA);
• Loss of an office — practice also ties exclusion to the end of a directorship: the removal of a subsidiary's managing director, coupled with dismissal from salaried duties there, has been held a just ground for excluding him as shareholder of the parent SAS (CA Paris, 26 January 2010, n° 08-16326).

Exclusion can also serve as the company's safety valve rather than a sanction — buying out the shareholder who has lost interest, who blocks every decision, or whose activity has become incompatible with the company's, instead of letting the deadlock ripen into judicial dissolution. Our guide to shareholder decisions covers the deadlock context itself.

Whatever the list, two rules of judicial control frame it. First, precision pays: vague triggers push the dispute onto the judge, who reads ambiguous or incomplete clauses with a wide margin of appreciation. Second, and less intuitively, precision does not exhaust the control — even where the bylaws do not require serious grounds, an exclusion pronounced without any serious ground justifying it is abusive (Cass. com. 14 November 2018, n° 16-24532). The clause frames the court's review; it does not exclude it.

For a corporate shareholder, the triggers overlap with the change-of-control clause of Art. L 227-17, which lets the bylaws treat a shift in a shareholder-company's own control as a ground for forced exit — a companion mechanism we cover separately.

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Who decides — and why the affected shareholder keeps their vote

The bylaws designate the deciding body freely: the collectivity of the shareholders (the most common choice, deciding in the bylaws' forms — meeting, written consultation, unanimous instrument), the president, a board, or a dedicated committee. Delegating the decision to an organ rather than the shareholders speeds the procedure up and removes the vote-counting frictions below — at the price of concentrating a serious power in few hands, which the drafting should balance with the procedural protections of the next section.

Where the shareholders decide, one design error dominates the case law. The right to take part in collective decisions is absolute (C. civ. Art. 1844): the bylaws cannot deprive the shareholder facing exclusion of their right to participate in and vote on the proposal to exclude them (Cass. com. 9 February 1999, n° 96-17661). Nor can they reach the same result through arithmetic — a clause computing the majority with the affected shareholder's votes removed deprives them of their vote just as surely (Cass. com. 21 April 2022, n° 20-20619 and 21-10355, for a SELARL and transposable). The sanction is targeted: the offending stipulation is deemed unwritten, while the remainder of the exclusion clause stands — in the 2024 case, only the sentence barring the shareholder from the vote fell, not the clause (Cass. com. 29 May 2024, n° 22-13158).

The drafting consequences are practical. Set the threshold knowing the target votes: a majority of votes cast where a 45 % shareholder votes against their own exclusion is a very different test from the same words on a dispersed table — model the arithmetic against your actual cap table before relying on the clause. Where the founders want exclusion to be workable against a large minority holder, the realistic routes are a non-shareholder organ as deciding body, or triggers drafted as automatic (de plein droit) so that no discretionary vote is needed. What is not available is the shortcut of silencing the target's shares.

One structure loosens the framework: the variable-capital SAS. There, the bylaws can stipulate, on the statutory footing of Art. L 231-6, al. 2 of the Commercial Code, that the general meeting may exclude a shareholder at the majority required for bylaws amendments — and a clause conforming to that text is valid even where it does not list limitative grounds (Cass. com. 9 November 2022, n° 21-10540, for a SARL and transposable). Our guide to the variable-capital SAS covers the regime.

The procedure: notification, the rights of the defence, the decision

It falls to the bylaws to fix the exclusion procedure and to organise how the rights of the defence are exercised. The treatise checklist for the clause: the grounds; the deciding body; how the affected shareholder is informed of the case against them; the reasons given; the response time they are allowed; the organisation of a debate in which they can speak to the facts alleged and justify their position; the information of the other shareholders; and the buy-out modalities — the period to transfer, the persons entitled to buy, the price method. A well-run procedure moves through recognisable steps:

• Notification — the shareholder receives formal notice of the contemplated exclusion, the trigger invoked and the supporting facts, in the form the bylaws prescribe (registered letter with acknowledgment in most drafting). For automatic triggers, the notice is a formal demand to cure the missing condition, exclusion following only if the demand stays unanswered;
• Response window — the bylaws give the shareholder a period to answer in writing, gather evidence and contest the trigger;
• Hearing — the shareholder is put in a position to present their explanations before the body decides — in person, in writing, or both, as the bylaws organise it;
• Decision — the body votes (with the affected shareholder voting, where the shareholders decide), the threshold is checked against the bylaws, and the reasoned decision is recorded and communicated;
• Buy-out — the transfer and payment mechanics of the next section run.

The courts patrol the edges of the procedure rather than its letter. A reasons requirement in the bylaws does not inflate into a full evidentiary disclosure: where the bylaws required the grounds of exclusion to be notified, the Cour de cassation held the company did not have to name in the convening letter the competing company involved, the activity concerned, or the proof it held (Cass. com. 12 February 2025, n° 23-20079). In the other direction, the merits control never disappears: an exclusion without any serious ground is abusive even where the clause requires none (Cass. com. 14 November 2018, n° 16-24532). And where the clause itself is defective, nobody can repair it on the fly — an unlawful exclusion clause voids the deliberation applying it, and neither the president nor the judge can modify the clause (Cass. com. 9 July 2013, n° 11-27235).

Document every step. The remedies map explains why: the excluded shareholder does not have to seek annulment of the decision to claim damages for the harm it caused them (Cass. com. 9 November 2022, n° 20-16454, transposable) — so even an exclusion that will never be unwound can still cost the company money if the procedure was mishandled. And where a court does reinstate the shareholder, the reinstated shareholder can seek annulment of the decisions taken after their exclusion (Cass. 2e civ. 26 September 2013, n° 12-23129) — months of corporate life exposed because one letter skipped a step. From notification to closing, a clean procedure typically runs a few months; plan interim measures (removal from operational roles, the bylaws' suspension mechanics after the decision) around that timeline rather than compressing the defence rights.

The buy-out: who buys, at what price, and the shareholder's status meanwhile

What the clause must above all organise are the execution and buy-back modalities — the promise, in substance, that someone will buy the excluded shareholder's shares. The drafting rule the treatise underlines: the decision and its implementation must not depend on the will of the person who has to sell, and the price must not be left to the initiative of one side — least of all the buyer's.

Who buys. The bylaws choose: the other shareholders or some of them, a third party (subject to the agrément rules where an approval clause exists), or the company itself. The company route is the safety net when the others refuse to take up the shares — the excluded shareholder must not stay prisoner of their titles — but it carries its own rules: the SAS that buys must transfer the shares within six months or cancel them by capital reduction (C. com. Art. L 227-18, al. 2), the operation must respect the company's interest and not endanger it, sufficient distributable reserves must back the self-holding period (Art. L 225-210, al. 3, applicable to the SAS), and the ANSA considers the creditors' opposition right must be respected in a cancellation scenario (ANSA, legal committee, 5 May 2004, n° 04-040).

At what price. Three layers. The bylaws can fix a valuation method — a formula, a reference to accounts, a designated expert. Failing agreement and failing any statutory valuation method, the price is set by an expert under Art. 1843-4 of the Civil Code (C. com. Art. L 227-18, al. 1) — and that expert, where valuation rules exist in any agreement binding the parties, is required to apply them (C. civ. Art. 1843-4). Where the bylaws are silent on the valuation date, the expert can value the shares at the date closest to the future transfer (Cass. com. 16 September 2014, n° 13-17807).

Status pending completion. Until the shares are transferred — and even while the price remains unpaid — the excluded shareholder remains a shareholder (Cass. com. 16 September 2014, n° 13-17807; Cass. com. 17 June 2008, n° 07-14965, for a GAEC). The bylaws can, under Art. L 227-16, suspend their non-pecuniary rights — voting, information, participation in meetings — once the exclusion decision is taken, never before; absent contrary drafting, the suspension applies immediately from the decision (ANSA, legal committee, 5 September 2012, n° 12-055). The pecuniary rights survive throughout: dividends, preferential subscription rights, and ultimately the reimbursement of the shares — the excluded shareholder recovers their contributions and, on the bylaws' conditions, a share of the reserves.

The refusal scenario. If the excluded shareholder refuses to sign the transfer order, a well-drafted clause lets the president or another authorised organ, after a formal demand has gone unanswered, record the transfer directly in the company's accounts and share-movements register — with the price simultaneously paid or put at the shareholder's disposal. Without that clause, the company faces enforcement litigation to complete an exclusion it has already validly decided.

Simulate the exclusion price: full value or leaver discount?

Enter the holding and the leaver category — the simulator computes the buy-out figure and flags the legal checkpoints on the discount.

Good leaver, bad leaver: calibrating the price to the trigger

French investor practice grafts the anglo-saxon leaver split onto the exclusion and buy-back machinery: the price follows the reason for the exit. Bad-leaver triggers — a fault trigger of the kind listed above: serious breach, competing activity, disloyalty — carry a discounted price: a fixed percentage of the formula or expert value, a stepped discount that shrinks with seniority, or in founder structures a repurchase of unvested shares at cost. Good-leaver triggers — the no-fault exits: loss of a qualifying status without fault, invalidity, death where the clause covers transmission, an agreed departure — take the undiscounted value.

The discount mechanism has judicial support in the employee-shareholder context: a pacte can require shareholders who cease to be employees to sell their shares and can apply a 50 % discount to the value of the shares of dismissed employees, provided disciplinary dismissals are excluded from the discount's scope (Cass. com. 7 June 2016, n° 14-17978). The treatise flags the sting in that position — an unjustified dismissal can still trigger the discount — which is exactly the kind of asymmetry a shareholder-side reviewer should catch before signing.

Three drafting disciplines keep the split enforceable. Assign every trigger expressly to a category, with a tie-breaker for the ambiguous ones (underperformance can be either, depending on wilfulness). Keep the categorisation and the price computation out of the buyer's unilateral hands — the rule against one-sided price initiative applies with full force here. And coordinate the layers: the vesting schedule and leaver matrix usually live in the pacte, the exclusion triggers, the procedure and the price method in the bylaws — our guide to the pacte-versus-bylaws split explains which promise belongs where and what each layer's breach actually costs.

Sanctions and challenges: nullity, damages, reinstatement

The enforcement map has three panels — one protecting the company, two protecting the shareholder.

Against escape transfers: nullity. A transfer made in violation of the bylaws' transfer clauses is null (C. com. Art. L 227-15). A shareholder under an exclusion procedure who tries to sell to a friendly third party first achieves nothing — the company refuses to register the movement, the buyer never becomes a shareholder, and the procedure continues. This is the structural advantage the bylaws hold over any pacte-based mechanism.

Against defective procedures: annulment and reinstatement. An exclusion built on an unlawful clause voids the deliberation that applied it (Cass. com. 9 July 2013, n° 11-27235); an exclusion pronounced without serious grounds is abusive (Cass. com. 14 November 2018, n° 16-24532); and a vote-stripping stipulation is deemed unwritten, contaminating a decision counted on that basis (Cass. com. 29 May 2024, n° 22-13158). A shareholder reinstated by the court can then attack the collective decisions taken during their absence (Cass. 2e civ. 26 September 2013, n° 12-23129). For nullity actions arising from 1 October 2025, the reformed regime of ordinance 2025-229 of 12 March 2025 applies — including a prescription reduced from three years to two (C. civ. Art. 1844-14, as amended), with transitional rules governing actions born before that date.

Damages without annulment. The excluded shareholder is not required to seek annulment of the exclusion decision in order to claim compensation for the harm it caused (Cass. com. 9 November 2022, n° 20-16454). A company can therefore win the battle over the exit and still pay for the way it was conducted — one more reason the procedure and its documentation deserve the same care as the decision itself.

Adopting, modifying and removing the clause: majority, not unanimity

Since 21 July 2019, an exclusion clause is adopted or modified by a collective decision taken in the conditions and forms the bylaws provide (C. com. Art. L 227-19, al. 2, as amended by law 2019-744 of 19 July 2019). Before that date, unanimity was required — a rule that still governs the SAS's other consent-heavy clauses, inalienability and change-of-control, and that explains why so much drafting lore about exclusion clauses assumes a veto that no longer exists. Removal follows the same logic: the clause leaves the bylaws by the same bylaws-set majority that can put it in.

The majority route has boundaries. The decision must be collective and must respect the general floor the case law has set for SAS decisions — a clause cannot validly let a decision pass below a simple majority of the votes cast. The increase-of-commitments objection under C. civ. Art. 1836 does not resurrect the veto: for the ANSA, the special text of L 227-19 prevails, and the clause can be adopted or modified in the bylaws' conditions even where it increases the shareholders' commitments (ANSA n° 19-059). What survives as a real limit is abuse: a clause adopted mid-conflict, at a majority, visibly tailored to expel one identified minority shareholder, invites an abuse-of-majority challenge on the adoption itself — and then a merits challenge on any exclusion pronounced under it. The clean sequence is the reverse: adopt the framework cold, apply it, if ever, to facts that post-date it.

For founders the timing advice stays what it was before 2019, for different reasons. Install the clause at incorporation — with unanimity automatic among founders, no adoption debate exists at all — and draft it complete: triggers, body, procedure, defence rights, buy-out cascade, price method, leaver split. A clause added later is possible at the majority, but every later addition happens against an existing table, existing tensions, and an abuse doctrine watching the motive.

Frequently asked questions about excluding a shareholder from a French SAS

This article is for general information only and states French law as published in the sources available at the date shown above. It does not constitute legal advice. The right exclusion framework depends on the cap table, the company's governance and the shareholders' objectives. Always seek qualified legal advice before drafting, adopting or invoking an exclusion clause in a French company.