Preferred Shares in a French SAS: How the Actions de Préférence Regime Works

The actions de préférence regime, end to end

The French SAS gives founders and investors the most flexible regime for preferred shares of any French commercial form. The bylaws can install share classes carrying tailored economic rights (priority dividends, liquidation preferences, anti-dilution mechanics, conversion rights) and tailored voting rights (multiple votes, no votes, vetoes on reserved matters, class-approval protections). The mechanism is called actions de préférence — preference shares — and it is the structural reason the SAS is the form investors prefer for French rounds.

This guide covers what preferred shares are, the economic and voting rights that can attach to them, the procedure to issue them (including the commissaire aux avantages particuliers), the class protections against changes to the holders' rights, the conversion and redemption mechanics, and how preferred shares operate at a fundraise and at exit. For how preferred shares fit into the round itself, see our guide on raising capital; for the suppression of the pre-emptive right that usually accompanies a reserved issue, our dedicated suppression guide.

What preferred shares (actions de préférence) in a French SAS are

Actions de préférence — preferred shares — are shares that carry rights different from those attached to ordinary shares, with or without voting rights (C. com. Art. L 228-11). The Commercial Code authorises French companies to issue them under Arts. L 228-11 to L 228-20.

In an SAS, the bylaws design the rights freely. The Commercial Code sets the procedural rules for issuance, modification, conversion, and redemption, but the substantive rights — what each preferred share entitles its holder to receive economically and how it votes — are left to the bylaws. Two drafting rules are mandatory: the preference shares and the rights attached to them must be stated in the bylaws (C. com. Art. L 228-11), and the bylaws must in most configurations also record the identity of the beneficiaries (C. com. Art. R 224-2).

Three structural points define the regime:

Multiple classes of preferred shares can coexist. A single SAS can have ordinary shares plus several distinct classes of preferred shares — Series A preferred, Series B preferred, founder-class preferred, and so on. Each class is described in the bylaws with its specific rights. The classes can be issued at different points in the company's life and rank in the order the bylaws set. The rights can be permanent or time-limited, and they can be suspended and revived on defined events — as long as the triggering event is defined objectively.

The rights attached to each class can differ from any other class. Class A preferred shares can carry a priority dividend; Class B preferred shares can carry a liquidation preference and double voting rights; founder-class shares can carry triple voting rights and no liquidation preference. The bylaws describe each class separately.

The rights follow the share. A preferred share is a structural feature of the company, not a personal undertaking. Anyone who buys the share buys the rights attached to it; anyone who deals with the company is on notice of the class structure through the bylaws.

The flexibility is the SAS's structural advantage. The SARL has no comparable mechanism — its statutory rules pre-empt large parts of the contractual space. The SA permits preferred shares but its framework is more rigid; the SAS starts from bylaws freedom and layers the preference regime on top.

The economic rights that can attach to preferred shares in a French SAS

The economic rights — the right to receive cash or shares from the company — can be designed in five common dimensions.

Priority dividend. Preferred shares can carry a right to receive a defined dividend before any dividend is paid on ordinary shares — a dividende préciputaire, charged first against distributable profits after the legal-reserve allocation. The dividend can be a fixed amount per share, a percentage of par value or issue price, or an amount linked to performance objectives — provided the trigger is preset and never left to management's discretion. The priority can be cumulative (unpaid years carry forward against future profits) or non-cumulative. Three legal limits frame the drafting: no clause may strip the other shareholders of any right to profits (the léonin prohibition, C. civ. Art. 1844-1), no dividend of any kind can be paid without distributable profits (C. com. Art. L 232-12), and fixed-interest clauses payable regardless of profits are prohibited (C. com. Art. L 232-15).

Liquidation preference. On the company's liquidation or on a defined exit event, preferred shares can carry a priority distribution: a defined amount per share is paid to the preferred holders before any distribution to the ordinary holders. The preference can be 1× the issue price, multiple-X (2× or more), participating (the preferred holders also share in the residue with the ordinary holders) or non-participating (the preferred holders receive their priority and stop) — always within the léonin limit.

Conversion rights. Preferred shares can carry the right to convert into ordinary shares — or into preference shares of another class — at a defined ratio, with adjustments for stock splits and dilution events (C. com. Arts. L 228-12 and L 228-14). The conversion is typically optional from the preferred holder's side and can be triggered automatically by defined events (a qualified IPO, a revenue threshold, a funding milestone).

Anti-dilution mechanics. Preferred shares can carry an adjustment in case the company issues new shares at a price below the preferred holder's issue price (a down round). The adjustment can be broad-based weighted average (the standard), narrow-based weighted average, or full-ratchet (the most aggressive and most controversial). The mechanics are built through the conversion ratio or through warrant structures attached to the class.

Pre-emptive subscription rights on subsequent rounds. Beyond the statutory pre-emptive right, preferred holders can be given a contractual right to subscribe a defined percentage of subsequent rounds. One statutory default runs the other way and deserves attention: preference shares carrying a limited right to dividends, reserves, or liquidation proceeds are deprived of the statutory pre-emptive right on cash increases, unless the bylaws provide otherwise (C. com. Art. L 228-11, last al.).

The five dimensions can be combined freely. A typical Series A preferred share might carry a 1× non-participating liquidation preference, broad-based weighted-average anti-dilution, automatic conversion on a qualified IPO, and a contractual pre-emptive right on Series B. The bylaws describe each layer. Dividends on preference shares can even be paid in shares — ordinary or preference — where the bylaws or the collective decision so provide (C. com. Art. L 228-18).

The voting rights that can attach to preferred shares in a French SAS

The voting rights of preferred shares in a French SAS can be designed in five common dimensions.

Multiple voting rights. Preferred shares can carry more than one vote per share — in an SAS the vote can be multiple, not merely double, and the Commercial Code sets no cap on the positive preference. The bylaws fix the multiple and any holding-period condition.

No voting rights — within a hard ceiling. Preferred shares can carry no voting rights, or a vote suspended for a determined or determinable period tied to an objective event. Non-voting preference shares cannot represent more than half of the share capital of an SAS (C. com. Art. L 228-11, al. 3). An issue that pushes the proportion past the line can be annulled — the nullity is at the court's discretion, not automatic — and the Cour de cassation counts only shares deprived of all voting rights toward the ceiling: shares with even a derisory vote sit outside it (Cass. com. 13 March 2024, n° 22-12205). Note that the deprivation does not extend to the class's own consultations: non-voting preferred holders still vote within their class.

Non-financial rights that shadow governance. Preferred shares can carry reinforced information rights, a privileged prior consultation on defined operations — which in an SAS can amount in practice to a veto on reserved matters (capital changes, mergers, key acquisitions, officer appointments) — or a free-transferability regime (or, conversely, a class-specific agrément).

Class-approval protections. Preferred shares can require the approval of the holders of the class for defined corporate actions — the class-consultation mechanism the bylaws organise (see below). The mechanism operates at class level rather than at the individual-vote level.

Representation rights. Preferred shares can carry the right to representation within the company's management or supervisory bodies — the structural translation of a board seat or observer seat that follows the share.

The combinations are limited only by the SAS bylaws-freedom rule and the non-voting ceiling. Investors typically negotiate for a mix: a veto on a defined list of fundamental matters, plus a seat, plus a class approval on changes to their rights.

How to issue preferred shares in a French SAS

Preferred shares can be created at incorporation or issued during the company's life. In both cases the shareholders alone are competent: the issue (like the conversion) is decided by the décision collective, on a special report of the statutory auditor where the company has one (C. com. Art. L 228-12) — and powers can be delegated to the president. Per the CNCC's reading, an SAS that has no statutory auditor does not need to appoint one just for this report.

The decision authorising the issuance must:

• describe each class of preferred shares being issued, including the rights attached — recorded in the bylaws, with the beneficiaries' identity where required;
• set the number of shares of each class, the issue price (par value plus any premium), and the conditions of subscription;
• where the issue is reserved to designated investors, suppress the pre-emptive right under the Art. L 225-138 procedure — with the auditor's special report on the price, for which an SAS without an auditor does appoint one specially;
• run on a report from the president stating the characteristics of the preference shares and the impact of the operation on the shareholders and on holders of securities giving access to capital (C. com. Art. R 228-17) — with the auditor, where one exists, giving its own opinion on the same points.

The commissaire aux avantages particuliers. Where the preference shares are issued in favour of one or more named persons — shareholders or, since 2019, third parties — the special-benefits procedure of Art. L 228-15 applies. A commissaire aux avantages particuliers is appointed, unanimously by the shareholders or by the court, among auditors who have not worked for the company in the past three years. His report describes and appraises each special right and, where the rights call for a valuation, confirms that their value covers at least the par value of the preference shares to be issued plus any premium; it is held at the registered office at the shareholders' disposal at least eight days before the decision — a period the shareholders can shorten by unanimous prior written consent (C. com. Art. R 225-136). Two refinements: at a capital increase the appraisal is mandatory, while at incorporation the appointment is no longer compulsory since 2019 — though the ANSA considers it still required where preference shares go to named founders; and where the issue is of a category already created, carrying identical rights, the appraisal is folded into the statutory auditor's special report instead (C. com. Art. L 228-15, al. 3). An omission can be regularised by a later bylaws amendment, but decisions taken before the regularisation are exposed to annulment (Cass. com. 13 March 2024, n° 22-12205).

One more voting exclusion. Where existing ordinary shares are to be converted into preference shares, the holders whose shares are being converted cannot vote on the creation of the category — on pain of nullity of the deliberation — and their shares are deducted from the quorum and majority, unless all the shares are being converted (C. com. Art. L 228-15, al. 2).

The decision is recorded in the register of decisions, the bylaws are amended to describe the new class, the registration update is filed at the Guichet unique, the legal notice is published, and the K-bis is updated to reflect the new capital figure. Where a delegation of competence to the president is used, the standard 26-month cap applies (18-month realisation where the pre-emptive right is suppressed for designated persons).

One cap to keep in view — and only one: the non-voting ceiling. Preference shares with reinforced financial rights are not capped against the capital; only the shares deprived of all voting rights are limited to half of it.

Run the exit waterfall on your preference terms

Enter the exit proceeds, the preferred investment, the liquidation multiple, and the preferred holders' as-converted ownership — and see which route the preferred take and what is left for the ordinary shares.

Protecting the preferred holders: class consultation in a French SAS

In the SA, preferred shareholders of each class form a statutory special meeting (assemblée spéciale) whose approval gates changes to the class's rights. In the SAS, the position is subtler: the special-assembly machinery does not clearly impose itself — the treatise-level view is that it "does not seem to be required" unless the whole preference-share regime is treated as mandatory — and pending a settled answer, the bylaws should organise the class consultation themselves. Well-drafted SAS bylaws specify:

• the modes of consultation of the class and the body that convenes it or takes the initiative;
• the majority — and, where wanted, quorum — rules for the class decision;
• the articulation between the collective decision of all shareholders modifying the class's rights and the approval of that modification by the class — including which comes first and when the modification becomes definitive.

Organised this way, the class approval works exactly as investors expect: a modification of the priority dividend, the liquidation preference, the voting rights, or the conversion ratio requires both the class's approval under the bylaws mechanism and the ordinary collective decision amending the bylaws. Where several classes are affected, each class approves separately.

One statutory protection operates regardless: the holders of preference shares, constituted as a class body, can commission a special report from one of the company's statutory auditors (where one exists) on the company's compliance with the rights attached to the preference shares (C. com. Art. L 228-19). The report gives the auditor's opinion on whether the special rights have been respected and, where they have not, the date from which they were disregarded; it is held at the registered office at the class's disposal at least fifteen days before the class meeting at which it is presented, and its cost is borne by the company (C. com. Art. R 228-22).

Two neighbouring rules complete the protection. On a change to the capital — increase, reduction, amortisation — the collective of shareholders determines the consequences of the operation for the preferred holders' rights, or the bylaws record them; the law imposes no precise safeguard, so the bylaws should (C. com. Art. L 228-16). And on a merger or division, the preference shares are exchanged for shares of the receiving company carrying equivalent special rights, or under a specific exchange ratio that accounts for the rights given up (C. com. Art. L 228-17).

Converting preferred shares in a French SAS

Preference shares can be converted into ordinary shares — or into preference shares of another class — by decision of the collective of shareholders, on a special report of the statutory auditor where one exists (C. com. Arts. L 228-12 and L 228-14).

Conversion on bylaws-set terms. The bylaws usefully fix the financial modalities of the conversion in advance — the ratio, the method for valuing the preference rights given up (an expert determination can be one of the methods). Where they do, the president (or the authorised body) carries out the conversion under the bylaws' conditions and draws up a report on it.

Conversion where the bylaws are silent. Absent those provisions, the modalities of the conversion must be approved by the holders of the affected preference shares, under the consultation rules the bylaws set; the bylaws are then amended, and the president draws up a report on the modalities (C. com. Art. R 228-20).

Triggers. Within that frame, the bylaws can make the conversion optional for the holder, automatic on defined events (a qualified IPO, a revenue or EBITDA threshold, a sale, a funding milestone), or exercisable by the company on defined conditions — the standard architecture of investor documentation.

At the moment of conversion, the president's report states the conversion's conditions, the calculation of the conversion ratio, and the impact of the operation on the shareholders and on holders of securities giving access to capital; the statutory auditor, where the company has one, opines on the conversion and certifies that the ratio calculation is exact and sincere (C. com. Art. R 228-18).

A specific point on the pre-emptive right: the decision to convert preference shares carries automatic renunciation, by the shareholders, of their pre-emptive right to the shares issued from the conversion (C. com. Art. L 225-132) — the conversion cannot be held up by a separate pre-emptive exercise.

The conversion is recorded in the share register and the cap table; where a whole class disappears, the bylaws are amended accordingly and the registration update filed.

Redeeming preferred shares in a French SAS

Redemption — the company buys back preferred shares from their holders — runs under two distinct regimes (C. com. Art. L 228-12):

The ordinary-law regime, applicable where the bylaws are silent: the redemption follows the general share-buyback rules (C. com. Arts. L 225-204 to L 225-214), typically as a capital reduction not motivated by losses, with the creditors' right to object within the statutory window after the registry filing.

The bylaws-organised regime — preference shares stipulated redeemable in the bylaws before their subscription. For shares issued since 23 May 2019, the bylaws decide whose initiative triggers the redemption: the company's alone, the holder's alone, or both jointly, on the rules, conditions and timelines the bylaws set (C. com. Art. L 228-12, III) — this is where the investor's put or the company's call is built. The statutory guardrails: the redemption can only be paid out of distributable sums; the company must hold reserves at least equal to the par value of the redeemed preference shares; the company cannot end up holding more than 10 % of its own shares or of the class; the redeemed shares carry no dividend, vote, or pre-emptive right while held; and the operation must respect equality between shareholders in the same situation. Where the bylaws did not fix the redemption conditions, the president's report must state the conditions, the justification and calculation of the proposed price, and the impact on shareholders and holders of securities giving access to capital (C. com. Art. R 228-19). For bylaws-stipulated redemptions, the president also draws up a redemption notice held at the registered office and filed at the registry at least fifteen days before the operation (C. com. Art. R 228-22-1).

The redeemed shares are cancelled and the capital structure updated. The price can be par value, the issue price, a defined formula, or an expert valuation under Art. 1843-4 of the Civil Code.

Tax treatment of the redemption depends on how the proceeds are characterised in the holder's hands; the analysis runs case by case with the holder's tax adviser.

Preferred shares in a French SAS at fundraising and at exit

At a fundraise, preferred shares are the standard equity instrument the lead investor receives. The Series A preferred class is created at the round, the lead subscribes for it at the agreed price, and the rights attached to the class are described in the bylaws and reinforced in a pacte d'associés.

At a follow-on round, a new class is typically created — Series B preferred — with rights that may stack on top of the Series A or rank in parallel. The bylaws describe the seniority of the classes (which ranks before which on liquidation preference, on priority dividend, on conversion adjustment).

At exit, the preferred share rights drive the waterfall calculation. Liquidation preferences are paid first to the most senior class, then to junior classes, then to the ordinary holders (where there is residue). The conversion rights and anti-dilution mechanics interact with the waterfall — preferred holders convert if the converted-as-ordinary outcome beats the liquidation-preference outcome, and the bylaws should make the conversion mechanics clear so the comparison can be run cleanly at exit.

A specific point applies on the transformation of the SAS into an SA for an IPO. Preferred shares in an SAS can carry rights that the SA's more rigid regime does not allow. On transformation, the preferred shares of the SAS are typically converted into SA-compatible preferred shares or into ordinary shares with a parallel mechanism that replicates the original rights as far as the SA regime permits.

A specific point applies on a merger involving the SAS. Where the SAS is absorbed, the preference shares are exchanged for shares of the absorbing company carrying equivalent special rights, or under a specific exchange ratio that accounts for the rights given up (C. com. Art. L 228-17). The class-consultation mechanism the bylaws organise is where the preferred holders weigh in on the exchange.

Two more interactions worth flagging. Where the company has securities giving access to capital outstanding (BSA, convertibles), creating preference shares that modify the profit-distribution rules needs the authorisation route those instruments impose. And in a variable-capital SAS, preference shares can be issued within the authorised range without a collective decision where the bylaws have provided for the class and the investor category — with the ANSA recommending a commissaire aux avantages particuliers at the bylaws stage.

What are you building with preference shares? Check your design path

Pick the goal closest to yours and see the class architecture it calls for — and the point to settle before drafting the bylaws.

Frequently asked questions about preferred shares in 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 preferred-share architecture for a French SAS depends on the cap table, the investor profile, and the company's planned trajectory. Always seek qualified legal advice before issuing or modifying preferred shares in a French company.