When a SARL Refuses to Approve Your Share Sale

Being refused approval to sell your SARL shares feels like a dead end - but French law is built so that a refused shareholder is not trapped. When the other shareholders block your buyer, they take on an obligation of their own: within three months, they must buy your shares, arrange for someone else to buy them, or have the company buy them and reduce its capital - at a price fixed, if you cannot agree it, by an independent expert under Article 1843-4 of the Civil Code. If none of that happens in time, you become free to complete your original sale after all. This guide sets out what happens when a SARL refuses your agrément: the buy-out obligation, the expert who fixes the price, the capital-reduction route, the seller's right to withdraw, and the fallback where the company does nothing at all.

What a refusal of agrément triggers

A refusal is not the end of the story - it is the start of a buy-out obligation. The shareholders' decision refusing approval must be notified to the selling shareholder by registered letter with acknowledgement of receipt. From that refusal, provided the seller qualifies, the law lets them force the company or the other shareholders to buy, or to arrange the buying of, the shares. The block on your chosen buyer converts into a duty on the others to give you an exit. That reframing is the single most important thing to grasp: a refusal shifts the burden onto the shareholders, not onto you.

The seller's right to force a buy-out depends on a holding condition. As a rule, the seller must have held the shares for at least two years. That two-year condition falls away where the shares came to the seller by succession, the liquidation of a matrimonial community, or a gift from a spouse, an ascendant or a descendant - in those cases the seller can demand the buy-out whatever the holding period. The logic is that someone who inherited or was given shares should not be locked in merely because they have not yet held them two years.

One point often misunderstood: a failure to follow the regulatory notification procedure to the letter is not, by itself, a ground to annul the transfer. The nullity sanction attaches to a transfer carried out without approval or despite a refusal - not to a procedural slip in how the refusal itself was notified. The substance that matters is the buy-out obligation the refusal sets running.

The three-month buy-out obligation

On a refusal, the other shareholders are obliged, within three months of the refusal, to acquire or arrange the acquisition of the shares at a price fixed under Article 1843-4 - unless the seller gives up the sale. The buy-out must cover all the shares whose transfer was notified; the shareholders cannot cherry-pick part of the block and leave the seller holding the rest.

The three-month period can be extended, but only by the court and only so far. On the manager's application, the president of the commercial court can prolong the three months, without the extension exceeding six months in total; it can be prorogued more than once within that six-month cap. The extension exists so a genuine buy-out can be organised - not so the company can run down the clock. A request to appoint the valuation expert made only days before the buy-out deadline expires can be treated as a delaying tactic aimed at an unlawful extension of a period already judicially prolonged.

The holding condition applies here too: a seller who has held the shares for less than two years cannot invoke the buy-out right, unless the shares came by succession, community liquidation or a family gift. So the first questions on any refusal are whether the seller qualifies to force a buy-out, and, if so, whether the three-month clock is running from a properly notified refusal.

The 1843-4 expert who fixes the price

Where the parties cannot agree the price, it is fixed by an expert under Article 1843-4 - the same mechanism used across French company law for valuing shares in a forced transfer. The Commercial Code expressly refers a refused SARL transfer to that article for fixing the buy-out price.

Appointing the expert

Failing agreement, the expert is designated either by the parties or, if they cannot agree, by the president of the commercial court ruling under an accelerated procedure - and that appointment decision is not open to appeal, even where the appointment is said to be irregular, nor to a further challenge in cassation. The expert must be genuinely independent and cannot be under the control of one of the parties. And once the shareholders have notified their intention to buy while asking for the price to be set by expert valuation - thereby submitting to the expert's estimate - the parties make the expert's decision their law, and the sale is complete on that basis.

The expert's mission

The expert is a technician charged with determining the value of the shares, and the assignment ends only when that value is fixed. Crucially, the expert must apply any valuation rules and methods laid down in the articles or in any agreement binding the parties - a well-drafted valuation clause governs the expert rather than being brushed aside. The expert can grant the departing shareholder an advance on the price. The cost of the expertise falls on the company, not the seller. The expert is not bound by the adversarial principle and need not reveal the names or opinions of the people consulted.

The expert's valuation is hard to dislodge. It can only be set aside for a gross error - and where a gross error is found, the judge cannot substitute their own valuation. Valuing the shares at a date far from the date of repayment, rather than the closest date to it, or at a date other than the one the articles fix, can amount to such an error. Once the price is fixed, the sale is perfected on it; a later dispute cannot generally reopen the expert's figure, save where the price is determinable and falls to be revised under a warranty of liabilities.

The capital-reduction alternative

The other shareholders are not the only possible buyer. With the selling shareholder's consent, the company can decide - within the same three-month window - to reduce its capital by the nominal value of the seller's shares and buy them back at the price fixed under Article 1843-4. This lets the company itself absorb the exit where the other shareholders do not want to increase their own stakes.

The company can be given time to pay. On justification, the court (by a summary order of the president of the commercial court) can grant the company a payment delay that cannot exceed two years, and the sums due bear interest at the legal rate. So a capital-reduction buy-out does not have to be funded on the day - the seller may have to wait, with interest, where the court allows the company time.

A technical question hangs over the creditors' opposition right. An ordinary capital reduction not motivated by losses opens a window for creditors to object, and it is debated whether a reduction carried out to buy out a refused seller neutralises that objection right - the refusal-of-approval article says nothing about creditor opposition, which suggests a specific, self-contained procedure, though the point is contestable. In any event, creditors harmed by a reduction made in fraud of their rights keep their ordinary remedies, including the action to set aside a transaction that defrauds them.

For the seller, the capital-reduction route has one practical drawback to weigh: the potential wait for payment. Where the other shareholders buy directly, payment usually follows the sale; where the company reduces its capital, the court may grant it up to two years to pay, so the seller exits their shareholding but carries a claim on the company, earning legal interest, until the delay runs out. A seller choosing between pressing the shareholders to buy and consenting to a capital reduction should factor in not only the price but the timing of when they will receive it - a buy-out that pays now can be worth more than a marginally higher figure paid over two years.

The seller's right to give up the sale

The buy-out obligation runs "unless the seller gives up the sale" - so a refused seller can walk away and keep their shares rather than sell at the outcome the process produces. But there is a genuine uncertainty about when and how far that right to withdraw goes, and it is a live trap for a seller who dislikes the expert's price.

Unlike the equivalent rules for company shares (actions), the SARL text does not spell out whether the seller can withdraw at any time - in particular, whether a seller can keep their shares if the expert's price does not suit them. Interpretations diverge, and only a definitive court ruling will settle whether "giving up the sale" includes retracting after the valuation. Until then, the cautious course for a seller who wants to preserve their freedom is clear: refuse to vote in favour of the expert valuation, and expressly reserve a right to retract within a defined period. A seller who submits to the expertise without reservation may find they have made the expert's price their law and can no longer back out.

This matters because the whole point of forcing a buy-out is usually to get a fair price, not to be bound to whatever number emerges. Structuring the position at the outset - reserving the retraction right in writing - is what keeps the seller's options open if the valuation disappoints.

What happens if the company does nothing

The strongest card the refused seller holds is the consequence of inaction. If no buy-out and no capital reduction has happened by the end of the three-month period (as extended, up to six months), the seller becomes free to complete the transfer they originally planned - to the same buyer the shareholders refused. The block dissolves. The one condition is the familiar two-year holding requirement, which does not apply to shares acquired by succession, community liquidation between spouses, or a gift from a spouse, ascendant or descendant.

The three-month deadline is strict. The company's buy-back of a refused seller's shares must be completed before the mandatory three-month period expires; if it is not, the seller who regains the freedom to sell cannot then turn round and demand that the company buy the shares instead. And the seller regains their rights where the other shareholders have not committed to acquire the shares at the expert's price before the deadline they were given. In short: the shareholders must complete, or at least bindingly commit to, the buy-out inside the window - an intention that is never acted on is worth nothing.

This fallback is what gives the whole regime its balance. The shareholders can keep an unwanted buyer out - but only if they, or the company, are willing to buy the seller out at a fair price within three months. If they want neither the buyer nor the buy-out, the law resolves the deadlock in the seller's favour, and the original sale proceeds. It is this even-handed design that stops an approval clause from becoming a one-way trap on a shareholder who wants to leave.

Promises to sell and the refusal risk

Because a refusal can upend a planned sale, how the deal is documented before the agrément matters. A seller can bind themselves to a buyer through a unilateral promise to sell, with an option period after which the promise lapses. For any promise to be valid there must be agreement on the shares and on the price: the price must be determined or determinable, and a promise that fixes the calculation method for only part of the shares is not valid. Exchanges of documents do not amount to agreement on the thing and the price.

The interaction with valuation is worth noting. Where the seller has promised to sell at a determined price, expert valuation is excluded - the agreed price governs. Where reciprocal unilateral promises to buy and to sell have the same object and identical terms, they can together form a binding bilateral promise amounting to a completed sale. And affectio societatis - the intention to associate - is not a condition for forming a share-transfer deed, so its absence does not prevent a binding promise of sale.

Two cautions from the case law. A promise with no term must be exercised within a reasonable time, judged by the parties' common intention - an option exercised eleven years after the promise was held invalid. And realisation of a promise's conditions precedent does not stop the promisor challenging the promise for a derisory price: performing the conditions is not a start of performance of the promise itself, so its validity can still be examined. For a shareholder anticipating a possible refusal, a well-drafted promise - with a real price, a defined term, and clear conditions - is the difference between an orderly exit and a dispute.

Shareholder agreements can pre-empt the whole problem. A shareholders' agreement (pacte d'associés) can provide that, on a manager's removal for cause or resignation, they must transfer their shares to the majority shareholder - a mechanism upheld for joint-stock companies and transposable to a SARL. Where the parties have set the terms of an exit in advance, the refusal machinery may never be reached, because the transfer route and often the price are already agreed. A promisor who has bound themselves under conditions precedent and then obstructs their realisation must pay any penalty the promise provides, and a condition is treated as fulfilled where it fails only because of the beneficiary's own unfair conduct. The lesson for a shareholder who fears being blocked is to address the exit in the articles or a pact at the outset, rather than relying on the statutory buy-out after a refusal has already soured relations.

What makes a refusal of agrément valid

Before a seller responds to a refusal, it is worth checking the refusal itself was validly made - because the whole buy-out timetable runs from a proper refusal. Approval, or its refusal, is a decision of the shareholders taken by the double majority the law requires: a majority of the shareholders representing at least half the shares, unless the articles set a stronger majority. A decision that does not reach that double majority cannot count as either an approval or a valid refusal.

The seller's own position in the vote is specific. The selling shareholder can vote and is counted in the double majority, but - being bound by a warranty obligation towards the buyer they proposed - cannot vote against approving that buyer. The refusal, once validly voted, must then be notified to the seller by registered letter with acknowledgement of receipt. That notification is what starts the three-month buy-out clock, so its date matters: a seller should keep the acknowledgement, because the deadline for the shareholders to complete their buy-out is measured from it.

A seller should also be clear about what a refusal does and does not do. It does not annul anything or strip the seller of their shares - the seller remains a full shareholder throughout the buy-out process, with all the rights that carries, until a buy-out completes or they give up the sale. And the refusal does not commit the shareholders to a price; it commits them to buy, with the price to be agreed or fixed by the expert. Understanding the refusal as the trigger for an obligation on the others, rather than a defeat, is the right frame for everything that follows.

The refused seller's step-by-step position

Putting the rules together, a refused seller who wants to leave should work through a clear sequence. First, confirm eligibility. Have you held the shares two years, or did they come by succession, community liquidation or a family gift? If neither, the forced buy-out is not open and the focus shifts to negotiation or waiting; if either, the buy-out right is live.

Second, fix the start of the clock. Identify the date of the validly notified refusal, because the three-month buy-out period - extendable by the court to a six-month maximum - runs from it, and the shareholders must complete or bindingly commit to the purchase inside that window. Third, deal with the price. If there is an agreed or clause-determined price, that governs and expert valuation is excluded. If not, and you cannot agree, the price goes to a 1843-4 expert - independent, applying any valuation rules in the articles, paid by the company, and challengeable only for a gross error such as valuing at the wrong date.

Fourth, protect your freedom to withdraw if you might want to keep the shares should the price disappoint: do not vote for the expertise, and reserve a written retraction right, because whether a SARL seller can retract after the valuation is unsettled. Fifth, watch the deadline. If the three-month period (as extended) passes with no completed buy-out and no capital reduction, you are free to complete your original sale to the refused buyer - a mere unacted intention to buy does not stop you. Working the sequence in order, with the dates documented, is what turns a refusal from a source of anxiety into a manageable, and usually winnable, process.

Frequently asked questions about a refused agrément

This article states general principles of French law as at its date of publication and is provided for information only. It does not constitute legal or tax advice and creates no lawyer-client relationship. Figures, rates and thresholds evolve; verify them against the texts in force before acting, and take advice on your specific situation.