Transfer of Shares and Approval Procedures in a French SARL: Legal Framework, Process, and Practical Implications

1. Introduction

The Société à responsabilité limitée (SARL) is a private, closely held form of company in French law. Its structure is deliberately designed to restrict the entry of new partners and preserve the personal nature of relationships among existing associates.
One of the most important consequences of this “closed” character is that share transfers to third parties require prior approval (agrément) from the partners.

This approval mechanism aims to ensure that outsiders cannot freely acquire an interest in the company without the consent of those already invested. The rule reflects both the contractual nature of the SARL and the desire to maintain a cohesive ownership base.

This article examines the full framework of the agrément procedure, including the legal rules for share transfers, exceptions, possible statutory modifications, and the procedural formalities that govern its implementation.

2. The Principle of Approval (Agrément) in a SARL

2.1 Approval for Transfers to Third Parties

Under Article L.223-14 of the French Commercial Code, the transfer of shares in a SARL to a third party outside the company requires the consent of a majority of partners representing at least half of the company’s share capital.

This statutory double majority ensures that decisions are not taken by a minority coalition and reflects the collective nature of partner consent. However, the company’s articles of association (statuts) may require an even higher majority, such as two-thirds or three-quarters.

If the approval is refused, the company or its partners must buy the shares from the transferor, or the company may decide to reduce its share capital accordingly.

The legal rule has been consistently upheld as compatible with the principles of legal equality and legal certainty, emphasizing its role as a legitimate mechanism of control rather than a discriminatory or arbitrary restriction.

2.2 Practical Impact of the Legal Majority Rule

Consider the following illustration: a SARL has four partners — A (51 shares), B (30), C (15), and D (4).

If D seeks to transfer his shares and votes in favor of approval along with B and C, while A opposes it, the approval fails. Although a majority of partners voted for it (three out of four), the votes do not represent at least half of the total shares.
Conversely, if A, C, and D vote in favor while B refuses, approval is granted because both conditions — the majority in number and in shareholding — are met.

This demonstrates that the rule is both collective and quantitative: partners must be numerically and proportionally in favor.

3. Exceptions to the Approval Requirement

3.1 Free Transfers

Certain categories of share transfers are free from approval unless the company’s articles impose stricter rules. These include:

• Transfers between existing partners;

• Transfers between spouses;

• Transfers between ascendants and descendants.

These exceptions reflect the legislator’s intent to allow flexibility within family and internal business relationships, while preserving the SARL’s private nature.

However, in some cases, these free transfers can have undesirable effects. The entry of a spouse, parent, or child might alter the originally intended control of the company or disturb internal harmony. For this reason, many SARLs include specific clauses requiring approval even for transfers within a family circle, within the limits of the law.

3.2 Non-Transferable Shares and Pre-emption Clauses

Certain shares, particularly those representing industry contributions (personal work or skill), are inherently non-transferable, as they are inseparable from the contributor’s personal involvement.

In addition, many SARLs insert pre-emption clauses giving existing partners a priority right to purchase shares before they can be offered to outsiders. Such clauses are valid and enforceable, provided they do not completely prohibit transferability.

French courts have ruled that violating a pre-emption clause does not automatically invalidate a transfer but may give rise to damages. Thus, while the mechanism reinforces control, it must be implemented with caution and legal precision.

4. Statutory Modifications to Approval Rules

4.1 Enhanced Majority Requirements

The statutory default rule — majority of partners representing half the shares — is not mandatory. The partners are free to adopt a stricter majority in their articles.

For example, the company may require approval by partners representing two-thirds or three-quarters of the capital, or even a qualified numerical majority. However, the law prohibits clauses demanding unanimous consent, which would effectively freeze the shareholding structure and prevent any transfer.

Older SARLs, formed before the 2004 reform, sometimes still contain outdated clauses requiring a three-quarters majority. For legal certainty, such clauses should be revised to explicitly reflect the current rules or a new chosen threshold.

4.2 Approval Between Partners

Transfers among existing partners are generally free, but the articles may decide otherwise. When approval is required even for intra-partner transfers, the same procedure as for transfers to third parties applies, though the required majority or deadlines may be shortened.

Failure to comply with a valid majority clause can lead to nullification of both the transfer resolution and subsequent corporate acts based on it.

Furthermore, if all shares become concentrated in the hands of a single partner after a transfer, the company automatically becomes a single-member SARL (EURL), subject to specific tax and governance rules.

4.3 Transfers Between Spouses, Ascendants, and Descendants

By default, transfers to spouses, ascendants, or descendants are free, but the articles may require approval. Such a clause cannot be stricter than the rule applicable to transfers to third parties.

For instance, if the company’s statutes require a three-quarters majority for external transfers, that same threshold — and no higher — may apply to family transfers.

If the company refuses approval, it must acquire or arrange the acquisition of the shares, or, with the transferor’s consent, reduce the share capital. If no decision is made within the statutory timeframe, approval is deemed granted.

Approval clauses also apply only to persons who are not already partners. Thus, an existing partner’s spouse who already holds shares does not require a new approval for additional acquisitions.

4.4 Special Cases: Deceased Partners and Community Property

Upon the death of a partner, the transfer of shares to heirs is governed by the articles. The company may either continue with the heirs or with the surviving partners only.

In the context of community property, a spouse who contributed joint assets to acquire shares may become a partner by simply notifying the company of their intention to do so.

These mechanisms ensure a balance between personal and patrimonial continuity within family-owned SARLs.

5. Other Operations Requiring Approval

5.1 Capital Increases and Entry of New Partners

When new partners are introduced during a capital increase — whether through a cash contribution or a contribution in kind — approval is generally required under the same conditions as a share transfer.

Some scholars have argued that since a capital increase creates new shares rather than transferring existing ones, approval should not apply. However, in practice, most statutes explicitly extend the approval requirement to any operation that results in the entry of a new partner, including capital increases.

5.2 Mergers and Demergers

In cases of merger or demerger involving a SARL, the approval clause does not automatically apply. French courts have consistently held that a merger-absorption or demerger transfer of assets does not constitute a “share transfer” within the meaning of the law.

The receiving company merely acquires assets through universal transmission, not through an individual transfer between living persons. Consequently, the agrément procedure does not need to be followed unless expressly stated in the articles.

5.3 Donations and Similar Transactions

Donations of SARL shares are treated in the same way as transfers for the purpose of approval clauses. Unless the donee is a partner, spouse, or direct relative, prior approval is required.

The same applies to civil partnerships (PACS), where the partner is not automatically exempted from the approval requirement.

Fraudulent transactions — for instance, a chain of transfers through intermediaries intended to bypass the approval procedure — may be annulled if the intent to evade partner control is established.

5.4 Transfers in Insolvency or Change of Control

Even in insolvency or judicial liquidation, the approval rules remain in force unless the law expressly overrides them. Thus, any transfer of shares during a judicial restructuring or sale plan must comply with Article L.223-14.

Similarly, a change in control of a corporate partner (where a company holding SARL shares itself changes ownership) may be treated as a transfer requiring approval, depending on the extent of control and the specific wording of the articles.

5.5 Portage Agreements

A portage agreement involves a temporary acquisition of shares by a “holder” (porteur) on behalf of another party who will repurchase them later.
When such arrangements involve SARL shares, the holder must first be approved by the partners. Later, the ultimate buyer will also require approval before the repurchase occurs.

Though rare, this mechanism may be used for business transfers or succession planning, particularly when an entrepreneur arranges financing through a bank acting as an interim holder.

6. The Approval Procedure (Agrément Process)

6.1 Notification of the Proposed Transfer

The approval process is strictly formal. The proposed transfer must be notified to both the company and each partner, either by judicial writ (acte extrajudiciaire) or by registered mail with acknowledgment of receipt.

Upon receiving the notification, the manager has eight days to convene a general meeting or, if allowed by the statutes, to initiate a written consultation. The company must decide within three months from the latest notification. If no response is given, approval is deemed granted.

Failure to observe these procedural requirements exposes the transfer to annulment. French case law is consistent: an unapproved transfer to a third party is null and void, and neither tacit consent nor partial participation of partners can cure the defect.

6.2 The Decision and its Effects

Approval is usually granted by an extraordinary resolution of the partners, taken at the majority in number and capital as prescribed by law or the articles. The transferor may participate in the vote but cannot oppose the approval of their proposed transferee.

Importantly, the resolution granting approval is an authorization only; it does not itself constitute the transfer. The parties must still execute a proper deed of sale, which then must be recorded and published in accordance with company law requirements.

6.3 Unanimous Deed and Simplified Approaches

In practice, some practitioners prefer to have all partners intervene in the transfer deed itself. This approach effectively confirms their consent, making a separate notification unnecessary.
When all partners sign the act, the approval is deemed explicitly given, and the deed simultaneously records the transfer and the amendment of the company’s articles.

However, even under this method, notification and registration requirements must still be observed to trigger statutory deadlines and protect third parties.

6.4 Legal Consequences and Sanctions

Failure to comply with the approval procedure renders the transfer void. The nullity can be invoked by the company or by any partner whose consent was required, but not by the transferee or the transferor themselves.

The right to bring such an action expires three years after the filing of the transfer deed with the commercial registry.

Additionally, any subsequent corporate decisions based on an invalid transfer (e.g., voting by an unauthorized partner) are themselves subject to annulment.

7. Refusal of Approval and the Consequences for Share Transfers in a French SARL

In a French Société à responsabilité limitée (SARL), the approval procedure (agrément) ensures that any transfer of shares to outsiders preserves the company’s stability and the trust among existing partners. Yet, this control mechanism inevitably raises a critical question: what happens when the partners or the company refuse to grant approval to a proposed transferee?

French corporate law provides a structured process designed to protect both the transferring partner and the remaining partners. It ensures that refusal of approval cannot be used arbitrarily to prevent legitimate transactions or to unfairly deprive a partner of liquidity. This framework balances the company’s autonomy with the economic rights of each associate.

7.1 Refusal of Approval: Legal Notification and Its Effects

When the partners decide to refuse approval of a proposed transfer, that refusal must be formally notified to the transferring partner by registered letter with acknowledgment of receipt.

This step is not a mere administrative formality — it has direct legal consequences. The notification triggers an obligation on the part of the company or the other partners to purchase or arrange the purchase of the shares that were the subject of the rejected transfer. In essence, the partner who has been denied the ability to sell to a third party cannot be forced to remain indefinitely locked in the company.

However, this right arises only if the partner has held the shares for at least two years, except in specific family-related cases. A shorter period of ownership does not entitle the partner to compel the buyback process, except where the shares were acquired through inheritance, a community property settlement, or a donation between spouses, ascendants, or descendants.

The objective of this rule is to prevent speculative or short-term transfers while safeguarding the legitimate right of long-term partners to recover their investment if approval is withheld.

7.2 The Obligation to Purchase and the Role of the Company

Once the refusal of approval has been notified, the company and its partners are placed under a three-month obligation to either buy or arrange the acquisition of the shares concerned. This is a firm deadline.

The purchase may be executed directly by one or several partners, by a third party approved by the company, or by the company itself if it opts to redeem and cancel the shares. If more time is required, the manager may apply to the commercial court for an extension, but such extensions are limited and cannot exceed six additional months in total.

The transaction must cover the entire number of shares proposed for transfer — partial acquisitions are not permitted. This ensures that the transferring partner can fully exit the company without being left with an unmarketable remainder of shares.

If the partner has not yet held the shares for two years (outside of family succession or donation cases), they cannot compel the company or the partners to buy them back, and the refusal of approval remains definitive.

7.3 The Price Determination: Appointment of an Independent Expert

A recurring source of dispute in these cases is the valuation of the shares. French law avoids arbitrary or unfair pricing by referring to the mechanism of independent expert valuation.

If the parties cannot agree on the price, an expert is appointed — either jointly by the parties or, failing agreement, by order of the President of the Commercial Court through a simplified judicial procedure. The expert’s appointment is final and cannot be appealed.

This expert acts as an independent technical authority. They must not be influenced or dependent on either party, and their mission is to determine the fair value of the shares at the relevant date, considering the company’s financial position and statutory valuation criteria.

Once the expert’s valuation is delivered, it is binding on both parties. The sale is deemed complete on the basis of that valuation, without further negotiation. French case law consistently recognizes that when the parties invoke the expert valuation mechanism, the expert’s decision becomes the “law of the parties.”

The costs of the expert assessment are borne by the company, not the transferring partner. This rule ensures that the process of determining a fair price remains accessible and neutral.

7.4 The Expert’s Mission and Boundaries

The expert’s mission extends beyond a simple arithmetic calculation. It requires a full professional assessment of the company’s actual and potential value, applying the methods specified in the company’s articles or in any binding shareholder agreements.

The expert’s responsibility ends only when the value of the shares has been definitively determined. In some cases, the court may authorize a provisional payment to the transferring partner pending final valuation.

The expert is not required to disclose the names or opinions of the persons they consulted during their work and is not bound by the usual principle of adversarial procedure. Their role is independent, and they are empowered to act autonomously in order to determine an objective market value.

If the valuation is found to contain a gross error, courts cannot substitute their own valuation but may annul the expert’s findings and appoint a new expert. Gross error may include, for example, the use of the wrong valuation date or a failure to apply the methods prescribed by the company’s statutes.

In general, the date of valuation coincides with the date closest to the planned transfer or exclusion, unless the parties have agreed otherwise. This ensures that the assessed value accurately reflects the company’s most recent financial reality.

7.5 The Option of Capital Reduction as an Alternative

Instead of arranging the purchase of the shares by partners or third parties, the company may, with the consent of the transferring partner, choose to reduce its share capital by the nominal value of the shares concerned.

This capital reduction is a distinct operation but serves the same objective: allowing the partner to exit the company and receive compensation for their shares. The price must again be determined according to the independent expert valuation process, and payment can be staggered over a maximum of two years if the court authorizes it.

This alternative provides flexibility in cases where the other partners cannot or do not wish to buy the shares themselves. It allows the company to manage its ownership structure and liquidity constraints without violating the rights of the departing partner.

Creditors, however, retain the right to challenge a reduction carried out in fraud of their rights under ordinary civil law. If the reduction diminishes the company’s assets in a way that jeopardizes creditor interests, legal recourse such as the action paulienne may be available.

7.6 The Consequences of Silence: When the Company Takes No Action

If, after three months following the refusal of approval, no purchase or capital reduction has been completed, the transferring partner regains full freedom to proceed with the originally proposed transfer.

In such cases, the law restores the partner’s right to sell their shares to the third party of their choice. This mechanism prevents the company or the remaining partners from blocking transactions indefinitely through inertia or delay.

However, this right to freely proceed is available only to partners who have held their shares for at least two years — except where the shares were inherited or received through family donation or marital property liquidation.

Once the period has expired without any effective buyback or capital reduction, the refusal loses its legal effect. The partner may finalize the sale without further approval, and the company cannot retroactively oppose the transaction.

If the company later attempts to repurchase the shares after the deadline, it has no right to compel the transferor to sell under the expired procedure. The law strictly limits this timeframe to ensure legal certainty and protect the partner’s exit rights.

7.7 The Importance of Timely Action and Procedural Discipline

The entire approval and refusal mechanism operates under strict deadlines and formalities.

• The refusal must be properly notified;

• The buyback or capital reduction must occur within the three-month period;

• The valuation process must be initiated without delay.

Failure to comply with these obligations exposes the company and its partners to litigation and potential liability for damages.

Conversely, for the transferring partner, premature or irregular notification may render the request for approval invalid, delaying or voiding the entire process.

Thus, both sides must exercise procedural discipline. The manager of the SARL plays a central role in monitoring timelines, initiating court procedures for valuation or extensions when necessary, and ensuring that all communications are properly documented.

8. Strategic Considerations for Investors and Practitioners

For investors, entrepreneurs, and cross-border shareholders, the agrément procedure is both a protection and a constraint. It safeguards the stability of ownership and ensures compatibility among partners, but it can also delay transactions or create uncertainty if not managed carefully.

Corporate counsel should therefore ensure that:

• The company’s articles of association clearly define the applicable majority and time limits;

• Notification methods strictly follow the statutory form;

• Family transfers and donations are reviewed in advance for approval implications;

• Exit strategies (especially for foreign investors) anticipate potential delays linked to approval procedures.

In well-drafted SARL statutes, these issues are foreseen and structured to balance flexibility with control.

The refusal of approval mechanism is not merely a safeguard — it is also a strategic tool. Partners can use it to protect the company’s identity, prevent hostile takeovers, or maintain a balance of power among shareholders.

However, such discretion must be exercised in good faith. A refusal that is clearly abusive or motivated by personal hostility could expose the company or its partners to liability.

For the transferring partner, preparation is key. Before seeking approval, it is advisable to:

• Verify the duration of shareholding and the eligibility to compel a buyback;

• Anticipate valuation disputes by proposing a recognized independent expert;

• Keep clear written records of notifications, deadlines, and responses.

For investors or foreign shareholders, the procedural rigidity of the French SARL may seem daunting, but it is precisely what gives this structure its reliability. The rules ensure transparency, equity, and predictability in shareholder relations.

9. Conclusion

The approval procedure (agrément) for share transfers in a French SARL is one of the cornerstones of the company’s legal regime. It ensures that ownership remains consistent with the partners’ intentions and preserves the personal, trust-based nature of the structure.

The refusal of approval (refus d’agrément) is a fundamental component of French corporate law’s balance between individual rights and collective control. It prevents unwanted outsiders from entering the company while guaranteeing that existing partners are not trapped by the company’s internal decisions.

While the rules may appear formalistic, they are designed to protect both partners and the company from unwanted or destabilizing transfers. Every step — from notification to decision — must be handled with precision.

Through mechanisms such as mandatory buyback, expert valuation, and capital reduction, French law provides a comprehensive and equitable system for resolving conflicts arising from denied transfers.

For foreign investors and domestic entrepreneurs alike, understanding and complying with these approval procedures is essential before entering or exiting a French SARL.