Voting Rights in a French SARL

Voting rights in a société à responsabilité limitée (SARL) determine how partners participate in the collective decisions of the company. These rules are primarily governed by articles L. 223-27 and L. 223-28 of the Code de commerce and by articles 1844 and following of the Code civil. The objective of this regime is to ensure that each partner can participate in decisions in proportion to the number of shares held, while maintaining legal equality among partners and protecting against abuses in the exercise of voting power.

1. Principle of Equality of Partners

Each partner of an SARL has the right to take part in collective decisions and possesses a number of votes equal to the number of shares owned. Any clause that derogates from this principle is void. The articles of association cannot establish plural voting rights or restrict the right to vote by imposing a minimum number of shares.

Voting rights are attached to ownership of the shares and are inseparable from them. They cannot be transferred separately or assigned by permanent mandate.

Partners who make contributions in industry are entitled to participate in collective decisions in the same way as partners contributing in cash or kind. However, they cannot take part in deliberations that require ownership of a certain proportion of the share capital, such as the right to request a management audit.

When a regulated agreement involving a partner is submitted to a vote, that partner must abstain and cannot participate in the decision.

Shares that are pledged or seized remain under the voting control of the partner who granted the pledge or who is subject to the seizure until the forced sale of those shares. The beneficiary of the pledge or the creditor of the seizure does not acquire voting rights.

2. Exclusive and Indivisible Character of Voting Rights

The voting right is personal to the partner. It can be exercised by the partner directly or, in certain cases, by proxy, but it cannot be separated from the ownership of the shares or transferred independently. Creditors, sequestrators, or any other persons who are not partners cannot exercise this right.

The indivisible nature of the voting right means that co-owners of a single share cannot each exercise a separate portion of it. This situation arises particularly in the case of undivided ownership, usufruct, or when the share is held by spouses or minors.

3. Undivided Ownership

When shares are held in undivided ownership, for example following an inheritance, the co-owners must be represented by a single proxy who exercises the voting right on their behalf. If they cannot agree on a representative, the most diligent co-owner may request the appointment of a proxy by order of the president of the commercial court.

The appointment of this proxy does not prevent the co-owners from attending the meeting, but only the proxy may vote.

Co-owners holding at least two-thirds of the undivided shares may grant a general administrative mandate to one of them or to a third party. This mandate covers acts of administration but not acts of disposition. The mandate allows the proxy to vote on ordinary decisions but not on extraordinary ones.

Any of the co-owners may contest the appointment of a proxy. The courts have confirmed that any partner, even if not a co-owner, has standing to challenge the validity of the representation of another partner when that representation may affect the validity of collective decisions.

If a co-owner acts at a meeting without written authorization, the courts examine whether the actions taken fall within the framework of a tacit administrative mandate. This depends on the agenda and the nature of the resolutions adopted.

4. Usufruct and Bare Ownership

When shares are subject to usufruct, the voting rights are divided between the usufructuary and the bare owner. In principle, the usufructuary votes on resolutions concerning the allocation of profits, while the bare owner votes on other matters. However, both may agree that the voting right be exercised by the usufructuary for other decisions.

The articles of association may confirm this arrangement but cannot deprive the usufructuary of the right to vote on matters relating to profit distribution. Any clause that eliminates the usufructuary’s right to vote on this subject is void.

The usufructuary and the bare owner must both be convened to meetings. Even when the articles give the usufructuary the right to vote on all decisions, the bare owner retains the right to be informed and to attend deliberations.

A clause giving the usufructuary the exclusive right to vote in both ordinary and extraordinary decisions is valid if it also provides that the bare owner is always convened to the meetings.

The usufructuary cannot be deprived of the dividend, which is the natural fruit of the share. The bare owner remains the holder of the ownership rights but does not benefit from profits except in cases where the usufruct is extinguished.

5. Leased Shares

When the company has opted for taxation under corporate income tax and leases of shares are permitted, voting rights are divided by law between the lessor and the lessee.

The lessor votes on resolutions amending the articles of association or changing the company’s nationality. The lessee votes on all other resolutions. For the purposes of other rights, such as information, the lessor is treated as the bare owner and the lessee as the usufructuary

6. Spouses as Partners

In marriages governed by the separation of property regime, the spouse who owns the shares is the partner and exercises the voting rights. When the shares are owned jointly, the rules of undivided ownership apply.

In marriages under a community of property regime, partner status belongs to the spouse who made the contribution or acquisition. However, if the shares were acquired with community funds, the other spouse may become a partner for half the shares by notifying the company of the intention to be personally recognized as a partner. Without such notification, only the contributing spouse is a partner and exercises the voting rights. The value of the shares, not the shares themselves, forms part of the community property.

The surviving spouse may receive ownership or usufruct rights over the shares depending on the applicable inheritance rules. If the spouse receives one-quarter ownership of the shares, he or she exercises the voting rights corresponding to that ownership. If the spouse receives usufruct over all the shares, he or she votes on decisions concerning profits as usufructuary.

7. Minors and Protected Adults

The exercise of the voting right is an act of administration. For minors, the parents or the parent exercising parental authority vote without requiring authorization from the guardianship judge.

Certain decisions, however, may qualify as acts of disposition—for example, approving a merger, amending the articles of association, or increasing capital. Even in such cases, the guardian’s prior authorization is generally not required, as these acts are not included in the list of acts requiring judicial authorization under article 387-1 of the Civil Code.

For adults under curatorship, the person votes with the assistance of the curator. For those under tutorship, the guardian represents the person and must seek directions from the family council or the guardianship judge for acts that significantly alter the structure or obligations of the company.

Ordinary decisions, such as approval of management accounts or routine administrative resolutions, can be voted on without special authorization.

8. Exercise of Voting Rights

Voting rights in an SARL may be exercised personally or through representation. Postal voting is not provided for by law, but partners may vote by written consultation or, if the articles allow, by videoconference or teleconference.

When a partner cannot attend, he or she may appoint a proxy, subject to the limits defined by law.

9. Representation and Proxies

A partner may be represented by a spouse, except where the company consists only of the two spouses. Unless the SARL has only two partners, a partner may also be represented by another partner. Representation by a third party is possible only if the articles authorize it.

A partner cannot split the voting right by giving a proxy for part of the shares while voting personally for the rest. Any clause allowing such division is void.

If the SARL has only two partners, one cannot represent the other at meetings. This rule prevents a single person from controlling both votes.

The proxy granted to a representative applies to a single meeting but remains valid for subsequent meetings convened with the same agenda. It may also cover two meetings held on the same day or within seven days of each other.

Corporate partners are represented by their legal representatives, such as the CEO of an SA, the president of an SAS, or the manager of another SARL. The legal representative may delegate this power to another natural person.

Only partners have standing to challenge the validity of the powers of representation exercised at meetings. Third parties cannot contest these mandates.

10. Freedom and Non-Transferability of Voting Rights

The voting right is a personal and discretionary prerogative of the partner. Any clause or arrangement that permanently restricts the free exercise of the vote is void. Partners cannot validly commit themselves to always voting in a certain way, nor can they renounce their voting rights except in cases provided by law.

The voting right is non-transferable. It cannot be sold, assigned, or granted separately from ownership of the shares. A permanent power of attorney granted to a former shareholder to continue voting after a sale of shares is null.

However, if the vote is free, it must not be exercised abusively. Abuse occurs when a majority uses its voting power contrary to the interest of the company and in a way that prejudices minority partners. Likewise, a minority may commit abuse by blocking essential decisions to the detriment of the company’s proper functioning.

11. Legal Effects of Voting Irregularities

Resolutions adopted in violation of voting rules may be annulled by the court if the irregularity affects the collective decision. For example, failure to convene all persons entitled to vote, breach of representation limits, or violation of the division between usufructuary and bare owner votes can result in annulment.

The burden of proof lies with the partner who challenges the deliberation. Nullity is subject to a three-year limitation period from the date of the contested decision.

If all partners were present or represented and participated in the vote without objection, minor procedural irregularities generally cannot lead to annulment.

12. Practical Application

In practice, SARL voting rules are applied through the following steps:

1. Identification of partners entitled to vote as of the date of the meeting.

2. Verification of ownership situations: full ownership, usufruct, pledge, lease, or undivided ownership.

3. Verification of proxies and representation mandates.

4. Recording of votes and abstentions in the minutes.

5. Preservation of minutes in the company’s register for evidence purposes.

Managers must ensure strict compliance with these rules before, during, and after meetings to avoid disputes.

13. Conclusion

The voting right in a French SARL is a central element of corporate life. It expresses both the financial and political rights of the partners. French law ensures equality among partners and prohibits any distortion of that equality through clauses creating multiple voting rights, minimum thresholds, or permanent mandates.

The law also provides detailed rules for complex situations such as undivided ownership, usufruct, leased shares, family property regimes, and protective measures for minors or adults under guardianship. Representation and delegation are strictly supervised to prevent any concentration of power or misuse of mandates.

Managers and partners must exercise these rights within the limits of law and good faith. Any abuse, whether by majority or minority, may give rise to legal action and annulment of decisions.

Abuse of majority

Abuse of majority occurs when the partners holding most of the votes adopt a decision contrary to the interests of the company and intended solely to favor themselves to the detriment of the minority. The courts assess this situation through two cumulative criteria: the decision must run counter to the company’s interest, and it must have been adopted with the sole purpose of benefiting the majority at the expense of other partners. Typical examples include the unjustified distribution of excessive remuneration to majority managers or the refusal to distribute dividends when the company’s financial situation allows it. In such cases, the injured partners may bring an action for annulment of the decision or seek damages.

Abuse of Minority

Abuse of minority arises when one or more minority partners block a decision essential to the company’s operation without legitimate reason, thereby acting against the company’s interest. The courts have recognized this abuse particularly when the minority refuses to approve a necessary capital increase, merger, or statutory amendment solely to exert pressure or preserve personal advantages. The existence of abuse requires proof that the minority’s opposition was motivated by purely personal interests and that it paralyzed the company’s normal functioning. Remedies may include court-ordered substitution of consent or damages to the company and other partners.

The regime of voting rights thus combines simplicity in its principle—one share, one vote—with a high degree of precision in its application, ensuring that decisions in an SARL are adopted in a legally valid, balanced, and transparent manner.