Rights and Obligations of Shareholders in an SAS

The French Société par Actions Simplifiée (SAS) has become one of the most attractive legal vehicles for entrepreneurs. Its success comes from its flexible structure, which allows shareholders to tailor governance and financial arrangements to their specific needs.

But this flexibility does not mean a lack of rules. Shareholders in an SAS enjoy specific rights designed to ensure their participation and protection, while also carrying essential obligations to safeguard the company and its other stakeholders.

This article explores in detail the rights and duties of SAS shareholders, from information access to voting rights, profit-sharing, and liability, highlighting how the bylaws shape these relationships.

1. Information Rights of the SAS Shareholders: Access to Transparency

Unlike public limited companies (sociétés anonymes, or SA), the SAS is not subject to the same mandatory framework for general meetings. Article L. 227-1 of the Commercial Code specifies that the rules governing SA general meetings do not apply to SAS, unless the bylaws state otherwise.

This does not, however, mean that shareholders are excluded from the company’s life. On the contrary, shareholders must receive sufficient information to exercise their role effectively.

1.1 Fundamental Right to Information

Even without a general meeting, shareholders have a basic right to information. While the law is less prescriptive than for SA, the bylaws or company officers must ensure an adequate flow of information. Courts have reinforced this principle, holding that information must be sufficient for shareholders to make informed decisions (CA Limoges, 28 March 2012).

1.2 Typical Information Demanded

By analogy with SA rules, SAS shareholders may reasonably expect access to:

• The annual accounts and management report, before approval of the accounts.

• Information on planned collective decisions, so they can evaluate the implications before voting.

1.3 Enhanced Rights for Significant Shareholders

Shareholders holding at least 5% of the capital benefit from additional tools:

• They may submit written questions to the president twice per year on any situation threatening business continuity (Article L. 225-232 C. com.).

• They may request the appointment of a court-appointed expert to examine specific management operations (Article L. 225-231 C. com.).

In practice, the bylaws may also grant reinforced rights to certain groups, such as institutional investors or founding partners, ensuring they receive information tailored to their role.

2. Political Rights of the SAS Shareholders: Participation and Voting

Political rights in an SAS guarantee that shareholders are not merely passive investors but active participants in corporate life. These rights include both the ability to take part in collective decision-making processes and the fundamental right to vote, with their scope and modalities largely defined by the company’s bylaws.

2.1 Right to Participate in Decisions

A cornerstone of the SAS is that all shareholders must be able to take part in collective decisions. Whenever an issue is placed before shareholders, each must:

• Be informed of the consultation,

• Be formally convened (if a meeting is held), and

• Be given the opportunity to express a view.

The bylaws play a decisive role, since they define the mechanics of participation: how meetings are convened, how consultations are conducted, the quorum required, and the majority needed.

Flexibility is high. Consultations may be held in writing, by videoconference, or even by electronic platforms if shareholders agree.

2.2 Right to Vote

In principle, every shareholder has the right to vote. This right cannot be completely removed, except in limited cases provided by law (for example, treasury shares).

The bylawst may, however, adapt the voting structure:

• Weighting of votes (some shares carrying more than one vote).

• Multiple voting rights for certain categories.

• Reinforced quorum or supermajority requirements for particular decisions.

This contractual freedom enables governance to reflect the company’s needs. But care must be taken: it is not lawful to deprive a shareholder of any effective voice in collective decisions.

3. Legal Remedies: Enforcing the SAS Shareholders’s Rights and Obligations

The right to take legal action is a powerful tool for SAS shareholders. It serves two purposes: protecting individual rights and defending the corporate interest when directors fail to act.

3.1 Individual Protection

A shareholder may bring an individual claim if one of their personal rights is violated. Examples include:

• Failure to provide required information.

• Violation of voting rights.

• Irregular exclusion from the company.

• Undue interference with their shareholding.

By contrast, case law confirms that the mere loss of value of shares—caused by poor company management—is not a personal injury (Cass. com., 8 Oct. 2013; 26 Apr. 2017). This type of harm relates to the company as a whole, not the individual shareholder.

3.2 Actions Against Third Parties

Shareholders may also act against third parties, but only if they can prove personal harm distinct from the company’s harm. Examples include:

• An overvalued contribution that disproportionately dilutes their shareholding (Cass. com., 28 June 2005).

• A seller concealing key information affecting share value (Cass. 1st civ., 27 Sept. 2023).

3.3 Ut Singuli Action

As in other corporate forms, shareholders of an SAS may initiate a so-called ut singuli action: suing directors on behalf of the company if they commit mismanagement and the company does not act.

This mechanism ensures that directors remain accountable even if management bodies remain passive. It is a crucial safeguard of corporate governance integrity.

4. Financial Rights of the SAS Shareholders: Dividends, Liquidation, and Subscription

Beyond their participation in governance, shareholders of an SAS enjoy key financial rights tied to their investment. These include entitlement to dividends, the right to share in liquidation proceeds, and the preferential right to subscribe to new shares during capital increases. While the bylaws provide wide flexibility in shaping these rights, they remain subject to fundamental legal safeguards designed to protect fairness among shareholders.

4.1 Right to Dividends

The bylaws determine how profits are distributed, subject to the prohibition of leonine clauses (Article 1844-1 C. civ.), which would unfairly allocate all profits or exempt certain shareholders from losses.

Common arrangements include:

• Priority dividends linked to the nominal value of shares.

• Additional dividends distributed equally to all shareholders.

• Non-proportional distributions, provided each shareholder receives at least some share of profits.

A shareholder who fails to pay up their subscribed contributions may temporarily lose dividend rights until their obligations are met.

4.2 Right to Liquidation Surplus

Upon dissolution, shareholders are entitled to:

• Repayment of their contributions, and

• A share in any liquidation surplus (boni de liquidation), allocated according to rules in the bylaws, subject however to the prohibition of leonine clauses.

4.3 Preferential Subscription Right

When the company increases its share capital in cash, shareholders benefit from a preferential right to subscribe to new shares. This protects them from dilution and allows them to maintain their proportionate stake.

The bylaws may, however, allow shareholders to waive this right or suppress it altogether.

5. Obligations of the SAS Shareholders

Shareholding in an SAS also entails specific duties.

5.1 Limited Liability and Its Exceptions

Shareholders are generally liable for company debts only up to the amount of their contributions (Article L. 227-1 C. com.).

However, liability may extend further if a shareholder:

• Acts as a personal guarantor of company debts, or

• Operates as a de facto director and commits management faults (Article L. 651-2 C. com.).

5.2 Return of Fictitious Dividends

If dividends are distributed without actual profits, shareholders may be required to return those funds (Article L. 232-17 C. com.). The same applies to disguised remuneration paid in place of dividends.

5.3 Non-Compete Rules

By default, shareholders are not bound by a strict non-compete obligation. However, they remain subject to the prohibition of unfair competition.

Certain situations impose stricter duties:

• If a shareholder contributes a business, they owe a warranty against eviction.

• If a shareholder contributes in industry (skills or services), they cannot engage in a competing activity without authorization in the bylaws.

Conclusion: Balancing Freedom and Responsibility in the Rights and Obligations of the SAS Shareholders

The SAS is often praised for its contractual freedom, which allows shareholders to shape governance, financial rights, and obligations in a way that matches their business vision. Yet this freedom carries a price: careful drafting of the bylaws is essential.

The bylaws are not a mere formality. They are the instrument that defines:

• The balance of power among shareholders.

• Access to information and participation in decisions.

• Distribution of profits and protection of minority rights.

• The limits of liability and obligations in specific contexts.

If well designed, the bylaws transform the SAS into a modern, efficient governance tool that supports entrepreneurial growth. If poorly drafted, they risk creating conflicts, imbalance, or even invalid clauses.

For entrepreneurs considering the SAS structure, understanding these rights and obligations is the first step toward building a secure and sustainable company. The second step is ensuring that the bylaws translate this legal framework into clear, enforceable rules tailored to the shareholders’ common objectives.