In a shareholders’ agreement, a clause can look simple on paper, but turn into a legal minefield when it comes to a “promise to sell shares” tied to an employee-shareholder’s employment contract.
That is exactly what the Court of Appeal of Versailles examined in its decision of July 1st, 2025, No. 23/02083.
🔍 The context ?
- The shareholders’ agreement provided that any employee-shareholder had to sell their shares if their employment contract ended for certain reasons: misconduct, prolonged absence, but also a “two-thirds shareholders’ vote” deciding on termination.
- When one employee-shareholder was dismissed for economic reasons, a shareholders’ meeting triggered the option to purchase his shares.
- The employee challenged the process: according to him, the shareholders’ vote should have taken place before his dismissal to activate the transfer promise.
- The Court disagreed: under French labor law, the decision to dismiss an employee lies solely with the employer (not the shareholders).
- For the judges, the shareholders’ vote had a different purpose: it triggered the purchase mechanism, but did not impose a condition precedent on the dismissal decision.
- Outcome: the employee lost his shareholder status as of the date the option was exercised.
⚖️ Why it matters
1. Respect for labor law
- A shareholders’ agreement cannot make dismissal subject to a corporate vote that would interfere with rules of public order in employment law.
- The Court therefore interprets the agreement in a way that preserves the employer’s managerial autonomy.
2. A pragmatic interpretation
- The judges adopted a reasonable reading of the agreement:
shareholders’ vote = trigger for the share purchase,
dismissal = separate HR decision. - This preserves the economic function of the agreement without distorting employment law.
3. Ambiguous wording is not fatal but it will be interpreted
- The agreement contained an “irrevocable promise” to transfer shares if certain conditions were met.
- Rather than invalidate it, the Court reinterprets the mechanism to preserve contractual balance.
- Key lesson: ambiguity will not save a party it will be interpreted in the light of coherence and practicality.
📘 The practical risk for shareholders and executives
- When drafting a shareholders’ agreement, any clause linking share transfers to employment status must be precisely drafted.
- The timeline of decisions must be clear:
- What triggers the transfer?
- Does the vote precede or follow the termination?
- A poorly drafted clause can lead to an interpretation that does not favor the employee-shareholder.
