Shareholders' agreements in France: what U.S. investors should know

A U.S. fund investing in a French SAS receives two core documents: the bylaws (statuts) and the shareholders' agreement (pacte d'associés). U.S. practice would put most investor protections in the certificate of incorporation and an investors' rights or voting agreement. In France, the split between bylaws and agreement is more consequential, because it determines how each protection can be enforced.

This guide explains the role of the French shareholders' agreement, the clauses it usually contains and its legal limits. It introduces a series of articles on governance, leaver, tag-along, drag-along, liquidation preference and waterfall clauses.

Bylaws or shareholders' agreement: what is the difference?

The practical consequence: a transfer that violates a right of first refusal set out only in the agreement generally gives rise to damages, unless the buyer knew of the clause. The same restriction in the bylaws of an SAS, combined with an approval clause, can lead to the transfer being voided. Key transfer restrictions are therefore usually mirrored in the bylaws, with the agreement detailing the procedure.

What does a French shareholders' agreement contain?

• Governance: board or strategic committee, reserved matters, information rights.
• Transfers: lock-up, right of first refusal (préemption), approval, permitted transfers to affiliates.
• Exit: tag-along, drag-along, liquidity commitments.
• Founders: exclusivity, non-compete, good leaver and bad leaver.
• Investor protections: anti-dilution, pre-emptive rights in future rounds, liquidation preference.
• General terms: duration, adherence of new shareholders, governing law, disputes.

What are the legal limits?

• Duration: a perpetual undertaking can be terminated at any time, so French agreements are concluded for a fixed term.
• Leonine clauses: no shareholder can be excluded from all profits or exempted from all losses.
• Corporate interest: voting agreements cannot force a shareholder to vote against the company's interest.
• Non-competes: must be limited in time, space and scope, and paid if the founder is an employee.
• Price determinability: call options must specify a price or an objective formula.

Can the agreement be governed by U.S. law?

The contractual provisions can be governed by a foreign law. French mandatory corporate rules still apply to a French company, and enforcement of transfer restrictions, options and corporate decisions will take place in France. Most agreements for French companies are governed by French law, with an English version for convenience. Romain Waiss-Moreau drafts bilingual agreements that reflect U.S. market terms while remaining enforceable in France.

Where do U.S. investor documents map in a French deal?

This mapping helps U.S. investors find the protections they expect, even when the documents are organised differently.

Which clauses depend on the company's stage?

Case study: a U.S. fund leading a French Series A

A U.S. fund leads a Series A in a French SAS using its NVCA-based term sheet. The French documentation reorganised the terms: preferred share rights and the waterfall went into the bylaws; information rights, pre-emption, tag-along, drag-along and leaver clauses into the shareholders' agreement; board composition into both. The fund received an English version of every document and a mapping memo against its usual U.S. set. The firm prepares this mapping systematically, so that investment committees can approve French deals without relearning the structure each time.

Shareholders' agreements: key points

• Keeping a critical clause only in the agreement: the remedy may be limited to damages.
• Forgetting adherence: employees exercising BSPCE must sign the agreement, or they escape its clauses.
• Importing U.S. terms without adaptation: some protections must be restructured to work under French law.

Frequently asked questions

Is a shareholders' agreement mandatory?

No, but every professional investor requires one.

Can the agreement be amended without unanimity?

Only if it provides for amendment by a qualified majority of signatories, which is common in agreements with many shareholders.

Does the company sign the agreement?

Often yes, so that it is bound by certain undertakings, such as information obligations or the registration of transfers in compliance with the agreement.

How long does a French shareholders' agreement last?

It is concluded for a fixed term, often eight to fifteen years, sometimes renewable. An indefinite term would allow any party to terminate at will, undermining exit clauses.