The Court of Cassation confirms the validity of the alternative offer clause (American clause or "buy or sell" clause)

Following disagreements, the minority shareholder and manager of the company invoked the clause and offered to sell his shares to the other shareholder. The majority shareholder and recipient of the offer contested the validity of its implementation, arguing in particular that the "buy or sell" clause left it solely up to the shareholder implementing the clause and offering his shares for sale to determine the sale price of the shares.

The Court of Cassation did not follow this reasoning. It held that the mechanism set out by the "buy or sell" clause did not leave the setting of the price to the discretion of one party. Indeed, the offeror proposed to sell the shares to the recipient at a given price but alternatively undertook to acquire the recipient's shares at the same price, depending on the option chosen by the recipient. The choice of the direction of the transaction (sale or acquisition) is therefore made by the recipient, who ultimately decides whether the proposed price will be the purchase price of the offeror's shares or the sale price of his own shares to the offeror.

It is important to note that the Court of Cassation took care to point out that the triggering of the "buy or sell" clause in this case was subject to objective conditions ("the existence of a serious and persistent disagreement between the shareholders"), which suggests that such a clause would not have been viewed as favourably if its triggering had been left to the sole discretion of the parties.

Finally, the recipient shareholder also contested the terms of implementation of the clause, arguing that the obligation of good faith on the part of the offeror (the managing minority shareholder) required him to provide the recipient (the non-managing majorityshareholder) with all documents necessary to assess the offer. The Court of Cassation did not accept this argument either, finding that (i) the wording of the clause did not require prior verification and (ii) the recipient had not established that it had requested specific accounting documents from the manager.

This decision therefore confirms a traditional solution adopted by M&A practitioners to resolve deadlock situations between shareholders (particularly in cases of equal shareholding), while highlighting the importance of seeking legal advice not only when drafting a shareholders' agreement but also when implementing it. At the drafting stage, the wording of the "buy or sell" clause could have better protected the non-managing shareholder by requiring the manager to provide the documentation necessary to assess the offer. At the implementation stage, the non-managing shareholder should have kept proof of his requests for the accounting documents from the managing shareholder.

Finally, the principles laid down by the Court of Cassation regarding a "buy or sell" clause concerning shares in a SARL were based on Article 1591 of the French Civil Code and should therefore be fully transposable to clauses concerning shares in a SA, SAS or SCA.