SPA termination disputes under French law: managing shareholder risk during litigation

An action seeking to terminate a share purchase agreement (SPA) will often plunge the company with disputed shares into crisis. In light of a recent court decision, this article explores the mechanisms offered under French law to manage such a crisis.

Under French law, résolution is the sanction for contractual non-performance. It traditionally entails a retroactive effect, meaning that once termination is ordered, the contract is deemed never to have existed.

This retroactive effect distinguishes résolution (termination with retroactive effect) from résiliation (termination without retroactive effect), the latter bringing a contract to an end before its term without triggering the reciprocal restitutions that characterise the retroactive effect of résolution. 1

Since the 2016 reform of French contract law, the regime governing termination has been expressly set out in Articles 1224 et seq. of the French Civil Code, in particular Article 1229, which provides that:“Termination brings the contract to an end. It takes effect, as the case may be, either under the conditions specified in a termination clause, or on the date of receipt by the debtor of the notice given by the creditor, or on the date set by the court or, failing that, on the date of the summons.”

The issue of the effective date of termination was at the heart of a recent decision of the French Supreme Court (Cour de cassation). In a decision dated 17 December 2025, the Court resolved a dispute over a claim for the termination of an SPA and the annulment of shareholders’ general assembly resolutions adopted after the initiation of the termination proceedings by the purchaser, in the absence of the selling shareholder.

In this case, the seller had transferred all shares to his brother, who was already a shareholder in the company. The purchaser was required to pay a deposit and to settle the balance of the purchase price at a later date. Because the purchaser failed to pay the balance when due, the seller initiated proceedings to obtain termination of the share transfer.

In initial proceedings, the seller obtained a decision ordering the termination of the SPA and requiring the company – also a party to the proceedings – to amend its share transfer registers accordingly.

However, during the proceedings, the purchaser, who still held shareholder status under the SPA (not yet terminated), took steps to harm the seller and prevent him from regaining his rights in the company, particularly his status as a shareholder. The purchaser convened a general assembly where he appointed himself a director and amended the articles of association to introduce a forced share buy-back clause, transfer the company’s registered office, and convert the company from a public limited company (SA) into a simplified joint stock company (SAS).

Under the purchaser’s influence, the company failed to implement the formalities ordered by the court (notably the amendment of share transfer registers and shareholder accounts). The seller then initiated a second set of proceedings against both the purchaser and the company, seeking annulment of the resolutions adopted at the general assembly held in his absence.

In its decision dated 17 December 2025 rendered in these second proceedings, the Cour de cassation held, on the basis of Article 1229 of the Civil Code, that where termination takes effect on the date of the summons, unless the judgment sets a different date, the seller is automatically reinstated in his shareholder rights as of that date, regardless of when the company records his re-registration in the company’s register.

By this decision, the Cour de cassation upheld the Court of Appeal’s ruling annulling the resolutions adopted by the purchaser during the proceedings. It held that, by virtue of the retroactive effect of termination, the seller must be deemed to have been reinstated in his shareholder rights as of the date of the summons.

This decision has generated significant commentary on the balance struck by the French Supreme Court between the rules of contract law governing the effects of judicial termination (résolution) and those of company law relating to shareholder status, which depends on registration of the shares in the company’s records. The Supreme Court adopted a pragmatic approach by prioritising the protection of the wronged seller’s rights based on termination, notwithstanding company-law rules governing the determination of shareholder status.

This decision provides an opportunity to focus on the management of the conflict period by outlining the various instruments available under French law to protect the parties’ rights. Initiating an action for termination of an SPA inevitably places the company in a period of uncertainty over the composition of its shareholding, especially because of the retroactive effect of the termination, thereby disrupting both its functions and the rights of its shareholders.

First, such a disruption is inherently prolonged, as it lasts throughout the entire duration of the proceedings. Although the length of the proceedings depends on the forum (e.g. state court or arbitral tribunal), it necessarily represents a significant period in the life of a company.

Beyond the company’s interests, the seller’s rights may also be significantly affected. As illustrated in the above case, the purchaser, who retains control of the company during the proceedings, may take steps aimed at preventing the seller from regaining shareholder status. More broadly, the purchaser may adopt decisions that are highly detrimental to both the company and the seller, such as diverting the company’s assets to a third-party entity. As a result, by the end of the proceedings, the seller may recover shareholder status in a company whose financial situation has substantially deteriorated. The situation may become even more complex if the purchaser transfers the disputed shares to a bona fide third party during this period.

In response to these risks, French law provides for various interim measures to preserve the status quo pending a final decision on the merits.

In particular, the seller may seek a judicial order placing the disputed shares in escrow. This measure, which requires evidence of a dispute over ownership, prevents the transfer of the shares to a bona fide third party, regardless of the intensity of the conflict. It avoids complicating the dispute and subsequent proceedings against third parties.

Another key step is to request the appointment of a third party responsible, at a minimum, for administering the disputed shares in the company’s interests during the proceedings.

In this respect, a distinction must be drawn between two situations. Where the dispute does not paralyse the company’s operations, the seller may seek the appointment of an ad hoc trustee (mandataire ad hoc). The trustee’s mandate is generally limited to managing the disputed shares, in particular exercising voting rights, while ensuring that decisions comply with the company’s interests and do not prejudice the seller. The trustee is not entrusted with managing the company itself. Since the ad hoc trustee is appointed for a specific mission defined by the court order, careful attention must be paid to the drafting of the application to clearly delimit the scope of the mandate. The person appointed as escrow agent may also be entrusted with the role of ad hoc trustee.

In more severe cases, particularly where the dispute concerns a controlling stake and where the purchaser jeopardises the company’s functioning, it may be possible to seek the appointment of a provisional administrator (administrateur provisoire). To obtain such a measure, the applicant must demonstrate both that the company is unable to operate normally and that there is an imminent threat to its interests. These stringent conditions reflect the broader powers conferred on the administrator, whose role extends beyond a specific mandate and consists in managing the company pending resolution of the dispute.

In any event, the appointment of an ad hoc trustee or a provisional administrator will have the effect of preventing, on an interim basis, decisions contrary to the interests of the company and the seller that could otherwise be taken by the purchaser during the proceedings.

Finally, in connection with an escrow of the disputed shares, it is possible to request that dividends attached to those shares and distributed during the proceedings be placed in escrow in a temporary account. This measure prevents future disputes over dividend distributions in the event of termination of the SPA.