Share transfers do not automatically trigger the transfer of the transferor’s shareholder loan.

Jan 11th, 2017

In a January 11, 2017 ruling, the commercial division of the Court of Cassation, the highest court in France, decided that a transfer of shares did not automatically entail a transfer of the transferor’s shareholder loan.

In that particular case, following the transfer of all of his shares in a company, a shareholder requested that that company repay his shareholder loan. The Court of Appeal ruled that the shareholder could not recover the loaned funds since his shareholder loan was inseparable from the shares he had transferred.

Pointing to section 1134 of the French Civil Code, prior to its amendment by the February 10, 2016 order n°2016-131, the Supreme Court quashed the Court of Appeal’s decision and affirmed that, to be concomitant with a share transfer, the transfer of a shareholder loan had to be either expressly specified in the share purchase agreement, or the subject of a distinct agreement.

As a result, parties to a share purchase agreement will have to pay particular attention to the effects their envisioned sale agreement may have on any pre-existing shareholder loans.

In fact, the highest French court highlighted the fact that one’s capacity as a creditor is to be distinguished from their capacity as a shareholder. The two capacities are independent and may only be connected by an agreement of the parties to that effect.


Jan 11, 2017 Business law, Corporate law, Mergers and Acquisitions