In most leveraged buy-out and management buy-out transactions, the parties enter into shareholders' agreements. When entering into such agreements, the signatories want to ensure that the agreement will remain effective and binding for the necessary period throughout the life of the investment until the exit.

On December 20 2017 the Supreme Court ruled that the date on which a signatory ceases to be a shareholder is not a certain date and therefore a shareholders' agreement – the duration of which is determined by reference to such event – is deemed to have been entered into for an indefinite period and may be terminated by any party and at any time in accordance with the Civil Code, subject to an appropriate notice period.


Company A held 25% of the share capital of Company B, a portfolio management company, and interests in different funds managed by Company B. Company A, Company B and the majority shareholder and managing director of Company A entered into a shareholders' agreement pursuant to which Company A and the majority shareholder were granted the same conditions as those of Company B in respect of future investments into the different funds managed by Company B. The right was granted for as long as the majority shareholder and his family controlled – directly or indirectly – Company A and the majority shareholder remained a direct shareholder of Company A.

A few months later, Company B terminated the shareholders' agreement considering that it had been concluded for an indefinite period and could thus be terminated at any time. Company A sued for damages based on an alleged wrongful termination, arguing that the agreement was concluded for a definite period and could therefore not be terminated.


The Supreme Court rejected Company A's arguments and ruled that the commitment of Company B was made for an indefinite period. Consequently, Company B had validly terminated the shareholders' agreement.

The Supreme Court considered that the agreement did not provide for a definite duration and that the reference to the date on which the majority shareholder ceases to be a shareholder of Company A was not certain enough in order to constitute a definite term. The duration of the agreement was thus neither definite nor determinable and the agreement could therefore be terminated at any time by any of the signatories.


The Supreme Court's decision confirms previous case law and explicitly recalls the importance that should be given to the drafting of provisions governing the duration of shareholders' agreements. The court highlighted the fact that shareholders' agreements concluded for as long as the signatories remain shareholders are considered concluded for an indefinite period and may be terminated by any party thereto at any time.

Further to the Supreme Court's decision, shareholders should check their existing shareholders' agreements.

For further information please contact Alain Levy, Gwenaëlle de Kerviler or Linda Erlandsson at AyacheSalama by telephone (+33 1 58 05 38 05) or email (, or The AyacheSalama website can be accessed at

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