In case of challenge, an appraisal of the value of shares pursuant to Article 1843-4 of the French Civil Code is subject to the admissibility of the challenge before the sale of the shares (Cass. com. 24 November 2009, no. 08-21.369).

The French Supreme Court has specified in a ruling dated 26 February 2013 (no. 11-27.521) that it suffices for the value of the shares to be determinable on the date of the sale for the sale to be concluded, thereby defeating the possibility to have recourse to an expert pursuant to Article 1843-4 of the French Civil Code.

Indeed, the sale of shares for good and valuable consideration is deemed complete when there is an agreement on the shares sold and the purchase price. The fact of indexing the price to a balance sheet that has not yet been prepared on the date of the sale renders the price determinable and suffices to preclude the application of Article 1843-4 of the French Civil Code.

The Court of Appeal of Paris, in a ruling dated 29 January 2013 (no. 11-20007) also broached the issue of the formation of a share purchase agreement prohibiting to have recourse to the expertise provided by Article 1843-4 of the French Civil Code.

In the instant case, a shareholder of a French société anonyme (limited company) had respectively entered into a memorandum of understanding and a shareholders’ agreement with the company and the other shareholders pursuant to which he promised to sell his shares in the event he were to cease to hold his position in the Company for any reason whatsoever. The other shareholders reciprocally promised to buy back his shares within a 3 months period following his departure. The price was to be calculated on the basis of the company’s net book value as recorded in the last approved financial statements.

Less than 3 months after the shareholder’s departure, a shareholders’ meeting had been called to buy back the shareholder’s shares. However, the latter contested the calculation method laid down by the shareholders’ agreement and in the memorandum of understanding and requested the appointment of an expert in accordance with the provisions of Article 1843-4 of the French Civil Code.

The Paris Court of Appeal denied the shareholder’s request since it considered that the purchase option had been exercised on the date the shareholders’ meeting had been called. The exercise of the option entailing the formation of the sale of shares, the departing shareholder could no longer rely on the provisions Article 1843-4 and seek an expertise of the value of his shares.