A shareholders' agreement that sets no term is not, for that reason alone, a contract of indefinite duration. The commercial chamber holds that such an agreement is deemed to have been entered into for the remaining term of the company in which the parties are shareholders, absent contrary intrinsic or extrinsic evidence. The immediate consequence is that no signatory may bring it to an end unilaterally. The duration of the company, set by its articles of association, may not exceed ninety-nine years, save for extension.
Key points
- A shareholders' agreement with no express term is deemed to have been entered into for the remaining term of the company in which the parties are shareholders.
- No signatory may then bring the agreement to an end unilaterally: a notice of termination is not enough to be released from it.
- This characterisation applies absent contrary intrinsic or extrinsic evidence, that is, indications drawn from the agreement itself or from its surroundings.
- The duration of the company is set out in the articles of association and may not exceed ninety-nine years, save for extension: the agreement is therefore not perpetual.
- A clause making the continuation of the agreement conditional upon an uncertain event is not enough to render the agreement terminable at any time.
A 1997 shareholders' agreement terminated by the heirs
The commercial chamber quashes the decision of the court of appeal: a shareholders' agreement with no express term is not, for that reason alone, a contract of indefinite duration terminable unilaterally (Com., 11 March 2026, No. 24-21.896). In 1997, the majority shareholder of a company holding the entire share capital of an industrial subsidiary entered into an agreement with a minority shareholder. The agreement governs, in particular, the exercise of the minority shareholder's rights. Its Article 8 sets out its entry into force and its continuation (free translation).
This agreement takes effect upon signature and shall remain in force for as long as [the founder] and their family hold, directly or indirectly, majority control (51%) [of the group].
The majority shareholder died in 2000, leaving their spouse and three children as heirs. In 2017, the minority shareholder was absorbed by another company following a merger. In April 2018, the heirs notified the absorbing company of their decision to terminate the agreement. The absorbing company brought proceedings against them, together with the group's parent company and its subsidiary, seeking to have that termination (résiliation) set aside.
The decision under appeal (CA Reims, 17 September 2024, No. 23/01892) held the termination valid. The lower court judges noted that the loss of majority control is not a certain event and therefore does not constitute an extinctive term. They inferred from this, in the absence of any other clause setting a fixed or ascertainable term, that the agreement was a contract of indefinite duration, terminable unilaterally. The defendants challenged the admissibility of the ground of appeal; the Court allowed it, that ground being one of pure law and not contrary to the parties' written submissions.
On the basis of Articles 1134, in its version prior to that resulting from the ordinance of 10 February 2016, 1835, 1838 and 1844-6 of the French Civil Code, the commercial chamber rejects this reasoning and lays down a general rule.
A shareholders' agreement not accompanied by an express term is, absent contrary intrinsic or extrinsic evidence, deemed to have been entered into for the remaining term of the company in which the parties are shareholders, so that they may not bring it to an end unilaterally.
Can a shareholders' agreement with no duration still be terminated?
A shareholder wishing to exit an agreement that is silent as to its duration can no longer rely on a simple termination letter. The silence of the agreement does not release the signatories: by default, it binds them until the end of the company's life. Exit therefore requires another basis, for example a clause of the agreement organising withdrawal, the consent of all the signatories, or the loss of shareholder status provided for by the agreement.
A signatory who nonetheless serves a notice of termination takes a real contractual risk. The notice may be deprived of effect, and the agreement may continue to produce its obligations: pre-emption rights, information rights, voting undertakings, tag-along clauses. Breaches occurring after the notice remain, in principle, capable of engaging the contractual liability of the defaulting signatory.
The solution is also of interest for capital transactions. An investor coming in through a merger by absorption takes over an agreement whose duration is no longer indefinite by default. The question on entry therefore becomes a simple one: what is the residual duration of the company under its articles of association, and what undertakings does the agreement keep running until that date?
What limits apply to a duration aligned with that of the company?
The rule laid down on 11 March 2026 is a default rule: it yields to contrary intrinsic or extrinsic evidence. The commercial chamber does not say that an agreement with no express term is necessarily entered into for the duration of the company. It says that it is deemed to be, unless there are contrary indications drawn from the agreement itself or from the circumstances surrounding it. The debate therefore shifts to those indications, the assessment of which falls to the lower court judges.
The solution creates no perpetual undertaking. The duration of the company must appear in the articles of association and may not exceed ninety-nine years, save for extension. The agreement therefore remains limited in time. The quashing extends to all the provisions of the decision and the case is remitted to the Nancy court of appeal, which will re-hear the whole dispute, including the scope of the clause relating to majority control.
Drafting the duration of a shareholders' agreement
The duration of the agreement must be expressly stipulated, failing which it will be aligned with that of the company. A fixed-duration clause, possibly renewable by tacit renewal, makes it possible to recover a controlled end date. Failing that, the signatories commit for a period that may exceed their investment horizon. The drafting must clearly distinguish the duration of the agreement, its exit conditions and the events that bring it to an end.
Exit clauses deserve the same attention as the duration clause. Voluntary withdrawal subject to a notice period, lapse in the event of a transfer of all the securities, the fate of the agreement upon the death of a signatory or upon a merger affecting a party: each of these cases must be drafted. A clause making the continuation of the agreement conditional upon an uncertain event, such as keeping a control threshold, is no substitute for a duration clause.
Checks to make before giving notice of exit from an agreement
- Re-read the duration clause of the agreement and check whether an express term really appears in it.
- Look up the duration of the company in the articles of association and calculate the period remaining to run.
- Identify the withdrawal, lapse or transfer clauses that offer an organised exit.
- Assess the obligations that will continue to apply if the unilateral termination (résiliation unilatérale) is deprived of effect.
- Document, before any capital transaction, the undertakings under the agreement taken over by the buyer or the absorbing company.
Frequently Asked Questions
My shareholders' agreement sets no duration, can I terminate it by letter?
A shareholders' agreement with no express end is deemed to have been entered into for the remaining term of the company in which the parties are shareholders, absent contrary intrinsic or extrinsic evidence. The signatories cannot then bring it to an end unilaterally. Exit requires a clause of the agreement organising it, or the consent of the other signatories.
Is a clause ending the agreement if the family loses control a term?
An uncertain event does not operate as a deadline fixed in advance. In the case decided on 11 March 2026, the court of appeal had held that the loss of majority control was not certain and did not amount to an extinctive term. The Cour de cassation did not endorse the consequence it drew from this: the absence of a term does not make the agreement terminable unilaterally. The referral court will re-examine that clause.
What happens to the parties after this quashing?
The decision of the court of appeal is set aside in all its provisions and the case returns to the Nancy court of appeal. Nothing is finally settled between the parties: the referral court will rule again on the characterisation of the agreement, on the validity of the termination notified in 2018 and on the claims made on both sides, applying the rule stated by the commercial chamber.
How can an exit from a shareholders' agreement be arranged in advance?
Exit is arranged in the agreement itself, at the negotiation stage. A fixed-duration clause, a right of withdrawal subject to a notice period, lapse upon a transfer of all the securities or upon loss of shareholder status all make it possible to provide for a way out. Failing any such stipulation, release in principle requires the consent of all the signatories.
What is the difference between articles of association and a shareholders' agreement?
Articles of association organise the company and bind all shareholders, present and future; they are published. The agreement is a contract entered into between all or some of the shareholders, generally confidential, which supplements the articles without being able to contradict them. Breach is in principle dealt with on contractual ground, through damages, unless the parties have specifically provided for other mechanisms.