{"id":2146,"date":"2026-03-30T19:33:22","date_gmt":"2026-03-30T17:33:22","guid":{"rendered":"https:\/\/www.alkeom.law\/?p=2146"},"modified":"2026-04-27T18:28:17","modified_gmt":"2026-04-27T16:28:17","slug":"put-option-and-call-option-under-french-law-adherence-to-the-promise-by-successors-and-validity-of-beneficiary-controlled-conditions","status":"publish","type":"post","link":"https:\/\/www.alkeom.law\/en\/put-option-and-call-option-under-french-law-adherence-to-the-promise-by-successors-and-validity-of-beneficiary-controlled-conditions\/","title":{"rendered":"Put & Call Options under French Law: Adherence by Successors and Validity of Beneficiary-Controlled Conditions"},"content":{"rendered":"\n
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In the case at hand, a shareholders\u2019 agreement was concluded in 2017 between a majority shareholder and a minority shareholder, who also served as an officer of the company. The agreement provided for reciprocal call and put options, enabling the majority shareholder to acquire the officer\u2019s shares in the event of termination of his managerial functions.<\/p>\n\n\n\n

In 2020, the officer transferred his shares to a holding company he had established, which met the criteria of a \u201cfamily holding\u201d as defined in the shareholders\u2019 agreement. He was subsequently removed from office by the supervisory board.<\/p>\n\n\n\n

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Following this removal, the majority shareholder sought to exercise the call option against the holding company, which refused to perform. The holding argued that it was not bound by the promise set out in the agreement, as it had never expressly consented to it. It further contended that the promise was void due to its potestative nature, since its exercise depended on the officer\u2019s removal, which in reality was controlled by the majority shareholder through his influence over the supervisory board.<\/p>\n\n\n\n

Share Put and Call Options Under French Law: Purpose and Key Issues<\/h2>\n\n\n\n

Share Put and Call options are standard instruments for liquidity and shareholder control, widely used in fundraising transactions, joint ventures, and management packages.<\/p>\n\n\n\n

As liquidity instruments, they allow a manager, a founder, or a partner involved in a joint venture to ensure the sale of their shares under predetermined conditions. As instruments of shareholder control, they enable, for example, a majority shareholder to secure the repurchase of minority stakes upon the occurrence of certain events.<\/p>\n\n\n\n

The options may be provided for in the articles of association, in a shareholders\u2019 agreement, or in a separate deed. Their effectiveness, however, requires careful drafting, particularly regarding the exercise conditions\u2014especially the triggering events\u2014the methods for determining the price, and the respective obligations of the parties.<\/p>\n\n\n\n

In this context, the Court decision dated 11 February 20261<\/a><\/sup> provides useful clarification both on the enforceability of a promise against a successor of the promisor and on the risk of nullity arising from conditions whose exercise is at the discretion of the beneficiary.<\/p>\n\n\n\n

Enforceability of Put and Call Options Against a Shareholder Adhering to the Shareholders\u2019 Agreement: Caution in Drafting the Deed of Adherence<\/h2>\n\n\n\n

The holding company argued that it was not bound by the share call option set out in the shareholders\u2019 agreement. Indeed, even if it had adhered to the agreement, it had neither formally accepted becoming a promisor nor clearly defined the scope of its rights and obligations towards the other shareholders.<\/p>\n\n\n\n

The Cour de cassation noted that the appeal court had validly held that the transfer of shares by the officer to his family holding company constituted a \u201cfree transfer\u201d as defined in the shareholders\u2019 agreement. Moreover, the holding had adhered not only to the agreement itself but also specifically to the put and call options. As a result, it could validly be bound by the call option, and the majority shareholder was entitled to seek its enforcement.<\/p>\n\n\n\n

It is common for shareholders\u2019 agreements to provide that certain share transfers are exempt from approval, lock-up, pre-emption, or other restrictions. These so-called \u201cfree transfers\u201d typically concern a natural person shareholder transferring shares to a company under their control for estate or family purposes. In this context, it is considered good practice that a free transfer be made conditional upon the full and express adherence of the transferee to the shareholders\u2019 agreement, with respect to the shares acquired.<\/p>\n\n\n\n

The decision thus recognizes the validity of transferring, to a new shareholder, the rights and obligations under a shareholders\u2019 agreement\u2014including the promises it contains\u2014through adherence to the pre-existing agreement.<\/p>\n\n\n\n

However, beyond adherence to the agreement, it is advisable that the new shareholder has expressly accepted the promise in order to be substituted for the original promisor. Indeed, it is uncertain whether the same result would have applied if the holding had merely adhered to the shareholders\u2019 agreement without expressly accepting the promises.<\/p>\n\n\n\n

Accordingly, deeds of adherence should be drafted with care, specifically addressing the promises they include and any related obligations (e.g., tag along \/ drag along rights\u2026).<\/p>\n\n\n\n

A Condition for Exercising a Promise That Is at the Beneficiary\u2019s Discretion Is not Void.<\/h2>\n\n\n\n

In its second argument, the holding company invoked the nullity of the call option on the grounds that the exercise condition was potestative, i.e. at the discretion of the majority shareholder.<\/p>\n\n\n\n

As the officer could be removed ad nutum by the supervisory board, the holding argued that the condition depended solely on the will of the majority shareholder, the beneficiary of the call option.<\/p>\n\n\n\n

In response, the French Cour de cassation recalled that, under Article 1304\u20112 of the French Civil Code<\/a>, an obligation is only void if the condition depends entirely on the debtor\u2019s will. Here, the removal fell within the creditor\u2019s discretion (the majority shareholder) and not the debtor\u2019s (the holding). Accordingly, the share call option could not be declared void.<\/p>\n\n\n\n

The decision thus secures put and call options concluded under the new Article 1304\u20112<\/a>, whose exercise may depend on a decision by the beneficiary of the promise. This includes, for example:<\/p>\n\n\n\n