Leaving a Company and Minority Shareholder Rights

Shareholdings usually break down not through open disagreement but through the flow of information stopping. The minority shareholder can no longer establish the company's real position; no dividend is paid and questions go unanswered. At that point two instruments become relevant.

First: the special audit

The starting point for a shareholder concerned that the accounts are not transparent is a special audit.

Any shareholder may ask the general assembly to clarify specific events through a special audit, provided it is necessary for the exercise of shareholder rights and the right to information or inspection has already been exercised.

Do not skip this step: an application cannot be made directly to the court. The request must first be put to the general assembly and the refusal minuted.

If the general assembly refuses, shareholders representing at least one tenth of the capital — one twentieth in a publicly held company — may apply to the court within three months for the appointment of a special auditor.

The minority's other instruments include postponing deliberation of the financial statements and requiring the general assembly to be convened. Neither is decisive alone, but both strengthen the file on the way to an audit.

Second: leaving the company

In a limited company, a shareholder may exercise a right of withdrawal where the articles provide for it. Absent such a provision, they may ask the court to permit withdrawal where just cause exists. The company may equally ask the court to expel a shareholder for just cause.

In a joint stock company there is no direct right of withdrawal. Instead, where just cause exists, shareholders representing at least one tenth of the capital may seek the dissolution of the company.

Instead of dissolution, the court may order that the claimants be paid the real value of their shares as at the date closest to the decision and removed from the company, or adopt another appropriate solution.

Dissolution is exceptional in practice; courts generally prefer a remedy that keeps the company alive. For the minority shareholder bringing the claim that is in fact a good outcome: the goal is usually not to end the company but to convert the shareholding into cash at its real value.

What counts as just cause

The law does not list them. Situations accepted in practice include:

• Persistent obstruction of the right to information and inspection,
• Years without dividends and without justification,
• Company resources used for the personal benefit of the majority,
• A general assembly that never convenes, or resolutions consistently adverse to the minority,
• A relationship of trust that has become impossible to sustain.

All of these count to the extent they are documented, not merely alleged. Unanswered written requests for information, objections minuted at general assemblies and notarised demands form the backbone of the file.

The order of steps

1. Send a written request for information and inspection, and await a reply.
2. Request a special audit at the general assembly; have the refusal minuted.
3. On refusal, apply to the court within three months for a special auditor.
4. Depending on what the audit shows, consider withdrawal, expulsion or dissolution for just cause.

Claims that skip this order usually founder on procedure or on a lack of evidence.

Conclusion

Being a minority shareholder is not the same as being without options. The law provides a set of instruments running from access to information through to leaving the company. Their effect depends on using them in the right order, in time.