Withdrawal of a Partner: Transfer of Shares During Procedure Annulled (Cass. civ., 25 May 2023)

Imagine: you own a flat in Pessac, let out through a SCI (property investment company). Tired of conflicts with the other partners, you initiate a withdrawal procedure: the company agrees to buy back your shares. Everything seems settled. But suddenly, before the buy-back is finalised, you find a private buyer who offers you a better price. You transfer your shares to this third party. Problem: the court annuls this transfer. Why? Because once the withdrawal procedure has been accepted, you are no longer free to sell to whomever you wish.

This is the question that any dissatisfied partner asks: can you change your mind and sell to a higher-bidding third party after the company has already accepted the buy-back? The answer, given by the Court of Cassation on 25 May 2023 (judgment no. 22-17.246), is a categorical no. And the consequences can be serious: annulment of the sale, repayment of the price, and even damages.

In this article, I break down this decision for you, its facts, its reasoning, and above all what it changes concretely for you, landlord owners, tenants or property professionals, whether you are in Arcachon or elsewhere.

The Facts: a Story Like Any Other

The case begins in a SCI named “du Cherche Midi”. A partner, whom we will call Mr T, holds shares (i.e. a fraction of the company's capital). Tired of the management or relations with the other partners, he decides to withdraw. He initiates a withdrawal procedure: he notifies the SCI of his wish to leave and requests the buy-back of his shares by the company. The SCI accepts. The procedure is well under way.

But then: in the meantime, a third party, the company Immobilière Herran, comes forward and offers to buy Mr T's shares at a more advantageous price. Mr T accepts and transfers his shares to this third party, ignoring the withdrawal procedure already in progress. The SCI finds out and sues Mr T and Immobilière Herran to have the transfer annulled.

The lower court judges (Court of Appeal) rule in favour of the SCI: the transfer is annulled. Mr T appeals to the Court of Cassation. He argues that nothing prevents him from transferring his shares to a third party as long as the buy-back by the company has not been completed. But the Court of Cassation dismisses his appeal: once the withdrawal procedure has been accepted, the partner is bound by his undertaking and can no longer freely dispose of his shares. The transfer to a third party is void.

The Reasoning of the Court — Explained

The Court of Cassation relies on a simple principle: good faith in the performance of agreements (Article 1104 of the Civil Code, which requires contracts to be performed in good faith). By embarking on a withdrawal procedure accepted by the company, the partner has concluded an agreement: the company undertakes to buy back his shares, and he undertakes to sell them to it. This agreement is a contract. Transferring them to a third party amounts to a breach of that undertaking.

The judges specify that the company's acceptance of the withdrawal creates a right for the company to acquire the shares. This right is enforceable against the partner, who can no longer disregard it. The transfer to a third party is therefore void for lack of authority of the partner to dispose of the shares (referred to as “lack of right to dispose”).

The Court does not merely say that the transfer is voidable: it is void ab initio, as if it had never existed. Consequence: the third-party purchaser must return the shares, and the partner must repay the price received. In addition, the company may claim damages if it has suffered loss (for example, legal costs).

This decision confirms settled case law: the undertaking given within the framework of a withdrawal is irrevocable once accepted. It also reminds us that the freedom to transfer one's shares is not absolute: it is limited by prior undertakings.

What This Means for You — Concretely

If you are a partner in a SCI (or an SARL, an SAS) and are considering withdrawing, this decision directly concerns you. As soon as you have notified your withdrawal and the company has accepted it, you can no longer sell your shares to a third party, even if that third party offers you a better price. Any subsequent transfer will be void, and you will have to repay the price.

Concrete example: you own a property in Arcachon held by a SCI. You want to leave, you initiate the procedure. The SCI agrees to buy back your shares for €100,000. A friend offers you €120,000. You transfer to your friend. Result: the sale is annulled, you must return the €120,000, and the SCI also claims damages from you. Not to mention legal fees.

For the third-party purchaser (the company Immobilière Herran in the case), the risk is also real: he buys shares that cannot be transferred. He will have to return them and recover his price, but he can also hold the selling partner liable for misleading him.

If you are a tenant of a property held by a SCI, this decision affects you indirectly: a change of partner may alter management, but if the transfer is annulled, the stability of the company is preserved, which can be reassuring.

In practice, if you are in this situation, you must: 1) check whether a withdrawal procedure is in progress before buying shares; 2) never transfer your shares after having initiated an accepted withdrawal; 3) in case of doubt, consult a specialist lawyer.

Four Tips to Avoid This Type of Dispute

• Never transfer your shares after notifying an accepted withdrawal. Even if a third party's offer is tempting, the transfer will be void. Wait until the buy-back by the company is effective (payment of the price and transfer of the shares).
• Require a clear written document during the withdrawal procedure. Have the company's agreement on the principle of the buy-back, the price and the terms recorded in writing. This avoids ambiguities as to when the undertaking becomes irrevocable.
• If you are a third-party purchaser, check that no withdrawal procedure is in progress. Ask the selling partner for a sworn statement, and consult the company's decision register. Better still: require an extract from a recent general meeting minutes.
• In case of dispute, act quickly. The limitation period for an action for nullity is 5 years from the transfer. But the longer you wait, the more evidence deteriorates. A swift claim can also allow the sale price to be seized to guarantee repayment.

Further Analysis: Related Case Law and Developments

This decision is part of a line of judgments that protect withdrawal procedures. For example, in a judgment of 15 January 2020 (no. 18-23.456), the Court of Cassation had already annulled a transfer of shares that took place after acceptance of the withdrawal, on the ground that the partner had breached his duty of loyalty. Here, the Court goes further by specifying that the nullity is absolute, even if the third-party buyer was in good faith.

On the other hand, if the withdrawal has not yet been accepted by the company, the partner remains free to transfer his shares to a third party. The boundary is therefore clear: acceptance is the trigger for irrevocability. This solution is logical: as long as the company has not accepted, there is no agreement.

The trend of the courts is therefore to secure withdrawal procedures, to prevent partners from using them as a bargaining chip. In the future, we can expect judges to require companies to act quickly to accept or refuse the withdrawal, so as not to unduly block the partner.

Key Points to Remember

• Can I sell my shares to a third party after requesting my withdrawal? No, if the company has accepted the withdrawal. The transfer will be annulled.
• What does the third-party purchaser risk? He must return the shares and may claim damages from the seller, but he loses his investment.
• Is there a time limit to bring an action for nullity? Yes, 5 years from the transfer (Article 2224 of the Civil Code).
• What if I have already transferred my shares? Contact a lawyer immediately to assess the risks and prepare for a possible regularisation.
• Does this rule apply to all companies? Yes, SCI, SARL, SAS, etc., as long as a withdrawal is provided for by the articles of association or by law.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →