Background
JC France Industrie was owned in equal shares by [P] [R] and two children from his first marriage. After [P] [R] died in June 2015, his surviving wife, Ms. [O], elected a usufruct over his shares, while their minor son, [K] [R], received bare ownership of part of those shares. In June 2016, the company’s extraordinary general meeting refused to approve them as new shareholders, canceled their shares, and set the amount payable for those shares.
Ms. [O], acting for herself and initially for her minor son, obtained the appointment of an expert under Civil Code Article 1843-4 to revalue the interests. The expert produced valuations based on accounts ending in 2014, 2015, and 2016. The Montpellier Court of Appeal held that approval had not been tacitly granted, but valued the shares using the September 30, 2016 accounts—the date closest to the heirs’ payment—and ordered the company to pay €83,039.99 to [K] [R] and €400,680 to Ms. [O], less amounts already paid.
The Court’s Holding
The Court of Cassation upheld the rejection of the company’s limitation defense. An unapproved heir’s action to recover the value fixed by an Article 1843-4 expert after rejecting the company’s proposed value does not require annulment of the corporate resolution that set that value. It is therefore governed by the ordinary five-year limitation period, not the shorter period applicable to actions seeking annulment of corporate resolutions. Because the heirs could not quantify their payment claim until the expert filed the report, the five-year period began on the report’s filing date.
The Court nevertheless partially quashed the judgment on valuation. An heir who has not been approved as a shareholder does not acquire shareholder status but instead becomes a creditor for the value of the deceased shareholder’s rights. When the articles of association contain no applicable valuation date, that value must be determined as of the shareholder’s death. The Court therefore set aside the awards based on the September 30, 2016 valuation and remanded the valuation, costs, and related issues to the Nîmes Court of Appeal. It rejected the heirs’ cross-appeal.
Key Takeaways
- Unless the company’s articles provide otherwise, shares passing to an unapproved heir are valued as of the deceased shareholder’s date of death.
- An unapproved heir is a creditor for the value of the deceased’s shares, not a shareholder.
- A claim for payment based on an Article 1843-4 expert valuation need not challenge the corporate valuation resolution and is subject to the ordinary five-year limitation period, running from the expert report when the claim could first be quantified.
Why It Matters
The ruling clarifies two distinct rules governing an unapproved heir’s financial claim in a French simplified joint-stock company. It fixes the default valuation date at death while allowing the heir to pursue the expert-determined payment without first obtaining annulment of the company’s resolution.
For companies and estate beneficiaries, the decision makes the articles’ valuation provisions especially important: absent an express rule, post-death changes in company value cannot shift the relevant valuation date away from the date of death.