2IntlCompLQ564

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1/16

Citation: 2 Int'l & Comp. L.Q. 564 1953

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2/16

THE

RIGHTS

OF

SHAREHOLDERS

I.-THE

CONTINTAL ocirt

ANoNYmE

WE propose here to

lay

before English-speaking

lawyers

a general

.survey of

the

rights of shareholders in that

form of socigtg which

is described in continental law

as socilti anonyme compagnie

anonyme or

socigt

par actions

;

and we shall endeavour

to do it

in

a

way

which will be

easily

understood by

common lawyers.

We shall

be considering in general

continental rights,

that is to say,

those prevailing in

the

civil

law

countries

not

only

of

Western

Europe

but also of Latin

America. We shall leave

aside the Soviet countries,

where the

problems of shareholders'

rights do not arise in

the

same

way as

under

the so-called capitalist

r6gimes; it may even

be said

that

in

fact there

are no socigt~s anonymes

there with private

capital and therefore

these problems do not

arise in practice. We

shall

also

disregard

the law of the United

States of America, which

lies

within

the common

law framework

and

is

more accessible to

English

lawyers.

For

English

lawyers,

who

are

not

familiar with

continental

law,

an elucidation

may

now

be

given of the terms socijt6 socilti

anonyme or

socijt5

par

actions

action

and actionnaires.

There

is no exact English

equivalent of the term

socigti

which

does not

correspond to

society.

2

In

fact soci t

corresponds

The French

term

societe

anonyme

adopted

in

the Commercial

Code of 1807

has

been also

adopted

in Belgium, Portugal and certain

Latin

American

countries

such as

Argentina, Chile, Uruguay,

Colombia and

Mexico.

The new

Spanish legislation of

1951 also uses the

term sociedad anonima while

the

term

compania anonima from

the Spanish

Commercial

Code is

also

to

be found

in Peru,

Venezuela,

Cuba

and Ecuador. The Portuguese

word

companhia

is

synonymous

with sociedade anonima

in Brazil. In Germanic countries

the

corresponding term

is Aktiengesellschaft

that is to say, so idtd par

actions;

similarly the new

Italian legislation

uses

the

term

societd per

azioni.

We may note as

a

matter of

interest that in

Quebec

the local code

uses the

term

socidtd par actions

because socitd anonyme

signifies a kind of partnership

with

one or

many dormant partners,

that

is

to say, a secret association, called

association

en

participation

in

France,

but

called

socidt6

anonyme

in

old French

law.

Finally we

may

add that

in

countries where the

term

socidtd

anonyme is in

use socigtd

par actions

means any association which

issues shares, that

is

to

say,

the socigtg anonyme. The sociitd

commandite

par

actions

a common

form

in continental

law

which has no equivalent

in English

law;

it

is a kind of

limited partnership,

which

is

a

legal

entity and the capital

in

which

is

represented

by

shares of the participants,

whose

liability is

limited.

2

The

English

term

society

corresponds,

in continental

law, to

those

associations

which are not

organised for profit and

which are called associations

in

Latin

countries. In

Germany

this

class of

association are called Vereine

not

organised

for profit; but

there

is a

difference from

the

Latin countries

that

socidtes

may

in

Germany

have

disinterested objects,

and

in

this

case they

are


3/16

The

Rights

of

Shareholders

to

that type of partnership

or company which is organised

for

profit.

3

The

main types of

socigt9

in continental law are

:-

(i) Socigtg

en norn collectif which is

more

or

less

equivalent to

a

partnership

';

(ii)

ocigtj

en commandite

simple which is equivalent

to

a

limited partnership ';

(iii) Soci~td

en commandite par actions and

socilte

en participa-

tion

societd

occulte),6 which have no

equivalent in English

law.

(iv) Socit anonyme socigt6

par actions)

commonly

translated

as company.

But

this translation is

imprecise

since the

term

company covers

several

types of

association

unknown

to

continental

law,

such

as

the company limited

by guarantee and the unlimited

company

;

on the

other

hand companies

having

a disinterested

object-charity,

religion, art, science-cannot in Latin

countries be socigtis

anonymes. Further,

an

English

company may be public

or

private; and private

company

corresponds to the

socigt a responsabilit6 limitge 8

The equivalent

therefore

of

the

soci~t

anonyme soci~t6

par

actions)

is the public

company

limited

by

shares.

The words

action

and

actionnaire

are equivalent

to

the English

share

and shareholder, though

in the

case of a private company

the

English terms

correspond

rather

to part sociale

and associi of

socigtg respons bilitg

limitge 1

However the share is a negotiable

instrument and

bearer

shares

are outspread, but

as

we shall see it

is

possible

to

have shares in

the holder's name and

in certain

countries, shares

payable

to

order.

We must note

that

the

portion

of

capital

attributed

to

each share-

holder is always

represented

by

his shares;

the English

notion of

the equivalent of the

English

society.

Sometimes,

however,

a wrong

terminology

is used; for example, in France an soci tion

may call

itself

8ocidtd:

thus

the Socidt

de

legislation

comparde of

Paris is not a socidtd

but an

association.

3

Save

in

German

law where they may

be socidtis not organised

for profit.

4 However, in most Latin countries

it is a legal entity. In the Germanic law

countries-Germany, Switzerland-and in

the new

Italian code,

these

societed

do not

have full

legal

personality.

a See previous

note.

6 See note

(1).

The

participation

is

a kind

of

secret

partnership with a

dormant partner.

7

Stille

Geseflschaft

in German

law: it

is an

association which

is

not

disclosed

to

third

persons,

that

is

to

say,

it

has a sleeping

partner

unknown

to

the public.

8

In German law,

Geselnschaft

mit beschrdnkter Haftung GmbH). In France,

socidtd

responsabilitd

limitde ; in

Belgium,

socidtd

de

personnes

d

responsa.

bilid

limitde;

in Spain, sociedad do responsibilidad

limitada;

in

Portugal

and

Brazil, sociedades

por

estas

do

responsabilidad

imitada.

9

So

in the United

States

the word

stock

s

used

to

denote shares.

OCT 958]


4/16

66

Internationaland

Comparative Law

Quarterly [VoL.

2

6

tock

is

unknown

in continental

legal

systems.

Finally

the

term

associg is

used in

the case

of soci~te

anonyme as a

synonym

for

actionnaire

10; and the French word

administrateurcorresponds

to the English director,

while

the French

directeur is the English

manager.

We

shall

now consider the rights

of

shareholders

in

the

societe

anonyme

societM

par

actions),

which we shall

call

company for

short

it being

understood

that by this is meant public

company

limited by shares;

and

we

shall not

be

concerned

with the societl

responsabilit6

limitee. For

while in English law the private

company is a company, subject

to

certain restrictions

but

enjoying

certain advantages, the

socidt6 a responsabilitJ limite

is

in

con-

tinental

law

entirely

distinct from the soci~tJ

anonyme.

II.-CLASSIFICATION

OF

SHAREHOLDERS RIGHTS

W e have elsewhere

12 propounded a

division

of shareholders' rights

into

those

arising

in

law

from

the

statutes

of

the company,

and

from

decisions

of the courts. In the first

class are the rights

con-

ferred

on shareholders by

law;

in

the

second rights

conferred

by

provisions

of the company's

statutes

3; in

the third

are

rights

which

are not expressly conferred

by any provision of

law

but

are recog-

nised by

the courts

for the

purpose

of protecting the position

of

minority shareholders.

On the other hand,

in

regard to

the

person

who

may

exercise

these rights, we may

distinguish

between

individual and collective

rights:

the

first

are capable

of

being exercised

by each shareholder,

the second

only by a group of shareholders

fixed by law or

the

company's statute.

1 4

III.-INDIVIDUAL

LEGAL

RIGHTS

The rights conferred

by law

upon

each

shareholder are

not

the

same in

all

legal

systems,

while

rights

recognised in several

countries

are

often

not of

the

same extent or

governed

by the same legal rules.

Speaking

generally, we

find the following rights:

of

member-

ship

in

the company; of sharing

profits; of

vote;

of

transferring

shares; of withdrawal from

the company; of control;

of contesting

10

So in England member is

a

synonym for shareholder.

11 But in

several

Latin American countries

we

speak

of directeurs,

directores and

not

of

administrateurs.

12

F. de Sola Canizares:

Revista

Juridica La ey

(Buenos

Aires)

16 5 50;

and

Report

from Toulouse Rev. Intern.

de Droit.

Comparg,

Paris, 1953,

no.

3).

sThe term

statutes here includes both

the

memorahdum

and

the

articles

of

association, the

English distinction between

them

not being recognised

in

continental law. Occasionally

a distinction is made between

the constitutive

deed

and

the statute of the

company, but the deed contains

the

statute

so

that

they

are in effect

one and

the same thing.

14 In some cases

a single shareholder, who holds

the required

number of shares.


5/16

The Rights

of Shareholders

the company's

decisions; of proceeding

at law against the directors;

of subscribing

new

shares;

of participation

in distribution of assets

on liquidation:

-

1)

The

right

of

membership

in the company

Every

person

who has

subscribed

shares

has the

right to main-

tain

his

position as

shareholder

and cannot

be excluded

from the

company

either

by

the

board

of

directors

or by

the

general

meeting.

Such

exclusion marks

the

lapse or

dispossession

of

the

shareholder's

title;

and it is

not open

to the company

to

nullify

or

dispossess the shareholder

of

his title. Even the

courts

cannot

compel

a

shareholder

to

sell

his

shares.

15

But

the

shareholders'

right

of membership cannot

be made

an

obstacle

to

a

modification

of

their

rights.

The

general principle

is

that

the

company's

statute

may

always

be amended

at

the

.general

meeting,

but the

applicable legal

provisions require

more

rigorous

conditions

for

this

than

for

other

decisions.

18

Expulsion

from

the

company

may

take place

in

the following

circumstances

:-

1)

if the

shareholder fails

in his obligation to

pay

the

value of

of the

shares subscribed,

here

the

company

may order

the

sale

of the

defaulting

shareholder's

shares.

In many

countries

this

is

expressly prescribed

by law

7;

in

other

countries

inclusion in the

company's

statute of a clause

covering for sale

of

shares

is

permitted

by law, and

even

in the

absence of

any express

legal

provision,

this

clause

is

accepted in

the

courts

1;

2)

upon

the

redemption

of

shares 2 ;

(8)

under

provisions

of

law covering

special

cases.

2

1

5

S. 210 of the English

Companies

Act

1948,

is an object

of

amazement

for

continental

lawyers.

1

In countries

where prior authority

is

required to constitute

a

company, the

authority

of

the Executive

power is

necessary for any

modification of

the

company's

statute:

this obtains

in several

countries of

South

America,

for

example, Argentina,

Chile,

Uruguay

and Colombia.

17 Germany, Law

of

1937,

Art. 58;

Italy,

Civil

Code,

Art.

2344;

Switzerland,

Code of Obligations,

Arts.

681,

682;

Spain, Law

of 1951,

Art. 44; Brazil,

Law

of

1940,

Art.

76;

Mexico, Law

of

1934,

Art.

118; Ecuador,

Commercial

Code,

Art. 320.

18 Argentina,

Commercial Code,

Art.

333.

19

So

in France:

see Escarra,

Manuel

e

Droit

Commerciel

(Paris,

1947)

p. 423,

and Ripert,

Traitd 416mentaire

e Droit

Commerciel

(Paris,

1950)

2nd ed.,

pp.

420

421.

2 But

here

the

company's

statute

contains a

redemption-table

or

redemption is

carried

by

drawing

lots.

Generally the shareholder

receives

another

share

called a dividend

share

action de jouisoance),

entitling

the

holder

to participate

in the profits of

the company.

21

As, for

example,

in France

the

confiscation

of M.

Renault's

shares

in the

Renault company

or

the extinction

of rights

acquired

by

the Germans

in

French

companies

during the occupation.

OCT. 1958]


6/16

568

International

and

Comparative

Law

Quarterly [VoL. 2

2)

The

right o

sharing profits

In the Latin countries

of Europe and

America, the

right to

share

in profits is

a fundamental

right

in all

socidtds including

the

soci~tj

anonyme; and it

is impermissible

to deprive

one or more

members

of their

right

to share

in profits.

22

In

countries where

Germanic

law

21

prevails

the socijt6 par

actions may have

an object

which

is not

of an

economic

nature, but where its object

is economic

each

shareholder

is entitled to

share in the profits.

24

But in the Latin

countries,

as well as the

countries

under

Germanic law, it

is

not

essential

that the right

to share

in the

profits be based

upon equality

between

the

shareholders.

Priority

shares,

that is to

say, preference

shares or privileged

shares, enjoy

a

preference in the distribution

of dividends

and

sometimes

also

in

the

distribution

6f the

company s

assets

upon

liquidation;

such

types

of share are

recognised in

all legal

systems 25;

but

in some

the extinction

or

restriction

of the privilege

attached to

a

particular

category

of share

must

have the approval

of

an

extraordinary

general

meeting

of the shareholders

in this

category.

2 s

We must

note finally

that

in some countries

it is possible

for the

company s

statute to sanction

the

payment

of fixed interest

during the period

of establishment

of the

company but

subject to conditions

which

vary

according

to the

legal

system.

2

8) The

right

to

vote

The

shareholder s

right

to

vote

is in

many

countries

fundamental.

So

in France it

is

unlawful

to issue

shares

without

a

voting right

attached or

for the

shareholder

to surrender

or

transfer

his

vote

8;

indeed the law

declares

void all

agreements in

respect

of the

right

22

Such

a

provision in

a

company s statute

would be

called

a leonine

clause

after the

Phaedrus

fable of the lion who formed

an

association with the

other

animals but himself

took

all the shares. This rule

against

deprivation

of

profits is to be found

in most civil codes:

France Art.

1855;

Spain

Art.

1691

Argentina

Art.

1686; Brazil

Art. 1372

In

Italy

the shareholder s

right

to

profits is

derived from

Art. 2247 of the

Civil Code.

3

Germany

Civil

Code,

Art. 705 Switzerland Code of

Obligations,

Art. 620

24 German

Law

of 1937,

Art.

53,

54; Switzerland Code of

Obligations,

Art.

660.

5

In France the institution

of these shares

dates from the Law

of

November 16,

1903.

In

most systems there

is express provision

for them: Germany

Law of

1937,

Art.

11;

Switzerland Code

of

Obligations,

Art. 654;

Italy

Civil

Code,

Art.

2348; Spain Law

of

1951,

Art.

37;

Argentina

Commercial

Code, Art.

334; Brazil Law

of 1940, Art. 9; Mexico Law of

1934, Arts.

112,

113.

6

France Commercial

Code,

Art.

34; Germany

Law

of

1937,

Art. 117;

Switzer-

land Code

of

Obligations, Art.

654; Italy Civil

Code, Art.

2376;

Spain

Law

1951,

Art.

85;

Mexico

Law of 1934,

Art. 195.

7 Germany

Law of

1937,

Art.

54; Switzerland Code

of Obligations,

Art. 676;

Brazil

Law

of 1940,

Art.

10;

Colombia Law of 1931,

Art.

36;

Mexico

Law

of

1934,

Art.

123.

In France this rule

is recognised by

the courts; but it

has

no

place

in

other

countries, for

example, Italy.

8 Ripert, op. cit.

p. 442.


7/16

The

Rights

o

Shareholders

to

vote.

2

Spanish

law

rests

upon the

same

principles 30

and

other

legal

systems

treat the

right to

vote

as fundamental.

31

However

in some

countries 32 the

law allows the

issue

of

shares

without votes attached

and

with

right

to

vote restricted

to

some

resolutions

specified by law.

3

3

Multiple voting has been forbidden

in

a

number

of countries 31

but is

allowed

in

others by

law

15

or,

in

the

absence

of

a

rule

of

law

excluding

it,

by

the

courts.

3

6

Finally, in

some

legal systems

a single

shareholder

is not

per-

mitted

to

hold

a number of

votes higher

than th t fixed

by law 'r;

or alternatively

the

company's statute

may establish

such a

limita-

tion or

require

a

given

number of

shares

to

be represented

at

general

meetings

of the company.

9

But

in

this case

the share-

holders may

combine to produce

the necessary

number

and

may

be represented by

one

of

themselves.

(4)

The

right to

transfer

shares

We have

already

seen

that,

under

continental laws a

share is

essentially a negotiable

instrument ' : thus,

the

shareholder

may,

if

the share

is

a

bearer

share,

transfer his

title

by

simple

delivery

to

another

person.

If however the

share is registered

in the

name

of the

holder in the

company's books,

transfer

is

allowed in

some

systems

by

endorsement; but this is rare

in

practice.

The

shareholder's right to

transfer

his

shares

may

be

subject

to

limitation.

In

the first

place,

some legal systems

forbid, for fiscal

reasons, the

issue

of

shares

to bearer

1;

on

the other

hand

it

is

29 Decree-Law of

August

31,

1937,

amending the

Law of November

13,

1933. But

the

courts

allow

agreements

by

groups of shareholders

to

vote in a

certain

sense

and

nothing

precludes the

exercise of carte

blanche powers.

30

Law

of

1951, Art.

39.

31

Belgium Law of

1935, Art.

74;

Colombia

Decree

of

1950,

Art.

54.

32

Argentina

Commercial Code

Art. 325;

Portugal Commercial Code

Art.

185.

In

Uruguay

they are recognised

in

administrative jurisprudence:

Resolution

of

March

15,

1946. In

Germany

(Law

of 1937,

Art.

115)

and

Brazil

(Law

of

1940

Arts.

9,

10 and

81) it

is possible to

have

shares, which are

privileged

in

the

distribution

of

profits

but carry no

vote.

33 Italy

Civil Code

Art.

2351;

Mexico

Law

of 1934

Art.

113.

4 France

Law

of

1933; Germany Law of

1937, Art.

12;

Italy

Civil Code

Art. 2351; Spain

Law of 1951,

Art.

38; Belgium

Law

of 1935, Art.

74;

Brazil Law

of 1940

Art. 80;

Mexico

Law of 1934 Art.

113.

Switzerland

Code

of Obligations,

Arte. 627, 693.

16 Argentina, Uruguay,

Peru,

Chile.

7 Argentina

Commercial

Code Art. 350;

Belgium

Law of

1935, Art.

76;

Uruguay

Commercial

Code

Art.

420.

This limitation

scarcely

works

in

practice,

since

the holder

of a large number

of shares

will

make

a fictional

transfer

of them before

the meeting.

-1

Germany

Law

of

1937,

Art.

114;

Switzerland

Code

of

Obligations, Art.

692;

France

Law

of

1867,

Art. 27.

9 France

Law

of 1867, Art.

27;

Spain

Law

of 1951

Art. 39.

40

Vide

supra

41

In

France the bearer

share

had

been

to all intents and

purposes abolished

by

the Laws of 1941 and

1942

but it

was

reinstated in

1948.

In Italy

it was

abolished

by

the

Decree-Law

of

October

25, 1941

and in

Ecuador

by

the

OCT. 1958]


8/16

570 Internationdl

and Comparative Law

Quarterly [VOL.

2

generally

required

by

law that

shares

be

registered

in

the

names of

the holders

until

the whole nominal

value has been

paid

up,

2

and

only

in a few systems

is it sufficient to pay

up one half.'

3

Limitations

upon the transfer

of shares

contained in the

pro-

visions

of

a

company's

statute

are

recognised

by

the

courts,

4

and

in recent legislation

are

established

by

law.

45

Limitations con-

tained in company

statutes lay

down

a right of

pre-emption,

in

cases

of

transfer, in

favour

of

other shareholders

in

the

company

or the

board

of

management;

or

they may provide

that transfer

can be

made

only

to

persons

of a given nationality

or

to other

shareholders,

and

so on .

5) The right of

withdrawal from

the company

In

some

legal

systems

the

shareholder has

the

right

to

withdraw

from the

company

in cases

where

the

general

meeting

of the

com-

pany has adopted

one

of

a category

of

resolutions,

which

is

fixed

by law.

The dissident

shareholder

can

require the

company to

reimburse him

with

the money

value

of his shares.

'

6) The

right of control

In

principle

the shareholder's

right to

exercise individual

control over

the administration

of the

company

is very

restricted.

He

is

accorded

by law

only

the

right

of

examining

the

company's

balance

sheet,

accounts,

and

report,

within

a certain

number of

days

before

the general meeting.'

It is unusual

for

special

rights

Law

of

January

29 1948.

In Spain the

new law

of

1951

permits the

existence

of bearer

shares but

to little

effect since

the

law

of

September 19 1936

which continues in

force requires all transfers

of shares to be

made

by deed

witnessed

by a stockbroker.

In

Chile the

governmental authorities

disallow

company statutes making

provision

for bearer shares.

4

France

Law of

1867

Art. ;

Germany

Law of

1937

Art.

10; Italy

Civil

Code

Art.

2355; Spain

Law of

1951 Art. 33; Switzerland

Code of Obliga-

tions, Art.

683;

Belgium

Law

of 1935

Art.

96;

Portugal

Commercial

Code.

Art.

166; Argentina Commercial

Code

Art.

326;

Brazil Law of 1940

Art.

23;

Mexico Law of 1934

Art. 117.

43

Peru

Commercial

Code

Art.

171.

44 For

France Ripert,

op

cit.

p. 442;

Belgium

Restan,

Traitd des Socidtds

Anonymes

I.N.

p. 673.

4 5Germany

Law

of

1937

Art.

61; Switzerland

Code

of Obligations,

Arts.

627

686; Italy Civil

Code Art.

2325; Spain

Law

of

1951

Art.

46; Mexico

Law

of

1934

Art. 130; Brazil Law

of

1940

Art. 27.

46 Legal

provisions on the point

vary

from country to country.

The

resolution

may be concerned with

a

change in

the company's

objects or

with

merger or

transformation.

47

Argentina

Commercial

Code

Art. 354;

Italy

Civil

Code

Art. 2437;

Brazil

Law

of 1940

Art.

107;

Mexico

Law

of 1934

Art.

206;

Uruguay Law of

July 19 1909; Venezuela

Commercial Code Art.

287. But the

right of

withdrawal

does not exist

in France,

Belgium,

Spain

and

several

other

countries.

48

France

Law of

1867 Art. 35; Germany

Law of

1937

Art.

125;

Switzerland

Code

of

Objections,

Art. 2432; Spain

Law of

1951

Art.

110; Colombia

Commercial

Code Arts.

586 587; Mexico

Law

of

1934

Art. 173.


9/16

The Rights

of Shareholders

of

control to

be

conferred upon shareholders by law, and, even

in

those

counties

where rights

of individual

control

generally

obtain

in all

types

of socigtJ,

the

courts

tend

not

to give

effect

to

them

in

the

case

of the

soci~t6 anonyme.'

The right

of

control

is,

in almost

all systems,

exercised

not

individually

but

through intermediaries

appointed

by

the general

meeting,

equivalent

to the auditors

in England.

The

English

con-

cept

has

been

imitated

in many other

systems,

but

so far

with

little

success

because in

continental

countries

and

in

Latin America,

the

impressive incorporated

accountants

do not

exist

as they

do in England

able

to

warrant

their independence,

competence

and impartiality.

In

countries

where

a

permanent

organisation exists

for

State

supervision

of the

affairs of

companies,'

2

the

shareholder may

on

his

own

behalf

approach

the administrative

organ

responsible for

the

supervision

of

socigt~s

anonymes.

7) The ri ht

of contesting

the

company's

decisions

A shareholder

may

always contest

at law

the decisions of

the

company

taken

in general meeting,

and

by normal

process,

when-

ever the decision

involves

a

breach

of

the

law or

of

the company's

statute

The

laws of some countries

expressly

prescribe

this

right

1 and

some

even lay

down

a special

procedure

1

for its

exercise;

and we

shall see

th t some

legal systems

establish

this

right

in

favour

of

a

minority

of

shareholders.

49 France, Law

of 1867,

Art.

35; the shareholder

may examine

at any time

documentary

information

presented

to

the

general

meeting.

In.

Italy

Civil

Code,

Art.

2422)

the register

of

shareholders

and

the minutes

of

the

general

meeting

may be

inspected.

In Switzerland

Code of

Obligations,

Art.

697)

a

court

order

may be

obtained

for production

by

the company

of extracts

from

its

books or papers

on specific

points.

5 R Fernandez,

Codigo

e

Comercio

Comentado

(Buenos

Aires, 1943)

I, p. 396.

The English

method of

private

scrutiny

of a company's

affairs has inspired

the

following

legislation:

France, Decree

Law

of 1937;

Germany,

Law of 1937,

Arts. 118,

136;

8witzerland,

Code of

Obligations,

Art.

727; Italy,

Commercial

Code,

Art. 2397;

Argentina,

Commercial

Code,

Arts. 325 and

340;

Belgium,

Law of 1935,

Art. 64; Portugal,

Commercial

Code, Art.

175;

Spain,

Law

of

1951,

Art.

108;

Brazil,

Law of

1940,

Art. 124;,Colombia,

Law

of 1931,

Art. 58;

Venezuela,

Commercial

Code, Art.

314.

5

For

example, in

South

America,

Argentina,

Chile, Colombia,

Uruguay,

Bolivia.

53 It

should be

noted

that

in

some

countries, for example,

Ecuador (Decree

of

March

24, 1935)

the supervision

of

the so idtds anonymes

is

in the

charge of a

judge,

who upon

the application

of

a

shareholder must appoint

an

expert

to

investigate

the company's

affairs.

5 Switzerland,

Code of

Obligations,

Art.

706.

Italy,

Civil Code,

Art.

2378;

Spain, Law

of

1951,

Art.

70; Portugal,

Commercial

Code,

Art.

186; Venezuela,

Commercial

Code, Art. 295.

56 See.

infra

OCT.

1958]


10/16

572

Internationaland Comparative

Law

Quarterly

[VOL. 2

8)

The right of

proceeding at law against

the

directors

Apart

from criminal

proceedings

based

upon

the penal

codes

the shareholders

may

bring proceedings

personally

when they

have

suffered damage

through

the

fault of

the

directors,

and

this rests

upon

the

general

principles

of

civil liability.

8

In

fact however it

is

very

unusual for

a

shareholder

to be

personally

and directly

injured;

more

often damage

is

caused

to the company

itself,

which

may bring proceedings

in its

name:

action

sociale

59;

though

such

an

action

in practice is

sometimes

brought personally

by

a

share-

holder.

6 0

9)

The

right of subscribing

new

shares

When

the

capital

of

the

company

is

increased,

several

modern

enactments

have

given

to

each

shareholder

the right

of subscribing

to the shares

issued

to

effect

the

increase

of

capital, in

proportion

to their original

shareholding;

this

may be

the case

even

where

the company's

statute

has

not envisaged

it.

10)

The

right of

participation

in

the

distribution

o

assets

on

liquidation

Since

a

share

represents

a portion

of the

company's

capital, it

is

plain

that

the shareholder

is

entitled,

in proportion

to

his

holding,

to share

in

the assets

upon the

company's

liquidation.

The

com-

pany's

statute

may

create

a privileged

class

of share

for

purposes

of

liquidation.

6

2

IV.-COLLECTIVE

LEGAL RioHrs

For

the

purpose

of

protecting

minority shareholders,

there are

various legal

provisions

designed

to

give

certain

rights

to a group

of

shareholders

or

to

a single

shareholder

having

a

number of

shares

prescribed

by

law.

Thus

we

find

the

following:-

(1) the

right of

a minority

of the

shareholders

to

convoke a

general

meeting of the

company

;

57 Administrateur

s

the

equivalent

of the English

director.

58

France Civil

Code, Art. 1382;

Germany

Civil Code,

Arts. 823,

826.

Certain

bodies of law expressly

mention

this

right

of shareholders,

for

example,

Italy

Civil

Code,

Art.

2395; Spain

Law

of

1951,

Art.

8 ; Brazil

Law of 1940,

Art.

123.

59 See

infr

6 Ripert,

op cit.

p. 487; Fernandez,

op

cit.

p. 505.

6

Germany

Law

of

1937,

Art.

152;

France

Decree

Law

of

1937;

Switzerland

Code

of

Obligations,

Art.

652;

Italy Civil

Code, Art. 2409;

Spain Law of

1951,

Art.

92;

Brazil

Law of 1940, Art.

111;

Mexico Law

of

1934,

Art.

132.

62

See

supra.

6

Germany Law

of

1937,

Art. 106; Argentina

Commercial

Code,

Art.

348;

Ecuador

Commercial

Code,

Art.

311; Italy

Civil Code,

Art. 2367;

Mexico

Law of

1934,

Art.

184;

Switzerland

Code

of

Obligations, Art.

699.


11/16

The Rights

o Shareholders

2) the right

of a minority to

require

the adjournment of the

general

meeting

64;

(8)

recourse to

the

courts against

decisions of

the

general

meeting, to obtain, in

some

systems, an order

suspending

the

execution

of

the resolution which

is

opposed ;

4) compulsory

representation

of minority interests

in

the

board

of management 66;

5)

compulsory

representation

of

the

minority

in

the

super-

visory

body,

7

that is to

say, the auditors;

(6) the

right of the

minority to call

for an investigation

of the

company ;

(7)

other

special rights

conferred

in some systems

upon

the

minority

shareholders.

V. RIGHTS

UNDER THE

COMPANY S STATUTE

As

regards the

rights conferred

on shareholders

by

the company's

statute

itself,

7

they

may

be taken

away only by

a decision of

the

general meeting

of

the company,

taken subject

to

the

strict

con-

ditions

governing the

amendment of the

company's

statutes,

7

and

we see further

that in

order

to protect the

minority, the courts

will annul resolutions

of the company

even in cases

where the

legal

formalities have been observed.

VI. RIGHTs ACCORDED

TO SHAREHOLDERS

IN THE

COURTS

Into

this

category fall

those

rights

which

are

not expressly

granted to

shareholders by

statute but which

are recognised

and

enforced

by

the courts in

regard

to soci~t~s

anonymes

on the

basis

of

general principles

of

law or

of articles

of

a

code

having

a general

64 Ecuador Commercial

Code, Art.

311; Italy Civil

Code,

Art.

2374;

Mexico

Law

of 1934,

Art.

199;

Venezuela

Commercial

Code,

Art.

293.

65

Ecuador Decree No. 153

of

1936;

Italy Civil Code,

Arts. 2377, 2378; Mexico

Law

of

1934, Art.

201; Norway

Law of

1910,

Art. 67;

Sweden,

Law No.

14 of

1944; Venezuela

Commercial Code.

Art.

295.

65

Colombia

Law

No.

58

of

1931,

Art. 29;

Mexico

Law of 1934, Art.

144;

Switzerland

Code of

Obligations, Art. 708.

67

Brazil

Law of 1940,

Art. 125; Mexico Law

of

1934, Art.

171;

Sweden

Law

No.

14

of

1944.

68 Germany

Art.

118;

Ecuador Decree of

March 24, 1936;

Italy

Civil

Code,

Art. 2409; Venezuela

Commercial Code,

Art. 296.

69

For example,

Art. 358 of

the Argentine Commercial Cbde

gives

a minority of

shareholders

resident abroad

the right

to

form a group and

nominate repre-

sentatives

to the

general

meeting

of the company.

7

See

A.

van der Heyde

Gassigo,

La proteccion

estatutaria del

accionista

(Buenos

Aires,

1938).

71 The

solutions

vary.

Some

legal

systems,

for

example,

Spain (Law

of

1951,

Art. 58), require a quorum to

be

present;

others, for example, Germany

(Law

of 1937,

Arts. 146

and following)

require

a

qualified majority;

others,

again,

such

as

France

(Law

of

1867, Art.

31),

require

both.

I.C.L.Q. 2

87

OCT.

1958]


12/16

574 International and

Comparative

Law

Quarterly [VoL. 2

bearing.

It is in effect a

matter of

setting

limits

to the

powers of

the

general

meeting

of

the

company,

by allowing the minority

of

shareholders in

certain

cases

to

have annulled resolutions passed

by the majority

even

though

all

legal

formalities have been

observed.

We will now survey

the

different

principles which are

to

be

found

underlying this

practice in

continental

law :-

(1) The essential

character

of the contractual relation: here we

find a

principle

derived

from

the contractual

relationships within

the company, nowadays

debated

and in our view

inadequate.

The

theory, which

has been developed

by

French

7

jurists

and

tribunals,

has

influenced

the courts of other countries and par-

ticularly

Spain.

7

It supposes

that, since

the

company rests upon

a contract,

the

intention of

the

contracting

parties must be

taken

into

account and that there are clauses

in the

company's

statute,

which are

essential

to the contract

in

that the contracting parties

would not

have entered

into

it

without them,

and which cannot

therefore

be amended

without the

consent of all the

members.

(2) The special

rights of

the shareholders:

here we have a

theory

of Germanic origin worked out on

the

ground of

the

applicability

to

companies of Article 35 of

the

Civil Code, which

provides

that

the

special

rights

(Sonderrechte)

of

members

of an

association cannot be

modified by decisions of

the

general

meeting

of

association

taken without the

concurrence of those

members.

However,

under

this German

doctrine various

interpretations

of the

provisions

of

the

code have

been

propounded:

thus

some

writers regard as special rights

those which belong

to

all the share-

holders, as being

rights

attaching to

the

very status

of shareholder;

while

others

confine

these

special rights

to

privileges conferred

by

the company's

statute or

the

general meeting upon

one share-

holder

or

a

group

of

shareholders. The terminology

is

equally

confused: writers

speak

of rights

as inherent,

special,

particular,

individual,

essential,

intangible,

or

(Swiss

Code,

Art. 646)

acquired.

7 See

Lyon, Caen

&

Renault,

Traitd

de

droit

commercial

2nd ed.

1892) p. 647

et seq ; Appleton,

Du

droit des assemblies extraordinaires

de

modifier s

statuts (Paris, 1902); Boncart, De

l organisationet des

pouvoirs

des assembldes

gengrales

(Paris,

1905); R. David,

La

protection

des

minoritds dans

s

socidtds

par actions (Paris, 1929).

7 See

A.

Polo,

l

respeto

a

las bases esenciales

de

la

sociedad, Arriba

16.8.1942;

J Garrigues,

Tratado

de

derecho mereantil

(Madrid, 1947).

On the

powers of

the

shareholders meeting in Spanish

law,

see A.

Vicente Gella, Las

resoluciones

de

la asambles

general de una sociedad anonima (Zaragoza, 1932);

J

Dalmases

Jordana, El regimen de mayorias en la

sociedad anonima (Estudios

de

derecho

historico y moderno, Madrid, 1949); F.

de

Sols

Canizares,

Le

droit

espagnol

es

socidtis anonymes (Paris, 1947) pp. 153 et seq.


13/16

The

Rights

of

Shareholders

In

any

case, it

is

a question

of

rights

which

are'

excluded from

the vote

of

the

general

meeting

I

but

German law has never

provided

either a definition or an

enumeration

of these

rights.

5

The Swiss Code

of 1986 gives an

inadequate

definition of special

rights-

acquired

rights

in

Swiss terminology, though it

does

specify some

of them.

6

The Brazilian

law

of

1940, inspired

according

to

the author

of

the

draft law

77 by that

part of the

federal

constitution

which deals

with individual rights, lists a

number

of

rights

which

cannot

be

extinguished

either by

amend-

ment

of

the

company's

statute

or

by

the

general

meeting.

7

8

However rights

thus

enumerated by law are plainly

legal

rights,

rather than rights

accorded

in

the courts. There

is a

vast litera-

ture

upon

the

subject

of

special

rights

in Germany,' Switzerland,

8

France,

8

' Italy,

8

Spain,

8

' Portugal,

8

Argentina,

8 5

Brazil,

8

Peru.

3) Application of principles of natural justice: The

courts

74

E. Mezger,

Le

nouveau

rdgime

des

socitds

anonymes en Allemagne

(Paris,

1939) p. 305.

75 Art. 35 of the Civil Code is

confined to

indicating

that

certain rights

only

may

not be

affected. The

new

law of

1937

on companies offers no definition

of

these

rights; the official commentary

upon it regards as special

rights

all

the rights

of

sharing in the

administration

possessed by members of

the

company: Schlegeberger-Quassowski,

Commentary, p. 464; but this is not a

definition,

much less

an enumeration.

76 Art.

646 of

the Code

of

Obligations.

77 T.

de Miranda

Valverde,

Sociedades

per aQoes

(Rio de

Janeiro,

1941)

I p.

376.

78

Art.

78 of

the

Decree-Law

of

September 26,

1940.

79

Alexander, ie Sonderrechte der Aktiondre (Berlin, 1892);

Lehmann,

Das

Recht der Aktiengesellschaften

(Berlin, 1894

and

1904); Fischer, Die ktien

gesellsohaft (Leipzig,

1916);

Horrwitz,

Das

Reeht der Generalversammlun en

der Aktiengesellschaften 1913);

Bondi, Die

Rechte

der Aktiondre (Berlin,

1930);

Ritter, Sonderrechte

der Aktiondire

(Hausrechts-

und

Gerichts-Zeitung,

1934) pp. 417 e seq.

80 Bachmann,

Die Sonderrechte des Akltiondrs

(Zurich,

1902);

Wieland, Handels-

recht (Munich

and

Leipzig, 1931); Siegwart,

Aktiengesellschaft, Kommentatur

(Zurich, 1945)

2nd ed .

8

Thaller, Note

to

Dalloz

1893)

pp.

105

e

seq.;

Appleton,

op

cit.,

supra,

note

72;

Boncart,

op

cit.,

ibid.;

Chizaut, Les peuvoirs

e l assemblde

extraordinaire

dons les sociUds par actions

et les

droits propres

e l actionnaire (Toulouse,

1906). Lauquest, Des

droits

de I actionnaire dans les sociftds anonymes (Paris,

1908); H. Leohner, Les

droits

propres des aetionnaires

(Nancy,

1933); Garreau

de

]a

Mechenie, Les droits

propres des

actionnaires

(Poitiers,

1937).

82 Vighi,

I

diritti individuali

degli azionista (Parma, 1902);

Navarrini,

Della

soCietd e della associazone

commerciale (Milan,

1924);

Ferra,

La.

Tutela de

la

minoranza

nelle societdt

per azioni (Dir. Prat. Comm. 1932) I, pp. 23 et seq ;

Ascarchi, Studi in

tema

e

societd

(Milan,

1952)

pp.

82

et

seq

83 J. Garrigues,

op

cit. in

note

73, pp. 971

e

seq.; and see works referred

to in

note 73.

84 Bonbosa

de Nagalhaes,

Revista

da

Ordem

dos advogados (Lisbon,

1948)

No.

1-2.

85 Goldschmidt,

Problemas

juridicos

e

la sociedad

anonima, Chap. V

(Buenos

Aires,

1946).

86

W. Ferreira

and C. Alves de

Aranjo,

0

direito insurreccional do aecionista

Sao Paulo,

1939).

67 Baldo

Serkovic, La

Sociedad

anonima

y la

asamblea

general

de aeCionistas,

Revista de Derecho

Ciencias

Politicas

(Lima, 1945)

No.

111, 1947.

OCT.

1953]


14/16

76 International

and Comparative

Law

Quarterly

[VOL.

2

sometimes apply

principles of natural

justice in order

to protect

minority

shareholders. Among

these

rules

we note the

following:-

(a)

agreements must be carried

out in good faith. This

rule

of

the French

Civil Code,

and

of

other

codes,

9

may

be

applied

to

companies

90 ;

b) restraint of

actions

contra

bonos

mores. The German

courts have adopted

this

principle

to

protect

minority

shareholders.

(4) The

abuse of rights

and

abuse of

powers:

The doctrine

of

the

abuse of

rights,

developed

by

famous jurists in France

and

other

countries 9 is to

be found expressly

set out in several codes

and is

applied

by the

courts in other legal

systems. '

It

has

been

used,

particularly in France, to

protect the minority against

abuses

by the

majority

of

a company.

4

We also

meet

the doctrine in

German

and

Swiss

law, not only declared

in a general form

in the

respective codes

but

also set

out

in

the

detailed provisions

relating to

companies.

9

The

doctrine of

the

abuse of rights coincides

to some extent

with

that

of administrative

law

called

the

abuse of

powers,

which

is

applied

to companies29

5)

The institutional

theory: The

institutional theory, developed

by

Haurion,

95

Renard,

99

and other French

jurists1

has

been

88 Article

1134.

9 Belgium,

Civil Code,

Art.

1134;

Spain,

Commercial

Code, Art. 57.

90 R.

David,

op.

cit.,

p.

41; Garrigues,

op.

cit., p. 1006.

91 By

the

application

of

Articles 138

and

826 of

the Civil

Code: see cases cited

by

David,

op.

cit., p. 150, and by Mezger,

op. cit.,

pp. 286,

309.

92

Josserand,

De

l'abus

de

droit

(Paris, 1905 ;

De

l'esprit

des

lois et

leur

relativitd (Paris, 1939) 2nd

ed.;

Saleilles,

Thgorie gndnrale

de

.l'obligation

Bull.

Soc.

Llg.

(1905).

The

literature on the

subject

of

the

abuse

of

rights

is

substantial

in all countries:

see A.

G.

Spots, Relatividad

y abuso de los

derechos

in Volume

1,

Part

2

of

his Tratado de

derecho civil

(Buenos

Aires,

1947) for the

most

recent and complete

work.

93 V. M. Markovitch, La

thdorie de l'abus des

droits en droit compard (Paris,

1936).

9.1 Decugis,

-

L'abus

du

droit

dans

les

socidtds

par

actions,

Journal

des

Socidtds,

1925, p. 481;

David,

op.

cit.; Bosvieux, A., De l'organisationet des

pouvoirs de

l'assemblie

extraordinaire des

actionnaires

(Paris,

1933);

C.

Harpin and H.

Bosvieux,

Traite

Gdndral

des Socidtds,

7th

ed.

(1935)

II, pp. 484

et

seq.;

Copper Royer,

De

la

notion

juridique

de l'abus du droit et de

son application

possible

en matiere des socidtes,

Rev. Spec.

de Socidtds,

1937,

p. 1; Coppens,

L'abus

de

la majoritd dans

l s socidts

anonymes (Louvain, 1947). As regards

the

possibilities of the

application of

the

doctrine in Spain: F. de Sola

Canizares: Le

droit espagnol, pp. 161 et

seq.,

and for the new Spanish

law see

F. de

Sola

Canizares, Tratado

de sociedades anonimos (Barcelona, 1953).

95 German

Civil

Code, Art. 226;

Swiss Civil Code,

Art. 2.

96 See

in particular

Art.

197 of

the German

law

of 1937

and Art. 706

of the

Swiss

Code of

Obligations.

97

Abus

de

pouvoirs.

98 M. Haurion,

Principes de droit

public (1910-11); L'Institution

et le droit

statutaire, Rec.

Legisl.

de

Toulouse,

1906;

La

Thdorie de l'institution

et de

la

jondation, 4th volume of

the Nouvelle Journde.

99

G. Renard,

La thdorie de

l'institution (Essai

d'ontologie juridique,

Paris,

1930).

1

See

note

1

on page 577.


15/16

The

Rights

of Shareholders

welcomed and

discussed in many

countries

2; it is well known and

its examination here

would

transgress

the limits

of the

article.

We

will remark

simply that

this theory

has been applied

particularly to

companies,

and may be regarded as

a solution taking the

place of

the

old

notion

of

contractual

relationship.'

However,

the pure

and

simple application

of the institutional

concept

should

not rest upon

the theories

of

Haurion

and Renard,

for

they

have

not been

fully

worked

out

and

fall

rather within

the

framework

of

philosophy

and

sociology;

and

it is

now

for jurists

to

develop them.

We

think

that

the

institutional theory

should

be

applied

only to

important

enterprises,

which

should, in

the

other

way, be

the only

ones which

can

adopt the

legal structure

of socigtj

anonyme

and this by

application

of

what

we

have

elsewhere

called

the

criterion

of

dimension.

The

institutional

conception

of the company

involves

by defini-

tion the

protection

of minorities,

since it

rests on

the notion

of

the

Delos,

La

thdorie de l'institution,

Archives

e Phil.

du droit

1-2, 1931;

Morin,

Vers la rdvision de

la technique

juridique:

Le coocepte

de l'institu-

tion : ibid.;

Desqueyrat,

L institution

e

droit subjectif

et

la technique

juridique (Paris,

1934);

Bonnecasse,

Une nouvelle

mystique-la

notion

d'insti-

tution,

Rev.

Gen.

du

droit, 1931

Part

5;

1932,

Parts

1 and 2.

2 W Ivor

Jennings,

The Institutional

Theory,

Modern Theories

of

Law

(London,

1933);

J

Corts,

G.

Renard

y

su

doctrina

de

la

institution,

Extrait

e la

Revista e derecho pub

lica (Madrid, 1934);

A.

Decio

Ferraz,

Teoria

da

institao,

Rev. Crit.

Jurid. (Rio

de Janeiro,

1934);

E. Aftalion

and

F.

Garcia

Olano, -

La Teoria de la

institution,

Boletin

Mens.

del

Seminario e

Cienc.

Jur.

(Buenos

Aires,

1935),

Vol.

IV;

Laplaza,

La

Teoria

de

la

institucion

y la teoria de

la

causa en

los contratos,

ibid.;

H.

C.

Dowdall,

L'anatomie

d'un

corps social-La

thdorie

des institutions,

Recucil

en

l honneur

e

Lambert (Paris, 1938);

J L. Palz, El

derecho e

la asociaciones

(Buenos

Aires, 1940);

Lissarraques,

El

concepto de institucion

en el

derecho

publico de

Haurion,

Rev. e

la Facultad

e Derecho

e Madrid,

1941,

No. 6

and

7;

Casaras,

L'institucionalidad

en el derecho,

Revista e

la Univ.

Nacional

e

Buenos

Aires, 1944,

p.

199;

J Ruiz Juinenez,

La

conception

institucional

del

derecho

(Madrid, 1944);

A.

G.

Spota,

Tratado

e

Derecho

Civil,

Vol.

1, Pt. 1

(Buneos

Aires,

1947).

3

E. Gaillard,

La

Socidtd

anonyme

e

demain

(Paris,

1932);

Thibault

Laurent,

De Ia

nature juridique

de la

souscription

&une socit6

anonyme,

Rev Gen.

e

droit, commercial

(Paris, 1942)

No.

4;

G.

Ripert,

Aspects

juridiques

u

capitalismenmoderne

(Paris, 1946);

Traitd Elementaire

e droit commercial

(Paris,

1948);

J. Escarra,

Manuel e Droit

Commercial

(Paris,

1947); J.

Portemer,

Du contrat

& l'inetitution,

Germaine

Jurid.,

1947,

I, 586; F.

de

Sola

Carrizares,

La

crisis del

concepto

juridico clasico

aplicable a

las

empresas por acciones,

La

Ley, Vol.

46, p.

964

(Buenos Aires,

1947);

La

teoria de

la institution

en las sociedades

por

acciones,

Revista trimestral

e

derecho

comercial

(Bogota, 1947)

No.

5;

La

crisis del

concepto clasico

de ]a

sociedad anonima,

Revista e derecho

V

jurisprudencia

(Santiago,

1944),

Vol.

44, No.

9, 10);

Le caractbre

institutionnel

de la

socidt6

de

capitaux,

Rapport sur le Congras

International e

droit compard, London,

1950. See

also

memoranda

to

conference

of

P.

Gieseke in

German); B.

de

Montouollin

(in

French);

G.

Horneey

in

English).

See further

F. de Sola

Canizares,

Las

formas

juridicas de

las empresas,

Revista e

derecho mercantil

(Madrid,

1952)

No.

39.

4

F. de

Sola

Canizares,

Le ritre

de

la

dimension

dans les soci~tds

commer-

ciales en

droit compar6,

Rev.

Trimest. e

droit

commercial

(Paris,

1950)

No.

3.

OCT.

19581


16/16

578 nternationaland omparative Law

Quarterly [VoL.

protection

by society of all legitimate interests

of the minority share

holders

in the interest

o

the

company

and

of third

persons

in

the

interest of the community at

large. The

abuse of

rights and abuse

of power

equally have their

place within

the institutional

theory.

F

DE SOLA

CANIZARES

2IntlCompLQ564

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