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

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THE RIGHTS OF SHAREHOLDERS

I.-THE

CONTINTAL Socirt

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 socigtM par actions 1; 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 sociMtM corresponds
1

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, socidtd 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.
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

OCT. 1958]

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) Socigtj en commandite simple which is equivalent to a
limited partnership ';
(iii) Soci~td en commandite par actions and socilte en participation (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
covers several types of association
term "company"
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

socigtM a responsabilit6 limitge.8

The equivalent therefore of the soci~t4 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 a responsabilitg 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 shareholder is always represented by his shares; the English notion of
Sometimes, however, a wrong
the equivalent of the English " society."
terminology is used; for example, in France an asociation 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 4 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 responsabilidadlimitada.
9 So in the United States the word " stock " is used to denote shares.

566

International and Comparative Law Quarterly

[VoL. 2

"6stock " is unknown in continental legal systems. Finally the

term associg is used in the case of soci~te anonyme as a synonym
for actionnaire10; and the French word administrateurcorresponds
to the English director, while the French directeur is the English
manager."i
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
a '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 continental law entirely distinct from the soci~tJ anonyme.
II.-CLASSIFICATION OF SHAREHOLDERS' RIGHTS

We 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 conferred 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 recognised 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 membership 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 Ley (Buenos Aires) 16.5.50; and
Report from Toulouse (Rev. Intern. de Droit. Comparg, Paris, 1953, no. 3).
Is The 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.

OCT. 1958]

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 maintain 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
15
compel a shareholder to sell his shares.
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 20;
21
(8) under provisions of law covering special cases.
15

17

18

19
20

21

S. 210 of the English Companies Act, 1948, is an object of amazement for

continental lawyers.
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.
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.
Argentina, Commercial Code, Art. 333.
So in France: see Escarra, Manuel de Droit Commerciel (Paris, 1947) p. 423,
and Ripert, Traitd 416mentaire de Droit Commerciel (Paris, 1950) 2nd ed.,
pp. 420, 421.
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.
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.

568

Internationaland Comparative Law Quarterly

[VoL. 2

(2) The right of 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 28;
indeed the law declares void all agreements in respect of the right
22

23
24
25

26

27

28

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.
Germany, Civil Code, Art. 705. Switzerland, Code of Obligations, Art. 620.
German Law of 1937, Art. 53, 54; Switzerland, Code of Obligations, Art. 660.
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.
France, Commercial Code, Art. 34; Germany, Law of 1937, Art. 117; Switzerland, Code of Obligations, Art. 654; Italy, Civil Code, Art. 2376; Spain, Law
1951, Art. 85; Mexico, Law of 1934, Art. 195.
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.
Ripert, op. cit., p. 442.

OCT. 1958]

The Rights of 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,
36
in the absence of a rule of law excluding it, by the courts.
Finally, in some legal systems a single shareholder is not permitted to hold a number of votes higher than that fixed by law 'r;
or alternatively the company's statute may establish such a limitation " or require a given number of shares to be represented at
But in this case the sharegeneral meetings of the company. 9
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.
5 Switzerland, Code of Obligations, Arte. 627, 693.
-16 Argentina, Uruguay, Peru, Chile.
37 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.
39 France, Law of 1867, Art. 27; Spain, Law of 1951, Art. 39.
40
41

Vide supra.

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

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 provisions of a company's statute are recognised by the courts, 4 and
in recent legislation are established by law. 45 Limitations contained 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 company 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.
42 France, Law of 1867, Art. 3; Germany, Law of 1937, Art. 10; Italy, Civil
Code, Art. 2355; Spain, Law of 1951, Art. 33; Switzerland, Code of Obligations, 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.
4-5 Germany, 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.

OCT. 1958]
of
in
in
in

The Rights of Shareholders

control to be conferred upon shareholders by law," and, even

those counties where rights of individual control generally obtain
all types of socigtJ, the courts tend not to give effect to them
the case of the soci~t6 anonyme.' 0

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 concept 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 right 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, whenever 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 that 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.
50 R. Fernandez, Codigo de Comercio Comentado (Buenos Aires, 1943) I, p. 396.
5 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.
52 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 socidtds 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.
54 Switzerland, Code of Obligations, Art. 706.
5 Italy, Civil Code, Art. 2378; Spain, Law of 1951, Art. 70; Portugal, Commercial
Code, Art. 186; Venezuela, Commercial Code, Art. 295.
56 See. infra.

572

International and Comparative Law Quarterly

[VOL. 2

(8) The right of proceeding at law against the directors "7

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 shareholder.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 of 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 company's statute may create a privileged class of share for purposes
62
of liquidation.
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 ";
Administrateur is 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. 81; Brazil, Law of 1940,
Art. 123.
57

59 See infra.

60 Ripert, op. cit., p. 487; Fernandez, op. cit., p. 505.

61 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.
65 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.

The Rights of Shareholders

OCT. 1958]

(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 supervisory body, 7 that is to say, the auditors;
(6) the right of the minority to call for an investigation of the
company 61;
(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 conditions 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 representatives to the general meeting of the company.
70 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

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 72 jurists and
tribunals, has influenced the courts of other countries and particularly 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 shareholders, 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 shareholder 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."
72

73

See Lyon, Caen & Renault, Traitd de droit commercial, 2nd ed. (1892) p. 647
et seq.; Appleton, Du droit des assemblies extraordinaires de modifier les
statuts (Paris, 1902); Boncart, De l'organisationet des pouvoirs des assembldes
gengrales (Paris, 1905); R. David, La protection des minoritds dans les
socidtds par actions (Paris, 1929).
See A. Polo, El 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
des socidtis anonymes (Paris, 1947) pp. 153 et seq.

OCT. 1953]

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 amend78
ment of the company's statute or by the general meeting.
However rights thus enumerated by law are plainly legal rights,
rather than rights accorded in the courts. There is a vast literature upon the subject of special rights in Germany,' Switzerland, 8 "
France, 8 ' Italy, 8

Spain, 8 ' Portugal, 8

Argentina,8

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, Die Sonderrechte der Aktiondre (Berlin, 1892); Lehmann, Das
Recht der Aktiengesellschaften (Berlin, 1894 and 1904); Fischer, Die Aktiengesellsohaft (Leipzig, 1916); Horrwitz, Das Reeht der Generalversammlunyen
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, Handelsrecht (Munich and Leipzig, 1931); Siegwart, Aktiengesellschaft, Kommentatur
(Zurich, 1945) 2nd ed.
81 Thaller, Note to Dalloz (1893) pp. 105 e seq.; Appleton, op. cit., supra, note
72; Boncart, op. cit., ibid.; Chizaut, Les peuvoirs de l'assemblde extraordinaire
dons les sociUds par actions et les droits propres de 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 de 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 de 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 V Ciencias Politicas (Lima, 1945) No. 111, 1947.

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[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 92 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.

19 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'organisation et 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 les 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.

OCT. 19581

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 definition the protection of minorities, since it rests on the notion of the
1 Delos, " La thdorie de l'institution," Archives de Phil. du droit 1-2, 1931;
Morin, "Vers la rdvision de la technique juridique: Le coocepte de l'institution ": ibid.; Desqueyrat, L'institution de droit subjectif et la technique
juridique (Paris, 1934); Bonnecasse, " Une nouvelle mystique-la notion d'institution," 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
de la Revista de 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 de
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 de Lambert (Paris, 1938); J. L. Palz, El derecho de la asociaciones
(Buenos Aires, 1940); Lissarraques, " El concepto de institucion en el derecho
publico de Haurion," Rev. de la Facultad de Derecho de Madrid, 1941, No. 6
and 7; Casaras, " L'institucionalidad en el derecho," Revista de la Univ.
Nacional de Buenos Aires, 1944, p. 199; J. Ruiz Juinenez, La conception
institucional del derecho (Madrid, 1944); A. G. Spota, Tratado de Derecho
Civil, Vol. 1, Pt. 1 (Buneos Aires, 1947).
3 E. Gaillard, La Socidtd anonyme de demain (Paris, 1932); Thibault Laurent,
" De Ia nature juridique de la souscription & une socit6 anonyme," Rev. Gen.
de droit, commercial (Paris, 1942) No. 4; G. Ripert, Aspects juridiques du
capitalismenmoderne (Paris, 1946); Traitd Elementaire de droit commercial
(Paris, 1948); J. Escarra, Manuel de 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 de
derecho comercial (Bogota, 1947) No. 5; " La crisis del concepto clasico de ]a
sociedad anonima," Revista de derecho V jurisprudencia (Santiago, 1944),
Vol. 44, No. 9, 10); " Le caractbre institutionnel de la socidt6 de capitaux,"
Rapport sur le III Congras International de 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 de derecho mercantil (Madrid,
1952) No. 39.
4 F. de Sola Canizares, " Le critre de la dimension dans les soci~tds commerciales en droit compar6," Rev. Trimest. de droit commercial (Paris, 1950) No. 3.

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International and Comparative Law Quarterly

[VoL. 2

protection by society of all legitimate interests of the minority shareholders in the interest of 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.