The French Supreme Court related to private matters (Cour de cassation) ruled as a ratio decidendi on 28 November 2018 that the single vote on the resolution related to an increase in share capital reserved to employees is considered satisfactory to regularize an increase in share capital not subject to a vote on a preceding general meeting. This allows the possibility for a general meeting to ratify an increase in share capital reserved to employees (due to the relativity of the nullity – nullité relative). The legal concept that may be considered as underpinning the ratio decidendi is the French appearance theory: the ratification is being made possible by the subscribers (employees) having legitimately believed that the increase in share capital was regularly made.

This is in line with the spirit of company law to allow ratification as much as possible to ensure legal safety. In light of this, it is reasonable to think that this ratio decidendi can therefore be extended to other types of increase in share capital (not only reserved to employees). In particular, this ratio decidendi would be used (with an analogical reasoning) for an increase in share capital in the field of sports law (or IPOs), such as in football. In this respect, an increase in share capital of a football club would be subject to a ratification in the same manner.

Author: Ludovic Timbal Duclaux de Martin