Conflict between manager and partner in France: understand, anticipate and resolve blocking situations

A conflict between manager and partner, or more generally a conflict between partners, can very quickly endanger the survival of your company, paralyze strategic decisions and expose you to expensive litigation. The objective of this article is to give you a clear, practical and in-depth vision of the legal mechanisms applicable to identify, prevent and deal with these conflicts, with a focus on SMEs and SAS/SARLs.

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The main sources of conflict between manager and partner

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Conflicts rarely happen overnight: they are often the result of a combination of frustrations, a lack of information or poorly written statutes.

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Differences in strategic vision and operational involvement

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• Disagreement on the strategy: aggressive development vs prudent dividend distribution policy, major investments vs cash flow maintenance, diversification vs refocusing on the core business.
• Conflict over involvement: a partner criticizes the manager (or co-managing partner) for not investing enough, or on the contrary, a manager reproaches a partner for no longer coming to work, for no longer participating in meetings or decisions.

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Concrete example: two 50/50 partners of a B2B services SAS. One assumes the presidency and manages operations, the other is not very involved, no longer comes to meetings and blocks any fundraising project by refusing to vote on capital increases. The president considers that he is doing all the work, the egalitarian partner feels that he is not receiving enough dividends. The situation degenerates into a paralyzing disagreement.

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Lack of transparency, right to information and access to accounting

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The feeling of not being informed is a classic trigger for conflict between associates. Under French law, partners have a right to information, the extent of which varies according to the corporate form (SARL, SAS, SA...) and the statutory clauses.

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• In a SARL, any partner may require the communication of certain documents (annual accounts, inventories, management reports, minutes) for the last three financial years, at the company's headquarters, with the possibility of copies.
• In SAS, the right to information is essentially organized by the statutes, but practice and doctrine recommend providing a right of access to accounts and main documents to avoid tensions and accusations of opacity.

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Concrete example: a minority partner asks for access to accounting, the manager systematically pushes back on the pretext of a lack of time. After several reminders, the partner went to court to obtain forced disclosure of the documents and threatened to hold the manager responsible for managing opacity and abuse of majority.

Distribution of powers and abuses (majority, minority, equality)

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The balance of power is another fertile ground for conflicts between manager and partner:
• Abuse of majority: when one or more majority partners adopt a decision contrary to the social interest, with the sole aim of favoring the majority at the expense of the minorities (for example, systematic refusal to distribute dividends without economic justification, excessive remuneration of the manager).
• Minority abuse: when a minority blocks an essential decision for society (capital increase, approval of financing) for the sole purpose of protecting their personal interests, to the detriment of social interest.
• Abuse of equality: a frequent situation in 50/50 societies, when an egalitarian partner paralyzes decision-making by systematically refusing any evolution, creating a lasting blockage.

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Concrete example: a SAS owned equally by two partners. The president proposes a capital increase necessary to finance a strategic investment. The other partner refuses any dilution, without offering an alternative solution, while the cash flow deteriorates. Depending on the circumstances, judges may see this as an abuse of equality justifying judicial measures (appointment of a mandatary, or even dissolution if paralysis is severe).

Compensation, dividends, current accounts and personal benefits

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Financial issues are catalysts of conflicts between managers and partners:
• Executive remuneration considered excessive by the partners.
• Distribution of dividends or not, and the choice to leave significant profits in cash.
• Reimbursement of partners' current accounts or the granting of special benefits.

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Concrete example: a managing partner pays himself a high salary despite poor results, while he refuses to pay dividends on the grounds of maintaining cash flow. Minorities are considering an action in abuse of majority and in the responsibility of the manager for violating the social interest.

Conflict between SAS and SARL partners: legal framework and challenges

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The treatment of the conflict also depends on the social form: statutory freedom in SAS offers significant contractual levers, while SARL is more regulated by law.

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Characteristics of the conflict between SAS partners

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SAS is characterized by a great deal of contractual freedom, which makes it possible to finely organize:
• The powers of the president and other management bodies.
• The political and financial rights of partners (preference shares, veto rights, approval and exclusion clauses).

However, this freedom involves a risk: incomplete or poorly written statutes in the event of disagreement. Without exit, exclusion or blocking resolution clauses, a conflict can quickly become intractable other than through litigation or dissolution.
Example: in a SAS, the approval clause prevents a partner from freely selling his shares without the agreement of others. In the event of an intense conflict, a partner who wants to leave may find himself a “prisoner” of his shares if no exit or forced transfer clause has been provided for.

Conflict between SARL partners: a more regulated regime

In SARL, the Commercial Code provides for a more rigid framework:
• The manager represents the company and has extensive powers within the limits of the corporate purpose.
• Collective decisions are strictly regulated (meetings, voting powers, quorum and majority).
• The right to information is particularly structured (permanent right to consult certain documents).
Statutes offer less freedom than in SAS, but may still contain approval, pre-emption or exclusion clauses, useful in case of conflict.

Disagreement between egalitarian partners and functional paralysis

The situation of “disagreement between egalitarian partners” is a classic of litigation: two partners in equal shares, neither succeeds in imposing their vision and important decisions are blocked.
• Jurisprudence considers that disagreements must be long-lasting and lead to a paralysis in the functioning of society in order to justify extreme measures (in particular judicial dissolution).
• The simple difference of views or the deterioration of personal relationships is not enough: it is necessary to demonstrate that social bodies no longer function normally (blocked meetings, impossibility of taking essential decisions, lack of accounts...).
Example: two 50/50 partners in a SAS no longer have relationships, meetings are systematically contested, current management decisions are no longer ratified and accounts have not been filed for several years. Judges may consider that the paralysis has been established and pronounce the dissolution for good reasons.

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The role of statutes and partners' agreements in the prevention of conflicts

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A large number of disputes could have been avoided by drafting the articles of association and the shareholders' agreement more carefully.

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Governance clauses: distribution of powers between manager and partners

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Clear clauses on the distribution of powers between the manager (or president) and the partners reduce the risk of conflicts:
• List of decisions subject to the agreement of the partners (investments greater than a certain amount, participation, modification of the dividend policy, etc.).
• Establishment of committees (strategic committee, audit committee) involving certain partners in the decision.
Educational framework — Example of distribution of powers (formulation to be adapted and legally secured):
“The President has the broadest powers to act in all circumstances on behalf of the Company, within the limits of the corporate purpose and subject to the powers expressly granted by the law and these statutes to the partners. In particular, the following decisions are subject to the prior authorization of the shareholders' meeting: list of important decisions.”

Approval, pre-emption and exit clauses

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To prevent a conflict from turning into a lasting stalemate, the statutes and the pact may provide for exit mechanisms:
• Approval clause: checking the identity of new partners, which limits the entry of a hostile third party.
• Pre-emption clause: priority given to existing partners in the event of the sale of shares, to preserve the balance of capital.
• Joint or forced exit clauses (drag-along, tag-along): organization of the exit of capital during a global sale or in the event of a serious disagreement.

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Exclusion clauses and internal sanctions

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In SAS, it is possible to provide for clauses excluding a partner in certain limitatively listed hypotheses (serious violation of the contract, unfair competition, criminal conviction incompatible with the function, etc.).

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Educational framework — Example of an exclusion clause (simplified framework to be validated and adapted):

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” The partner may be excluded in the event of a serious breach of his statutory obligations or those resulting from the partners' agreement, in particular in the event of unfair competition, violation of the duty of loyalty or conduct likely to harm the social interest. The exclusion decision is taken by the competent body under the conditions of quorum and majority provided for in article... The shares of the excluded partner will be purchased under the valuation conditions provided for in article... ”

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What legal remedies should there be in the event of a conflict between manager and partner?

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When negotiation fails, it is necessary to identify the legal levers adapted to the type of conflict and your objective (maintaining the company, ousting a partner, reorganizing governance, exiting capital, etc.).

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Liability action against the manager or a partner

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In the event of a management error on the part of the manager (or the president of SAS), the partners may take legal action:
• Social action (on behalf of the company) to repair the harm suffered by society.
• Individual action (in their own name) when the partner suffers a personal injury that is distinct from that of the company.
The faults can be multiple: embezzlement of assets, non-compliance with the statutes, taking decisions contrary to the social interest, failure to submit certain decisions for the approval of the partners, etc.

Example: a manager enters into a disadvantageous contract with a company in which he has a personal interest, without information from the partners. They may incur liability for breach of duty of loyalty and conflict of interest.

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Dismissal of the manager for just cause

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Partners may request the dismissal of the manager or the president when they consider that his continuation in office infringes the social interest.
• In a SARL, the dismissal of the manager may take place for just reasons (management error, serious disagreement, loss of objective trust) at the initiative of the partners meeting or, in the event of a blockage, by a court decision.
• In SAS, the procedures for the dismissal of the president are defined in the statutes, but practice shows that judges punish abusive dismissals (absence of serious reasons, irregular procedure, disproportionate interference with the rights of the person concerned).
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Example: partners are seeking the dismissal of the manager on the grounds that he refuses to convene meetings, does not communicate the accounts and takes decisions that are contrary to the social interest. The judge may order the revocation and, in some cases, appoint a provisional administrator to manage the company pending a solution.

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Request for the appointment of an ad hoc representative or a provisional administrator

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To get out of an impasse without going immediately towards dissolution, the partners can request:
• The appointment of an ad hoc mandatary or a conciliator, responsible for bringing the parties together and preparing a solution (new statutes, transfer of shares, reorganization of powers).
• The appointment of a temporary administrator when the functioning of corporate bodies is seriously disrupted, in order to ensure management in the social interest for the time necessary for a more lasting solution.

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The dissolution due to a disagreement between partners paralyzing the functioning of the company.

Article 1844-7, 5° of the Civil Code provides that the early dissolution of a company may be pronounced for just reasons, in particular in the event of a disagreement between partners paralyzing its functioning.
• The request must be submitted by a partner before the competent jurisdiction (commercial court or judicial court depending on the nature of the company and the activity) of the place of the head office.
• Jurisprudence requires the demonstration of real paralysis: blocking of meetings, absence of deposits of accounts, multiplication of disputes, impossibility of taking decisions essential to the continuation of the activity.
• If the disagreement is attributable exclusively to the plaintiff partner, the judge may refuse the dissolution on the ground that just reasons are not justified.
Example: in a SAS, a minority partner multiplies legal actions, contests all decisions and refuses to participate in meetings, while the management itself is criticized for lack of transparency. The court may order the dissolution if the paralysis is proven and if the responsibility for the disagreement is not solely attributable to the requesting partner.

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Which court has jurisdiction in the event of a conflict between partners or a conflict between manager and partner?

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The question of the jurisdiction of the court is central to securing your procedures and limiting the risks of contesting the procedure.

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Commercial court or judicial court?

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• For commercial companies (SARL, SAS, SA, SNC...), disputes between partners, or between manager and partners, are in principle brought before the commercial court of the place of the company's head office.
• For certain civil structures (civil companies, SCI), jurisdiction may fall under the jurisdiction of the judicial court.
An action for dissolution due to a disagreement between partners must be brought before the jurisdiction of the registered office, and the company must be called to the proceedings, in addition to the partners concerned.

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Jurisdiction clauses and arbitration clauses

The statutes or the shareholders' agreement may contain:
• Clauses conferring territorial jurisdiction (for example, such specific commercial court).
• Arbitration or arbitration clauses, providing that disputes between partners will be settled by an arbitral tribunal.
Doctrine and case law admit that an arbitral tribunal may, under certain conditions, order the dissolution of a company for disagreement between partners if the clause allows it and does not encroach on public order.

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Amicable options to get out of a conflict between manager and partner

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Before going to court, it is often advisable to explore amicable solutions, either to preserve the relationship or to organize a separation under the best conditions.

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Supervised negotiation, mediation and conciliation

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• Direct negotiation, often with the support of a lawyer, to clarify grievances, reposition social interests and imagine exit scenarios (share repurchases, governance review, creation of committees, etc.).
• Mediation: intervention of a neutral and independent third party to help the parties reach an agreement. This solution can be encouraged by the judge, especially in complex corporate disputes.
• Conciliation or ad hoc mandate: amicable procedures supervised by the court, often used in case of economic difficulties, but which may also be relevant for restructuring conflictual governance.

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Repurchase of shares or shares: organizing the separation

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Buying back shares or shares is a frequent solution when the level of trust is definitively broken:
• Acquisition by the other partners or the company itself (under legal and financial conditions).
• Transfer to an authorized third party.

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The main difficulty lies in the valuation of the shares: the parties can use an independent expert, appointed amicably or by the president of the court at the request of one of them.

Concrete example: “My partner does not want to buy my shares from me.” In this case, it is possible to:
• Find a third party purchaser and activate the approval clause.
• If a forced exit or exclusion clause exists, consider implementing it according to the conditions provided for.
• Otherwise, negotiate a review of governance or, as a last resort, consider legal action (majority abuse, paralyzing disagreement, etc.).

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Conflict between partners and daily functioning: absent partner, partner who no longer comes to work

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The reality of SMEs shows that conflict does not only result in judicial remedies, but also in disruptive daily behaviors: absent partner, partner who no longer comes to work, refusal to participate in meetings.

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My partner no longer comes to work: what are the legal and practical consequences?

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When one of the partners, especially if they also hold management positions or an operational role, no longer comes to work:
• If the partner is an employee or a corporate officer (manager, managing director, etc.), his unjustified absence may fall under labor law or company law (revocation of his mandate, dismissal for misconduct, etc.).
• If the partner does not have a formalized operational function, his absence is not necessarily legally at fault, but may create an economic imbalance (distribution of workloads, receipt of dividends despite zero involvement).
In all cases, it is essential to distinguish the status of partner (which can only be withdrawn in the event of exclusion or sale of shares) from the status of manager or employee (which can be revoked or terminated in a more flexible, but supervised, framework).

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Disagreement between partners paralyzing the functioning of the company: reaction in the short and medium term

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Faced with a disagreement that disrupts daily life:
• In the short term: restore a minimum of governance (regular convening of meetings, formalization of decisions, recourse to an external council).
• In the medium term: renegotiate the articles of association or the pact to clarify roles, provide exit or arbitration mechanisms, or even consider capital restructuring.
In the event of a persistent blockage and the impossibility of reaching an agreement, legal actions (dissolution, revocation, appointment of a mandatary) may become unavoidable.

FAQ: answers to the most frequently asked questions about the conflict between manager and partner and the conflict between partners

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Which court is competent for a dispute between partners?

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In general, for a commercial company (SARL, SAS, SA, SNC...), the competent court for disputes between partners is the commercial court in the place of the company's head office. For some civil companies, jurisdiction falls to the judicial court, always the responsibility of the head office. When the articles of association or a partners' agreement provide for an arbitration clause, an arbitration tribunal may be required to settle the dispute, or even to pronounce dissolution under certain conditions.

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How do you remove a partner?

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One does not “remove” a partner in the strict sense: on the other hand, one can organize his exit from the capital or his exclusion in limited cases. The main routes are:
• The voluntary transfer of its shares or shares to another partner or to a third party, subject to approval clauses.
• The implementation of an exclusion clause provided for in the statutes (especially in SAS) in the event of a serious breach.
• The questioning of its responsibility and, ultimately, a dissolution if the disagreement makes it impossible to continue the company.

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In all cases, exclusion or forced exit must be provided for by contract and strictly comply with the procedure provided for, under penalty of nullity and heavy litigation.

How to resolve conflicts between managers and shareholders/partners?

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The resolution of a conflict between managers and shareholders is based on several steps:
1. Clarifying grievances and information: governance audit, review of the financial situation, possible independent expertise.
2. Explore amicable solutions: renegotiation of statutes, adjustment of powers, establishment of committees, mediation.
3. In case of failure: liability action, dismissal of the manager, appointment of a mandatary or action for dissolution if the disagreement paralyzes the functioning.

The support of a lawyer is crucial to prioritize options, measure risks and avoid counterproductive approaches.

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Can you file a complaint against your partner?

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Yes, it is possible to file a complaint against your partner, but this implies distinguishing several types of situations:
• In the criminal field: in the event of embezzlement of assets, abuse of corporate assets, forgery and use of forgeries, fraud, etc. a criminal complaint may be filed.
• On a civil or commercial basis: an associate may file an action for civil liability, abuse of majority or minority, or even request dissolution for disagreement.

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Before filing a complaint, it is recommended to measure the consequences on the company's image, the commercial relationship and the rest of the project: a poorly calibrated judicial strategy can lead to the destruction of value for all.

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Conflict between partners: which court has jurisdiction?

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For a “conflict between partners” in the broad sense (annulment of meeting decisions, abuse of majority, dismissal of directors, paralyzing disagreement, etc.), the competent court is in principle:
• The commercial court for commercial companies, at the company's head office.
• The judicial court for certain civil companies, always at the place of the seat.

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However, the jurisdiction clauses and the arbitration clauses contained in the statutes or the pact may change this distribution, subject to their validity.

Disagreement between egalitarian partners: what solutions?

Disagreement between egalitarian partners (50/50) is particularly dangerous because it can paralyze essential social decisions. The possible solutions are:
• Renegotiate the statutes to introduce tie-breaking mechanisms (preponderant vote of the president, use of an external arbitrator, decision-making committees).
• Organize the exit of one of the partners (repurchase of its shares, sale to a third party) with a clear valuation method.
• As a last resort, request the appointment of a mandatary or the dissolution for just cause, if the paralysis is proven and lasting.

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Can a partner require to see the company's accounts?

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Yes, an associate has a right to information, the content of which depends on the corporate form:
• In a SARL, any partner may require the communication of certain documents (annual accounts, inventories, reports, minutes) for the last three financial years, at the company's headquarters, with the possibility of copies.
• In SAS, the right to information is organized by the articles of association, but practice requires at least access to annual accounts and main corporate documents.
In the event of a persistent refusal by the manager or the president, the partner may go to court to obtain the forced disclosure of the documents and, possibly, incur the liability of the manager.

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Conflict between partners in a SAS: what remedies?

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In the event of a conflict between partners in a SAS, the main remedies are:
• Application of the clauses of the pact and the statutes: approval, pre-emption, exclusion, mediation, arbitration, etc.
• Action in abuse of majority or minority, in contesting decisions, or in liability against an offending manager or partner.
• Request for the appointment of an ad hoc mandatary or a provisional administrator to unblock governance.
• Action in dissolution due to disagreement between partners paralyzing the functioning of the company.
The SAS is a very contractual structure: the quality of the statutes and the partners' agreement often makes the difference between a manageable conflict and a lasting blockage.

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Disagreement between partners paralyzing the functioning of the company: when to speak of dissolution?

Disagreement justifies judicial dissolution when it:
• Is durable and profound, and is not the result of the sole attitude of the requesting partner.
• Causes a real operational paralysis (irregular or impossible meetings, lack of accounts, impossibility of taking essential decisions).
The judge assesses on a case-by-case basis, taking into account the nature of the company, its activity and the prospects for continuing the business.

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Disagreement between partners and dissolution: what steps?

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The procedure for dissolution due to disagreement generally involves:
1. Analysis of the situation, collection of elements showing the paralysis (minutes, correspondence, absence of accounts, etc.).
2. Consultation with a lawyer to assess the chances of success, the alternatives (mandatary, share repurchase) and the consequences (liquidation, fate of contracts, personnel).
3. Submission of an action before the competent jurisdiction (commercial or judicial court) to have the just reasons established and to declare the dissolution.

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My partner does not want to buy my shares from me: what can I do?

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If your partner refuses to buy your shares, several options exist:
• Verify the articles of association and the pact to identify possible exit clauses (promise to purchase, forced transfer clause, exclusion clause, liquidity clause).
• Find a third party purchaser and initiate the approval procedure.
• In the event of a valuation freeze, request the appointment of an independent expert or refer the matter to the president of the court to fix the value of the shares.
• If the disagreement is such that it paralyses the functioning of the society, consider dissolving it for good reasons.

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My partner no longer comes to work: what levers can I use?

When your partner no longer comes to work, the answers will depend on their status:

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• If he is a manager (manager, president, managing director), a revocation of his functions may be considered, according to the procedures and conditions provided for by the statutes or the law.
• If he is an employee, the situation falls under labor law: warning, disciplinary procedure, even dismissal for misconduct or for disorganization of the service.
• In all cases, his status as a partner is not automatically affected: only a sale of his shares, or the application of an exclusion clause regularly implemented, can make him leave the capital.

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This situation is typically a sign of deep disagreement that can justify a renegotiation of governance, or even judicial measures in the event of a lasting stalemate.

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A regulated matter: why the support of a lawyer is essential

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The conflict between manager and partner, or more generally the conflict between partners, concerns a highly regulated field, at the crossroads of company law, contract law, criminal business law and sometimes labor law. The solutions to be preferred (renegotiation of the articles of association, purchase of shares, dismissal of directors, action for dissolution, arbitration, etc.) depend closely on the legal form, the drafting of the articles of association, the shareholders' agreement, the partners' agreement, recent case law and the economic strategy of your company.

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Only tailor-made support, by a lawyer who is used to dealing with these situations, makes it possible to anticipate risks, to choose the right levers at the right time and to best preserve the value created by your company. In practice, the early drafting of comprehensive statutes and partners' agreements, including dispute resolution clauses, is often the most profitable investment to avoid years of litigation and paralysis.

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Article written by Guillaume Leclerc, litigation lawyer in Paris.

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