Participatory deductible and unlawful termination of the franchise agreement

By a long-awaited judgment of 23 October 2025 (No.24/01618), the Rouen Court of Appeal put an end to a long legal battle between the company Selima, a subsidiary of the Carrefour group, and its co-partners, spouses C, managers of the franchised company Houdec.

Reversing the decision of first instance, the court rejected the charge of abuse of minority, considering that Selima’s refusal to validate a statutory amendment resulted from an unlawful decision of the managers. This judgment rendered after cassation clarifies the border between the legitimate defence of the rights of a minority shareholder and abuse within the framework of the so-called “participatory” franchise.

Background and Context

SARL Houdec, incorporated on 15 February 2007, was 74% owned by spouses C, managers, and 26% by Selima, a subsidiary of Carrefour. This participation conferred on Selima a blocking minority, decisions to amend the articles of association requiring a majority of three quarters of the shares.

The articles of association of Houdec linked its corporate purpose to the operation of a supermarket “under the Carrefour Contact brand or any other brand belonging to the Carrefour Group, to the exclusion of any other”.

Considering the profitability of their operation insufficient under the Carrefour brand, spouses C sought to free themselves from it. At the end of 2019, they convened an extraordinary general meeting to amend the articles of association in order to remove the reference to the Carrefour brand and to expand their powers as managers. Encountering Selima’s negative vote, the resolutions were rejected.

In addition to this refusal, Mr and Mrs C, in their capacity as managers, unilaterally terminated the franchise and supply agreements on 12 February 2020, with effect from 24 February 2021. They then tried again, in March and June 2020, to pass the statutory amendments necessary to regularize the situation, but Selima maintained her opposition.

Claiming that this blockage paralyzed the company and was contrary to its social interest, spouses C and Houdec sued Selima for minority abuse. The Commercial Court of Caen, by a judgment of April 7, 2021, upheld them, a decision confirmed on appeal by the Court of Appeal of Caen on January 20, 2022.

The judgment of the Court of Cassation of 13 March 2024

The saga finally experienced a decisive turning point following the judgment rendered by the Court of Cassation on 13 March 2024 (No.22-13.764), which partially quashed the decision of the Court of Appeal of Caen.

As we analyzed in a previous article (available here), the Court of Cassation noted that the Court of Appeal of Caen had found that “the denunciation of supply and franchise contracts led to the need for Houdec to modify its corporate purpose”. However, under Article L223-30 of the French Commercial Code, such an amendment fell within the exclusive competence of the general meeting of shareholders and fell outside the competence of the manager. Therefore, by judging that the managers had been able to validly denounce the contracts while acknowledging that this act implied a statutory amendment, the Court of Appeal had “not drawn the legal consequences of its findings”.

The termination of contracts by the managers alone was irregular, as it encroached on the prerogatives of the shareholders. The Court of Cassation had therefore referred the case back to the Rouen Court of Appeal for it to decide the dispute again.

The decision of the Rouen Court of Appeal: the refusal to validate an unlawful act does not constitute any abuse

Following scrupulously the reasoning of the Court of Cassation, the Rouen Court of Appeal reversed the initial judgment and rejected the existence of an abuse of minority.

This assertion is based on the following elements:

1. The illegal nature of the denunciation: The court affirmed that “the denunciation of the supply and franchise contracts in question could only be a matter of deliberation by the general meeting since it was likely to necessarily lead to a modification of the corporate purpose”.
2. Excess of power of the managers: Consequently, “the termination of contracts by the managers […] was unlawful as exceeding their powers”. The managers could not, by an act of management, circumvent the need for a collective decision of the shareholders.
3. The legitimacy of the minority’s refusal: The conclusion is then necessary: “Since the contracts in question were not validly denounced, Selima was not required to consent […] to the amendment of the articles of association because of the illegality of this denunciation”.

In other words, a minority shareholder cannot be blamed for having committed an abuse by refusing to “regularize” a posteriori a decision taken by the managers in violation of the articles of association and the law. Selima’s refusal was not dictated by the sole purpose of favouring her interests to the detriment of society, but was based on the legitimate refusal to endorse an unlawful act.

The court states that it is “not even necessary to examine the economic situation of the latter”. This is despite the fact that the documents in the file revealed that after changing the brand name for the “U” network, the company’s net income increased from 2,657 euros for the year ended 31 January 2020 (under the Carrefour brand) to 262,131 euros for the year ended 31 January 2024. The economic legitimacy of the decision taken by the franchisees cannot suffice to justify an unlawful legal manoeuvre.

It is interesting to note that the judges thus consider that the question of whether the change of brand was economically “essential” for the company is quite secondary to the initial illegality of the managers’ approach.

Consequently, the Rouen Court of Appeal dismissed all their claims, including their claims for compensation amounting to 50,000 euros for each, and ordered them to pay the costs of appeal.

Scope of the decision for the crowdfunding system

This judgment strongly recalls that the managers, even if they hold a majority of the capital, may not usurp the prerogatives of the general meeting, including indirectly. A minority shareholder is perfectly entitled to oppose a resolution aimed at validating a violation of the articles of association without this being considered abusive.

Beyond the technical aspect, this case highlights the impact of the “participatory franchise” system, whose use is appreciated in some large groups, on the independence of franchisees.

(CA Rouen, October 23, 2025, RG n°24/01618)