Can a pre-emption right be validly exercised over a fraction of the shares for sale?

A pre-emption clause will be deemed invalid if its purpose or effect (alone or in combination with other clauses, such as a prior approval clause) is to prevent a shareholder from selling its shares.

This is why pre-emption clauses generally provide that in the event that the beneficiaries of a pre-emption right fail to pre-empt all of the shares for sale (although they may wish to pre-empt a fraction thereof), the pre-emption rights will be deemed not to have been exercised and the selling shareholder will be free to proceed with the contemplated sale.

It is generally considered that a partial pre-emption of shares which are the subject of a contemplated sale may prevent the selling shareholder from selling the remaining shares which have not been pre-empted, and therefore “imprison” the selling shareholder within the company.

Indeed, it is quite likely that a purchaser who has offered to purchase a controlling stake of a company, for example, is no longer interested to purchase what has become – as a result of a partial pre-emption of the shares for sale – a minority interest.

Some French legal scholars consider however that a partial pre-emption of shares should be possible, provided however that this is specifically allowed by the pre-emption clause, and provided further that an appropriate mechanism enabling the selling shareholder to sell all of its remaining shares exists.