## Facts

- A minority shareholder (Mme X) inherited 3,321 shares of CFCF and sought to sell them without knowing their exact value.
- The company’s president, Bernard Vilgrain, agreed to find a buyer and acted as intermediary.
- On Sept. 27, 1989, Mme X sold 3,321 shares for 3,000 francs per share to Vilgrain and, through him, to family/associates (the consorts Z), with an earn-out clause triggered only if the shares were resold before Dec. 31, 1991 for more than 3,500 francs per share.
- Four days later, the consorts Z resold their stake to Bouygues for 8,800 francs per share.
- Before the sale from Mme X, Vilgrain had arranged a bank mandate to locate a buyer for the controlling shareholders’ shares at a minimum price of 7,000 francs per share, and he did not disclose that mandate or the related negotiations to Mme X.
- Mme X alleged her consent was induced by fraudulent concealment (réticence dolosive) and sought damages.
- A trial court found liability and awarded damages; the Paris Court of Appeal affirmed, emphasizing Vilgrain’s corporate role and intermediary function.
- Vilgrain appealed to the French Court of Cassation, arguing the nondisclosure concerned only his resale strategy or third-party negotiations rather than information he owed to the seller.

## Issues

1. Whether a company director who intermediates and purchases a shareholder’s shares commits fraudulent concealment by failing to disclose existing negotiations and a bank mandate reflecting a substantially higher minimum sale price.
2. Whether the director can avoid liability by asserting he was merely a third party or representative for other buyers rather than a contracting party owing a duty to inform.

## Decision

- The Court of Cassation rejected the appeal and affirmed the judgment against Vilgrain.
- The court upheld the finding that Vilgrain’s silence constituted fraudulent concealment in light of undisclosed, concrete negotiations and a formal bank mandate indicating a minimum price of 7,000 francs per share.
- The court agreed that Vilgrain, as director and intermediary in the “reclassification” of the shareholder’s participation, owed a duty of loyalty to the selling shareholder.
- The court affirmed the damages award of 10,461,151 francs plus legal interest.

## Legal Principles

- Silence may constitute fraud when it conceals decisive, existing facts that would have affected the other party’s decision to contract.
- A corporate director dealing directly with a shareholder, particularly while acting as intermediary for the shareholder’s exit, owes a duty of loyalty that can include a duty to disclose material information bearing on share value.
- Undisclosed mandates and ongoing negotiations that establish a materially higher minimum sale price may be treated as value-relevant information, not merely the buyer’s future resale intentions, supporting liability for fraudulent concealment and damages.

## Conclusion

The court held that a corporate director who intermediates and buys a shareholder’s shares breaches a duty of loyalty, and commits fraudulent concealment, by withholding concrete information—such as an existing bank mandate and negotiations—showing the shares were being marketed at a far higher minimum price than the price paid to the shareholder.


Vilgrain v. X (Cass. com. Feb. 27, 1996) (Fr.)