Written commercial agreement

Significant imbalance

Sudden termination of established relationships

Competition investigation – French law

Civil competition action

French competition law

Competition investigation – European law

European competition law

Vertical restraints

Distribution law

Liability for defective products

Consumer law

Prohibition of measures having equivalent effect

European business law

Corruption

Compliance

Economic law

Shareholders' agreements

Removal of company directors

Abuse of voting rights

Companies

Action for infringement (counterfeiting)

Rights conferred by the trademark

Patentability

Industrial property

Commercial rent review

Renewal of the commercial lease

Despecialization (change of use)

Commercial leases

Reform of contract law

Reform of the law of special contracts

Preliminary sales agreement

Obligation to deliver goods in conformity

Classification of the contract for services (contrat d'entreprise)

Effects of the agency agreement with respect to third parties

Business contracts

Ongoing contracts

Recovery claims

Court-approved transfer plan

Bankruptcy proceedings

Personal data breaches

White collar crime

Commercial law

500 Questions - Business Law

The dismissal of a director exposes the company to the payment of damages in two scenarios.

The first is where the measure must be based on a just cause, which the party initiating the termination does not establish as real. This is the case in an SNC, SARL , SA with a management board and, if the statutes provide for it, in the SAS . Conversely, in corporate forms where dismissal occurs ad nutum …

What is the financial risk associated with the removal of a director?

A manager of an SNC (société en nom collectif) can be dismissed either by a collective decision of the partners or by a judicial decision. In the first case, Article L. 221-12 of the Commercial Code requires compliance with different majority rules depending on the status of the manager. Whether the dismissal is collective or judicial, it must also be based on just cause.

Regarding the quality of the manager, several scenarios must be distinguished:

A statutory managing partner can, in principle, only be removed by the unanimous decision of the other partners, unless the company has only two partners . The removal must then follow the judicial route and be based on legitimate grounds.

A managing partner who is not a statutory manager can be dismissed by a unanimous decision of the other partners, unless otherwise stipulated in the articles of association. If all partners are managers, the rule of unanimity also applies, without possible statutory derogation, unless before the dismissal, another manager has resigned and as a result, not all partners hold the position of manager anymore.

A non-partner manager may be dismissed by a majority of the partners, unless otherwise stipulated in the articles of association.

Then, for the revocation to be valid, it must be based on a just cause. Just causes for revocation include:

the concealment of criminally punishable facts;

the act of compromising the corporate interest or the functioning of the company by not preparing the inventory of assets and liabilities and by not drawing up annual accounts or management reports;

the act of repeatedly avoiding weekly management meetings, showing minimal involvement, and expressing a complete divergence with the other managers on the company's management prospects .

Do not confuse just cause with management decisions contrary to the interests of the majority shareholders. Indeed, case law considers that a manager's divergence of views with the majority shareholders on the policy to be pursued cannot constitute just cause for dismissal when it does not compromise the functioning of the company.

The removal of a statutory manager of a general partnership can only be decided unanimously by the partners if the company includes at least two other partners besides the manager himself.

CA Paris, 12 September 1995, LawLex202200007597JBJ.

A manager can be dismissed by the general meeting of the SNC when their refusal to comply with the instructions of the commercial services of the group to which their store belongs constitutes a management fault leading to a loss of revenue.

CA Paris, 2 February 2010, LawLex202200010141JBJ.

The dismissal of a manager of an SNC does not appear to lack just cause when they repeatedly avoid weekly management meetings, show little involvement in receiving sales representatives, defending acquired markets, and seeking new markets, exhibit a complete divergence with the other two managers on the company's management prospects, and their attitude contributes to compromising the economic results, the company's operations, and the corporate interest.

CA Toulouse, 11 March 2009, LawLex202200011110JBJ.

How to remove the manager of an SNC (general partnership)?

The removal of a manager of a SARL -(société à responsabilité limitée) can be decided by the partners or result from a court ruling.

Pursuant to Articles L. 223-25 and L. 223-29 of the Commercial Code, one or more partners representing more than half of the shares may freely dismiss the manager, provided they justify a valid reason, under penalty of incurring liability. No provision of Book II of the Commercial Code requires companies to record the reasons for dismissing a director in the minutes of the general meeting, and the absence of this mention does not, in itself, affect the regularity of the dismissal procedure .

Within the limits of the requirement for just cause, the dismissal of managers of an SARL is unrestricted: any clause intended to infringe upon this free revocability, particularly by providing for a disproportionate indemnity , must be deemed unwritten.

The partners may request the manager to convene the meeting responsible for proceeding with their dismissal. However, in the event of the manager's refusal, a partner may ask the judge to appoint a representative responsible for convening the said meeting, which must be granted without the ability to assess the appropriateness of the measure .

Paragraph 2 of Article L. 223-25 of the Commercial Code specifies that the manager may be dismissed by the courts for legitimate cause, at the request of any partner. Such a provision aims to prevent a manager, supported by the majority, from never being dismissed.

Legitimate cause can be understood as the fact, for a co-manager:

to fail in its duties of loyalty and fidelity towards the SARL ;

to be the author of accounting anomalies .

Does not constitute a legitimate cause for the removal of the manager:

the sole defect in convening general meetings, when it does not compromise the corporate interest;

operations carried out on the current accounts of two partners, when they do not significantly affect the normal functioning of the company .

No mandatory provision of Book II of the Commercial Code requires that the reason for dismissal be recorded in the minutes of the general meeting revoking the mandate of the corporate officer.

Cass. com., 7 May 2025, LawLex202500003716JBJ.

The management agreement that allocates one year of salary to the manager of the SARL in the event of dismissal, while the company's current operating results are consistently in deficit, is void insofar as such an indemnity, by its amount, is likely to dissuade the partners from pronouncing the dismissal.

Cass. com., 6 November 2012, LawLex202200006210JBJ.

The court hearing the request from a majority shareholder of an SARL for the appointment of a representative tasked with convening a general meeting with the agenda of dismissing the manager must grant it if the request is in line with the corporate interest, without being able to assess the reasons for the dismissal.

Cass. com., 15 December 2021, LawLex202200010130JBJ.

Constitutes a legitimate cause for judicial removal, the fact that a co-manager fails in their duties of loyalty and fidelity towards the SARL by negotiating undeclared personal benefits that harm the corporate interest.

Cass. com., 16 May 2018, LawLex202200006449JBJ.

Accounting anomalies can justify the judicial dismissal of a manager of an LLC, even if they have had limited consequences.

Cass. com., 25 January 2023, LawLex202300002176JBJ.

Operations carried out on the current accounts of two partners, which concern more the relations between them than the management of the SARL and the corporate interest, and which have never significantly affected its normal functioning, cannot justify the judicial removal of the manager.

Cass. com., 10 July 2007, LawLex202200006509JBJ.

How to remove a manager of a private limited liabilty company (SARL)?

When a public limited company (SA) has a board of directors, the removal of a director may, pursuant to Article L. 225-18 of the Commercial Code, occur ad nutum, meaning at any time and without the decision needing to be based on a just cause, by decision of the ordinary general meeting. Any contrary provision must be deemed unwritten . This is particularly the case for a clause subjecting the removal to the prior authorization of the board of directors.

Any provision of the shareholders' agreement that has the purpose or effect of undermining the free revocability of the director of a public limited company is unlawful.

Cass. com., 26 April 2017, LawLex202200005854JBJ.

How to remove a director of an SA?

When a public limited company (société anonyme) has a board of directors and the chairman of the board also serves as the chief executive officer (directeur général), he is referred to as the président-directeur général (PDG). Article L. 225-51-1 of the Commercial Code provides that in such a case, the provisions relating to the chief executive officer apply to the PDG. Therefore, he can be dismissed ad nutum, meaning at any time and without the decision needing to be based on a just cause . Any clause that would hinder this free dismissibility is void . The expiration of the term of the chairman of the board of directors' corporate mandate cannot be classified as a dismissal .

Advice: Do not assume that a clause providing for a termination indemnity constitutes a barrier to the dismissal of the PDG. Such clauses which infringe the principle of revocability ad nutum of company officers are systematically annulled by the courts.

In the event that the general management of a public limited company is assumed by the chairman of the board of directors, the latter is, in his two capacities, subject to dismissal at any time by the board of directors, without the dismissal needing to be based on a just cause.

Cass. com., 15 November 2011, LawLex202200005856JBJ.

The clause that hinders the free revocability of the PDG, by imposing on the company a financial compensation likely to cause significant harm to its financial balance, is void.

The non-renewal of the chairman of the board's term at the end of his mandate does not equate to a revocation.

CA Grenoble, Commercial Chamber, 11 April 2024, LawLex202400003158JBJ.

How to dismiss the PDG (président-directeur général ) of a public limited company (SA)?

When a public limited company (SA) has a board of directors and the management of the company is not carried out by a PDG (président-directeur général), it falls to the DG (directeur général), in accordance with Article L. 225-51-1 of the Commercial Code.

Like the PDG, the DG can be dismissed ad nutum, meaning at any time and without the decision needing to be based on a just cause. The decision is made by the board of directors.

The decision of the board of directors of a public limited company to abandon the dual governance model and entrust its chairman with the general management of the company, which results in the termination of the functions previously performed by the DG, does not constitute a dismissal of the latter. For this change to be classified as a dismissal, it must be proven that it was orchestrated solely to remove the individual concerned . A decision made outside this body would incur the company's liability. Furthermore, no agreement may have the purpose or effect of restricting or hindering the principle of the at-will dismissal of a managing director of a public limited company .

Even if the company is not required to justify its decision, the existence of a valid reason, such as discord among the company's members, the commission of fraudulent acts leading to a loss of confidence among the company's financial partners, or having made statements during meetings with the group's executives that reflect a deep doubt about its prospects and the viability of its business model, excludes any claim for compensation by the interested party.

Moreover, if the dismissal is pronounced, it has no impact on the possible employment contract from which the may have retained the benefit .

The decision of the board of directors of a public limited company to abandon the dual governance structure and entrust its chairman with the general management of the company, which results in the termination of the functions previously performed by the general director (DG), does not constitute a dismissal of the latter, unless it can be demonstrated that it was made with the intent to remove him from his corporate office.

Cass. com., 4 April 2024, LawLex202400002836JBJ.

An agreement cannot have the purpose or effect of restricting or hindering the ad nutum dismissal of a general manager of a public limited company, given the significant financial consequences it may entail for the chairman of the board of directors of this company.

Cass. com., 2 June 1992, LawLex202200004797JBJ.

The dismissal of a general director does not in itself constitute a substantial modification of the employment contract from which they continue to benefit in the absence of reassignment of their technical duties.

Cass. soc., 14 June 2000, LawLex202200004861JBJ.

How to dismiss the general director (DG) of a public limited company (SA)?

When a public limited company (SA) has an executive board (directoire), Article L. 225-61 provides that its members may be dismissed for just cause by the general meeting, or, if the bylaws so provide, by the supervisory board.

disagreement among the members of the management board when it no longer allows, for several years, its collegial functioning and jeopardizes the proper operation of the undertaking ;

divergence of views on management or social policy between a new group of majority shareholders and a member of the management board;

commission of fraudulent acts having impacted the confidence of financial partners in all the entities of the group.

On the other hand, the implementation of a new governance  or the mere fact that a member of the management board abstained from voting on the appointment of a member of the supervisory board does not constitute a valid reason for the dismissal of a member and chairman of the management board.

Advice: Do not assume that the revocation of the corporate mandate releases the company from all its ties with the member of the management board. Indeed, if the person concerned has also entered into an employment contract with the company, the revocation of their management duties does not automatically terminate this contract.

The removal of a member of the management board is based on just cause when it occurs following a change in the group's direction through new internal organization and governance methods, to which the member did not adhere, in a context of significant discord over several years within this corporate body, preventing its collegial functioning and likely to jeopardize the proper operation of the undertaking.

Cass. com., 10 February 2015, LawLex202200005007JBJ.

The establishment of new governance does not constitute a valid reason for the dismissal of a member and chairman of the management board, unless it is justified by the need to preserve the corporate interest.

Cass. com., 30 March 2022, LawLex202200006671JBJ.

How to revoke a member of the management board (directoire) of an SA?

There is no specific provision in the law governing simplified joint-stock companies (SAS) that addresses the removal of the president. It is therefore up to the articles of incorporation to establish the conditions for such removal i.e., the procedure, grounds, competent body, terms for any compensation, and so on. The exercise of the power to remove the president of a simplified joint-stock company is subject to compliance with the principle of adversarial proceedings. Consequently, the absence of a prior hearing—intended to inform the individual concerned of the allegations against them and to hear their defense - vitiates the validity of their removal, even if it is based on a particularly serious breach of conduct .

From then on, the dismissal of the president of an SAS may occur, depending on the statutory provisions:

Ad nutum, that is, without just cause and at any time, by decision of the partners. In such a case, any challenge to the reasons for the decision is ineffective .

For just cause. This method of dismissal requires demonstrating the existence of actions by the SAS manager that harm or are likely to harm the proper functioning of the company, but not necessarily characterizing a wrongful behavior . A just cause for dismissal is constituted by the breach of the duty of loyalty by the president of the SAS who receives a bonus he knows to be undue or who makes withdrawals from the company's funds and terminates the only agreement guaranteeing him income and allowing him to pay the salaries of his employees. Conversely, the mere loss of confidence of the shareholders in the president does not constitute a just cause when it is not likely to compromise the company's social interest.

Advice: Include in the articles of association a provision for revocation even without just cause or for reasons other than serious misconduct, by providing for the payment of compensation in these cases, to avoid judicial intervention. Case law recognizes the legality of these clauses, considering that they are not likely to deter the company from terminating the director's mandate but merely reflect the founding partners' desire to specify the conditions and reasons for which revocation may occur.

The president of an SAS cannot be dismissed, even for gross misconduct, without a prior meeting being organized to allow them to be informed of the reasons for the decision made against them and to present their observations.

Cass. com., 11 October 2023, LawLex202300013722JBJ.

Since the sole shareholder of an SAS has the right to dismiss the president at any time, they are not prohibited from deciding on an immediate dismissal for reasons that the court does not have to assess the merits of.

CA Toulouse, 31 October 2012, LawLex202300008806JBJ.

The refusal of the vice-president of an SAS to be bound by an obligation to devote himself entirely to the company, to the exclusion of any other external activity, while he is an operational manager whose activity is necessary for the company's development, particularly for the creation of its site, and which may expose it to difficulties by blocking the entry of a shareholder into the company's capital and delaying its development, constitutes a just cause for dismissal.

CA Paris, 15 September 2020, LawLex202300008355JBJ.

How to revoke the president of a simplified joint-stock company (SAS)?

The dismissal of a director exposes the company to the payment of damages in two scenarios.

The first is where the measure must be based on a just cause, which the party initiating the termination does not establish as real. This is the case in an SNC, SARL , SA with a management board and, if the statutes provide for it, in the SAS . Conversely, in corporate forms where dismissal occurs ad nutum, the reasons for dismissal do not need to be assessed by the judge and cannot, by themselves, expose the undertaking to compensation. This is the case for SA with a board of directors, concerning directors, the PDG, and the DG, and in the SAS, when the statutes provide for ad nutum dismissal.

The second is that of the so-called “sudden and vexatious” dismissal. This scenario, which actually covers two types of behavior, can concern all corporate forms. It is irrelevant whether the cause of termination is valid: it is the circumstances of the termination that are scrutinized by the judge. The dismissal is said to be abrupt when the decision-making bodies have not respected the principle of adversarial proceedings, meaning they did not summon the director with sufficient time to prepare their defense and did not listen to their observations before making their decision .

It is considered vexatious when it is accompanied by behaviors likely to harm the honor and/or dignity of the manager. This is particularly the case:

when he is asked to vacate the premises without delay and return his keys ;

when insults, provocations, and hateful exchanges were directed at him in front of the staff;

when threats are made against him and a false pretext is invoked regarding the management policy pursued, even though it was perpetuated by his successor.

Advice: Always allow the person to present his or her views, even if the decision must be made urgently. It is not necessary to give them notice far in advance: a notice issued on the same day as the meeting of the governing body is permissible. It is not even necessary for the notice to specify the proposed measure, since a general meeting is necessarily called upon to decide on the management of its executive and, consequently, on whether to retain him or her in office. However, the executive must have had an opportunity to present his or her arguments and defend himself or herself. To preserve this evidence, the company should take care to scrupulously record all comments made by the executive in the meeting minutes.

The manager of an SARL must be compensated for a dismissal without just cause, as long as they cannot be blamed for a drop in revenue or abuses causing the losses incurred, nor for having worked “in a cavalier manner” in the four structures they controlled, and the invoices issued by a sole proprietorship they also managed correspond to actual services and were regularly recorded.

Cass. com., 22 October 2002, LawLex202300004780JBJ.

The dismissal of the manager of an SARL, who was not informed of the reasons invoked and was unable to present their observations before the vote, is wrongful notwithstanding the presence of a bailiff during the general meeting.

Cass. com., 29 September 2015, LawLex202200006205JBJ.

The dismissal of a manager of an SARL is deemed sudden and vexatious when they are asked to immediately return the keys to the company's premises and leave without delay, and are prohibited from accessing the company without the express authorization of the management.

500 Questions - Business Law

288. What is the financial risk associated with the removal of a director?

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288. What is the financial risk associated with the removal of a director?

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Les décisions de justice citées dans ce paragraphe :

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