All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

The pronouncement of the invalidity of a company carries significant consequences. Therefore, the legislator intended to restrict the cases of company invalidity. These rules are primarily found in Article 1844-10 of the Civil Code, which provides that the invalidity of the company can only result from the violation of the provisions of Article 1832 and the first paragraph of Articles 1832-1, rela …

Causes for invalidity of companies

The pronouncement of the invalidity of a company carries significant consequences. Therefore, the legislator intended to restrict the cases of company invalidity. These rules are primarily found in Article 1844-10 of the Civil Code, which provides that the invalidity of the company can only result from the violation of the provisions of Article 1832 and the first paragraph of Articles 1832-1, relating to contributions, as well as Article 1833, concerning the legality of the corporate purpose, or from one of the causes of contract invalidity in general . Article L. 235-1 of the Commercial Code, which exclusively targets commercial companies, states that the invalidity of a company can only result from an express provision of Book II of the Commercial Code or the laws governing contract invalidity. Indeed, a company is primarily a contract. It is therefore not surprising that it is subject to the classic rules governing their invalidity  such as the incapacity of partners, vitiated consent, the fictitious nature of the company, fraud...

The courts have ruled on several occasions on cases of invalidity of companies. Hypothetically, a fictitious company  or one established for fraudulent purposes  is subject to invalidity. In fact, a SNC must be annulled for fraud when, deprived of financial contributions and the means necessary for normal operation and having conducted a very brief activity with an insignificant turnover, it constitutes only a legal arrangement intended to allow its partners to evade their obligations towards their personal creditors by requesting the opening of collective proceedings . However, the invalidity of a fictitious company does not call into question the enforceability of acts performed Similarly, it has been ruled that the absence of affectio societatis may result in the nullity of the company, effective from the date of its dissolution . Indeed, the lack of affectio societatis results in the absence of any true association link between the pseudo-partners and notably excludes that their contributions have entered into a temporary indivision . The illegality of the corporate purpose also constitutes a factor likely to lead to the invalidity of the company , it being specified that such invalidity is assessed with regard to the articles of association and not the activity actually carried out . Finally, a company also faces invalidity when the number of shareholders is below the legal minimum, the articles of association have been falsified, and the contributions in cash have not been fully paid up at the time of its formation .

It is important to note that most cases of invalidity provided for by French law are contrary to European law, despite several attempts by the legislator to bring them into compliance. Indeed, Article 11 of Directive No 2017/1132 of 14 June 2017  lists a much more limited number of cases of invalidity concerning limited liability companies or joint stock companies. While the directive does indeed provide that the unlawful or contrary to public policy nature of the corporate purpose, or the absence of certain mentions, constitute grounds for invalidity, it does not address any of the other hypotheses found in French texts. The national judge has been led to recognize the primacy of European law by refusing to declare the invalidity of a public limited company for fictitious contribution of a business asset . Similarly, it has been considered that the invalidity of an SARL cannot result from a failure to release capital  or from a defect in consent affecting only one founding partner .

The risks of annulment of a company are also reduced by Articles L. 235-9 and 1844-14, which provide for a shortened statute of limitations of three years . Similarly, case law considers that the invalidity incurred in the event of invoking a lack of capacity is a relative invalidity, so it cannot be requested by a third party .

Finally, the legislator has provided, in Article 1183 of the Civil Code, an interrogatory action allowing for the regularization of companies tainted by a defect, except those based on the illegality of the corporate purpose . Thus, one party may request in writing that the party who could invoke the invalidity either confirm the contract or act for invalidity within a period of six months, under penalty of foreclosure, provided that the cause of the invalidity has disappeared.

CA Paris, 21 February 2024, LawLex202400001673JBJ, holding that a wine-producing civil company using the designation “château” cannot be annulled on the grounds that its corporate name is unlawful, as no text provides for such a sanction.

Cass. com., 4 May 1981, LawLex202200003731JBJ, considering that the invalidity of a company can only result from an express provision of the law of 24 July 1966 or those governing the invalidity of contracts, and not from the absence of the company's registration in the commercial register.

OJ L 169 of 30 June 2017, 46, which consolidates the amendments made to the former Directive No 68/151 of 9 March 1968.

CA Paris, 21 September 2001, LawLex200500009062JBJ.

Cass. com., 10 February 2015, LawLex202200003086JBJ.

Cass. com., 20 June 1989, LawLex202200003575JBJ.

Cass. com., 17 July 1974, LawLex202200003585JBJ.

CA Paris, 23 February 2023, LawLex202300009702JBJ, considering that a SARL acting to annul an SASU due to the violation by this company of its own statutes as well as its corporate purpose, must be opposed with a plea of inadmissibility based on a lack of capacity to initiate legal action, since the invalidity attached to the alleged violation is of a relative nature.

Cass. 3e civ., 3 December 2013, LawLex202200002966JBJ.

CA Grenoble, 1re civ., 26 March 2012, LawLex202200003597JBJ; Cass. com., 28 January 1992, LawLex202200003587JBJ, establishing that a company formed solely to commit fraud can only be annulled if all the partners participated in the fraud.

Cass. com., 3 June 2008, LawLex202200002906JBJ.

Cass. 1re civ., 20 November 2001, LawLex202200003584JBJ.

Cass. 3e civ., 8 January 1975, LawLex202200003075JBJ.

Cass. com., 27 May 2015, LawLex202200002987JBJ; CA Lyon, 4 March 2014, LawLex202200002948JBJ, holding that the company whose corporate purpose provides that it engages in legal consulting activities and drafting of private deeds without possessing the necessary degrees or approval must be declared void.

Cass. com., 10 November 2015, LawLex202200003048JBJ.

CA Versailles, 13 November 2007, LawLex202300011989JBJ.

Company Law (en cours)

51. Causes for invalidity of companies

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51. Causes for invalidity of companies

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise