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

Company Law (en cours)

Article L. 223-18 of the Commercial Code provides that the SARL is managed by one or more natural persons. They may be chosen from outside the partners but must necessarily be appointed by them, either in the articles of association or by a subsequent act, under the majority conditions provided for in Article L. 223-29. Certain incompatibilities exist despite this apparent freedom. In fact, the re …

Specificities inherent to the corporate office.

Article L. 223-18 of the Commercial Code provides that the SARL is managed by one or more natural persons. They may be chosen from outside the partners but must necessarily be appointed by them, either in the articles of association or by a subsequent act, under the majority conditions provided for in Article L. 223-29. Certain incompatibilities exist despite this apparent freedom. In fact, the refusal by the bar council to grant a lawyer's request for authorization to manage an SARL is compatible with Union law, which, while enshrining the principle of free exercise of an economic and professional activity, allows for restrictions that are objectively necessary to safeguard the dignity of the legal profession with regard to the exercise of a financial activity .

1) Cumulation with an employment contract

The classic question of a possible combination of the functions of manager with an employment contract may arise, particularly in the case of an employee subsequently promoted to the position of manager. Unlike a public limited company, there is no prohibition in an SARL against simultaneously holding a corporate office and employee functions . However, such a combination requires certain conditions to be met to be recognized. Indeed, the employee functions must correspond to an actual job for which the individual receives remuneration distinct from that attributed to them as a manager and must be performed in a state of subordination to the company . Thus, a minority partner who does not cease, from the day they become manager of the SARL, to perform their duties as a quantity surveyor, unrelated to those pertaining to corporate management, and for which they continue to receive a salary distinct from the remuneration of their mandate, can claim the existence of an employment contract . The existence of a subordination link between the salaried manager and the company, which poses no difficulties when the employee is a third party to the company , proves more delicate to establish when the person combines the qualities of employee, manager, and partner . Indeed, case law considers that a partner who holds two-thirds of the shares, whose working time and remuneration are determined based on these, and who performs their functions independently, interfering in the management of the company, cannot justify a subordination link characterizing the existence of an employment contract . Similarly, the absence of a technical function distinct from the manager's corporate office and the interference of their spouse in the management of the company allow for the conclusion that no subordination link exists between the SARL and these individuals . Finally, the manager of a company, who holds the majority of the shares and administers it alone, cannot, therefore, be in a state of subordination characterizing an employment contract, even in terms of their technical functions, nor can they register their salary claim as a liability of the company in judicial reorganization .

When the conditions for cumulation are not met, the employment contract is only suspended during the term of the corporate office, unless there has been a novation of the contract . The salaried functions generally resume when the corporate office ends. However, cumulation may also be excluded when the corporate office is merely apparent. This is the case when, despite being designated as a corporate officer of the SARL, a person performs the functions of a sales director representing the company's products, under the dependency of the parent company, and has only limited autonomy in exercising his office  . Conversely, a manager who joined the company as a trial engineer-manager with a conditional promise of appointment as manager, whose engineer and manager duties with the broadest powers were completely and voluntarily merged, can no longer be considered an employee of the SARL .

2) Individual exercise of a distinct activity

The title of manager of an SARL does not preclude the individual from engaging in activities in their personal name. However, they cannot, in their capacity as manager, be personally placed under judicial reorganization if they do not engage in an independent professional activity in this context . Similarly, the fact that a manager participates in the agricultural activities of the company as the head of operations does not suffice to prove that they individually engage in an activity distinct from the management of the SARL . Furthermore, the mere fact that the manager and majority shareholder of an SARL is listed as a sole proprietor in the SIRENE directory of INSEE does not suffice to prove that they effectively engage in an independent professional activity distinct from that conducted on behalf of and in the name of the company, which could justify the initiation of a judicial reorganization against them .

The terms of remuneration for the manager of an SARL can be set either in the statutes or in a collective decision of the partners  in which the principal party may participate, as it is not strictly speaking a regulated agreement , even if he is a majority partner . The courts cannot substitute for the manager of an SARL, who alone is competent, in accordance with the statutes, to request a collective decision of the partners to determine his remuneration . The manager of an SARL cannot claim any remuneration if it has not been approved by a collective decision of the partners . However, the fact that the manager of an SARL waits to withdraw the sums corresponding to a profit-sharing based on turnover as part of his remuneration, approved by the partners' meeting, until the company's cash flow situation allows it, does not imply any waiver on his part .

The remuneration may consist of a principal amount, but also various bonuses or even include the company's payment of social security contributions owed by the manager, provided that an SARL cannot cover the social security contributions owed personally by the manager without the consent of all the partners . It is also important to note that the rules relating to employment contracts do not apply to the remuneration allocated to the manager of an SARL: this is exclusively due to the function assumed and not the actual performance of their duties .

The remuneration of the manager can be a source of litigation, particularly if its amount contravenes the company's interest . Indeed, the decision to quadruple the average remuneration of the co-managing partners after the death of the third manager, while the company's net accounting result decreased by more than 99%, without a corresponding investment policy, appears contrary to the corporate interest and, as such, constitutes an abuse of majority . Conversely, the increase in the remuneration of the managing partner and the granting of additional remuneration to the latter does not constitute an abuse of majority if this decision is justified by the evolution of the turnover achieved during the period considered . Furthermore, the receipt of high remuneration by the manager of an SARL could constitute an abuse of corporate assets provided it is excessive in view of the company's economic and financial situation and the actual activity he has devoted to it .

Cass. 1re civ., 14 May 2009, LawLex202200006025JBJ.

Cass. soc., 2 June 1988, LawLex202200006143JBJ, considering that the labor tribunal is competent to rule on the dispute between the SARL and the minority partner who retained his status as an employee after becoming a manager, as long as he continued to perform duties as an analyst engineer, distinct from those arising from his corporate mandate, and received compensation in return for his technical work.

Cass. soc., 10 February 2010, LawLex202200006147JBJ.

Cass. soc., 18 November 1970, LawLex202200006050JBJ.

Cass. com., 12 November 2008, LawLex202100005709JBJ.

Cass. com., 15 November 2016, LawLex202100005711JBJ.

Cass. com., 20 September 2017, LawLex202100005710JBJ.

Cass. com., 28 November 1995, LawLex202300004343JBJ, holding that the manager of an SARL cannot request the payment of a paid leave allowance that would represent part of his remuneration, in the absence of a collective decision made by the associates concerning him and since the provisions recorded in the balance sheet for leave only concern employees; 30 May 1989, LawLex202200006540JBJ, emphasizing that the setting of the remuneration of the manager of an SARL by decision of the assembly of associates does not constitute a management act subject to examination of its terms and amount by a management expert; 15 March 2017, LawLex202200006027JBJ, considering that the manager of an SARL must reimburse the remunerations he received when he did not convene and hold the assembly of associates for the approval of the accounts, during which these remunerations are determined; 18 November 1997, LawLex202200006424JBJ, considering that the manager of an SARL not dismissed from his duties is entitled to receive his remuneration, in the absence of a contrary decision regularly made by the assembly of associates, unless the majority associate, who refuses payment, proves that it is not due; 18 December 2019, LawLex202200006030JBJ. - See also Cass. com., 25 September 2012, LawLex202200006026JBJ, emphasizing that the remuneration of the manager of an SARL must be authorized by the general assembly, even when he is, with his spouse, the only other associate.

Cass. com., 4 May 2010, LawLex202200006136JBJ; 31 March 2021, LawLex202200006138JBJ, holding that the manager of an SARL may participate in the vote that grants him a special bonus as long as it is not an agreement between him and the company but rather the determination of an element of his compensation.

Cass. com., 4 October 2011, LawLex202200006137JBJ.

Cass. com., 14 November 2006, LawLex202200006426JBJ; Cf. CA Rennes, 4 December 2007, LawLex202300004351JBJ, considering that when the decision of the general meeting of partners of an SARL to refuse the increase in the manager's compensation reflects an abuse of equality, the judge who notes it may set this compensation himself; Cass. com., 31 March 2009, LawLex202200006029JBJ, holding that the judge cannot, even if he notes an abuse of equality, substitute himself for the legally competent corporate bodies to set the manager's compensation.

Cass. com., 12 December 2018, LawLex202200006028JBJ.

Cass. soc., 21 July 1981, LawLex202200006048JBJ; 14 May 1998, LawLex202200006142JBJ, holding that the employment contract of the manager, who holds no shares in the capital of the SARL and who effectively performs technical functions as a saleswoman, distinct from the corporate mandate, within a relationship of subordination, continues within the company until the termination of the employment relationship.

Cass. com., 17 January 1989, LawLex202300004355JBJ.

CA Paris, 2 June 2020, LawLex202300004352JBJ.

Cass. com., 21 February 1995, LawLex202300004344JBJ; 21 April 1992, LawLex202200006134JBJ; Cass. soc., 11 March 1982, LawLex202200006425JBJ, holding that the regime of non-seizability of remuneration provided by the Labor Code only extends to the manager of an SARL if, during the exercise of their activity, they are in a state of subordination to the company.

Cass. soc., 8 July 1980, LawLex202300004342JBJ, considering that the salary increase of the manager of an SARL can only be challenged by an employee with a profit-sharing interest if it is decided solely to harm them or in fraud of their rights.

Cass. com., 15 January 2020, LawLex202300003969JBJ; 20 February 2019, LawLex202200006216JBJ; 1 July 2003, LawLex202200008860JBJ, considering that the resolutions of the meetings of an SARL granting a bonus and remuneration to the manager may be annulled if they are excessive and constitute an abuse of majority.

Cass. com., 14 October 2020, LawLex202200006139JBJ.

Cass. crim., 23 March 1992, LawLex202300004345JBJ.

Cass. soc., 16 May 1990, LawLex202200006140JBJ.

Cass. soc., 14 May 1998, LawLex202200006142JBJ, considering that the employment contract of the manager, who holds no shares in the capital of the SARL and effectively performs technical sales functions, distinct from the corporate mandate, within a relationship of subordination, continues within the company until the termination of employment relations; 31 May 2006, LawLex202200006435JBJ, holding that an employee appointed as manager and then dismissed can claim damages on the grounds that the dismissal procedure was not followed, as she only ceased performing technical functions during her corporate mandate, before resuming them thereafter, in a state of total subordination to the company.

See however Cass. soc., 18 February 2015, LawLex202200006055JBJ, considering that the absence of an employment relationship cannot be inferred from the concealment by the employee and the SARL, in the forms submitted to the Assedic when applying for dismissal benefits, of the fact that he was also an equal partner of the SARL, or from the absence of a challenge to the dismissal for gross misconduct that clearly occurred without compliance with legal formalities.

Cass. soc., 15 June 1994, LawLex202200006054JBJ.

Cass. soc., 22 October 2015, LawLex202200006057JBJ.

Cass. soc., 7 February 1979, LawLex202200006429JBJ; 8 October 1980, LawLex202200006146JBJ; 17 January 1989, LawLex202200006148JBJ, holding that the manager of an SARL who holds the monopoly of technical skills inherent to the company's activity cannot claim to be bound to it by an employment contract since this situation is incompatible with a relationship of subordination; 16 January 2019, LawLex202200006145JBJ.

Cass. soc., 18 September 2019, LawLex202200006051JBJ.

Company Law (en cours)

446. Specificities inherent to the corporate office.

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446. Specificities inherent to the corporate office.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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