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

Company Law (en cours)

The actions of the manager of an SARL generally bind only the company, pursuant to the theory of representation. However, in certain cases, their personal liability, both civil and criminal, may be engaged, both towards the company and third parties, due to their management actions. Conversely, the faults committed by the manager in the exercise of their mandate do not constitute, when they are al …

Mismanagement.

The actions of the manager of an SARL generally bind only the company, pursuant to the theory of representation. However, in certain cases, their personal liability, both civil and criminal, may be engaged, both towards the company and third parties, due to their management actions. Conversely, the faults committed by the manager in the exercise of their mandate do not constitute, when they are also a partner, a breach of the obligations arising from the company contract that would justify judicial dissolution .

Article L. 223-22 of the Commercial Code provides that managers are liable, individually or jointly, as the case may be, to the company or to third parties, either for violations of legislative or regulatory provisions applicable to limited liability companies, or for breaches of the articles of association, or for faults committed in their management. Although the text does not specify this, case law has long held that the liability established by Article L. 223-22 concerns only de jure managers and not de facto managers .

The manager of an SARL commits a management fault when, just before resigning, he transfers the business assets operated by the company to another company he has just created without invoicing . Similarly, management faults include failing to execute the exclusive supply contract entered into by the company with a brewer and putting the business assets under lease-management without notifying the latter, thereby making the SARL liable for heavy contractual indemnities , being responsible, through irregularities in bookkeeping, for a tax adjustment that the company had to bear,  or failing to urgently take measures to rectify the company's situation in the face of increasing difficulties and worsening deficit, which led to the loss of corporate capital, without informing the partners of the seriousness of the situation . However, the manager's liability is only engaged in the presence of a causal link between the fault attributed to him and the damage claimed by the company .

For the fault committed to engage the manager's liability towards third parties, it must be separable from their functions . The fault separable from the manager's functions refers to a fault of particular gravity and incompatible with the normal exercise of corporate functions . Therefore, the manager's failure to respond to a request for information , the late filing of the company's annual accounts with the commercial court registry , or the failure to pay for a delivered product whose non-compliance is contested  cannot constitute faults separable from their functions. However, the manager of an SARL who is guilty of corruption to artificially and fraudulently fulfill their contractual obligations commits personal faults separable from their function, which engage their tortious civil liability . The same applies to a manager who knowingly agrees to start a construction site without the company being covered by insurance guaranteeing the ten-year liability of builders .

Regarding the modalities of exercising the action, Article L. 223-22 specifies that in addition to the action for compensation for personal harm suffered, the partners may, either individually  or by grouping together, initiate the corporate liability action against the managers . The plaintiffs are authorized to seek compensation for the entire damage suffered by the company to which, if applicable, damages are awarded . Article R. 223-32 adds that when the corporate action is initiated by one or more partners, acting either individually or under the conditions provided for in Article R. 223-31, the court can only rule if the company has been duly involved through its legal representatives . Nevertheless, the existence of the corporate action available to partners under Article L. 223-22 of the Commercial Code cannot deprive the company, which has suffered harm resulting from the wrongful acts of its former manager, of its own right to take action for liability . Finally, under Article L. 223-23, the statute of limitations for the liability action is three years, whether the action is exercised by the company or by third parties . It runs from the commission of the harmful act, or, if it was concealed, from its revelation.

The criminal liability of the manager of an SARL is considered under Articles L. 241-2 and following of the Commercial Code. These provisions prohibit managers from: (i) issuing, directly or through an intermediary, on behalf of the company, any marketable securities ; (ii) distributing fictitious dividends among the partners, in the absence of an inventory or by means of fraudulent inventories; (iii) presenting to the partners annual accounts that do not provide, for each fiscal year, a true and fair view of the results of operations, the financial situation, and the assets at the end of that period to conceal the true situation of the company; (iv) making, in bad faith, use of the company's assets or credit in a way they know is contrary to the company's interest, for personal purposes or to favor another company or undertaking in which they have a direct or indirect interest; (v) making, in bad faith, use of the powers they possess or the votes they hold, in this capacity, in a way they know is contrary to the company's interests, for personal purposes or to favor another company or undertaking in which they have a direct or indirect interest ; (vi) failing to prepare an inventory, annual accounts, and a management report for each fiscal year ; and (vii) failing to submit the inventory, annual accounts, and management report prepared for each fiscal year for approval by the partners' meeting or the sole partner . For all these offenses, Article L. 241-9 expressly provides that de facto managers may be prosecuted like de jure managers. The most frequently sanctioned offense is the misuse of company assets. Such a classification can be recognized when managers have engaged in sales and leases of machinery to the detriment of the company and have received unjustified sums and excessive remuneration given the company's financial difficulties and the insufficiency of the work provided . However, mere delay in submitting the inventory, annual accounts, and management report for approval by the partners' meeting or the sole partner does not, in itself, constitute a criminal offense .

When there are multiple co-managers, the liability action brought by the company does not need to be directed against all of them, as their plurality does not prevent their liability from being engaged individually . Furthermore, the right to compensation of an SARL due to faults committed by the manager in accounting management cannot be dismissed on the grounds that the manager's liability would be shared with a former associate, a de facto co-manager . The co-managers of an SARL incur criminal liability in the event of presenting an inaccurate balance sheet and fraud committed to the detriment of the transferee of a majority stake . However, the determination of the contributory share of each co-manager of an SARL, who participated in the same acts, applies only to their civil liability and not to their criminal liability .

Cass. com., 20 June 1966, LawLex202300004745JBJ.

Cass. com., 12 July 1993, LawLex202300004741JBJ, considering that the de jure manager of an SARL cannot be indemnified by an alleged de facto manager for his personal liabilities arising from the violation of the company's tax obligations, when it is not established that he has relinquished all control and management powers attached to his functions in favor of the latter; 21 March 1995, LawLex202300004630JBJ, holding that the partners of an SARL can only bring a corporate liability action for mismanagement against the de jure manager and not the de facto manager of the company; 14 February 2018, LawLex202100001679JBJ, considering that the liability action brought by an SARL and its partners against the de facto manager is not subject to the provisions of Article L. 223-22, which only concerns actions committed by de jure managers. - Cf. Versailles, 21 March 2023, LawLex202300009030JBJ, holding that both the de jure and de facto managers of the SARL incur liability by failing to ensure that the invoices paid correspond to services actually performed and in line with the corporate interest.

Cass. com., 3 May 2018, LawLex202300004603JBJ; Cass. 3e civ., 4 April 2001, LawLex202300004784JBJ, considering that the manager of an SARL, who, although having received funds to insure a building, refrained from taking out a contract and verifying that the company responsible for the renovation work was itself insured, does not incur personal liability if it is not established that such faults are separable from his functions.

Cass. com., 27 January 1998, LawLex202300004688JBJ; 12 January 1999, LawLex202300004689JBJ, considering that the failure to cover a construction site, even if it caused harm to a third party, does not constitute a circumstance allowing the manager of the SARL responsible for carrying out the work to be charged with a management fault separable from their functions.

Cass. 1re civ., 6 October 1998, LawLex202300004694JBJ; Cass. com., 18 May 2010, LawLex202300004698JBJ, considering that the manager of an SARL commits an intentional fault of particular gravity incompatible with the normal exercise of his functions when he accepts that the company carries out work not included in the corporate purpose without taking out ten-year liability insurance; 12 May 2015, LawLex202300004701JBJ, considering that the dormancy of an SARL, decided by its manager after the submission of an expert report that concluded the company's liability in the defective execution of the work assigned to it, is likely to constitute, on the part of its author, an intentional fault of particular gravity incompatible with the normal exercise of his corporate functions; 27 May 2015, LawLex202300004699JBJ, considering that the manager of an SARL engaged in paragliding instruction incurs personal liability due to a fault separable from his functions, when he has not contracted, contrary to legally penalized provisions, liability insurance in the name of the company.

Cass. com., 28 September 2010, LawLex202300004691JBJ; Cass. 3e civ., 10 March 2016, LawLex202300004692JBJ.

Cass. com., 7 July 2009, LawLex202200006531JBJ, considering that the individual liability action available to the members of an SARL against the manager of the company can only aim at compensating a personal loss, which cannot consist of the loss of opportunity to receive the value of the shares, since this loss is not distinct from that caused to the legal entity, which falls under the corporate action. - Cf. Cass. crim., 19 October 1978, LawLex202300004751JBJ, considering that a member can bring a liability action against the manager of an SARL, who, through his maneuvers, led to a decrease in the value of his shares by causing the company to lose an opportunity on which its development hopes were based.

Cass. com., 21 June 2016, LawLex202300004734JBJ and Paris, 29 February 2024, LawLex202400002084JBJ, considering that the provisions of Article L. 223-22 of the Commercial Code only authorize the partners to bring a corporate liability action against the manager and not against the amicable liquidator of the SARL. - See also, Aix-en-Provence, 22 February 2024, LawLex202400002213JBJ, holding that an action ut singuli concerning an unauthorized regulated agreement, directed not against the manager but against the contracting partner, is inadmissible.

Cass. com., 10 July 2024, LawLex202400005890JBJ, holding that there is no need to award damages for the harm caused by the fault of a manager of a limited liability company detachable from their functions when the damage resulting from the fraudulent removal of a sum of money from the company's assets has already been remedied by the conviction of the perpetrator to return this sum.

Cass. crim., 19 October 1978, LawLex202300004751JBJ, holding that the exercise of the ut singuli action by the partners of an SARL is subject to the regular involvement of the company through its legal representatives, including before criminal courts.

Cass. com., 14 December 2004, LawLex202300004749JBJ.

Cass. com., 20 October 1998, LawLex202300004711JBJ, considering that the three-year limitation period applies both to actions brought by third parties and to corporate actions directed against the manager of an SARL for faults committed in their management; 9 February 2012, LawLex202300004713JBJ (action by a third party); 10 July 2012, LawLex202300004598JBJ (action by a partner); 20 December 2023, LawLex202400000353JBJ, RJDA 2024, Nos. 38 and 41. - Cf. Cass. com., 28 June 2023, LawLex202300008572JBJ, emphasizing that the liability action directed against the manager of a limited liability company for acts prior to their management is not subject to the three-year limitation period of Article L. 223-23 of the Commercial Code.

Cass. com., 7 October 1997, LawLex202300004687JBJ.

Commercial Code, Art. L. 241-2, which provides for imprisonment of six months and a fine of 9,000 EUR.

Commercial Code, Art. L. 241-3, which provides for each of these acts a five-year imprisonment and a fine of 375,000 euros.

Commercial Code, Art. L. 241-4, which provides for a fine of 9,000 euros.

Commercial Code, Art. L. 241-5, which provides for a fine of 9,000 EUR.

Cass. crim., 21 October 2009, LawLex202200006438JBJ.

Cass. crim., 12 February 2025, LawLex202500000993JBJ, Gaz. Pal. 17 June 2025, No 20. 64: since the law of 22 March 2012, Article L. 241-5 of the Commercial Code no longer penalizes the failure to hold the meeting within six months of the close of the fiscal year, or, in the event of an extension, within the period set by court decision.

Cass. com., 25 January 2023, LawLex202300001647JBJ.

Cass. com., 3 March 2004, LawLex202300004735JBJ; 7 December 1982, LawLex202300004748JBJ, holding that the fact that the manager who initiated the action brought by the SARL contributed to the wrongful acts of the co-manager does not exempt the latter from liability towards the company.

Cass. crim., 29 November 2000, LawLex202300004725JBJ.

Cass. crim., 22 January 1975, LawLex202300004752JBJ.

Cass. com., 20 January 2015, LawLex202300004600JBJ; Cass. com., 22 October 2013, LawLex202200006207JBJ.

Cass. com., 12 October 1993, LawLex202300004739JBJ.

Cass. com., 5 June 1961, LawLex202300004738JBJ.

Cass. com., 27 September 2005, LawLex202300004599JBJ; CA Paris, 29 February 2024, LawLex202400002084JBJ, considering that a partner cannot invoke management faults of the former manager as long as he does not provide detailed evidence, whereas on the contrary, it is established that the transfer of the business assets and the early dissolution of the company were carried out by the latter in accordance with the statutes, that the financial statements were approved, that discharge of management was granted to him, and that the request for nullity of the meetings was declared inadmissible.

Cass. com., 22 May 2001, LawLex202200006441JBJ; Cass. com., 21 May 2025, LawLex202500004147JBJ, D. 2025, 945: the existence of a fault separable from the functions is a substantive condition for the personal liability action brought by a third party against the manager of a limited liability company.

Cass. 3e civ., 23 November 2017, LawLex202300004602JBJ; 7 June 2018, LawLex202300004742JBJ, holding that the manager of an SARL responsible for the construction of a house commits faults separable from his corporate duties, engaging his personal liability by failing to conclude an individual house construction contract and to take out a ten-year liability insurance. - See already, Cass. com., 26 February 2008, LawLex202300004724JBJ, holding a particularly serious fault committed intentionally, and the incompatibility of this with the normal exercise of his corporate duties.

Cass. com., 5 July 2017, LawLex202300004601JBJ.

Company Law (en cours)

448. Mismanagement.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

448. Mismanagement.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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