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

Company Law (en cours)

The common causes of dissolution of companies, such as dissolution for just grounds, apply to the SARL. Just grounds may be characterized by a disagreement between partners , or the compromised financial situation of the company , if they lead to a paralysis of its functioning . Indeed, the dissolution of an SARL may be pronounced for just grounds, as soon as one of the partners paralyzes its functioning by acting alone, without the agreement of the other, and does not allow the company to make a decision contrary to that resulting from his sole will, nor to challenge his management and mandate . Similarly, complaints with the constitution of a civil party by two partners of an SARL against the manager for breach of trust, leading to the cessation of the website's operation, the cessation of the company's activity, whose shareholders' equity has become less than half of the share capital, demonstrate the loss of affectio societatis and the disagreement between partners and constitute just grounds for dissolution, even if the litigation was closed by a decision of dismissal . The judge may reverse the decision of dissolution if the cause at the origin of the paralysis of the company's functioning disappears .

The extinction of the corporate purpose also constitutes a cause for dissolution applicable to the SARL. Indeed, the SARL whose statutory corporate purpose is the performance of all work related to the profession of chartered accountant must be dissolved due to the extinction of its purpose, as soon as it no longer includes the minimum number of required professionals and has been removed from the Order of Chartered Accountants, so that it can no longer, even if it still engages in advisory activities, perform the work related to the corporate purpose set by its articles of association .

On the other hand, dissolution due to the consolidation of shares in a single hand does not apply to the SARL. Indeed, in such a case, it is not dissolved but is transformed into an EURL.

Certain causes of dissolution are specific to the SARL. This is the case when the number of partners in the SARL exceeds the maximum number of one hundred. Article L. 223-3 indeed provides that if the situation is not rectified within a year, the company is irrevocably dissolved. Similarly, according to Article L. 223-42, this also applies when, within the same period, the partners have been unable to deliberate on the procedure to follow due to the loss of half of the capital .

The SARL has the particularity that, unlike companies with a strong intuitus personae, the personal status of the partners does not constitute grounds for dissolution. In fact, Article L. 223-41 of the Commercial Code provides that elements such as personal bankruptcy, a management ban, a measure of incapacity, or the death of one of the partners are not likely to lead to the dissolution of the company.

Regarding the effects of dissolution, they are the same as those applicable to any company, notably the survival of the legal personality of the dissolved company for the purposes of liquidation , the liquidation of the company , and the return of contributions and the distribution of the liquidation surplus. In particular, the dissolution of an SARL does not prevent a request for reimbursement of a current account by the associate who directs their request against the company and not against the other associate .

Jurisprudence also considers that after the closure of the liquidation of the SARL, former partners may be required to settle social debts, provided they have been reimbursed for their contributions  and that the amount reimbursed is sufficient to discharge the debts . Thus, a partner of an SARL who, at the end of the liquidation operations, is allocated a share of the social assets greater than a social debt, may be jointly liable with the other partner for its payment .

Even if the legal personality of the company is maintained as long as its rights and obligations are not liquidated, an action based on the manager's mismanagement for the damage suffered by the company is admissible only if an ad hoc administrator has been appointed to represent the company, whose functions as manager and liquidator necessarily ceased at the close of the liquidation operations . Furthermore, the liquidator who closed the liquidation and proceeded with the deregistration of an SARL whose liability was sought in an ongoing dispute, without having set aside the amount claimed as damages, incurs liability because, through negligence, they caused the claimant to lose the opportunity to obtain payment of the amounts charged to the company .

Cass. com., 16 June 1992, LawLex202300002212JBJ, BJS 1992, 944, note LE CANNU, considering that the early dissolution of an SARL due to a disagreement detrimental to the proper functioning of the company cannot be pronounced when the partner requesting it is the cause; 18 November 1997, LawLex202300002431JBJ, holding that the action for dissolution of an SARL brought by a partner is admissible, as long as the disagreement between the partners is not more attributable to them than to the other partner; Douai, 4 April 2024, LawLex202400003104JBJ, specifying that the existence of a persistent disagreement between the partners of an SARL that makes continued collaboration impossible justifies ordering the dissolution of the company.

Montpellier, 18 June 2002, LawLex202200009247JBJ, considering that the dissolution of the company, resulting from its paralysis and the impossibility of finding a solution to rectify its accounts, may be requested by the associate who opposes the adoption of ruinous means for the associates or insufficient to remedy it, as long as this deadlock situation cannot be attributed to them.

Cass. com., 27 March 1990, LawLex202300003042JBJ.

Cass. com., 13 June 1984, LawLex202300002934JBJ.

Cass. com., 17 December 1979, LawLex202300002936JBJ, considering that the associate of a liquidated SARL cannot be ordered to pay a corporate debt if the amount of the return of their contributions does not allow them to settle it; 8 October 2013, LawLex202300002938JBJ.

Cass. com., 3 July 2001, LawLex202300002932JBJ.

Paris, 29 February 2024, LawLex202400002084JBJ.

CA Aix-en-Provence, 20 June 2024, LawLex202400004767JBJ.

Cass. com., 21 October 1997, LawLex202300001689JBJ, considering that the disagreement between partners of an SARL is a cause for dissolution only insofar as it results in paralyzing the functioning of the company.

Cass. com., 3 March 2021, LawLex202300002740JBJ.

Paris, 10 May 2011, LawLex202300002939JBJ.

Paris, 30 September 2010, LawLex202300002927JBJ, holding that the memorandum of understanding and the private agreement concluded between the two equal capital blocks held in an SARL, which provide for the transfer of all its shares to an SAS being formed, under the suspensive condition of overturning the judgment that pronounced its dissolution, put an end to the dissensions that paralyzed the company and justify overturning the decision that pronounced its dissolution.

Cass. com., 3 May 1995, LawLex202300002416JBJ.

Grenoble, 21 March 2024, LawLex202400002660JBJ, considering that the failure to restore the shareholders' equity of an SARL, which has fallen below half of the corporate capital, within the legal deadlines, justifies the early dissolution of the company even if it engages in activities likely to generate income and if its banker reports no operational anomalies.

Basse-Terre, 11 February 2019, LawLex202200007189JBJ, considering that a dissolved SARL, whose liquidation operations have been closed and which has been removed from the RCS, can be a party to a proceeding, as it retains its legal personality as long as claims and debts remain.

Cass. com., 24 November 1992, LawLex202300003367JBJ, considering that the request of a partner in an SARL for the appointment of a non-partner liquidator cannot be granted on the grounds that a dispute exists with the amicable liquidator, as long as it is not established that the latter has committed a fault in the performance of his duties.

456. Causes and effects.