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

Company Law (en cours)

When the chairman of the board of directors combines their functions with those of the chief executive officer, they are referred to as the chairman and CEO or CEO. Before the NRE law of 15 May 2001 , this management mode was the only possible option, and the CEO, while overseeing the direction and monitoring of the board's missions, legally represented the company in dealings with third parties.  …

Cumulation of functions

When the chairman of the board of directors combines their functions with those of the chief executive officer, they are referred to as the chairman and CEO or CEO. Before the NRE law of 15 May 2001 , this management mode was the only possible option, and the CEO, while overseeing the direction and monitoring of the board's missions, legally represented the company in dealings with third parties. Now, companies are allowed to separate these functions and appoint a chief executive officer distinct from the chairman of the board of directors.

Article L. 225-51-1 of the Commercial Code provides that when the general management of the company is assumed by the chairman of the board of directors, the provisions relating to the chief executive officer apply to him. The powers of the chairman are defined by the board of directors. It follows that the essential and determining clause of a memorandum of understanding concluded between the chairman of a joint-stock company and its majority shareholder, which neutralizes the powers of the former in favor of the latter, is void . The board of directors also defines the CEO's remuneration . Consequently, the unilateral decision of the latter to allocate himself an increase in his remuneration is void and cannot be ratified a posteriori by the board of directors .

As the Chief Executive Officer, the CEO can combine their position with an employment contract if they demonstrate that their work is effective and that they perform their duties under a relationship of subordination to the company . However, the delegation by the board of directors to its chairman of all necessary powers to ensure the general management of the company, including the powers to appoint and dismiss all directors, effectively removes their subordination to the company . Furthermore, the employment contract must not aim to undermine the principle of free dismissal. This is not the case when a public limited company hires the CEO of one of its subsidiaries as an employee to hold a corporate office in other subsidiaries, provided that the employment contract was concluded before the individual was appointed as CEO of these subsidiaries and they were then serving in a different company from the one that concluded the employment contract . If the conditions for combining are not met, the employee's employment contract is, in the absence of an agreement to the contrary, suspended  during the time they serve as CEO, even if it has been modified in one of its substantial elements upon the termination of the mandate . Indeed, the acceptance by an employee of a corporate office does not result in the termination of their employment contract, in the absence of an unequivocal expression of their intention to resign .

The CEO is dismissible ad nutum, meaning at any time, without the decision needing to be based on just cause . Also, any clause that hinders the free dismissibility of the CEO by imposing a financial burden on the company that could significantly affect its financial balance is void . Furthermore, the non-renewal of the chairman of the board of directors at the end of their term does not equate to a dismissal .

The dismissal of the Chairman and CEO only exposes the company to the payment of damages if it is fraudulent or wrongful , particularly due to the offensive and vexatious nature of the terms used and the manifestly humiliating attitude of the board of directors towards the individual concerned , or if it occurs under circumstances likely to cause unjustified harm to their honorability, such as threats and the invocation of a false pretext regarding the management policy pursued, while this policy was continued by their successor . The right to compensation applies, if applicable, only in the case of actual dismissal, and not in the case of non-renewal of the chairman of the board of directors at the end of their term . If they have agreed to a non-compete clause due to their status and predominant role in the establishment or development of the clientele, which is justified by the powers, benefits, and obligations inherent to their position, it takes effect on the date of the termination of their duties .

Finally, like the Chief Executive Officer, the CEO can incur liability towards the company. The limitation period for the recourse action for indemnity brought by a public limited company against its former CEO only begins to run from the time of its own summons in the context of the main action .

Law No 2001-420 of 15 May 2001 on new economic regulations.

Cass. com., 11 June 1965, LawLex202200004751JBJ.

Cass. com., 15 November 2011, LawLex202200005856JBJ, Rev. sociétés 2012, 234, obs. DONDERO; JCP E 2012, No 1001, obs. VIANDIER.

Cass. com., 15 November 2011, LawLex202200005856JBJ, previously cited; 17 May 1971, LawLex202200004796JBJ.

CA Grenoble, 11 April 2024, LawLex202400003158JBJ.

Cass. com., 23 January 1978, LawLex202200004798JBJ.

Commercial Code, Art. L. 225-55. - See, for an application, CA Paris, 30 June 2016, LawLex202300007912JBJ.

Cass. com., 20 November 1962, LawLex202200006570JBJ.

CA Grenoble, 11 April 2024, LawLex202400003158JBJ, previously cited.

Cass. com., 6 May 2014, LawLex202300007939JBJ.

Cass. com., 9 May 1990, LawLex202300007974JBJ, holding that the supplementary pension for which the company must immediately pay a contribution proportional to the salary constitutes deferred compensation for the CEO and the general managers, which falls under the decision of the board of directors alone.

Cass. com., 31 March 2021, LawLex202200005859JBJ.

Agen, 13 November 2001, LawLex202300012241JBJ, considering that proof of the actual performance of technical duties during the term of office is not sufficient to characterize the continuation of an employment contract if the subordination link is not also established.

Cass. soc., 12 December 1990, LawLex202300006667JBJ.

Cass. soc., 20 March 1996, LawLex202200004762JBJ.

Ibid; Cass. soc., 22 September 2011, LawLex202200004756JBJ.

Agen, 13 November 2001, LawLex202300012241JBJ.

Company Law (en cours)

506. Cumulation of functions

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Les décisions de justice citées dans ce paragraphe :

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506. Cumulation of functions

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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