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

Company Law (en cours)

When not exercised by a chairman and CEO, the management of the company falls to the chief executive officer, in accordance with Article L. 225-51-1 of the Commercial Code. The statutes must provide an age limit for the position of chief executive officer, which, in the absence of an express provision, is set at sixty-five years. Any appointment made in violation of these provisions is void. When  …

Legal representative of the company

When not exercised by a chairman and CEO, the management of the company falls to the chief executive officer, in accordance with Article L. 225-51-1 of the Commercial Code. The statutes must provide an age limit for the position of chief executive officer, which, in the absence of an express provision, is set at sixty-five years. Any appointment made in violation of these provisions is void. When a chief executive officer reaches the age limit, they are deemed to have automatically resigned. The remuneration of the chief executive officer is determined exclusively by the board of directors  and cannot be set by an agreement with a third party .

Article L. 225-56 specifies the terms of exercising his power by stating that he is vested with the broadest powers to act in any circumstance on behalf of the company. He also represents the company in its dealings with third parties. As the legal representative, he has the power to initiate legal proceedings on behalf of the company, just like the chairman of the board of directors , even in the absence of express delegation from the chairman of the company . His ability to delegate the power to make claims declarations on behalf of the company can only be restricted by an express resolution of the board of directors or by a clause in the company's statutes . His powers are not without limits. Indeed, he exercises them within the scope of the corporate purpose and subject to those expressly attributed by law to the shareholders' meetings and the board of directors. However, in dealings with third parties, the acts he concludes in disregard of the corporate purpose may bind the company , unless the company proves that the third party knew that the act exceeded this purpose or could not have been unaware of it given the circumstances, with the mere publication of the statutes not being sufficient to constitute such proof.

The Chief Executive Officer may incur liability  when committing acts separable from their duties. Failing to verify whether the authorization given by the board of directors to grant guarantees on behalf of the company has not expired does not constitute such a fault . No decision of the general meeting can have the effect of extinguishing a liability action against the Chief Executive Officer for a fault committed in the performance of their mandate .

Regarding the accumulation of corporate offices, Article L. 225-54-1 provides that a natural person cannot simultaneously hold more than one position as Chief Executive Officer of public limited companies with their registered office in French territory. By exception, a second position as Chief Executive Officer or a position as a member of the management board or sole Chief Executive Officer may be held in a company controlled within the meaning of Article L. 233-16 by the company of which they are the Chief Executive Officer. Furthermore, a natural person holding a position as Chief Executive Officer in a company may also hold a position as Chief Executive Officer, member of the management board, or sole Chief Executive Officer in a company, provided that its securities are not admitted to trading on a regulated market. Any person in violation of these rules must resign from one of their positions within three months of their appointment, or from the position in question within three months of the event that caused the disappearance of one of the conditions. Upon expiration of this period, they are deemed to have resigned, as the case may be, either from their new position or from the position no longer meeting the set conditions, and must return the remuneration received, without affecting the validity of the deliberations in which they participated.

Regarding the combination of a corporate office and an employment contract, it is allowed if the CEO is not a director and in the absence of fraud. If he is a director, he can also combine these functions, provided that his employment contract corresponds to an actual job and that the number of directors linked to the company by an employment contract does not exceed one-third of the directors in office . Furthermore, a real subordination relationship must exist between them and the company. The CEO of a subsidiary who performs his duties under the dependence of the parent company's managers is subject to a legal subordination relationship characterizing the existence of an employment contract . Similarly, the CEO of a joint-stock company who received a warning for unjustified absences, had a salary deduction due to these, and received paid leave after his dismissal must be considered as having, concurrently with his corporate office, performed salaried functions in a subordination relationship with the company and been linked to it by an employment contract . Finally, the employment contract of an employee of the parent company may provide for his secondment within its subsidiaries to serve as CEO within them . The CEO of a subsidiary who performs his duties under the dependence of the parent company's managers is subject to a legal subordination relationship characterizing the existence of an employment contract with the latter . If the conditions for combining are not met, the employment contract is suspended  during the time of holding the corporate office . The appointment of an employee as CEO, with suspension of the employment contract during the term of this office, in the absence of distinct technical functions, does not end the ongoing probationary period, so that it resumes after the dismissal from the corporate office . Moreover, the employment contract suspended during the term of the CEO of the SA entrusted to the employee resumes its effects at the end of it . During the suspension period of his employment contract, the employee who became CEO of the SA remains bound to his employer by a duty of loyalty .

Like directors, the Chief Executive Officer is free to resign. The resignation of a Chief Executive Officer, a unilateral legal act, takes full effect as soon as it is brought to the company's attention, so that failure to comply with the statutory obligation to give notice may only entitle the company to damages and does not prevent the individual from being immediately appointed as a union representative . The resigning Chief Executive Officer remains bound by a duty of loyalty to the company, which prevents him from massively hiring the company's employees, whom he released from their non-compete clause during his management, in the new structure he created .

The chief executive officers are also dismissible at any time  without this dismissal affecting the employment contract from which they may have retained the benefit, in the absence of assignment of their technical functions . An agreement cannot have the purpose or effect of restricting or hindering the ad nutum dismissal of a chief executive officer of a public limited company, given the significant financial consequences it may entail for the chairman of the board of directors of this company . If the dismissal of the chief executive officer of a public limited company can be decided at any time, without notice or specification of reasons, by the board of directors on the proposal of its chairman, it engages the company's liability  when it has been decided outside of this corporate body and without the person concerned having been given the opportunity to present their observations beforehand . The mere fact that the dismissal is motivated by gross misconduct committed by the chief executive officer does not justify depriving them of the right to be heard by the board of directors before it takes this measure . Conversely, the dismissal is not considered abusive, as long as they have been fairly given the opportunity to explain themselves before the decision is made regarding the serious misconduct they were accused of . The same applies when the dismissal is based on just grounds, such as discord among the company's members , the commission of fraudulent acts leading to a loss of confidence among the company's financial partners , or having made statements during meetings with the group's executives that reflect a deep doubt about its prospects and the viability of its business model, particularly its financing method, and having, through direct communications with potential investors, attempted to create an antagonism between the company and its main shareholder likely to endanger the debt refinancing project .

In any event, the action of the manager can only succeed if it involves a genuine dismissal. This is not the case with the decision of the board of directors of a joint stock company to abandon the dual governance model and entrust its chairman with the general management of the company, which results in the termination of the functions previously exercised by the chief executive officer, unless it can be demonstrated that this decision was made with the intent to remove him from his corporate office .

See, however, Cass. com., 25 June 2013, LawLex202200004857JBJ, holding that the allocation of an exceptional bonus to the Chief Executive Officer in execution of his employment contract as operational director does not need to be determined by the board of directors under Article L. 225-53 of the Commercial Code.

Cass. com., 14 September 2010, LawLex202200004856JBJ.

Cass. soc., 4 March 1997, LawLex202200004745JBJ; 2 October 1991, LawLex202200004761JBJ, holding that the managing director of a subsidiary is bound by an employment contract with the parent company that remunerates him directly if there is a relationship of subordination between them requiring him to report to the latter on any important matter.

Cass. soc., 29 January 1992, LawLex202200004853JBJ.

Cass. soc., 20 March 1996, LawLex202200004762JBJ.

Cass. soc., 4 March 1997, LawLex202200004745JBJ.

Cass. soc., 4 March 1997, LawLex202200004745JBJ, considering that in the absence of cumulation between the corporate office held by a director for the subsidiary and the salaried activity he performs for the parent company, there is no need to verify if these two activities are distinct.

Cass. soc., 21 June 1994, LawLex202200004854JBJ; 11 June 1997, LawLex202200004855JBJ, considering that the employment contract of a salaried director, appointed as chief executive officer, is suspended when he has not expressly waived its benefit without invoking a cumulation between these two functions.

Cass. soc., 24 April 2013, LawLex202200005213JBJ.

Cass. soc., 21 May 2014, LawLex202200004757JBJ.

Cass. soc., 16 May 2018, LawLex202200005214JBJ.

Cass. soc., 1 February 2011, LawLex202200004862JBJ.

Cass. com., 10 June 1997, LawLex202300008933JBJ; 9 May 1995, LawLex202300008932JBJ; Cass. ass. plén., 18 November 1994, LawLex202200004864JBJ; Cass. com., 12 July 1993, LawLex202200004863JBJ, considering that the Chief Executive Officer, vested with the same powers as the Chairman of the Board of Directors, may act in all circumstances on behalf of the company and, in particular, represent it before the court during the preliminary hearing prior to the pronouncement of judicial liquidation.

Cass. com., 24 February 1998, LawLex200200001174JBJ, RJDA, 1998, No 810.

Cass. soc., 14 June 2000, LawLex202200004861JBJ.

Cass. com., 2 June 1992, LawLex202200004797JBJ.

Cass. soc., 22 November 1972, LawLex202200006567JBJ, holding that the dismissal of a deputy chief executive officer of a joint stock company may give rise to damages when it is abrupt and malicious and solely aims to remove them from management under the unfounded pretext of a "divergence of views" with the chairman and CEO.

Cass. com., 26 April 1994, LawLex202200004858JBJ; 29 March 2011, LawLex202200004859JBJ.

Cass. com., 26 April 1994, LawLex202200004858JBJ.

Cass. com., 11 March 2014, LawLex202300001087JBJ; 10 November 2015, LawLex202200004860JBJ.

Cass. com., 4 November 2008, LawLex202200004865JBJ.

Cass. com., 10 November 2015, LawLex202200004860JBJ.

Cass. crim., 12 February 1998, LawLex202300008935JBJ.

Cass. com., 5 July 2016, LawLex202200005857JBJ; 11 March 2014, LawLex202300001087JBJ, considering that the forced buyback of half of a corporate officer's stake in a joint stock company, following a serious fault, is lawful, provided it occurs in execution of a clause stipulated in the shareholders' agreement that was not contracted under a potestative condition.

Cass. com., 4 April 2024, LawLex202400002836JBJ, RJDA 2024, No 341; D. 2024, 1109, obs. GERARD.

Cass. com., 10 February 2009, LawLex202300008929JBJ; 15 October 2013, LawLex202300008930JBJ.

Cass. 2e civ., 23 October 1985, LawLex202200005216JBJ, considering that while the provisions of the statutes that limit the powers of the chairman of the board of directors of a joint stock company are unenforceable against third parties, they may rely on them to justify the lack of authority of this chairman to appear in the trial as the representative of the company.

Cass. com., 11 October 2023, LawLex202300012321JBJ, JCP E 2023, No 1357, obs. DONDERO; RJDA 2024, No 25; RJDA 2024, No 40; JCP E 2024, No 1100, obs. PAGNUCCO, holding that shareholders cannot bring an action for liability against persons who are neither the directors nor the chief executive officer of the company on whose behalf the action is exercised; Paris, 13 February 2024, LawLex202400002204JBJ, holding that a manager who merely implements a current account agreement decided and signed by the partners cannot be accused of mismanagement by one of them.

Cass. com., 20 October 1998, LawLex202200005852JBJ; 2 April 2025, LawLex202500002800JBJ: the mere failure to mention an apparently contestable claim on the list of creditors does not constitute a management fault engaging the personal liability of the manager, as long as no bad faith, fraudulent intent, or personal interest is established against them with respect to the creditor company.

Cass. com., 8 March 2016, LawLex202300007941JBJ.

Company Law (en cours)

507. Legal representative of the company

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507. Legal representative of the company

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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