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

Company Law (en cours)

Article L. 225-47 of the Commercial Code provides that the board of directors elects from among its members a chairman who must, under penalty of nullity of the appointment, be a natural person. It determines his remuneration . The chairman is appointed for a term that cannot exceed that of his directorship. He is eligible for re-election. Pursuant to Article L. 225-48, the statutes must provide a …

Status and powers

Article L. 225-47 of the Commercial Code provides that the board of directors elects from among its members a chairman who must, under penalty of nullity of the appointment, be a natural person. It determines his remuneration . The chairman is appointed for a term that cannot exceed that of his directorship. He is eligible for re-election. Pursuant to Article L. 225-48, the statutes must provide an age limit for the position of chairman of the board of directors, which, in the absence of an express provision, is set at sixty-five years. Any appointment made in violation of these provisions is null. When a chairman of the board of directors reaches the age limit, he is deemed to have resigned automatically. A chairman placed under guardianship is also deemed to have resigned automatically. A person may replace a resigning chairman of the board of directors even in the absence of a decision by the board appointing him in this capacity . Article L. 225-50 states that in the event of the temporary incapacity or death of the chairman, the board of directors may delegate a director to the functions of chairman. If the incapacity is temporary, the delegation is given for a limited period. It is renewable. In the event of death, it remains in effect until the election of the new chairman. The statutes may require the chairman to hold a certain number of shares. Thus, the chairman of the board of directors, who, at the date of his appointment as director, did not hold any shares of the company, contrary to its statutes, and who has not regularized this situation within the legal time frame, is deemed to have resigned automatically .

Until the adoption of the NRE law, the positions of chairman of the board of directors and chief executive officer were combined. Now, these are two distinct functions governed by specific provisions, although the chairman of the board of directors can still hold both roles under the title of chairman and CEO, which exempts the board from having to appoint a chief executive officer. Article L. 225-51, which governs the powers of the chairman of the board of directors, provides that the latter, while reporting to the general meeting, organizes and directs the work of the board of directors. He also ensures the proper functioning of the company's bodies and ensures, in particular, that the directors are able to fulfill their mission . He must not encroach, in the exercise of his functions, on the prerogatives of the general meeting. This is the case, however, when he proceeds with the sale of the business assets constituting the company's sole asset, depriving it of any activity and any possibility of fulfilling its corporate purpose, whereas such an operation must be authorized by the extraordinary general meeting . The provisions of the statutes that limit the powers of the chairman of the board of directors of a public limited company are unenforceable against third parties, but the latter may rely on them to justify his lack of authority to represent the company in court . In fact, the guarantee subscribed by the chairman of the board of directors binds the public limited company, even if it exceeds the limits of the corporate purpose, when the third-party beneficiary had every reason to believe in the regularity of the act . However, the bank that discounts a bill of exchange, knowing that it was countersigned by the chairman of the board of directors of the company in excess of its corporate purpose, cannot rely on any commitment of the company towards it .

No text in principle prohibits the combination of the roles of president and employee . However, the president must comply with the rules of combination that apply to all other directors. In particular, the existence of a subordinate relationship in the exercise of employee functions must be established. This is not the case when the chairman of the board of directors of a joint stock company, in which he and his brother hold the majority of shares, has the most extensive powers to act in all circumstances . Conversely, the employment contract is not absorbed by the corporate mandate subsequently entrusted to the employee as long as the latter retains, after his appointment as chairman of the board of directors, his former remunerated technical functions that he performed under the company's orders and his subordinate relationship to it is maintained . In the absence of an agreement to the contrary, the employment contract of an employee who becomes chairman of the board of directors and who has ceased to be linked to the company by a subordinate relationship is suspended during the term of his mandate . Furthermore, since the mandate of chairman of the board of directors is not incompatible with distinct employee functions, the burden of proving the cessation of these functions lies with the company claiming it .

Article L. 225-47 specifies that the chairman of the board of directors may be dismissed at any time. Any provision to the contrary is deemed unwritten. The dismissal can only give rise to the payment of damages if it is fraudulent or wrongful. This is not the case when the chairman of a joint stock company was informed in detail of three grievances likely to lead to his dismissal more than a month before the contested decision and was able to discuss them usefully, but voluntarily deprived himself of the opportunity to debate them again by choosing not to attend the board meeting during which his dismissal was decided .

The chairman of the board of directors may be dismissed for gross misconduct when he illegitimately opposes the execution of a decision regularly adopted by the board instituting an audit measure aimed at finding solutions in the interest of the company, which is recording heavy losses, delays the transmission of the business plan containing crucial information to enable directors to determine strategic directions, and obstructs the board's work and decisions . Once dismissed, the former chairman of the board of directors, whose termination of duties has been duly published, has no authority to enter into a lease agreement on behalf of the company .

Finally, the chairman of the board of directors is liable to the company or third parties for either violations of legislative or regulatory provisions applicable to joint-stock companies, breaches of the statutes, or faults committed in his management. In addition to the action for compensation for personal harm suffered, shareholders may, either individually or collectively, bring a derivative action against him. However, a shareholder cannot exercise the individual action mentioned in Article 225-252 of the Commercial Code against the chairman of the board of directors if the harm he has suffered, due to the management faults committed by the latter, consisting of the obligation to bear corporate losses, is merely a corollary of that caused to the company and does not have any personal character .

Cass. com., 12 January 1993, LawLex202200004793JBJ, holding that the chairman of the board of directors, who, during his term, never submitted to the board of directors, which has exclusive competence in this regard, a request for the determination of his remuneration, cannot sue the company for compensation for the work performed, under the rules of the employment contract that do not apply to his situation.

Cass. soc., 9 May 2006, LawLex202200004755JBJ.

Cass. soc., 30 June 1993, LawLex202200004743JBJ.

Cass. soc., 26 April 2000, LawLex202200005212JBJ; 9 May 2006, LawLex202200004755JBJ.

Cass. soc., 10 April 1991, LawLex202200004758JBJ.

CA Versailles, 2 July 2024, LawLex202400005068JBJ.

Cass. com., 3 February 2015, LawLex202200005849JBJ.

Cass. com., 4 May 1993, LawLex202200004799JBJ.

Cass. com., 15 January 2002, LawLex202300007927JBJ.

Cass. com., 7 June 2011, LawLex202200005858JBJ.

Paris, 31 August 2006, LawLex202300007913JBJ, considering that the chairman of the board of directors is required to provide the directors with the necessary documents to fulfill their mission and deliberate effectively and to convene the board when requested by some of them.

Cass. com., 24 June 1997, LawLex202200004803JBJ.

Cass. 2e civ., 23 October 1985, LawLex202200005216JBJ.

Cass. com., 18 June 1980, LawLex202200004804JBJ.

Cass. com., 25 June 1985, LawLex202200004805JBJ.

Cass. soc., 26 February 2013, LawLex202200005848JBJ, considering that the status of employee cannot be recognized for the individual who did not perform the duties provided for in the contract and who, seven days later, was appointed chairman of the company's board of directors.

Cass. soc., 29 June 2017, LawLex202200004752JBJ.

Company Law (en cours)

505. Status and powers

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505. Status and powers

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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