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

Company Law (en cours)

The management board of the joint stock company is governed by Articles L. 225-57 to L. 225-93 of the Commercial Code. It is composed of up to five members, who must, under penalty of invalidity, be natural persons and may be chosen from outside the shareholders. In joint stock companies with capital of less than 150,000 euros, the functions assigned to the management board may be performed by a s …

Statute

The management board of the joint stock company is governed by Articles L. 225-57 to L. 225-93 of the Commercial Code. It is composed of up to five members, who must, under penalty of invalidity, be natural persons and may be chosen from outside the shareholders. In joint stock companies with capital of less than 150,000 euros, the functions assigned to the management board may be performed by a single person, referred to as the sole chief executive officer. However, the appointment of a sole chief executive officer performing the functions of the management board is unenforceable against third parties if they do not justify the shareholder status required by the statutes, due to the failure to implement the registration formalities of the loan of securities granted to them on the company's securities movement register . The members of the management board are appointed by the supervisory board, which grants one of them the status of chairman. The statutes determine the term of office of the management board within limits of between two and six years. In the absence of a statutory provision, the term of office is four years. In the event of a vacancy, the replacement is appointed for the remaining time until the renewal of the management board.

Article L. 225-64 grants the management board the broadest powers to act in all circumstances on behalf of the company. It exercises these powers within the limits of the corporate purpose and subject to those expressly attributed by law to the supervisory board and the shareholders' meetings. It determines the company's business directions and ensures their implementation, in accordance with its corporate interest, considering the social, environmental, cultural, and sports issues of its activity. It also considers, if applicable, the company's purpose defined pursuant to Article 1835 of the Civil Code. In dealings with third parties, the company is bound even by acts of the management board that do not fall within the corporate purpose, unless it 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 articles of association not being sufficient to constitute such proof. In the absence of an established delegation of powers, the chairman of the management board of a public limited company is criminally liable, as the head of the company, for purchasing products for professional activity without a compliant invoice, as it is his responsibility to ensure compliance with the legislation .

The members of the management board or the sole chief executive officer may be dismissed by the general meeting, and, if the statutes provide, by the supervisory board. If the dismissal is decided without just cause, it may give rise to damages. The implementation of new governance does not constitute just cause for the dismissal of a member and chairman of the management board, unless it is justified by the necessity to preserve the corporate interest. Similarly, in the absence of mismanagement, the mere fact that a member of the management board abstained from voting on the appointment of a member of the supervisory board does not constitute just cause for dismissal, but only the exercise of their right to express themselves freely, even in the particular context of a family business. Conversely, the dismissal of a member of the management board is based on just cause when it occurs following a change in the group's direction, to which they did not adhere, in a context of significant discord over several years within this corporate body, which no longer allows for collegial functioning and jeopardizes the smooth operation of the company. The dismissal of a member of the management board is also justified when their fraudulent actions within another company of the group have impacted the confidence of financial partners in all the entities of this group.

If the member of the management board was dismissed for just grounds, but under abusive circumstances, their compensation requires demonstrating that these circumstances caused them a distinct harm separate from that resulting from the dismissal . Abuse is not established when the management board member was summoned by each of the entities on which they depended several days before the decision to be heard and had sufficient time as well as all necessary documents to defend themselves,  or when they were aware of the reasons for the measure and were able to present their observations before the vote was conducted . Similarly, their dismissal is not abusive merely because, being on sick leave, they could not participate in the general meeting, as long as they were timely informed of the grievances supporting the dismissal proposal presented for a vote and the company took necessary steps to allow them to present their observations beforehand . The dismissal must also not occur under vexatious or insulting conditions .

If the person concerned has entered into an employment contract with the company, the revocation of their duties as a member of the management board does not automatically terminate this contract. In the event of revocation, the member of the management board may bring a claim before the labor court for back pay, paid leave allowances, compensation in lieu of notice, and compensation for dismissal without real and serious cause . However, the chairman of the management board, who has all powers within the company without any control and performs their technical director duties independently without reporting to anyone, is not in a subordinate relationship characteristic of an employment contract with the company and cannot request the payment of salaries and allowances in the event of revocation .

CA Paris, 26 March 2008, LawLex202300007911JBJ.

Cass. crim., 21 June 2000, LawLex200200000362JBJ, JCP G 2001, I, 289, obs. ROBERT; RJDA, 2000, No 1117.

Cass. com., 15 May 2007, LawLex202300012412JBJ.

A contrario, See Cass. com., 10 February 2015, LawLex202200005007JBJ, considering that the mere seniority of the chairman of the management board within the group, his undeniable contribution to its success, and the absence of any prior specific reproach are not sufficient to characterize vexatious or injurious conditions.

Cass. soc., 17 November 1988, LawLex202200005218JBJ.

Cass. soc., 5 July 1989, LawLex202200005219JBJ.

Cass. com., 22 November 1977, LawLex202200005224JBJ, holding that the member of the management board dismissed without just cause is entitled only to damages but not to the remuneration he could have claimed until the end of his term.

Cass. com., 30 March 2022, LawLex202200006671JBJ, Rev. sociétés 2022, 425, obs. DONDERO, RTD com. 2022, 329, obs. MOURY; 4 February 1997, LawLex202200005223JBJ, holding that in the event of substitution of the board of directors for the management board and supervisory board, within the framework of significant changes to the group's structures, the chairman of the management board cannot claim that the elimination of his position resulting from this change constitutes a dismissal without just cause; 24 April 1990, LawLex202300012405JBJ.

Cass. com., 7 June 1983, LawLex202300012414JBJ.

Cass. com., 10 February 2015, LawLex202200005007JBJ. - See also Cass. com., 19 December 2006, LawLex202200005222JBJ, considering that the existence of deep and manifest disagreements among the members of the executive board, which prevent the collegial functioning of this corporate body and are likely to jeopardize the proper operation and sustainability of the company, constitutes just grounds for the dismissal of one of them; 17 July 1984, LawLex202300012413JBJ, holding that a divergence of views on management or corporate policy between a new group of majority shareholders and a member of the executive board is likely to harm the effectiveness of management and constitute legitimate grounds for dismissal.

Cass. com., 10 November 2015, LawLex202200004860JBJ.

Cass. com., 10 February 2015, LawLex202200005007JBJ.

Company Law (en cours)

509. Statute

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509. Statute

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