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

Company Law (en cours)

In accordance with Article L. 227-5 of the Commercial Code, the articles of association set the conditions under which the company is managed. The associates have the greatest freedom to define and delimit the powers of their manager, subject to the powers expressly reserved for the body of associates by Article L. 227-9. The only body whose appointment is mandatory, the president of an SAS is vested with the most extensive powers to act in all circumstances on behalf of the company within the limits of the corporate purpose.

Except for the powers reserved for the body of shareholders , the statutes freely define the distribution of powers between the assembly and the president. Decisions regarding the closure of a SAS's operating site, management of employment contracts, or withdrawal of authorizations on payment instruments do not fall within the attributions of the body of shareholders but are within the powers of the company's president . Similarly, in the absence of an express provision in the statutes granting the body of shareholders the power to extend the deadline for convening the general assembly, the president of the SAS has the power to file such a request before the judge . In companies with only one shareholder, the management report, annual accounts, and, if applicable, consolidated accounts are approved by the president . It is also the president's responsibility to convene the general assembly and set the agenda. The appointment of an ad hoc representative to convene an assembly to decide on the request for the president's dismissal can only be considered if it is demonstrated that the president failed to convene an assembly and not to include his dismissal on the agenda, which he is not legally required to do . A SAS shareholder also cannot request the appointment of a provisional administrator unless it is demonstrated that the president's temporary absence hinders the proper functioning of the company, which is also represented to third parties by a designated general manager vested with the same powers as the president, in accordance with the statutes .

On the other hand, it is not within the powers of the president of an SAS to unilaterally modify a statutory provision, even if it is unlawful, as such a modification requires the unanimous consent of the shareholders . Similarly, if the statutes require a decision by the assembly, the president of an SAS who, with the help of a third party, fabricates a false general meeting minutes to circumvent his lack of authority to independently conclude a loan in the company's name, incurs liability towards the company .

In accordance with Article L. 227-8 of the Commercial Code, the rules establishing the liability of the members of the board of directors and the executive board of joint stock companies apply to the president and executives of the simplified joint-stock company. Therefore, the president of an SAS is individually or jointly liable, as the case may be, to the company or third parties, either for violations of legislative or regulatory provisions applicable to simplified joint-stock companies or joint stock companies, insofar as they are compatible with the provisions relating to SAS, or for breaches of the statutes, or for faults committed in their management. Case law holds that the status of "executive" of the SAS, which allows for the questioning of their liability by application of Article L. 225-251 of the Commercial Code, can be recognized for the permanent representative of the legal entity president .

In dealings with third parties, the president of an SAS binds the company, even through acts that do not fall within the corporate purpose , 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 sole publication of the articles of association not being sufficient to constitute such proof . The guarantee undertaken by the legal representative of an SAS towards a supplier, as security for debts contracted by its sole associate, must be annulled if it is not only contrary to its corporate interest, as it immediately deprives it of almost all of its current assets and any means to continue its activity, but also contrary to its corporate purpose, known to the beneficiary, notwithstanding an undeniable community of interest between the two companies . Conversely, the president remains within the scope of the corporate purpose when taking legal action to recognize a compensatory claim related to a loss, which he claims has impaired the company's results and diminished its assets, allegedly resulting from breaches of the duty of care by its accountant and lawyer .

Furthermore, if the statutes of an SAS can limit the powers of the president, these provisions are unenforceable against third parties . An SAS is thus bound by promissory notes signed by the representative of its corporate president, even if the company's statutes provide that the shareholders' assembly is solely competent to authorize them with regard to their amount, as this provision is unenforceable against third parties . Similarly, a loan agreement granted to the SAS cannot be annulled on the grounds that the board of directors did not authorize it, when it is in accordance with the corporate purpose of the company and the president, who signed it, validly binds the company with respect to third parties. .

The statutes may also provide for the possibility for the president to delegate his powers to third parties under conditions they determine . They may thus require that a delegation of powers be subject to prior authorization by the board of directors, so that the agents appointed by the president in violation of this procedure do not hold regular power to exercise, in particular, a requisition for a higher bid .

The general power, delegated by the president of an SAS, which grants its beneficiary full capacity to act in the interest of the company, may include the ability to declare the company's claims in the liabilities of insolvency proceedings  as well as to hire or dismiss the company's employees . In the latter case, since no legal provision requires that the delegation of the power to dismiss an employee be given in writing by the president of an SAS, it may be implicit and arise from the functions of the person conducting the dismissal procedure . When the statutes also designate a chief executive officer, the president of the SAS can no longer be considered the sole holder of the power to dismiss employees, and, consequently, of the power to delegate this prerogative . Conversely, when the statutes of an SAS reserve all powers to the president without the ability to delegate, a commercial director cannot sign a service agreement alone .

Commercial Code, Art. L. 227-9, para. 2: increase, amortization or reduction of capital, merger, spin-off, dissolution, transformation into a company of another form, appointment of statutory auditors, annual accounts and profits.

CA Grenoble, 17 September 2020, LawLex202300007840JBJ.

Commercial Code, Art. L. 227-6, para. 2. - For an application, See CA Colmar, 15 September 2016, LawLex202300007386JBJ.

Cass. com., 14 February 2018, LawLex202200008502JBJ.

Paris, 21 March 2023, LawLex202300007368JBJ.

Commercial Code, Art. L. 227-6, para. 4. - For an illustration, See Versailles, 13 March 2018, LawLex202300007378JBJ, specifying that the statutory clause requiring the president of the SAS to obtain authorization from the management committee for any guarantee exceeding a certain amount is not enforceable against third parties, as long as the operation is in line with the corporate purpose.

CA Douai, 12 September 2019, LawLex202300007371JBJ.

Nancy, 6 March 2019, LawLex202300007373JBJ.

See CA Amiens, 26 September 2013, LawLex202300007396JBJ, controversially holding that this option excludes the company's employees, who would not be considered third parties in relation to it.

See, for an illustration, CA Aix-en-Provence, 9 March 2007, LawLex202300007411JBJ.

CA Aix-en-Provence, 3 September 2015, LawLex202300007390JBJ.

CA Versailles, 10 April 2008, LawLex202300008802JBJ, considering that while only the President of an SAS has the status of legal representative of the company, nothing prevents him from delegating, within the undertaking and to other persons, part of the powers he holds to ensure the internal functioning of the company, and in particular to proceed with the hiring and dismissal of a specific category of employees.

CA Versailles, 23 November 2017, LawLex202300008351JBJ.

Lyon, 21 June 2011, LawLex202300007401JBJ; Douai, 26 October 2012, LawLex202300007397JBJ, holding that a president of an SAS can delegate, even tacitly, the power to hire or dismiss employees of the company. - Cf. Aix-en-Provence, 15 June 2010, LawLex202300009249JBJ, considering that for the dismissal of an employee to be valid, the termination letter must come from the president of the SAS, in the absence of a formally given delegation of powers to a third party; Grenoble, soc. ch., 22 March 2010, LawLex202300007403JBJ, considering that the dismissal notified to an SAS employee is void for emanating from a person without powers, even if the president of the company delegated authority to sign the dismissal letter on his behalf, as long as the company does not justify that its statutes allow persons other than the president to exercise his powers and does not justify that the delegation was recorded in the commercial and companies register.

Cass. mixte, 19 November 2010, LawLex202200010208JBJ, censuring on this point Paris, 3 December 2009, LawLex202300007404JBJ.

CA Lyon, 6 April 2017, LawLex202300008785JBJ.

Commercial Code, Art. L. 227-9, para. 3. - See, for an illustration, CA Douai, 3 November 2022, LawLex202300007272JBJ.

CA Versailles, 18 April 2023, LawLex202300008340JBJ.

CA Paris, 5 January 2022, LawLex202300008652JBJ.

Cass. com., 9 July 2013, LawLex202200010138JBJ.

Paris, 18 March 2016, LawLex202300007388JBJ.

CA Poitiers, 26 January 2021, LawLex202300008776JBJ.

Aix-en-Provence, 28 February 2019, emphasizing that being contrary to the company's interests does not, by itself, constitute a cause for invalidity of the commitments made by the president of an SAS towards third parties; 23 June 2017, LawLex202300007305JBJ.

590. Power of representation and management within the limits of the corporate purpose