Company law in France

The company law can be regarded as the whole of the legal rules which govern the life of the companies of their birth (one speaks about creation) to their death (Liquidation), while passing by other stages such as the Capital growth, the fusion with another company…

It applies as well to the business firms (examples: Public limit company, Limited liability company) that with the Civil society (examples: Law firm associated or Real estate company).

Concept of company

The company is the broadest concept, and from there one can say that any company is a company but not the reverse.

According to article 1832 of the Civil code French, " the company is instituted by two or several people who agree by a Contrat to assign to a joint undertaking goods or their industry in order to share the benefit or to benefit from the economy which will be able in résulter.
Elle can be instituted, in the cases envisaged by the law, the act of will of only one personne.
Les Associé S commit themselves contributing to the pertes."

The company is a grouping of people

That excludes the groupings from goods, from where the problem of the foundation S. the foundation is the act by which one or more people decide the irrevocable assignment of goods to the realization of a work of General interest. In fact thus goods are perpetually affected with goals désintéressés.
Une association is also a grouping of people.

This principle, there are exceptions. Thus, the law of July 11th, 1985 created the Entreprise unipersonal with limited responsibility (EURL). Since the beginning of the XXe century, the criterion of lucrative goal was research and the division of the Bénéfice S. But the law did not specify the concept of Bénéfice.
It is thus the Jurisprudence which gave of it a definition in a famous Arrêt of the Court of appeal of March 11th, 1914. This last related to the tax authorities against the Rural Case of Manigod which was a Coopérative of credit which lent to its members. In addition to its declaration of the Rural Case of Manigod of association, the Court of appeal defined the Bénéfice like a pecuniary or material profit " who adds to the fortune of the associés". Consequently, all the groupings made up to make it possible their members to realize savings or to avoid expenditure to them could not, to in theory take the form of société.
This restrictive design of the concept of benefit required the intervention of the legislator, either to qualify company certain groupings having for goal obtaining of a service with lower costs (companies Coopérative S (law of September 10th, 1947), companies of construction, company of agricultural collective interest, etc), or to create of all parts a new legal structure, the Groupement d'Interet Economique (ordinance of September 23rd, 1967), allowing the companies to meet within an organization equipped with the legal entity although it is not made up with an aim essential to carry out bénéfices.
The law of January 4th, 1978 reformed article 1832 of the Civil code French by adding the expression " there; or to benefit from the économie" : the realization of economy is equivalent in the search of a profit.

Current distinction of the lucrative and nonlucrative sectors

The association remainder always defined, by the article L of the law of the 1° July 1901, like “the Convention by which two or several people share permanent way their knowledge or their activity with an aim other than to share benefit”, it seems that one is brought, at the end of a comparison with article 1832 of the civil code, to distinguish three fields: the reserved domain of the company, the reserved domain of association, finally that where these two groupings can, to some extent, to appear competitor.
  • the nonlucrative sector includes in particular the activities religious, political, artistic, sporting, charitable.
When the grouping is made up with a purely not involved aim, exclusive of any search for a material advantage whatever it is (profit or economy), the founders will be able to use of another legal form only that of the association governed by the law of 1901. However, the grouping will be able to carry out benefit, since its last only additional with the continuation of the not involved objective and are solely intended for better serving this one. A association can have to make Commercial acts while remaining within the limit of its Statut S. By doing this, it is subjected to the Commercial law but will not be able to call upon the quality of Trading.
  • Reserved domain at the company:
When the purpose of the grouping is to divide the Bénéfice S or to make benefit the associates from an economy (article 1832 of the civil code), being able to result from the united action, it must obligatorily take the form of a company. However, this criterion does not prevent a company from continuing in an additional way of the aimings of a moral nature.
  • competitor Field of the company and association:
If the purpose of the grouping is only to make it possible its members to realize savings, the company or the association could be used indifferently. However, in such a case, the company will be preferred with association: on the one hand, the company enjoys full a Legal capacity whereas association can have and manage only the contributions of its members and the buildings strictly necessary to the achievement of the end which it works towards.

The constitution of the companies

The company is constituted and functioned starting from a deed of partnership concluded between the Associé S.

The company is a demonstration of will

Conditions of validity of the common right of the contracts

The assent of the associates

The Consentement is at the origin of the contract. The assent of the Associé S must be real, sincere and not simulated if not one is in the presence of a associate of kindness or a figurehead. Moreover, the assent should not be vitiated i.e. sullied with error, fraud, violence and lesion. The founders draw up a promise of company while waiting to confirm their will to contract. Generally, the defects of the assent are called upon in the transfers of partnership shares or an increase in the capital.

Some precise details:

As for the error

Jurisprudence admitted on several occasions nullity for error of a deed of partnership. But she considered that the called upon error was to relate either to the substance, or on the person.

She admits the error on the substance when one of the associates had made an error on the extent of its responsibility to the debts for the company (for example, somebody who thought that it was a joint stock company whereas it was a partnership) or an error on nature for the contribution carried out (for example, a associate who believed that its contribution was a contribution of pleasure whereas actually the contract put at its load a contribution in freehold; with the contribution in pleasure, the associate did not lose the quality of owner of the good).

The Court of appeal admits the error on the person, although it is a means little called upon before this court, when the error had a character determining of the assent. In practice, this error is called upon for the partnerships characterized by a fort intuitu personae

As for the fraud

It is necessary that there were determining fraudulent operations of the assent.

Note:

When the defect of the assent is established it carries the nullity of the deed of partnership. However, for certain types of companies, this rule is reversed. indeed the article' L235-1 of the commercial law provides that with regard to the limited liability companies and the Joint stock companies, the nullity of the company cannot result from a defect of the assent unless this one does not reach all the associates founders (signatories of the contract). Thus the rule is reversed, nullity for defect of the assent is the exception, the proof of the defect is not enough more it should be also proven that all the associates have their vitiated assent.

Capacity

In theory any natural person as moral can adhere to a company. But there exists of the incapacities different according to the type of company S (with regard to the minor , the husband, the foreigners, prohibited people).

The object and the cause

In a Contract, the object and the cause merge. It is about the social object such as it is defined by the Statut s.
This object and this cause must exist and be licit i.e. not opposites with the Law and order and the moralities.
In the same way, the social object must be licit and given. The companies must indicate the program which they wish to carry out and their activity will be limited to the object in sight of which they were created: principle of the speciality of the companies. But that does not want to say that the social object must be single. The experts endeavor to formulate the social object in the most extensive way in order to avoid having to modify the Statut S.

Conditions specific to the deed of partnership

A plurality of associates

This condition is not obligatory for the constitution of the unipersonal companies. Two people at least are required for the formation of companies of people. Four people are necessary for the limited partnerships with share capital. Seven people for SA. The plurality of associate is thus sometimes necessary to the formation of the company and, when it is required by the law, it owes also perdurer throughout the life of the company under penalty of seeing the latter being dissolved judicially at the request of any interested party, if this situation remains with the expiry of a one year deadline. The court can grant a six months maximum delay to regularize the situation. This rule is nonapplicable I) in the event of meeting in only one hand of all the shares of a limited liability company, which becomes in this case, a EURL, or II) in the event of meeting in only one hand of all the actions of SAS, which becomes a SASU (Unipersonal Joint stock company Simplified).

Obligation of a contribution

Each Associé must make a Apport. The word " apport" indicate at the same time a legal operation and the object of this operation:
  • a legal operation: it consists in placing at the disposal of the company goods and rights of exchange of social rights (shares of interests, partnership shares, action S). The contribution can be made in property or relate only to the pleasure of the goods and rights.
  • the object of this legal operation: the good or gotten right. The contributions have all in common feature to be intended to make it possible the company to carry out its social object.

# the diversity of the contributions

Article 1843-3 of the Civil code French devotes the traditional distinction between 3 types of Apport S:
  • the cash subscription : it is a contribution of an amount of money. N the other hand, the associate receives social rights.
  • the contribution in industry (excluded by the law for all the joint stock companies): it is the contribution of an community activity (technical Connaissance, experiment, know-how). To facilitate the evaluation of it (necessary to the handing-over of the corresponding social rights), the law lays out that, except contrary clause, the share which returns to the contributor in industry is equal to that of the associated one which brought the least in kind or cash.
  • the contribution in kind : it is the contribution of a tangible asset (piece of furniture, building) or of an incorporeal asset (goodwills, patent, credit). Any contribution in kind comprises two alternatives:
* the contribution in property: the owner transfers the property from the good to the company which becomes sole owner about it. The partnership shares or actions allotted to the contributor constitute the price of them.
* the contribution in pleasure: the associate is satisfied to place the good at the disposal of the company which has of it simply the use, the associate remains only the propriétaire.
about it The legislator set up measurements allowing the most faithful possible evaluation of this contribution (Commissaire with the contributions).

# Conditions of validity of the contributions

The contributor must guarantee the existence of the contribution: the thing must exist, be in the trade and be appreciable out of money. One often compares to this category the contributions of thing without value (patent fallen into the public domain,…). Such fictitious contributions are struck of nullity and make lose with their authors the quality of associates. For certain authors, a fictitious contribution involves the nullity of the company. If a contribution is overestimated, the contributor is unduly favoured compared to its joint partners, and the thirds are likely to be misled by this richness which does not exist. The sanction is in theory a calling into question of the possibly penal responsibility for the apporteur. The contribution must be made without idea of fraud (with an only aim of escaping a creditor,…).

The vocation of each associate to a share of the statutory income

The right to share the benefit is the right for each associate to come to the division from the profit carried out by the company, after a social decision allowed at least partial distribution of it.
  • the division of a benefit: the dividend is the share of the benefit distributed and indeed versed with the associates. It will generally be done in cash or in kind (new actions).
  • the division of the losses: in theory, the losses can be noted only during the winding-up of the company, since the value of certain goods varies in the course of company (real,…). The practice tends however to note them every year, which inevitably does not involve the obligation for the associate to fill them. The contribution to the division of the losses in the course of company is done indirectly: a associate who wants to yield his social rights, and who sells them with loss following a depreciation of the title due to the reduction in the Company's net assets; a reduction in the capital in the course of company in order to restore the parity between the face values and real of the titles, involves either a reduction in the number of titles held by each associate, or a reduction in their face value.

The division normally takes place in proportion of the value of the contribution on the entire amount of the capital. Each social right returns to associated like a right, inter alia, with a share in the result. The old authors and jurisprudence were attached to the principle of the absolute equality of associated notwithstanding the respective importance of the contributions. The article 1844-1 al .1 of the Civil code French states the principle of the proportionality today, but this rule is suppletive: the statutes can envisage other modes of distribution, and can even stipulate a variable distribution of the benefit and losses according to the associés.
This article prohibits however the leonine clauses (by which one reserves the lions share).

The affectio societatis

For the near total of the lawyers, the Affectio societatis constitutes an element essential to the validity of the société.
It is the moral element of the deed of partnership. It is the intention to join, i.e. the will to act together with a common aim which is the realization and the division of the benefit. The presence or the absence of the affectio societatis is generally appreciated compared to the behaviors of the associates, with their investment in the life of the company and its gestion.
For jurisprudence, it is an effective collaboration with the exploitation in an shared interest, and on an equal footing with the others associated. To collaborate means to contribute actively to the social activities, the administration of the social affairs or its control. On an equal footing excludes that a associate is subordinated to another.
The existence of the company is conditioned with this concept. It belongs to that which is prevailed of the existence of a company to bring the proof of the existence of this element. It is a concept with variable geometry because to create a company with a friend is different because of buying actions of SA " X" quoted on the stock exchange.

See also: Affectio societatis

Statutes

Article 1835 of the Civil code French (all companies) and article 2 of the law of 1966 (business firms) state the mentions having to appear in the statutes. Failing this, any interested party can ask for the regularization of it. Nullity is incurred only if the defect of mention is due to a defect of the consentement.
The statutes must be written in writing. If there exist contributions of buildings, a notarial act will be necessary. If there does not exist building, there are the choice between writing a Informal agreement or a Acte authenticates.
The statutes comprise obligatory mentions for any company. It is about the indication of the shape of the company, the social object, the denomination social, the head office, assembling authorized capital and duration of the company (the maximum duration of a company is 99 years renewable indefinitely).
There exist also mentions imposed by the law, variables according to the type of company. In the same way, there exist optional mentions which are varied according to the will of the associates. One can find there clauses statutory restrictive of capacities which relate to the capacities of the leaders and who come to frame the legal capacities which are allotted to him; or a clause of approval of transfer of shares (founding the need for an agreement to be able to sell its shares). Any specific and optional clause is possible provided that it does not come to anything to draw aside an imperative legal rule.

The sanction of the irregularities of constitution

Like any irregular legal document, a company irregularly made up is exposed to a nullity, which as regards company, is not retroactive: all the acts concluded by the company since its origin can be cancelled. This solution being unjust for the associates nonresponsible for nullity and for the thirds in connection with the company, the law made it possible to regularize nullity to avoid cancellation, and if the cause of nullity could not be regularized, jurisprudence made play nullity only for the future. The law of the 7/24/1966 reduced the cases of nullity: when a cause of nullity arises, a procedure of regularization is envisaged, and failing this, the law mitigates the effects of nullity while envisaging a mechanism of responsibility for associated and founders responsible for nullity.

Grounds for revocation

Article 1844-10 of the Civil code French states: " the nullity of the company can result only from the violation of the provisions of articles 1832 and 1833 or the one of the causes of nullity of the contracts in general ".
  • in the event of absence of plurality of people
  • in the event of absence of contributions
  • in the event of nonparticipation in the result even of deficiency of the affectio societatis
  • in the event of incapacity, of defect of the assent, of it of the cause or the object
  • in all the cases of fraud

The action for annulment

When the cause of nullity exists, the fate of the company becomes precarious, and depends on the pugnacity of the holder person of the right to act as nullity and length of the term of limitation of the action.
The term of limitation was fixed at 3 years (Article 367 of the law of 1966 for the business firms; Article 1844-14 of the civil code for the civil society), to prevent that the company does not remain too a long time exposed with the risks of an action in nullité.
The company can regularize all the irregularities except it of the object of the company.

Effects of nullity

The law poses the principle of the non-retroactivity of the nullity of a company, which plays only for the future, like the winding-up of the company: the null company is liquidated in accordance with the statutes. This principle was posed by article 1844-15 al .1 of the civil code, and article 368 of the law of the 7/24/1966, the law having just recopied the jurisprudential solutions existing as regards companies in fact. Such a company was registered, functioned, then was cancelled in justice for defect of constitution but continues to function: it is a become company in fact. The companies in fact and created in fact were confused a long time, which is not very serious insofar as they are subjected to the same mode juridique.
Under the terms of this principle, the company must carry out the obligations which it subscribed before its cancellation. all the world

Legal entity

According to the law of July 24th, 1966, the company acquires the legal entity starting from its Immatriculation. It acquires a clean existence distinct from that of the associates. Thus like any individual natural person, it has a clean identity, a clean inheritance as well as legal capacity to achieve in its own name the acts necessary to the exercise of sound activité.

Not registered companies

Their common point is not to have the legal personality. For the remainder, they are very heterogeneous: for some, the defect of registration is only provisional ( company in formation ); for others, the absence of registration is voluntary: the associates wanted to form a company, but do not want that it acquires the legal personality ( joint venture ); finally, it can be a question of a company which does not manage to be constituted ( company created in fact ).

The company in formation

The associates must achieve acts, translating their unambiguous will to create a company. Ex: they sign the statutes, decide to open an bank account in the name of the company, ask the court to appoint a police chief with the contributions if the company in kind constitutes by contributions.
The law expressly did not fix this starting point, and it is thus necessary to study on a case-by-case basis to know if the company is or not in formation. For the period of formation, which can last of a few days to a few years, the relationship between associates is governed by the PGD applicable to the contracts and obligations (Article 1842 al .2 of the Civil code French), and by the Statut S of the company, if they were already signed. A modification of the social pact for this period will be able to take place only according to the rule of the unanimity (application of the Mutuus dissensus and of the Mutuus consensus of the common Droit).
For its part, the tax authorities, in its legal literature published, fix the starting point of the period of formation: either with date of nomination of police chief with contributions (in the event of contribution in kind and when that such a nomination is necessary in consideration of the shape of the company), or at the date of the deposit on an inalienable bank account of the funds representing the initially released share of the contributions in capital, corresponding to cash subscriptions. Under the terms of these administrative doctrines, any load exposed before the date of the one of these events thus exposes the company in formation to the risk of a rejection of the right to the tax deduction of the load considered of the result of the first accounting period. Concerning the mode of the acts achieved during the formation, the law envisages 3 methods of recovery:
  • an act concluded before the signature from the statutes : The recovery will be carried out automatically by the annexation with the statutes, of a state of all the acts achieved on behalf of the company, and which indicates for each one of them the engagement which results from this for the company. If the formalism is not scrupulously respected, the statutes, even signed, do not carry the resumption of engagements. The associate who pledged or those which elected it then remains only (S) responsible (S) for his execution with respect to the thirds.
  • an act concluded between the signature from the statutes and the registration will be automatically taken again by the company during its registration to the Company and Trade register, if it were taken under the terms of a mandate given by all the associates to a determined person, and specifying the acts concerned.
  • an act concluded constantly could be begun again by ratification of the general meeting of the associates, at the time of a special deliberation of recovery in the majority of the associates.

The recovery is retroactive: engagement resulting from the act is regarded as a corporate measure right from the start. This legal retroactivity makes that there is only one change, and thus only one transfer tax to pay with the tax authorities. The founder is untied of any obligation with regard to the contracting thirds: the recovery substitutes a debtor for another.
If the company does not take again the acts subscribed on its account, or that it takes them again irregularly, the responsibility includes only the associates who passed the act or who gave mandate to pass it, without falling to the people who remained to him foreign, even if they could acquire the quality of founder in addition. Their responsibility will be indefinite and interdependent if the company is commercial by the form or the object; indefinite and joint if the company is civil

The joint venture

The associates agree not to proceed to the formality of the registration, while posing the bases of a true company. They do not seek to create a moral being distinct from associated and thus limit their action to the concluding of a deed of partnership. They remain, in theory, owner of the goods which they place at the disposal of the company, except organizing between them a joint possession which will be next to the deed of partnership without him to be reducible. This kind of company is a useful instrument of co-operation in the life of the businesses. It can tend to very varied purposes: exploitation of important building sites for groups of BTP, coproduction of works of cinema, pooling of the means and risks out of banking matter or of insurance and, more generally, all forms of association of which the parts wish to avoid the revelation with the thirds, each associate acting as his name personnel

All the legal conditions of the deed of partnership must be joined together. However, the contributions are only placed at the disposal of the company, either without alienation, or as an undivided property, feeding the mass of the rights held in joint possession by the associés.
The participants can freely choose the object, the operation and the conditions of the joint venture. For the relations between the associates, the law returns to title back-up troop to the relative tendencies to the SNC if the joint venture is commercial, or at the civil society on the contrary assumption. It is not necessary to establish a writing, but in the facts, these companies are in general established in writing (summary document or various legal documents).

The responsibility for associated with regard to the thirds: article 1872-1 of the civil code provides that, if the company is occult, each associate contracts in his personal name, and is only engaged with regard to the thirds. If the company is open, the responsibility for the associates is collective between all those which were made known thirds: those which remained in anonymity will not be responsible.

The company created in fact

The company created in fact joins together all the elements of the deed of partnership, but reveals them only through the behavior of 2 or several people working together, sharing the result of their work, and giving the impression to be animated by a affectio societatis , heard here like the manifestation of the intention to divide the products and loads resulting from the activité.
The company in fact is a company which continues to function after being cancelled by justice following a defect of constitution. It rises from the relative tendencies to liquidation of the struck companies of nullity: it is a become company in fact. The company in fact and the company created in fact were confused a long time, but it is not very serious insofar as they are subjected to the same mode juridique.

The company in formation is distinguished from the company created in fact by an activity especially limited to the essential operations for the beginning of common business activity. The company created in fact is characterized 3 elements: an activity exceeding the only acts necessary to the creation of the company; an important activity; an affected activity of a certain duration. Jurisprudence does not make a criterion absolute of the complete absence of acts of exploitation.
Depuis the stop of December 4th, 2001 the criteria of an activity important and durable seem to be called into question. It is enough from now on that " the activity exceeds the simple acts necessary to the formation of the company " so that the company in formation becomes a company creates in fact. However, the stake of a clear distinction is of size: the associates of a company created in fact all are engaged with regard to the thirds as from the moment or it was proven that the associates have acts in accordance with one of the three exceptions presented by the civil code to article 1871-2. Indeed, in theory and according to article 1873 of the civil code the company created in fact east governs by the mode of the joint venture (article 1871 of the civil code) which poses as principle that only those which contracted are held with regard to the thirds. As a stop of the commercial room of November 26th, 1996 indicates it is not because a company is described as company creates in fact that all the associates will be responsible: it is necessary to show one of the exceptions of article 1871-1 of the civil code. In a company in formation, only the associates who personally acted (founders or by the means of a mandate) can be held with regard to the thirds.

Registered companies

In theory, the legal entity is born from the day of the registration with the RCS. Only the professional civil society escapes this rule: the legal personality is born the day from obtaining the approval or the authorization of exercise necessary for the exploitation of the company. The registration makes it possible to inform the thirds of the birth of a new legal personality, and to give birth to for the thirds in relation to it a certain number of risques.
There is no time to make register a company, but as long as the procedure is not initiated, there is no registration: there is not true legal entity (inheritance,…), the social rights cannot be seized, and the people designated by the statutes cannot assert this quality nor to act in the name of the société.

The clerk of the Bankruptcy court checks that the file is complete: the head office indicated to the statute must correspond to the address of the room for which the company provides a rental title or of property, the parts, diplomas and administrative acts necessary to the exercise of the trade must be regular. It is thus a control of regularity formel.
The decree of the 5/30/1984, modified by that of the 4/10/1995, gives more important capacities to the clerk. The article 30 al .3 enables him to examine whether the basic conditions of the deed of partnership are joined together. However, one can doubt that the clerk goes beyond formal control more especially as it has only one deadline 5 business days to accept or refuse the registration, this one famous being acquired, in the absence of answer, as of the 6th day. If it carries out the registration, it issues a certificate which attests of it, with the sight of which the bank agent of the funds constitutive of the capital is held to free them with the profit of the moral person. If it refuses the application of registration, it must notify its refusal within 5 business day by indicating its reasons and while specifying with the applicant that it with faculty to seize the judge.

The operation of the company

Social bodies

The Law and the Jurisprudence often qualify them " agents sociaux". They are not necessarily associates: they have capacities that the associates do not have, and that they received by an effect of the law. They are not more the agents of the company: a leader who would be also legal representative of the company (Gérant, president of the directory, managing director, delegated general director, will not have a contract of mandate with the company. The expression " leaders sociaux" express that they act on behalf of the company under the terms of legislative measures organizing the extent of their capacities and sanctioning possible goings beyond.

Concept of social leaders

Is leading social that which has the decision-making power near the Moral person. A representative having a capacity of representation with regard to the thirds, is leading social. But the reciprocal one is not true: the administrators of SA, traditional type, the chairman of the board are social leaders, but the capacity of representation is held by the managing director who can possibly divide it with the delegated general directors.

If the statutes envisage it, the chairman of the board can be simultaneously a managing director (one speaks then about chairman: General President-director).

In SA with directory, the President of the directory is the legal representative of the company; he can share this capacity with one or more other members of the directory on which the board of trustees conferred the title of managing director.

In SAS the President of the company is the legal representative, but, if the statutes envisaged it, of another people can also have this capacity of representation of the company by taking, according to the case, the title of managing director or delegated general director.

In theory, only the legal representative has quality to act, contract or be party to legal proceedings in the name of the company. By exception, the law makes it possible to the associates to act for the account of all to blame the responsibility for the leader, especially if he is also legal representative (it will not act against itself).

That of the leaders who exerts the power of representation of the moral person (manager or director of the company) can thus have to carry out the decisions that it itself took as an autonomous decisional body, but also decisions taken by other competent authorities. The category of the social leaders is thus not homogeneous: there are leaders of right and leaders in fact.

In a social crisis situation, the judge draws aside the regularly invested leaders and replaces them by a provisional administrator. In the absence of text, jurisprudence specified the assumptions of crisis: 1) a case of paralysis or seriously irregular operation of the body of management 2) an unquestionable or imminent danger for the company or the associates. A possible danger will lead to the rejection of the provisional request for administration. A last danger (damage carried out) will be inoperative, except if the applicant establishes that nothing is done to obtain with the profit of the company repair of its damage.

Designation and suspension of the functions of the leaders
1) Methods of designation
For any company other than a SA or a Joint stock company Simplified (SAS): the social leaders are elected by the General meeting associates or by a group decision of associated made according to the methods envisaged by the law and the statutes, the Gérant who can be a natural person or morals, including a moral person other than a company. In the SA and limited liability company, the leaders are necessarily people physiques.
In SA, the administrator S or members of the Board of trustees are named by the general meeting of the shareholders. The Board of directors names and revokes its president, as well as the managing director of the company and the possible delegated general directors. The Board of trustees indicates the Directoire.

2) The suspension of the functions of the leaders
It takes place on arrival of the term envisaged (when it is fixed by the law or the statutes), in the event of prevention or of death, in the event of resignation or of révocation.

  • the revocation in the companies in general

Basic condition : is needed a legitimate ground. It can be a question of an abuse of power of the leader, his bad management or its physical or intellectual incapacity to fill its fonctions.
Formal requirement : the revocation must be decided by an extraordinary general assembly, ruling on an day order including the project of revocation.
  • the revocation of leaders of SA
The Jurisprudence legitimates a revocation not included/understood in the day order, since a new circumstance imposing a revocation urgently was revealed between the date of the convocation and the behavior of the réunion.
Moreover, the principle of contradictory recognizes the right of the revocable leader AD nutum to present its observations before its révocation.

The Doctrine variously appreciated these solutions stating that the leaders of SA are revocable AD nutum (constantly, without justification nor financial claim). However, the respect of the rights of defense supposes a préavis.
In SA of the traditional type, the principle of revocation AD nutum applies for the leaders, the administrators, the managing director, the chairman of the board.

Publication of the decisions
The publication is organized by the law to inform one the thirds of the nomination or the suspension of the functions of the leaders. It is subjected to the same mode as the social pact, or than the acts of modification of the statutes: newspaper of legal advertisements, deposit of the act to the Trade register and the companies (RCS), publication with BODACC.
If the resignation is not published in the RCS, the leader object of measurement can try to bring back the proof of it, but it is the judge who will appreciate the convincing value of the provided elements.

Leaders in fact

Constitute a leader in fact any natural person or morals who without having the title of it, carries on the same activity as a leader of right with same independence and same sovereignty, which implies that the leader in fact on the one hand acts with the place and place under cover of the leaders of right, and on the other hand that the company has the legal personality.

The commercial law uses the concept of leader in fact only in connection with penal offenses applicable to the joint stock companies and the limited liability companies. She does not speak about it for business firms about people, nor for the civil responsibility of the leader social. The law of the 1/25/1985 employs this concept for all the companies: Article 180 makes it possible to very condemn leader in fact or apparent right or occults, remunerated or not, to support whole or part of the social liability on the assumption that a fault of management would be ascribable for him. This same concept exists in articles 181,182,188 and 196 (procedures of liquidation or file for bankruptcy; personal bankruptcy; bankruptcy) of the law of 1985.

Capacities of the social leaders

The principle of the full powerss

In the beginning, the representative of the company was the agent of the associated ones: the company was not committed if it exceeded the received capacities. The third was to thus check that the contract entered the list of the operations which the leader could achieve: it was to ask a copy of the statutes RCS , then to interpret it. Jurisprudence then retained an extensive design of the clauses of the determining statutes the capacities of the leaders, which involved an inversion of the principle, the capacities of the leader being so largely interpreted that the leader could act as any circumstance in the name of the société.
For the legislator, the statutory clauses limiting the capacities of the leaders are incontestable with the thirds, except proving that the third concerned was informed of such a contractual limitation of these capacities (being specified that the simple publicity of the statutes is insufficient to constitute such a proof). But, their capacities are not unlimited: the leader must respect the clean capacities of the other social bodies and the speciality of the company.

The respect of the capacities of the other social bodies
The principle of the full powerss is justified by the will of effectivity of the action of the social leaders, who must have a great liberty of action. The leader should not however not be able to encroach on the capacities of the other social bodies. He cannot thus approve with him only the accounts of the company, to decide the assignment of the result for the period ended, to amend of the company,…

The respect of the speciality of the company
the legal speciality : article 1832 of the Civil code French gives to the companies the mission of realizing savings or benefit for their division. The leaders cannot thus achieve acts désintéressés.
the statutory speciality : the leader is chosen by the associates for his capacity to develop the type of activity which the company gave itself in the statutes. He cannot pass from acts exceeding the social object, which jurisprudence restrictivement interprets like acts referring to a completely foreign activity with the social object, contradicting it as long as that would require a modification of the statutes.

Effectiveness of the limits of capacities of the leaders

A going beyond of a limit should involve a sanction (nullity/inopposability with the thirds), but jurisprudence privileges the protection of the thirds and the engagement of the civil responsibility of the leader.

Opposable limits with the thirds
They are posed by the law:

  • when the manager encroaches on the capacities reserved for a social body. The thirds thought of calling upon the appearance of being able (Article 98 of the law of 1966). The law provides that the leaders cannot take only the initiative of operations presenting of the serious risks, but this rule is often ignored, and the thirds call upon the appearance of being able. For jurisprudence, the company is not engaged by the guarantee not expressly authorized.

  • the company is not engaged by the acts concluded for its account, of the time when it was in formation, which if the acts were taken again according to the conditions envisaged by the law.

In the partnerships, the opposable limits with the thirds are those of the statutory object. The SNC and limited partnerships are not bound by acts of their manager exceeding the social object.

Incontestable limits with the thirds
Are incontestable with the thirds:
  • statutory provisions and social decisions limiting the capacities of the social leaders. The company will be engaged, and the leader in question will be personally responsible with respect to the company. The thirds can themselves oppose the limits of being able of the social leaders.
  • limits coming from the definition of the social object from SA and limited liability companies. In theory, the acts of the leader which exceed the social object, oblige the company. By exception, there can be inopposability of the act if the company proves that the third which profits from it, knew the going beyond of the social object or could not be unaware of it. The company cannot be limited to support that the third could consult the statute with the RCS: it must prove that it was informed of the statute (otherwise than by the RCS), and than it could become aware that the act did not enter the statutory object. The proof is delicate to bring, except in the groups of company: when, in a group, the companies contractors together have common leaders, they inevitably know the statute of the various companies.

The problem of the office plurality of the functions

in the public limit companies, the office plurality of a Work contract and function of administrator of the company are not possible that in the event of anteriority of the work contract (the employee becomes administrator) and that so less than one third of the administrators is paid société.
The employee of an head office, which becomes administrator of the subsidiary company, then which concludes a work contract with the subsidiary company, cannot validly become paid about it: it is necessary to respect the existence of the various moral persons. Here, the administrator became paid company, which is prohibited. This prohibition is due to the fact that the administrators must control the leaders, who engage and direct the employees: the employee controls his hierarchically superior then. It is necessary to add the fear which the administrator allocates as paid important wages.

The office plurality is prohibited only if there exists a subordination connection between the company and the minority manager: the office plurality is possible when it has technical functions distinct from the management of the company.

The leader-guarantee

The leader can go guarantee of the underwriting liabilities by the company. He is then held of all the debts of the company as long as he did not denounce his guarantee: he is held of the obligation of payment (debts former to the denunciation) but not of the obligation of cover (debts posterior to the denunciation).

Regulated conventions

T. In SA, art. L 225-38 of the commercial law specifies that all the conventions passed between the leaders and the company, who are not nor free (art. L 225-39), nor prohibited (art. L 225-43) are subjected to a procedure of authorization and control, whatever their object. That relates to the conventions passed directly between the company and the administrator, but also those last between the company and a company associated with at least 10%, or in which the administrator has interests (owner, administrator or manager) and those passed by the company when the administrator is there particularly intéressé.

For these conventions, the leader must inform the board of directors, so that he votes an prior approval (the leader does not vote). The president of the council then informs the auditor, who writes a special report/ratio placed at the disposal of the administrators 20 days before the meeting of the general meeting, this one having to approve conventions. If convention is disapproved, and as it applies as of the authorization of the council, it will produce effect with regard to the thirds, and the leader will be responsible for the undergone damage.

If this procedure is not observed, there will be nullity only in the event of defect of authorization of the detrimental effect and board of directors for the company. In the other cases, only the personal liabilities of the leader will be committed. Nullity is prescribed by 3 years starting from the date of convention, or, in the event of dissimulation, of the day when it was revealed. The assembly can cover this nullity by a vote taken on special report/ratio of the auditor explaining why the authorization was not required.

During this procedure also exists in the companies at directory and board of trustees (art.143 and following of the commercial law).

In the limited liability companies, the associates are also aimed. The procedure (art. L 223-19 of the commercial law is simpler: there is no Board of directors and thus not of procedure of prior approval. Only a procedure of approval a posteriori is envisaged by the law.

The responsibility for the social leaders

The law does not define the obligations falling to the social leaders. Jurisprudence makes it possible to draw up a list:
  • obligation of diligence : the passivity of the administrator of SA constitutes a fault of management likely to engage its responsibility.
  • to have of honesty towards the company : the leader must permanently defend the interest of the company. The law gives a report on a requirement for honesty in connection with penal provisions of the law of 1966, but honesty is a general requirement, applicable to all the social bodies, even not leaders.

The Civil responsibility

The texts envisaging the civil responsibility of the social leaders distinguish the infringements with the laws and payments applicable to the managed companies; infringements with the statutes; and faults of gestion.
This last category gathers all that the law describes neither as infringement to the laws and payments applicable to the managed companies, nor of infringement to the statutes. The doctrines propose to add the bad administration of the company to it, as well as a behavior of the leader translating the lack of care or diligence with regard to the social material (ex: the concluding of a désavantageux contract for the company, or refusal of an operation favorable for the development of the social affairs).

Responsibility with regard to the company
It can be difficult for the company to bring an in reparation action for its injury against a faulty leader, especially if it remained in function. Moreover, its revocation will be difficult if it is majority in the capital. The law thus makes it possible to the associates to take action in compensation for damage social, which known as will be exerted C singuli (an exerted action C universali is exerted by the regular social bodies).
Certain leaders sought to amend, while inserting there a clause of pure and simple renunciation of the social action of responsibility, or giving to the final discharge (decision of general meeting holding the administrators for free of their management) the effect to exonerate them by advance of any fault of management. From now on, the art.1843-5 of the Civil code considers not written any clause of irresponsibility, and provides that no decision of general meeting of final discharge or prohibiting to engage the responsibility for the leaders, is opposable with the société.

Responsibility with regard to the thirds
  • the rule of nonresponsibility for the leaders with regard to the thirds
The action (or the faulty omission) of the leader engages in theory only the company: an injured third will have to be turned over against the company to require comptes.
of him That is checked:
    1. * out of contractual matter: a company which does not respect engagements rising from a contract concluded via its legal representative, will have to answer of the caused injury with the thirds
    2. * out of extra matter - contractual: a company which makes an unfair act towards another company, is considered to have made the fault instead of the natural person who represents it.
  • jurisprudential attenuations
A jurisprudence admits however that the leader can be personally held with regard to the thirds if it made a separable fault of his fonctions.
One distinguishes thus between the personal fault and the service-connected fault from the leader. The fault made by the leader within the framework of his attributions engages only the company, but if it leaves this framework, it then makes a detachable fault of the service and engages its personal liabilities. Jurisprudence remains nevertheless confused in the matière
  • the legal attenuations
Certain laws create a legal responsibility for the leaders with regard to the thirds, in particular in the event of rectification or of compulsory liquidation of the company: the leader is personally responsible with regard to the thirds, because the company cannot anything any more faire.
The possibility of seeking the responsibility for the leaders in the event of bankruptcy of a moral person was initially instituted with regard to the presidents of SA, before being wide to the managers of limited liability company, then with any leader of business firm. The law of the 1/25/1985, modified by that of the 6/10/1994 extended this device to the leaders of any moral person of private law: civil society, co-operative, association, trade union, work's council,…
This law of 1985
  1. * requires to prove the fault of management of the leader
  2. * requires to bring back the proof of a damage (insufficiency of assets)
  3. * makes it possible to the judge to modulate the sanctions (damages): it can charge whole or part of the social debts to the leaders of right or fact of the moral person.

The responsibility with regard to the associates
To justify this assumption of responsibility for the leaders, the doctrines retain the idea, opposite for the legislator, that the associates are thirds compared to the company. Consequently, the responsibility will be: 1) towards the company in the event of bad management of the social affairs. 2) towards the associates for a decision favouring some associated with the detriment of autres.
It is thus necessary to distinguish what concerns the social interest and what concerns the shared interest: the notion of shared interest is aimed to article 1833 of the Civil code French but this text relates to more the formation of the company (conditions of validity of the deed of partnership), that the responsibility for the bodies in the course of life sociale.
Jurisprudence followed this analysis while recognizing to the load directing it a duty of honesty and a responsibility in the event of failure with respect to the associates. The principle posed is due largely to the facts of the species: a associate requested council from a leader to sell his titles, and the leader personally repurchased to him, to resell them later a few days three times more expensive at a third which had proposed this price a few days before. The courts dealing with the substance of a case considered to be this behavior illicit on the base of a fraudulent reserve, and the Court of appeal approved the decision by specifying that the leader had a duty of honesty with regard to the associés.
The principle posed is however that the leader is debtor with regard to the associates of a duty of honesty.

The criminal responsibility of the leader

The criminal responsibility as an officer of the company
Many incriminations, in particular contained in the law of the 7/24/1966 concern the leader of company. A movement of de-penalization of the company law followed, but it saves the most serious infringements: presentation of inaccurate accounts, distribution of fictitious dividends, abuse of corporate asset,…
The law of the July 24th 1867 did not know the infringement of abuse of corporate asset. The facts were then continued like " breach of trust by a mandataire" , which supposed a mandate, whereas the leaders received capacities of the company more and more, and what supposed a movable thing diverted or dissipated, but did not make it possible to seize simple uses nor an attack with the credit social.
An Order in Council of the October 30th 1935 created an offense of abuse the good and credit of the company, punishing the use of the social goods and the credit of the company to the contempt of the social interest, but in the personal interest of the leader. It precisely punishes the managers, administrators, presidents, managing directors, members of the directories of limited liability company and joint stock companies, and the liquidators of any business firm. It also applies by extension to the leaders of the civil society which calls upon the saving publicly, and to the leaders of Company of Mixed economy and co-operatives. But the offense does not apply to the leaders of partnerships (SNC, simple mixed liability company, civil society of common right,…).
  • One needs an act of use: it will be a diversion, or a simple provisional use of the good.
  • One needs an abnormal risk: the act of use must be against the social interest, which means, for the jurisprudence, which it must make run to the company an abnormal risk in particular taking into consideration its financial possibility. This qualification will depend on the judge, being wide that the action of a leader is by generating definition of risks for the company: a head of undertaking in good faith can thus achieve an act which a judge will describe later as abuse social good.
  • One needs a will to be favoured personally: the leader must have ignored the social interest, and to have wanted an personal interest through his action. He must have acted insincerely at personal ends, or to support another company.

To sanction the leader on the only base of the risk created for the company would paralyze its action. The law thus requires a special fraud by giving him the greatest abstraction: it is about an unspecified personal advantage. Jurisprudence admits a material advantage with its profit or somebody of its entourage, a moral advantage (relation with a politician, businessman, a woman,…) or an interest of a purely professional nature. She admits that a company belonging to a group of company is temporarily handicapped if it goes from there from the superior interest of the group of which she is member, provided that the group is sufficiently structured, that he is composed of company having bonds of capital between them, and that these companies continue a common economic purpose. Failing this, it will not be beneficial of sufficient group to draw aside the incrimination of abuse good social.

The responsibility for the leader as a head of undertaking
The leader must answer of the failures with the Law the labor, the regulation of hygiene and safety in the companies, the infringements to the Droit of the environment, the failures to the Droit of competition and more generally to the economic, social and tax legislation to which the company is subjected. He must answer of the infringements made in the company while at the same time they were not made by him, but by employees acting within the framework of their activity professionnelle.

Jurisprudence makes it possible the Head of undertaking to true its responsibility on another person, when it proves to have given him the means of supervising the personnel considered (= delegation of powers).
However, the delegation will be valid only if it meets certain conditions:

1) the delegate must have competence, the authority and the means necessary to make ensure the respect of the lawful regulations

2) the delegation can relate only to certain attributions normally reserved for the head of undertaking. The leader cannot proceed to a delegation of the whole of his capacity.

Associates

It is about a natural person or morals who takes part in the capital of a company (of anybody or capital). It can be a question of a associate strictly speaking or the shareholder of SA. Beside the shareholders of control or those exerting a power of influence, the floating shareholding consists of a multitude the small ones or average direct savers or indirects.
For the legislator, associated and shareholder are synonymous words, only differentiated by the community to which they in general refer (company for the associates; SA for the shareholders), but the concept corresponds to same reality, namely a natural person or morals who n the other hand from her contribution receives various services of a patrimonial nature, financial and political. Patrimonial prerogatives: each associate receives in exchange of his contribution a right on the social inheritance, in the form of " shares of intérêt" (partnership), or " shares sociale" (other companies, except SA: actions).
  • patrimonial Prerogatives : each associate receives in exchange of his contribution a right on the social inheritance, in the form of " shares of intérêt" (partnership), or " shares sociale" (other companies, except SA: actions). These social rights are rights:
* incorporeal of credit: the property right on the elements brought to the company is held by the profit moral person of the contribution. It is only in the joint ventures which the associates persist in being owners of the shared goods even if the property right is exerted collectively by the formed whole of the participants).
  • * movable: the social right constitutes movable rights by determination express of the law (Article 529 of the civil code).

    These social rights are in inalienable principles in the partnerships, except assent of the others associated. This inalienability is explained by the fact why one refuses that new people not envisaged in the contract of origin enter the company at the time of the exit of a associate without the authorization of the associates. The principle of transferability exists in the limited liability companies and joint stock companies. When they are actions, it is necessary to speak about " négociabilité" : the shareholder, can yield his wallet to a third without very having to respect the formalities envisaged by the civil code (authentic form, notification with associated).

    • financial Prerogatives : the associate has a right on the profits carried out, distributed or not, and if necessary put in reserve, and on the whole of the future profits that the company could realize. This credit is subordinate (the social creditors are always preferred with the associates to obtain the payment on the remaining credit) and possible (it supposes the effective realization of a profit by the company, and requires a decision to distribute them taken in the majority of the associates. As of this decision taken, each associate has an effective and current credit against the moral person. In the event of decision of retention of the benefit, the credit of the associate will carry on the no-claims bonus of liquidation.)
    • political Prérogatives : they relate to the operation of the company. The associates have a right to intervene in the social affairs.

    Right of the associates to take part in the group decisions

    In theory, the group decisions are those taken by the whole of the associates brought together as a general meeting or by any other manifestation of the collective will of the associates envisaged by the law (variable according to the various shapes of companies) and/or by or the statutes. Thus, decision making can also take place apart from the assemblies in the partnerships, civil and commercial, or the limited liability companies (if the statutes envisage it and other than the decision relating to the approval of the accounts annual) as in SAS for which the mode of consultation of the associates is legally free.

    In company law, the concept of resolution indicates the proposed text with a deliberation of assembly, but also that resulting from the vote of the associés.
    When she is voted by the assembly, the result of the vote constitutes a social decision: the collective will which is expressed there detaches from the person of associated which is prononcés.
    the instrument which makes it possible to give a unit and a coherence to individual wills dispersed and contradictory is the right to vote. It has an crucial importance in company law and must be freely exerted.

    Right to vote

    right for any associate to take part in the group decisions, article 1844 of C. civ. This right is of law and order and consequently, the statutes cannot remove the right to vote of a associate in the cases envisaged not the law.

    The principle of liberty of the vote

    Attributions of the assemblies of associates

    Various assemblies

    Conditions of regularity of the general meetings

    Winding-up of the company

    Causes

    According to article 1844-7 of the Civil code, a company ends:

    1. By the expiry of the time for which it was made up, except extension carried out in accordance with article 1844-6;

    2. By the realization or the extinction of its object;
    3. By the cancellation of the deed of partnership;
    4. By the anticipated dissolution decided by the associates;
    5. By the anticipated dissolution pronounced by the court at the request of a associate for right reasons, in particular in the event of inexecution of its obligations by a associate, or of disagreement between associates paralyzing the operation of the company;
    6. By the anticipated dissolution pronounced by the court in the case envisaged in article 1844-5;
    7. (Law of January 5th, 1988) “By the effect of a judgment ordering the compulsory liquidation or the total transfer of the credits of the company”;
    8. (Law of January 25th, 1985) “For very other causes envisaged by the statutes”.

    Article 1844-8 of the Civil code indicates that " the winding-up of the company involves its liquidation, except the cases envisaged in article 1844-4 (Law of January 5th, 1988) “and with the third subparagraph of article 1844-5”. It has effect with regard to the thirds only after its publication.

    The liquidator is named in accordance with the provisions of the statutes. In the silence of those, it is named by the associates or, if the associates could not carry out this nomination, by decision of the courts. The liquidator can be revoked under the same conditions. The nomination and the revocation are opposable with the thirds only as from their publication. Neither the company nor the thirds can, to withdraw themselves from their engagements, to prevail themselves of a irregularity in the nomination or the revocation of the liquidator, since this one was regularly published.

    The legal entity of the company remains for the needs for liquidation until the publication of the fence of this one.

    If the liquidation closure did not intervene within three year as from dissolution, the public ministry or any interested party can seize the court, which makes proceed to liquidation or, if this one were started, to its achèvement".

    Effects

    The principal effects lies in the fact that it is necessary to liquidate the existing credit and to regulate the creditors of the company. This one will remain for the period of liquidation but it undergoes some limitations.

    The most current liquidation is the conventional liquidation, i.e. decided by the associates. The court will designate a liquidator who will have the role of paying the creditors then to enclose liquidation. The dissatisfied creditors are 5 years old to lead possible judicial actions to the opposition to the liquidator or associates.

    Moreover, the thirds must be informed winding-up of the company. The formalities of publicity are the following ones:

    • Insertion in a JAL ( J ournal of has nuncios L equal)

    • Dépôt at the clerk'ss office of the bankruptcy court within one month
    • Insertion with the BODACC with the diligence of the clerk.

    Publicity is also operated by the mention, on all the social acts and documents following the company name, of the formula “company in liquidation”.

    Compulsory liquidation also exists.

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