A change in the case law of the French Supreme Court: a deliberation of the shareholders taken in breach of the clauses determining the competence, the forms and the conditions of collective decisions is likely to be null and void if this violation has been of such a nature as to influence the decision-making process. This nullity is not automatic; it is optional and can be requested by any interested person.
Since 2010, the French Supreme Court has ruled that an act or deliberation taken in violation of the articles of association of a commercial company could not be sanctioned by nullity, pursuant to Article L.235-1 of the French Commercial Code, which states that "the nullity of acts or deliberations taken by the organs of a commercial company can only result from the violation of a mandatory provision of the same code or of the laws governing contracts". An act or deliberation taken in violation of the articles of association was, then, in most cases, only sanctioned on the basis of liability.
The French Supreme Court has tempered this principle by considering that the permitted adjustment in the articles of association of a mandatory legal provision could be sanctioned by nullity. For example, Article L. 225-48 of the French Commercial Code provides that "The articles of association must provide for an age limit for the performance of the duties of chairman of the board of directors, which, in the absence of an express provision, is set at 65 years. Any appointment made in violation of the provisions of the preceding paragraph is null and void. [...] ". Consequently, if the articles of association of a commercial company provide that the chairman of the board of directors may not hold office beyond the age of 68, any appointment made in violation of the age limit set in the articles of association would be null and void insofar as it would be made in violation of an imperative provision that has been lawfully adjusted by the articles of association. The French Supreme Court also confirmed this position in 2017, in a case where a contribution of corporate assets was made in the context of a capital increase of a SAS. The French Supreme Court did not mention it clearly, but it appears from the terms of its decision that the said contribution had not been subject of a collective decision of the shareholders, as the minority shareholders had not been convened, even though the articles of association of the SAS reserved the competence to decide on such a transaction to the shareholders. It states that Article L. 227-9 paragraph 1 of the French Commercial Code provide that the articles of association freely determine "the decisions which must be taken collectively by the shareholders in the forms and conditions which they provide".
It therefore considers that, insofar as the provisions of the articles of association relating to the collective decisions of the shareholders, their form and their conditions do not constitute a conventional arrangement of a mandatory rule of Book II of the French Commercial Code or of the laws governing contracts, nullity is not incurred, even if the paragraph 4 of Article L. 227-9 of the French Commercial Code mentions the possibility to cancel the decisions taken in violation of the said Article.
On 15 March, 2023, the French Supreme Court made an important reversal of its case law. It first recalled that "the statutory provision which reserves, in SAS, certain decisions to the collectively of shareholders, does not set up any mandatory provision, taking advantage of the freedom that Article L.227-9 paragraph 1 leaves to the redactors of SAS articles of association". On the basis of this observation, and noting that the rules of organization and operation of the SAS are freely determined by the articles of association, and that compliance with them is essential to the proper functioning of the SAS and the security of its acts, the French Supreme Court specifies that "the limitations brought to this case law to the possibility of sanctioning by nullity the breach of these statutory provisions mean that their breach not being sanctionable".
At the end of this reasoning, the French Supreme Court modifies its position : the Court considers henceforth that Article L. 227-9 paragraph 4, is instituted in order to "complete for the [SAS] the regime of nullity of the acts or deliberations of companies, as it results from Article L. 235-1 of the Commercial Code paragraph 2" and that any act or deliberation taken in violation of the statutory clauses of SAS determining the scope of competence of collective decisions as well as their rules and conditions of adoption is likely to be null and void if this violation is likely to influence the decision-making process.
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