The legal representative of an entity being the director of a SAS may be held liable for insufficiency of assets

In this case, an SAS was placed under legal administration before the pronunciation of its compulsory liquidation. The liquidator brought an action against the managing legal entity (president) of the SAS and the natural person acting as legal representative of the managing company, claiming liability for insufficiency of assets.

The natural person appealed to the Court of Cassation, arguing that he should not be held personally liable since he was not the “permanent representative” of the managing legal entity, and neither the law nor the by-laws of the SAS required a managing legal entity to appoint a permanent representative.

The Court of Cassation held that, in the absence of a legal or statutory obligation to appoint a permanent representative of the managing legal entity within the SAS, liability for insufficiency of assets is incurred not only by this legal entity, as a de jure director, but also by its legal representative. The Court also extended this liability to directors, being natural persons, of the holding company and its mother company, in their capacity as de facto directors.

It should be recalled that the director of a company in compulsory liquidation may be ordered to bear all or part of the insufficiency of assets to which his or her mismanagement has contributed (Art. L. 651-2, al. 1 C. com.). Liability for insufficiency of assets notably applies to de jure and de facto directors, as well as to natural persons who are the “permanent representatives” of directors who are legal entities (Art. L. 651-1 C. com.). Unlike a société anonyme (SA) managed by a legal entity, where a permanent representative must be appointed, the SAS does not have such a rule, hence the difficulty of interpretation to which the Court of Cassation has provided an answer: in the absence of a permanent representative in an SAS, liability is incurred by the natural person who is the legal representative of the legal entity.

In this context, the possibility of providing in the by-laws of the SAS, of which the management may be freely organized, that the president of the legal entity must appoint a permanent representative who is a natural person (a principle whose legality was affirmed by Cass. com. 19 January 2022, no. 20-14.089 and 20-14.090, F-D) may be particularly useful in the organization of groups, as it allows the legal representative of the legal entity who is not operationally in charge of the company to be relieved of his duties in favour of a permanent representative.