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Insights France: Liability for insufficiency of assets of the legal representatives

France: Liability for insufficiency of assets of the legal representatives

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​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​published on 2 April 2025 | reading time approx. 3 minutes

Pursuant to the judgement of 13 December 2023 (Com. 13 Dec. 2023, no. 21-14.579), a judgement of the French Court of Cassation dated 20 November 2024 (Com. 20 Nov. 2024, no. 23-17.842) has added to the saga of case law on the liability for insufficiency of assets of the managing legal entity of a French simplified joint-stock company (“SAS”) placed in compulsory liquidation.


The first judgement – favorably received – shed light on Articles L. 651-1 and L. 651-2 of the French Commercial Code by establishing the principle that the legal representative of a managing legal entity is liable for insufficient assets, in the absence of any legal or statutory obligation within the SAS to appoint a permanent representative of the managing legal entity.

The judgement of 20 November 2024 rephrased this principle by adding the following clarification: “when a simplified joint-stock company is managed by a legal entity that has appointed a permanent representative in accordance with the company's articles of association, the individual managing the legal entity cannot be held liable for insufficient assets if he or she is not also the permanent representative.”

In above case, the liquidator of a SAS placed in receivership and then in compulsory liquidation brought an action for insufficiency of assets against the managing legal entity chairing the SAS. The French Commercial Court ruled in favor of the liquidator and convicted the corporate officer of the managing legal entity, which was subsequently upheld on appeal, before the French Court of Cassation overruled the appeal judgement.

The combination of these two Court of Cassation decisions shows that, on the one hand, where a legal entity managing an SAS has appointed a permanent representative, he or she is the one who can be held liable for insufficient assets.

On the other hand, in the absence of a permanent representative, either because the obligation to appoint one is not provided for in the articles of association, or because, despite the existence of a clause in the articles of association establishing such an obligation, no permanent representative has been appointed, the legal representative of the legal entity managing the SAS will remain the one who may be held liable.

As a result, and as we already mentioned for the judgement of 13 December 2023, this new judgement of 20 November 2024 confirms the advantage of stipulating in the articles of association of an SAS that the legal entity chairing the company must appoint a permanent representative, thereby allowing the legal representative of the legal entity managing the SAS who is not also appointed as permanent representative to be relieved of liability for insufficiency of assets.​​​​

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