Co-managers of a French LLC: Individual liability for their own faults


published on 22 February 2023 | reading time approx. 2 minutes

In a decision taken on 25 January 2023 (Cass. Com., 25 January 2023, n°21-15.772), the Chamber of Commerce of the Cour de Cassation (“French Federal Supreme Court”) confirmed the possibility of questioning the individual liability of one of the co-directors of a French limited liability company (“société à responsabilité limitée” or ”SARL“). 

In the present case, the company wanted to question the individual liability of one of its co-directors through a liability action based on Article L 223-22 of the French Commercial Code for managerial misconduct because she had charged the company for electricity costs related to the activities of another company in which she owned shares.
The company's claims were dismissed by the Court of Appeal (CA Nouméa, 28 January 2021, No. 19/00134), which decided that if there are several directors, the joint liability action must be taken against all the co-directors and not just the director affected by the claims.
Following the claims submitted to the Cour de Cassation, this one cancelled the decision with reference to Article L. 223-22 of the French Commercial Code, considering that several directors could not avoid to be made liable individually.
In other words: In the event of a management error, the company (or one of its shareholders by an action ut singuli) may decide to sue one, several or all of the directors who participated in the deficient act.  In the event of joint responsibility, the co-director sued by the company may nevertheless sue the other co-directors via mandatory intervention so that the Court can determine the contribution part of each towards the compensa­tion of the harm (Article L. 227-22, para. 2 of the French Commercial Code).
This decision both validates and reinforces the co-managers' wish to register and identify, if necessary, their objection to a decision taken by another co-managing director which they consider to be harmful to the com­pany. His objection may be formalized in written form (by email, letter, by registered mail to the sharehol­ders or, in difficult situations, by a judicial officer) in order to strengthen his position as a defensive measure in the event of liability.
For information: In the case of mistakes made by members of collegial bodies in an SAS (board of directors and executive board) and in SAS (ad hoc bodies), collective misconduct is assumed due to the collegial nature of the body. In order to discharge his liability, the executive director should demonstrate his professional, prudent and diligent conduct in the collegial body, not only by objecting to the questioned decision, but also by his alternative proposals and efforts to clarify the wrongness of the aforementioned decision.


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