Can decisions made in breach of an SAS‘s articles of association be annulled?
• Before 15 March 2023, case law constantly answered this question negatively.
Drawing on the provisions of Article L. 235-1 paragraph 2 of the French Commercial Code, case law acknowledged the nullity of acts and deliberations by commercial companies’ decision-making bodies only in case of a breach of the mandatory provisions of Book II of the French Commercial Code or of the laws governing contracts.
Therefore, non-compliance with statutory provisions was not punished by the nullity of acts or deliberations (except where the articles of association provided for such an arrangement).
• In its judgement of 15 March 2023 (known as the Larzul 2 judgement), the French Cour de Cassation endorsed a reversal of this case law.
The Court changed the reasoning it had hitherto adopted and took into consideration the principle of statutory freedom, which is one of the foundations of the organisation of an SAS.
Indeed, according to Article L. 227-9 French Commercial Code, an SAS‘s articles of association identify the decisions that must be made by shareholders as well as the form and conditions of such decisions.
Hence, compliance with statutory provisions is particularly vital for the proper functioning of an SAS and the security of its acts.
Therefore, the Court now judges that the violation of the statutory provisions of an SAS that define the terms and conditions for collective shareholder decisions may be punished by nullity, provided that the nature of such nullity will influence the result of the decision-making process.
It is therefore on this condition that the judge has the ability to pronounce the nullity, which may be requested by any concerned party, of a deliberation or act carried out in violation of the SAS‘s articles of association.
Please feel free to contact our Corporate team with any questions you may have concerning your company’s statutory clauses or the protection of your shareholders’ rights.