Can a company be held liable for wrongful acts committed by its founder during the period prior to its registration?
In the case at bar, the employee of an industrial engineering company (E.) had transferred several internal company documents from his work e-mail account to his personal e-mail account. Shortly after being dismissed from company E., he and another former E. employee set up another company (A.) carrying on a business similar to that of his former employer.
Company A. was then sued by company E. for unfair competition.
In this case, the Court of Appeal of Lyon ruled that company A. had indeed committed acts of unfair competition by having misappropriated commercial documents belonging to company E., through the intermediary of its director.
In a judgement of May 17, 2023, the Commercial Chamber of the French Supreme Court (Cour de Cassation) overturned the decision of the Court of Appeal for having held the company A. liable even though, at the time of the facts of the dispute, i.e. the misappropriation of commercial data, company A. was still in the process of being formed.
The formation of a company begins with the acts expressing the founders’ intention to form a company and ends with the company’s registration in the Trade and Companies Register.
It is only after this registration that the company enjoys legal personality (Article 210-6 of the French Commercial Code).
And it is only once the company has legal personality that the wrongful acts of its governing bodies are likely to engage the civil liability of the said company (Article 1240 of the French Civil Code).
The Cour de Cassation concluded that the Court of Appeal should not have condemned company A. because, at the time of the alleged acts, company A. did not enjoy legal personality and had no governing body.
Only the personal liability of the author of the misappropriation, in this case the former employee of company E. who became a director of company A., could have been engaged.
Moreover, company A. could have been held liable if company E. had invoked and established the appropriation or possession of this information by company A., which was not the case here.
If you have any questions about the liability of companies and their directors, please do not hesitate to contact our corporate team.
