In principle, commercial companies acquire legal personality, and therefore the capacity to enter into contracts, only when they are registered in the Trade and Companies Register.
Nevertheless, it is useful to be able to enter into deeds in the interest of the company under formation, before its registration, in order to ensure the start-up of its business (lease, bank loan, employment contract…). Founding shareholders who enter into such agreements are jointly and severally liable for these commitments until the company is registered.
These deeds may subsequently be taken over by the registered company, and thus be deemed to have been entered into by the company from the outset, if certain conditions laid down by law and case law are met:
– if the deed does not refer to the company under formation, it cannot be taken over by the company, and the commitment will remain the definitive responsibility of the founder who entered into it.
– if the deed provides that the founders are acting “in the name of” or “on behalf of” the company under formation, the commitment may be taken over by the company.
The difficulty of the matter arises when the deed refers to the company under formation, but does not mention “in the name of” or “on behalf of” the latter.
As recalled in our newsletter of May 12, 2021, until now, case law imposed a very strict formalism. In the absence of this exact wording, the deed could not be taken over by the company and was not subject to ratification after its registration.
In addition, if the company appeared as the signatory to the deed, the latter was null and void, as it had been concluded by an entity that did not have the capacity to do so, as it was not registered.
This sanction of absolute nullity thus enabled a signatory acting in bad faith to evade commitments entered into on the basis of the inaccuracy of the aforementioned mention, even if the intention of the parties to commit the company under formation was, moreover, obvious.
It is this situation that the reversal in case law is intended to correct.
In three decisions dated November 29, 2023, the French Cour de cassation abandoned this very rigid position.
After pointing out that this explicit mention is not required by law, the Court now gives the judge the power to assess, on a sovereign basis, by examining all the circumstances, both intrinsic and extrinsic to the deed, whether the common intention of the parties was to conclude the deed in the name or on behalf of the company under formation, in order to allow the company to take over the deed.
As a result, it will no longer be possible for a founding shareholder signing a deed on behalf of the future company to avoid commitments entered into prior to the company’s registration on the sole grounds of an inaccuracy in the wording used. The judge will assess the intention of the parties, as expressed in or outside the deed, in order to decide whether the deed can be considered as having been entered into by the company under formation and can therefore be taken over by the latter once registered, or, failing this, whether the founders remain liable for this commitment.
To ensure the legal protection of transactions carried out prior to your company’s registration, don’t hesitate to contact our corporate team.