FRANCE Law and Practice Contributed by: Véronique Millischer, Léna Sersiron, Eléonore d’Anthonay, Guillaume Nataf, Olivia Chriqui-Guiot, Pauline Celeyron, Damien Berruyer and Nella Picou, Baker McKenzie Paris
civil liability claim can be brought by the company through its legal representatives ( action ut universi ) or, in case of failure of its legal representatives to bring such claim, by the shareholder(s), acting here in the interest of the company ( action ut singuli ). • Towards the shareholder ( s ): Directors and officers may incur civil liability essentially in case of loss personally suffered by the shareholder(s) as a result of a fault by a director or officer of the company (and as long as such loss is distinct from the loss suffered by the company, if any). • Towards third parties : Directors and officers may incur civil liability only where they have committed a fault that is detachable from their functions and personally attributable to them. This is the case where a director or officer intentionally commits a fault of particular gravity incompatible with the normal exercise of its corporate functions. In the absence of such a detachable fault, a third party may only obtain damages by bringing a claim against the company itself. The civil liability of directors and officers can be cov - ered by a D&O insurance scheme. Criminal Liability of Directors and Officers Directors and officers may incur criminal liability, nota - bly for the following: • Misuse of corporate assets ( abus de biens sociaux ): This is the most frequently prosecuted offence, targeting directors and officers who, in bad faith, have used the company’s assets or credit in a manner they knew to be contrary to the company’s interest, for personal purposes or to favour another company or enterprise in which they had a direct or indirect interest. • Presenting or publishing misleading financial state - ments : This targets directors and officers who have knowingly published or presented to shareholders, with a view to concealing the true financial position of the company, annual accounts that do not give a true and fair view of the results for the financial year, the financial position and the assets of the company. • Distribution of fictitious dividends .
The criminal liability of directors and officers cannot be covered by a D&O insurance scheme under French law. Liability in Insolvency Proceedings Where judiciary liquidation proceedings are opened, directors and officers may be exposed to the follow - ing: • Action for liability for insufficiency of assets ( action en responsabilité pour insuffisance d ’ actif ): The court may order directors and officers to bear all or part of the company’s debts where a management fault contributed to the insufficiency of assets. • Personal bankruptcy ( faillite personnelle ) or a ban on managing companies : Courts may impose these in cases of particularly serious misconduct (including misuse of corporate assets, fraudulent or irregular accounting, and the abusive continuation of a loss-making business). Shareholders’ Liability and the Concept of “Piercing the Corporate Veil” Principle of limited liability for SAS companies The legal personality of an SAS acts as a protective screen between the company’s creditors and the personal assets of its shareholder(s). Therefore, the shareholder(s) of an SAS are liable for the company’s debts only up to the amount of its/their contributions. French law equivalent of “piercing the corporate veil” French law does not formally enshrine the concept of piercing the corporate veil as a general doctrine, but recognises several mechanisms allowing courts to disregard the protection afforded by the company’s legal personality in certain situations, notably the fol - lowing: • Commingling of assets ( confusion de patrimoine ): Courts may extend proceedings opened against a company to another entity or to a shareholder where their respective assets are so commingled as to be indistinguishable. • Abuse of legal personality to defraud creditors : The action paulienne allows creditors to have acts per - formed in fraud of their rights declared unenforce -
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