FRANCE Law and Practice Contributed by: Jean-Christophe Devouge and Kaïs Boussadia, Aurès
(b) intentionally committed; and (c) incompatible with the normal exercise of cor - porate functions. It is important to point out that unless one of the direc - tors is solely responsible, directors’ liability is collec - tive, and may be joint and several, given the collegial nature of the board. Lastly, the recognition of direc - tors’ liability under French law is not that common. 3.9 Other Claims/Enforcement Against Directors/Officers In France, directors and officers can be held liable for criminal and civil charges. They would be liable for any criminal infringement such as misappropriation of corporate assets, distri - bution of fictitious dividends or publication of inac - curate annual accounts. Directors and officers can also be civilly liable if they commit breach of laws and regulations applicable to the company (breach of the by-laws or other internal regulations). In addition, mismanagement by directors and officers can be a liability cause if they act contrary to the corporate interest of the company. Mismanage - ment ranges from negligence to fraud. Directors and officers can also face administrative and tax liability; for example, in a case where they infringe the AMF securities law-related regulations, the authority is able to impose financial sanctions. As regards tax matters, however, the liability of offic - ers is more limited and may only arise in cases of serious and repeated breaches of tax obligations or fraudulent conduct, attributable to them, which have made it impossible for the tax authorities to recover the company’s liabilities, potentially resulting in joint and several liability for such debts. Their liability cannot be restricted or limited on a contractual basis. However, it can be excluded if the directors and officers demonstrate that they acted with a legitimate lack of awareness of a wrongful act, or if they show they were in opposition to the decision at stake.
Usually, the company offers insurance to the directors and officers, covering specific defence and investiga - tion costs or damages. 3.10 Payments to Directors/Officers Approvals and Restrictions Concerning Payments to Directors/Officers SA In an SA, the approval process for directors’ and offic - ers’ compensation differs depending on whether or not the company is listed. In non-listed SAs, the general meeting of shareholders must approve the aggregate amount of the compen - sation to be paid to the board of directors, as a whole. The allocation of this amount between the directors is then decided by the board of directors itself. The board also has exclusive authority to set forth the CEO’s compensation scheme and authorise any pay - ment made to it, without any prior approval required from the shareholders. CEO compensation schemes generally include a fixed and a variable portion, with the latter being paid upon the achievement of targets set by the board. A listed SA must comply with the say-on-pay proce - dure. Under this regulation, the directors’ and offic - ers’ compensation schemes are subject to a double approval process from the shareholders. • The shareholders’ general meeting shall approve the compensation policy for the upcoming fiscal year, setting forth the principle and structure of the relevant compensation schemes (ex-ante vote). Any amount paid – or payable – to the directors and/or officers in violation of the approved com - pensation policy must be void. • Each year, the shareholders’ general meeting shall approve all payments made to directors and officers or amounts owed to them pursuant to the pre-approved compensation policy (ex-post vote). Payment of variable and extraordinary compensa - tion elements shall be subject to the approval of the ex-post vote. A rejection of the ex-ante vote or the ex-post vote by the shareholders entails severe consequences:
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