FRANCE Law and Practice Contributed by: Jean-Christophe Devouge and Kaïs Boussadia, Aurès
4.8 Consequences and Enforcement of Breach of Directors’ Duties According to the circumstances, a breach of directors’ or officers’ duties may be enforced by the following parties: • the company, by an ut universi action brought through its legal representative. The action can also be brought by a shareholder when the company is held liable for breaches com - mitted by its legal representative. In such case, it would be an ut singuli action; • the shareholders can enforce, for themselves, a breach of directors’ duties in case they suf - fered a distinct harm from the company; and • third parties can also hold a director person - ally liable in case of a fault separate from their functions, which fault is defined by case law as (i) particularly serious, (ii) intentionally com - mitted and (iii) incompatible with the normal exercise of corporate functions. It is important to point out that unless one of the directors is solely responsible, directors’ liability is collective, and may be joint and several, given the collegial nature of the board. Lastly, the rec - ognition of directors’ liability under French law is not that common. 4.9 Other Bases for 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 infringe - ment such as misappropriation of corporate assets, distribution of fictitious dividends or pub - lication of inaccurate 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 cause for liability if they act contrary to the corporate interest of the company. Mismanage - ment ranges from negligence to fraud. Directors and officers can also face administra - tive and tax liability; for example, in a case where they infringe the AMF securities law-related reg - ulations, the authority is able to impose financial sanctions. In the same way, fraudulent acts or breaches of tax obligations can lead to financial sanctions. Director and officer liability cannot be restricted or limited on a contractual basis. However, it can be excluded in case the directors and officers demonstrate 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 that covers specific defence and investigation costs or damages. 4.10 Approvals and Restrictions Concerning Payments to Directors/ Officers SA In SA, the regime of directors’ and officers’ com - pensation approval process differs depending on whether the company is listed. In non-listed SA, the general meeting of share - holders must approve the aggregate amount of the compensation to be paid to the board of directors, as a whole. Then, the allocation of this amount between the directors is decided by the board of directors itself. The board also has exclusive authority to set forth the CEO’s com - pensation scheme and authorise any payment
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