Douai court of appeal, c. 2, sect . 1 , 6 November 2013 , No. 12 / 00517, c Gordian / Baillie

( … ) Challenging the decision of the first judge, the appellants argue that the company has become a sole shareholder ; whereas, however, it is clear from the by laws, which the  judge rightly pointed out that they had not been changed since December 21, 2010 , on the one hand , that is part of a binding collective decision of the partners in accordance Article 22 of the bylaws , the appointment and dismissal of the President and, on the other hand, collective decisions are made during meeting or at the initiative of the President pursuant to section 24; that the fact that the French company, simplified joint stock company , has become a de facto one-man company is not likely to make irrelevant the provisions of the bylaws relating to manner in which decisions are made; that the provisions of Article 227-1 paragraph two of the Commercial Code under which : “The sole shareholder exercises the powers granted to the shareholders when this chapter provides a collective decision” Can not be usefully relied on this point ; In fact , the provisions of the bylaws created a balance between the powers and assignment of partners or the sole shareholder on the one hand, and the president of the company, on the other hand ; it is undisputed in this case that the shareholders’ meeting of July 8, 2011 was not held at the call of the president, but only on the initiative of the sole shareholder ; it is therefore right that the first judge held that the meeting was thus invalid under the bylaws; that the fact that the sole shareholder may “at any time rectify the situation by a new decision” is not likely to render invalid the action for annulment brought by the dismissed president, being observed that it is not disputed by the appellants that, as accepted by the judge, the disputed meeting was held without call of the President during which dismissal has been decided and therefore without him having been able challenge the objections raised against him ; (…)
observation :

The Sole shareholder of a French SAS can appoint and dismiss the president, in the manner organized by the bylaws. However, its decision should intervene in accordance with the classical formalism mentioned in the bylaws ( including convening the meeting with agenda).

The solution given by the Court of Appeal of Douai recalls that the sole shareholder has not all powers. If the articles provide, as in this matter, that revocation is a collective decision of the shareholders , a notice will be necessary.

While he concentrates in its hands all the powers of the shareholders, the sole shareholder must – to implement – operate in the forms provided in the bylaws, with,  if necessary, waiting to be summoned by the president (to be dismissed!), if the bylaws do not regulate and simplify decisions by a single shareholder. Need to be called by one president to be revoked … The situation may seem curious . Yet it is under the balance of power that the solution is fully justified.

That case proves that by-laws always have to be updated during the company’s life, to take into account new shareholding & management.

Benoît LAFOURCADE

Co-Founder, Partner & Solicitor -
International Corporate Law & Litigation

Benoît, Delcade’s co-founder, is a Paris Bar lawyer and UK Solicitor (London).

Advisor for various embassies, working closely with the firm's team, Benoît offers his services to French and foreign companies requiring cross-cutting strategic and legal support in business law.

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