The French Court of Cassation provides clarification on two issues: pursuant to Article L. 241-5 of the French Commercial Code, in the version in force since March 2012, a mere delay in submitting accounting documents to the shareholders’ meeting or to the sole shareholder of an SARL does not constitute a criminal offence; furthermore, neither a summons to appear served on the incumbent manager in his capacity as defendant nor the service of submissions on behalf of the company is equivalent to formally joining the victim company to the proceedings through one of its legal representatives, as required where a shareholder derivative action (action sociale ut singuli) is brought.
- Crim., 12 February 2025, F-B, No. 23-86.857
The background to the case under review is relatively straightforward: the manager of a limited liability company (société à responsabilité limitée – SARL) had allegedly sold a company asset (in this case, a truck) to a third party and failed both to record the sale in the company’s accounts and to transfer to the company the portion of the sale price paid in cash, which he allegedly retained personally. No shareholders’ meeting had been convened by the manager between 2013 and 2017, until a general meeting was called for 26 May 2017 to approve the annual accounts for the financial year ended 31 December 2016.
He was therefore prosecuted – and convicted – for misuse of corporate assets (abus de biens sociaux) and failure to submit the accounting documents to the general meeting.
In addition to an eight-month suspended prison sentence, a fine of €8,000, a five-year ban on engaging in the professional activity that had enabled the offence to be committed, a permanent ban on managing a company and a one-year period of ineligibility for public office, the trial court ruled on the civil claims and ordered the defendant to pay the SARL, in particular, €110,496 as compensation for its financial loss.
Somewhat unusually, all parties – the defendant, the public prosecutor and the civil claimant – appealed the decision.
Despite this general dissatisfaction, the Court of Appeal upheld the judgment in its entirety, except as regards the sentence, which was replaced by a €30,000 fine and a one-year period of ineligibility for public office.
This time, only the defendant challenged the judgment, lodging an appeal before the Court of Cassation.
The appeal relied on several grounds, themselves divided into several limbs, giving the Criminal Chamber an opportunity to revisit various aspects of French corporate criminal law.
First, the appeal challenged the judgment on the ground that it had failed to address an argument raised in the defendant’s appellate submissions, in which he contended that the cash had been deposited in the restaurant’s office, which had allegedly been completely destroyed by Hurricane Irma on 30 August 2017, so that the company had been unable to collect the funds as a result of force majeure. The Court of Cassation held that the Court of Appeal was not required to respond to a “mere allegation by the defendant” and dismissed this complaint without further discussion.
Second, the appeal challenged the conviction for failure to submit the accounting documents to the SARL’s shareholders’ meeting under Article L. 241-5 of the French Commercial Code, where the alleged offence consisted merely of a delay in submission. The accounts for financial years 2013 to 2016 had ultimately been submitted for approval at the initiative of the court-appointed representative, during an extraordinary general meeting held on 19 December 2017. The Court of Cassation quashed the appellate judgment on this point, holding that, pursuant to Article L. 241-5 of the French Commercial Code in the version in force since March 2012, a mere delay in submitting accounting documents to the shareholders’ meeting or sole shareholder of an SARL does not constitute a criminal offence.
Third, the appeal challenged a finding of guilt covering the period from 2012 to 31 December 2017, even though the lower courts had identified no act committed during 2017. Here again, the Criminal Chamber quashed the decision on this point.
Fourth, the appeal challenged the lower courts’ finding that the SARL’s civil-party claim was admissible, even though the company had not been formally joined to the proceedings through one of its legal representatives, as is mandatory where a shareholder derivative action (action sociale ut singuli) is brought. The Court of Cassation again quashed the judgment, holding that neither a summons issued by a judicial police officer to the incumbent manager in his capacity as defendant nor the service of submissions on behalf of the company is equivalent to the formal joinder required by law.
The second and fourth issues warrant particular attention. They highlight both the absence of a penalty for delay in submitting an SARL’s accounts for approval by its shareholders and the necessity and formal requirements for joining the company to proceedings where a shareholder derivative action (action sociale ut singuli) is brought.
No penalty for delay in submitting accounts for approval by an SARL’s shareholders
Pursuant to Article L. 223-26 of the French Commercial Code, the manager of an SARL must submit the management report, inventory and annual accounts for approval by the shareholders assembled at a meeting “within six months of the end of the financial year, subject to an extension of that period by court order”. Failing this, the public prosecutor or any interested party may apply to the competent court in summary proceedings for an order requiring the managers to convene the meeting or appointing a representative to do so.
At the same time, Article L. 241-5 of the French Commercial Code makes it a criminal offence for managers “not to submit for approval by the shareholders’ meeting or the sole shareholder the inventory, annual accounts and management report prepared for each financial year”.
Before Law No. 2012-387 of 22 March 2012 entered into force on 24 March 2012, the provision criminalised failure to hold such a meeting “within six months of the end of the financial year”. The current version no longer contains this requirement.
This is precisely the issue raised by the decision under review: does the six-month period imposed by Article L. 223-26 of the French Commercial Code for submitting annual accounts to the shareholders’ meeting mean that the criminal offence under Article L. 241-5 becomes applicable once that period has expired?
In the present case, the manager was prosecuted for failing to comply with his obligation to submit the accounts for approval in respect of financial years 2013 to 2016. The first general meeting he convened was held on 26 May 2017 to approve the annual accounts for the financial year ended 31 December 2016. The accounts for financial years 2013 to 2016 were subsequently submitted for approval, at the initiative of the court-appointed representative, during an extraordinary general meeting held on 19 December 2017.
The Court of Appeal found him guilty in respect of this period, holding that the offence was established “if such submission does not take place within six months of the end of the financial year, unless that period is extended by court order”.
The Criminal Chamber quashed the judgment on this point. It recalled that, since the criminal provision was amended in 2012, failure to hold the shareholders’ meeting within six months of the end of the financial year is no longer punishable and that, consequently, a mere delay in submitting accounting documents to the shareholders’ meeting or sole shareholder of an SARL does not constitute a criminal offence.
Since, in the present case, the accounts for financial years 2013 to 2016 were indeed ultimately submitted for approval, albeit late and at the initiative of the court-appointed representative, the elements of the offence were not established and the manager could not incur criminal liability on this ground.
The solution adopted by the Court of Cassation follows from the fundamental principles of French criminal law, in particular the principle that criminal statutes must be strictly construed. This is all the more compelling in a case such as this, where the legislature expressly relaxed the criminal provision through legislative reform and where the interpretation of the statute was unambiguous.
In our view, the same reasoning could also apply to Article L. 242-10 of the French Commercial Code, which criminalises the same conduct in relation to a public limited company (société anonyme – SA). Inexplicably, the offence is more severely punished in that context: in addition to a €9,000 fine, the person responsible may face six months’ imprisonment, whereas the same custodial sentence was abolished for SARLs by the Law of 22 March 2012.
Although the Court of Cassation’s decision is to be welcomed, it nevertheless raises questions as to how the material element of the offence should be assessed. It is not easy to determine precisely when the offence may be deemed to have been committed, since the wording introduced by the Law of 22 March 2012 no longer prescribes a time limit and merely penalises the failure to “submit” the documents for approval by the shareholders’ meeting. What happens if the meeting at which the accounts are submitted takes place between the commencement of the prosecution and the lower court’s decision? A provision of this kind appears capable of creating legal uncertainty.
To our knowledge, no criminal court decision had previously applied the amended version of this provision. The public prosecutor and criminal courts therefore do not appear to have addressed the difficulty, raising questions as to whether there remains any justification for retaining such a criminal provision in the French Commercial Code.
The necessity and formal requirements for joining the company to proceedings in a shareholder derivative action (action sociale ut singuli)
Article L. 223-22 of the French Commercial Code, which establishes the principle of the action ut singuli in SARLs, provides in its third paragraph:
“Without prejudice to an action for compensation for loss suffered personally, shareholders may (…) bring a corporate liability action against the managers.”
Article R. 223-32 of the French Commercial Code further provides that, where a corporate action is brought ut singuli:
“the court may rule only if the company has been duly joined to the proceedings through its legal representatives. The court may appoint an ad hoc representative to represent the company in the proceedings where there is a conflict of interest between the company and its legal representatives.”
In the present case, the SARL that was the victim of the alleged acts had joined the criminal proceedings as a civil party, having been informed of the proceedings in particular through the summons issued by a judicial police officer to its manager for the purpose of prosecuting him. The company had therefore been able to file, and serve on the defence, civil-party submissions in connection with the corporate action brought ut singuli by one of its shareholders.
Having convicted the defendant of failure to submit the company accounts to the general meeting and misuse of corporate assets, the lower courts held that the SARL’s civil-party claim was admissible and ruled on the civil claims, ordering the defendant, in particular, to pay the company €110,496 in compensation for its financial loss.
The Court of Cassation overturned the decision on this point on the ground that the victim SARL had not been validly joined to the proceedings, since such joinder could not be effected through the manager who was himself the defendant.
The Court reiterated that the victim company must be joined to the proceedings through one of its legal representatives where a corporate action is brought ut singuli, and that neither a summons issued by a judicial police officer to the incumbent manager in his capacity as defendant nor the service of submissions on behalf of the company is equivalent to such formal joinder.
Although this solution is not new in principle (see, for example, Com., 9 November 2022, No. 20-19.077, D. 2022, p. 1966; Rev. sociétés 2023, p. 223, note B. Lecourt; RTD com. 2023, p. 160, observations A. Lecourt), it provides additional practical clarification. It will naturally extend to other commercial companies governed by similar provisions (for public limited companies, see French Commercial Code, Art. R. 225-170). Legal practitioners will therefore need to pay particular attention to these formal requirements when bringing shareholder derivative actions (actions sociales ut singuli).
By Ghislain de Foucher and Chloé Méléard, Members of the Paris Bar