Management of a simplified joint-stock company: extra-statutory acts may supplement but not derogate from the statutes
Court of Cassation, Commercial Chamber, 12 October 2022, n° 21-15.382
In a judgment of 12 October 2022, the Court of Cassation recalled, in the light of Articles L. 227-1 and L. 227-5 of the Commercial Code, that the articles of association of a simplified joint-stock company set the conditions under which the company is managed, in particular the terms and conditions for the dismissal of its managing director.
It also specifies that although extra-statutory acts may supplement these statutes, they may not derogate from them.
I. The provisions of the Commercial Code
Article L. 227-1 of the Commercial Code states that :
“A société par actions simplifiée may be set up by one or more persons who shall bear the losses only up to the amount of their contribution.
Where such a company has only one person, that person is referred to as a “sole member”. The sole member shall exercise the powers vested in the members where this Chapter provides for collective decision-making.
Insofar as they are compatible with the special provisions laid down by this chapter, the rules concerning sociétés anonymes, with the exception of Article L. 224-2, the second paragraph of Article L. 225-14, Articles L. 225-17 to L. 225-102-2, L. 225-103 to L. 225-126, L. 225-243, the first paragraph of Article L. 233-8 and the third paragraph of Article L. 236-6, shall be applicable to simplified joint stock companies. For the application of these rules, the powers of the board of directors or its chairman shall be exercised by the chairman of the société par actions simplifiée or by the officer or officers designated for that purpose in the articles. […] ”
Article L. 227-5 provides that:
“The articles of association shall determine the conditions under which the company shall be managed.”
II. While extra-statutory acts may supplement statutes, they may not derogate from them
1. The facts
In this case, a natural person is appointed managing director (MD) of a one-person SAS, by decision of its sole shareholder.
A few years later, the CEO was dismissed from his position.
The central issue in this case is the contradiction between two documents providing for the dismissal of the director.
On the one hand, the articles of association of the SASU stipulate that the CEO can be dismissed ad nutum and that ” the termination, for whatever reason and in whatever form, of the duties of the Chief Executive Officer shall not entitle the dismissed Chief Executive Officer to any compensation of any kind whatsoever “.
On the other hand, the decision of the sole shareholder appointing the CEO states that ” the terms of his remuneration and of his collaboration in general with the company will be those set out in a letter […] addressed to him “The letter stated that by: ” in the event of dismissal of [ses] as managing director of the company without just cause, [ce dernier] shall benefit[a] from a lump-sum compensation equal to six months of [sa] gross fixed remuneration “.
Claiming that his dismissal was without just cause, the CEO sued the company for compensation on the basis of the letter of appointment sent to him just before his appointment.
The Paris Court of Appeal confirmed the first instance judgment insofar as it dismissed the DG’s claim for compensation. To this end, it relies on the provisions of Article L. 227-5 of the Commercial Code, which stipulates that “only the articles of association of a simplified joint stock company may lay down the conditions under which the company is managed, including the terms of dismissal of its managing director”.
Thus, if the minutes of the decision of the sole shareholder refer to the letter of engagement with regard to “the terms of his remuneration and his collaboration in general with the company”, this reference cannot be analysed as an amendment of the articles.
Consequently, the article of the statutes in force at the time of the appointment of the CEO, which was not subsequently amended, should be applied. the general manager may be dismissed at any time and without any reason being necessary, by decision of the general meeting of shareholders or of the sole member. The termination, for whatever reason and in whatever form, of the duties of the Chief Executive Officer shall not entitle the dismissed Chief Executive Officer to any compensation of any kind whatsoever “.
Consequently, the employment letter, which provides for a lump-sum compensation equal to six months’ gross fixed remuneration in the event of dismissal for just cause, could not validly derogate from this “clear statutory provision”.
As a result, the CEO could be dismissed at any time without any reason being given.
The CEO, dismissed on appeal, appealed to the Court of Cassation on the grounds that the Court of Appeal had disregarded the extra-statutory undertaking given by the sole shareholder and violated the above-mentioned provisions.
The latter considered that the Court of Appeal had erred in law by considering that only the articles of association of a simplified joint stock company set out the terms and conditions for the dismissal of its managing director, thus preventing the sole shareholder from derogating from the provisions of the articles of association by means of a valid extra-statutory act.
2. The opinion of the Court of Cassation
According to the Court of Cassation, ” it follows from the combination of Articles L. 227-1 and L. 227-5 of the Commercial Code that the articles of association of a simplified joint stock company set the conditions under which the company is managed, in particular the terms of dismissal of its managing director. While extra-statutory acts may supplement these statutes, they may not derogate from them. ”
Consequently, it confirmed the reasoning developed by the Paris Court of Appeal and dismissed the DG’s appeal.
The Court of Cassation therefore affirms the competence of the articles of association in establishing the conditions of management of an SAS.
On this point, the solution is not new.
According to a recent judgment which we had the opportunity to comment on in the News by NMCG of March 2022The Court of Cassation considered that the conditions for the dismissal of the directors of an SAS fall within the competence of the articles of association, in the absence of the law, “. whether it be its causes or its modalities “.
As a result, unless otherwise provided for in the articles of association, the principle is the dismissal ad nutum, without just cause, of directors (Com. 9 March 2022, no. 19-25.795).
In this particular case, the Court of Cassation pushes its reasoning even further since, without excluding the use of extra-statutory rules for the organisation of the management of the SAS, it limits their content.
Indeed, it considers that while “extra-statutory acts may complement these statutes”, they cannot replace them.
This solution therefore applies if the clause in the articles of association and the clause in the extra-statutory deed have the same purpose and if these clauses contain contradictory solutions.
It is also important to note that the reasoning applied does not seem to require that the parties to the two acts in question are strictly identical. Combined with the term “extra-statutory”, this gives the solution a potentially very broad scope, probably including shareholders’ agreements.
By prohibiting an extra-statutory act from derogating from the clauses of the articles of association of an SAS that set the conditions under which the company is managed, the Court of Cassation also seems to consider that the only way open to the sole shareholder (or the partners) is by amending the articles of association, in compliance with the processes applicable to company law.