CORPORATE LAW
Removal of a company manager in summary proceedings: the Cour de cassation restates the limits of the summary judge’s powers
Cour de cassation, Third Civil Chamber, 7 May 2026, no. 24-12.164, published in the Bulletin
Two partners set up a property management company (SCI) with equal shareholdings, one of them being appointed as manager. A few years later, the non‑managing partner complains of serious breaches: failure to communicate accounting documents, failure to hold annual general meetings, and irregularities in the management of current accounts between related companies.
In view of this situation, he brings the matter before the summary judge and makes three applications: judicial removal of the manager, appointment of a provisional administrator with the task of convening a general meeting, and appointment of an ad hoc representative to substitute for the removed manager at that meeting.
The Aix‑en‑Provence Court of Appeal dismisses the applications for the appointment of a provisional administrator and an ad hoc representative on the ground that no sufficiently characterized imminent harm had been established, and also rejects the claim for judicial removal of the manager.
The unsuccessful partner lodges an appeal on points of law, challenging in particular the rejection of the claim for removal of the manager and for appointment of a provisional administrator, arguing that the Court of Appeal had added a condition not provided for by law by requiring a total impossibility for the company to operate.
The question put to the Cour de cassation was therefore the following: Does the summary judge have jurisdiction to rule on an application for judicial removal of a manager of a company, in this case a civil company, and under what conditions may he appoint a provisional administrator?
The Third Civil Chamber partially quashes the judgment without remittal, on the basis of Articles 1851 paragraph 2 of the Civil Code and 484, 834 and 835 paragraph 1 of the Code of Civil Procedure.
➡️ Jurisdiction of the summary judge to rule on judicial removal
The Court reiterates a fundamental principle: judicial removal of a manager of a civil company for legitimate cause falls within the scope of the merits of the case, which only the trial judge, ruling on the substance, has jurisdiction to hear.
In other words, even if the manager’s misconduct is flagrant and undisputed, the summary judge has no power to order his removal.
By ruling on this point, the Court of Appeal exceeded its powers. The Cour de cassation therefore partially quashes the decision and holds that there is no ground for summary proceedings on this head of claim.
➡️ Conditions for appointing a provisional administrator
By contrast, the Court upholds the reasoning of the Court of Appeal on this point. The summary judge may appoint a provisional administrator, but only where two cumulative conditions are met:
- circumstances making it impossible for the company to operate normally; and
- a threat of imminent harm to the company.
In this case, the evidence produced was considered insufficient to establish the existence of such imminent harm, even though several management irregularities had been identified.
💡 What lessons can be drawn from this decision?
This judgment, published in the Bulletin, usefully restates the boundary between applications that may be brought before the summary judge and those that must be brought before the trial judge on the merits in connection with corporate governance crises.
Judicial removal of a manager is a serious measure with final effects, which may only be ordered by the trial judge seized of the merits on the basis of Article 1851 of the Civil Code.
The summary judge, whose powers are confined to urgent and interim measures, lacks jurisdiction to order such removal, even where the misconduct alleged against the manager is established.
However, in the event of a serious crisis, summary proceedings remain useful: appointment of a provisional administrator is still possible, but requires proof not only of dysfunctions in the company’s operation, but also of imminent harm threatening the company’s interests. Serious accounting or statutory irregularities, taken alone, are not sufficient to characterize such imminent harm.
In practice, minority partners in a civil company faced with wrongful conduct by the manager will therefore need to pursue two separate courses of action: proceedings on the merits to obtain judicial removal, and, where appropriate, summary proceedings to seek appointment of a provisional administrator if the situation so warrants, taking care to demonstrate precisely the existence of imminent harm threatening the company itself.
CORPORATE LAW
Share capital increase and abuse of majority: the dilutive effect alone is not sufficient to constitute fault
Cour de cassation, Commercial Chamber, 6 May 2026, no. 25-11.498
In a family‑owned private limited company (SARL), the majority managing partner carries out two successive share capital increases, to which only he subscribes, without the minority partner being duly convened to the related extraordinary general meetings. Following these transactions, the minority partner’s shareholding falls from 49.75% to 9.95% of the share capital.
Feeling that she has been expropriated, the minority partner brings an action in liability against the majority managing partner, alleging abuse of majority. She is successful before the Montpellier Court of Appeal, which orders the majority manager to pay her the sum of EUR 52,679, corresponding to the share premiums that he should have paid when the capital was increased.
The majority managing partner lodges an appeal on points of law, raising two pleas: limitation of the claim for damages on the one hand, and lack of characterization of an abuse of majority on the other.
The questions put to the Cour de cassation were therefore twofold: From what date does the limitation period start to run for an action in liability for abuse of majority where the minority partner was not duly convened to the disputed meetings? And is the dilutive effect of a capital increase sufficient in itself to constitute an abuse of majority?
The Commercial Chamber partially quashes the judgment on the basis of Article 1240 of the Civil Code.
➡️ Limitation: starting point postponed to the date on which the loss is revealed
The Supreme Court dismisses the plea based on limitation. It reiterates that a tort action for compensation for abuse of majority is subject to a five‑year limitation period, but that this period runs from the day on which the aggrieved partner became aware of the facts enabling him or her to bring proceedings.
In this case, the minority partner had not been duly convened to the disputed meetings. It was only when the court‑appointed expert’s report was filed that she was able to become aware of the existence and extent of the deprivation she had suffered. The action brought a few months later was therefore not time‑barred.
Key takeaway: where a minority partner has not been duly convened to the meetings at which the abuse is alleged to have occurred, the limitation period does not begin to run until the moment when he or she has actually been able to become aware of the relevant facts – and not from the date of the disputed resolutions themselves.
➡️ Abuse of majority: dilution alone is not sufficient
By contrast, the Supreme Court quashes the judgment on this point. It reiterates the classic definition of abuse of majority: a resolution adopted in a manner contrary to the company’s interests and with the sole intention of favoring the majority partners to the detriment of the minority. These two conditions are cumulative.
However, the Court of Appeal had merely noted the dilutive effect of the capital increases and inferred from this a breach of equality between partners contrary to the company’s interests.
This reasoning is insufficient, since the Court of Appeal had not examined whether the capital increases were or were not consistent with the company’s interests. The manager had put forward serious justifications: the first capital increase had been authorized by the court in order to bring the company into compliance with the statutory minimum capital requirements, and the second was intended to restore shareholders’ equity after operating losses. The Cour de cassation overturns this reasoning and remits the case to the Nîmes Court of Appeal.
💡 What lessons can be drawn from this decision?
This judgment reiterates two essential rules in the context of disputes between partners.
First, as regards limitation: where a minority partner has not been duly convened to the meetings at which the alleged abuse was committed, the limitation period does not begin to run until the moment when he or she has actually been able to become aware of the facts. An irregularity in the convening process may therefore considerably postpone the starting point of the limitation period and thus keep open an action which the majority partner believed to be time‑barred.
Second, on the merits: abuse of majority is not presumed. A capital increase, even one that massively dilutes the minority partner’s shareholding, is not necessarily abusive where it serves a legitimate corporate interest (compliance with statutory requirements, restoration of shareholders’ equity, financing the company’s development, etc.).
The mere fact that the minority partner’s stake is diluted is not sufficient: the minority partner will have to show not only that the resolution was detrimental to him or her, but also that it was contrary to the company’s interests and motivated solely by the intention to cause him or her harm.
In practice, when a capital increase is contemplated, several precautions are advisable: duly convene all partners, carefully document the economic or legal reasons justifying the transaction, and, where possible, provide for pre‑emptive subscription rights enabling each partner to maintain his or her shareholding. Otherwise, the risk of subsequent challenge remains significant, even though the burden of proving the abuse lies with the claimant.
CORPORATE LAW
Managing director of a SARL and conflicts of interest: the Cour de cassation clarifies the conditions for incurring liability
Cour de cassation, Commercial Chamber, 6 May 2026, no. 24-22.639
A company specializing in IT vocational training subcontracts part of its activities to a third‑party company, whose manager is also a partner in the first company. The two entities then join forces to set up a joint subsidiary, owned 51% by the parent company, 48.9% by the subcontracting company and 0.1% by the latter’s manager, who is appointed as manager of the newly formed subsidiary.
The subsidiary never manages to obtain the accreditation required to award the State diploma for which it was created, because no partnership agreement is signed with the parent company. It is eventually wound up early.
In the meantime, the manager has caused the subsidiary to pay significant sums to the third‑party company he also manages, in respect of management and training services, without any written agreements being entered into or submitted for approval by the partners and in breach of the financial commitment ceiling laid down in his extra‑statutory letter of appointment.
The parent company brings proceedings against the manager, seeking compensation for various heads of loss (mismanagement, damage to its image and reputation, and breach of the duty of information and transparency), relying on the fact that he exceeded the expenditure ceiling laid down in that letter of appointment.
The Grenoble Court of Appeal dismisses most of these claims. It considers that the limitations on the manager’s powers set out in the letter of appointment take effect only between partners and cannot amount to mismanagement. The parent company and the liquidator of the subsidiary lodge principal and incidental appeals on points of law.
The questions put to the Cour de cassation were therefore multiple: does breach by the manager of the statutory limitations on his powers constitute mismanagement giving rise to liability towards the company? Can agreements entered into without approval between a company and an entity managed by its own manager be characterized as ordinary transactions concluded under normal conditions where there is no evidence of the services provided? Does res judicata bar a new claim for damages where the capacity in which the defendant is sued has changed? 6
The Commercial Chamber partially quashes the judgment on the basis of Articles 1355 of the Civil Code, L. 223‑19, L. 223‑20 and L. 223‑22 of the Commercial Code and 455 of the Code of Civil Procedure. It reiterates that breach by the manager of the statutory limitations on his powers constitutes mismanagement: such clauses are not mere “internal rules” without effect; they genuinely structure the scope of the manager’s powers and their breach may found an action in liability.
➡️ Res judicata: the defendant’s capacity as a decisive criterion
The Supreme Court overturns the Court of Appeal’s finding that the claim for damages for harm to the parent company’s image and reputation was inadmissible on the ground that it was barred by the authority of an earlier decision.
The Court reiterates that res judicata requires identity of parties acting in the same capacity, and identity of subject‑matter and cause of action. However, the Court of Appeal had failed to ascertain whether the manager was being sued in a different capacity, namely as manager rather than as partner, and whether the cause of action was different, i.e. the misleading of students enrolled in a non‑degree‑granting course rather than disparagement of the company to third parties. This lack of legal basis justifies quashing on this point.
➡️ Statutory limitations on the manager’s powers: a breach constituting mismanagement
The Cour de cassation also censures the reasoning of the appellate court, which had ruled out any mismanagement on the ground that the limitations on the manager’s powers set out in the letter of appointment operated only between partners and could not amount to mismanagement.
The Supreme Court clearly reiterates that breach by the manager of the statutory provisions limiting his powers in relations between partners constitutes mismanagement giving rise to liability towards the company within the meaning of Article L. 223‑22 of the Commercial Code.
In other words, these clauses are not mere “internal rules” without effect: they genuinely structure the scope of the manager’s powers and their breach may found an action in liability.
➡️ Unauthorised related‑party transactions: apparent usefulness of the services is not sufficient to exclude loss
The Supreme Court also quashes the judgment on the issue of related‑party transactions. The Court of Appeal had rejected the claims for damages on the basis of the usefulness of the services and the existence of a long‑standing business relationship between the companies.
The Cour de cassation reiterates that these circumstances are insufficient to rule out the existence of prejudicial consequences for the subsidiary, since the latter did not hold the administrative approval required to provide the relevant training and the question was to assess the agreements from the point of view of the contracting company, not that of its counterparty.
What matters is not merely the apparent usefulness of the services or the history of the relationship between the companies, but the company’s own interest at the time of the transaction.
➡️ The manager’s duty to inform: obligation to reply to written questions from partners
Lastly, the Supreme Court finds fault with the appellate court’s failure to give reasons on the alleged breach of the duty to inform. The Court of Appeal had merely noted that the majority partner already had access to the company’s documents, which it considered sufficient.
The Cour de cassation reiterates a stricter requirement: the manager must reply to written questions put by partners, in particular prior to general meetings. Mere access to accounting documents is not sufficient to release him from this obligation.
💡 What lessons can be drawn from this decision?
This judgment provides a useful reminder of the obligations incumbent on the manager of a SARL where conflicts of interest arise.
First, statutory limitations on the manager’s powers, as set out in letters of appointment to which the articles refer, are not mere internal formalities. Breach of these limitations engages the manager’s liability towards the company. It is therefore for the partners to draft letters of appointment with care where the articles refer to such documents to limit the manager’s powers.
Second, the characterization of an ordinary transaction concluded under normal conditions must be assessed from the point of view of the company bearing the financial burden, not from that of the counterparty.
A prior business relationship between the entities is not sufficient to establish that such conditions are met where the services invoiced are not substantiated as to their content and where the company was not actually in a position to benefit from them.
