How to appoint and remove officers in a French subsidiary

In France, corporate officers have different titles depending on the company form. Their status differs from that of French employees meaning that French labour law does not apply to officers (it is merely the French Commercial Code and/or the Articles of Association of the concerned company).

Mandatory corporate officers of the three most common types of commercial companies are the following (from the most frequently incorporated to the least):

• a simplified limited liability company (société par actions simplifiée – “SAS”) must be represented by a President (président); if more corporate officers are needed, one or more General Directors (directeurs généraux) or other types of corporate officers can also be appointed (to be provided in the Articles of Association);
• a small limited liability company (société à responsabilité limitée – “SARL”) must be represented by a Managing Director (“MD”, gérant); co-MDs can also be appointed;
• a large limited liability company (société anonyme – “SA”) is represented by a General Director (directeur général), who can also be the Chairman of the Board of Directors. Up to five Deputy General Directors (directeurs généraux délégués) can also be appointed. A Board of Directors is also required, composed of 3 to 18 members (if the SA has a two-tier form, there is a Supervisory Board and an Executive Board, but this a very rare form so it will not be detailed in this Q&A).

Regardless of the company form, corporate officers must fulfil certain common requirements, of which the following:

• they must have legal capacity to act and not be prohibited by a court from managing a commercial company;
• they need not be a shareholder of the company, unless otherwise required by the Articles of Association;
• they are not required to be a French national or live in France (other than European Union nationals, those who wish to work and live in France must of course obtain a residence permit or a visa). Certain regulated sectors (e.g., banking, insurance, real estate, transport, telecom) will require additional conditions, such as specific diplomas, French language, etc;
• combining the mandate of a corporate officer with employee functions in the company is only possible subject to certain conditions (distinct technical functions, hierarchical subordination, distinct remuneration, etc). If the corporate officer also has an employment contract within the company, the situation needs to be double-checked from a legal point of view to ensure that the maintaining of both statuses is legally possible.

Other specificities vary depending on the company form, e.g.:

• appointment of a company as a corporate officer: this is possible in an SAS (unless specified otherwise in the Articles of Association) but prohibited in an SARL. Companies can be Board members in an SA, but the General Director must be an individual. If a company is appointed as a corporate officer, its own officers are subject to the same conditions and obligations and incur the same civil and criminal liability as if they were corporate officers in their own name, without prejudice to the joint and several liability of the company they manage;
• age limits of corporate officers: no statutory age limit exists in an SAS or in an SARL (but can be provided in the Articles of Association). Age limits are however mandatory in an SA: 65 years old for General Directors and 70 years old for Board members (Articles of Association can change these limits but not remove them);
• the Articles of Association can add additional prerequisites to appointments, such as requirements for a specific training or degree, or include restrictions regarding holding multiple corporate mandates (e.g., for an SA, there are certain restrictions in holding corporate mandates in several companies at the same time).

The appointment process of corporate officers depends on the company form:

• SAS: the process for appointing the President (and any General Directors) is freely determined in the Articles of Association (usually by a shareholders’ decision);
• SARL: the Managing Directors are appointed by a shareholders’ decision;
• SA: the Board members are appointed by a shareholders’ decision; the General Director is appointed by the Board of Directors that can appoint one of its members or a non-Board member; any Deputy General Directors are appointed by the Board on proposal of the General Director.

The appointment decision fixes the conditions in which the corporate officers will carry out their functions (i.e., term of office, remuneration, restrictions of powers), in accordance with the applicable legal provisions and those set out in the Articles of Association.

As indicated previously, if the corporate officer is an individual who already has an employment contract with the company, the possible combination of both needs to be legally double-checked to avoid having the French unemployment authorities consider the employment contract as suspended.

Formalities to update the Corporate Extract must be carried out with the Clerk of the local Commercial Court so that an appointment is enforceable against third parties (NB: the personal information regarding a corporate officer - DOB, POB, home address - is therefore made public).

No legal provision limits the right of corporate officers to resign from their duties at any time.

However, the Articles of Association may set out conditions for their resignation, insofar as they do not deprive corporate officers of their actual right to resign. The Articles of Association generally require that the resignation be given in writing, by recorded delivery, with a specific notice period, or require that the departing corporate officer organise her/his/its replacement in order to ensure the continuity of the management of the company. Corporate officers who do not comply with these conditions may be held liable by the company for any damages.

In addition, resignation can be deemed wrongful if given in an untimely manner or with the intention to cause harm to the company. In such cases, the corporate officer may be found liable towards the company and sentenced to pay damages if the wrongful resignation is acknowledged by a court.

The resignation of an officer must be acknowledged by the person or body in charge of the appointment. Corporate officers may remain liable until they are fully discharged for the performance of their duties.

Formalities to update the Corporate Extract must be carried out with the Clerk of the local Commercial Court so that the resignation is enforceable against third parties.

Corporate officers can be freely removed from their office (see limits in the section hereafter) by decision of the person or body in charge of their appointment:

• SAS: the President (and any General Directors) is removed by the person or body in charge of the appointment (as per the Articles of Association);
• SARL: the Managing Directors are removed by the shareholders
• SA: the Board members are removed by the shareholders, the General Director (and Deputy General Directors, if any) is removed by the Board of Directors.

The specific process of the removal (required quorum and majority, participation of the corporate officer to the vote, form of notice, timing, etc) must comply with the provisions of the law and the Articles of Association, and depends on the company form:

• SAS: the removal process is entirely determined by the Articles of Association:
• SARL: the removal requires a decision of the shareholders representing more than half of the shares, unless the Articles of Association provide for a higher majority (a Managing Director is allowed to vote if also a shareholder);
• SA: the removal of Board members requires a decision of the shareholders representing more than half of the shares; the removal of the General Director requires a decision of the majority of the Board Members. The Board member, if also a shareholder, or the General Director, if also a Board member, cannot take part to the vote.

Formalities to update the Corporate Extract must be carried out with the Clerk of the local Commercial Court so that the removal is enforceable against third parties.

If the corporate officer also has an employment contract (suspended or not during the corporate mandate), the above removal process as corporate officer does not preclude the company from also having to deal with the individual’s situation as an employee.

The principle of freedom of removal has two limits: removal without “just cause” and wrongful removal.

The requirement for “just cause” for removal depends on the company form:

• the President (and General Directors) of an SAS can be removed without “just cause” (unless the Articles of Association provide otherwise);
• the law provides that removing without “just cause Managing Directors of an SARL and General Directors (or Deputy General Directors) of an SA” may give rise to damages. However, current case law considers that the Articles of Association of these companies can provide otherwise and specify that removal without “just cause” may under no circumstances give the corporate officer the right to claim damages from the company;
• in an SA, Board members, the Chairman of the Board, or the General Director if also the Chairman of the Board, may be removed at any time and under any circumstances (“ad nutum”) by the shareholders, since no “just cause” is required.

“Just cause” for removal may result from misconduct committed by the corporate officer or from the consequences of a corporate officer’s behaviour compromising the company’s interests or its day-to-day running (e.g., ruinous management, failure to finalise and submit annual accounts to the shareholders’ approval, unlawful dividend distribution, etc).

Whatever the company form, corporate officers who are removed in wrongful circumstances may also claim damages. Circumstances are deemed wrongful where the removal is detrimental to the reputation or honour of the corporate officer or when it is decided brutally, without respecting the obligation of loyalty towards the corporate officer and without giving the person the possibility to challenge the removal (e.g., calling in a bailiff and the police to remove a corporate officer from the workplace in front of employees, filing the full text of the minutes mentioning the reasons of the removal of the officer with the Clerk of the Commercial Court, etc).