The bylaws set the conditions for dismissal of a SAS director

The Commercial Chamber of the French Supreme Court (Cour de cassation) clarifies the rules governing the organization and management of a simplified joint-stock company (société par actions simplifiée). In this case, it addresses the question of the terms and conditions governing the dismissal of an SAS director. In this decision, the Supreme Court recalls that the bylaws set the conditions under which the company is managed. Extra-statutory acts may supplement them, but not derogate from them.

The Articles of Association set out the conditions under which the SAS is managed.

In this recent case, the managing director of a SAS, who had been appointed by decision of its sole shareholder, was dismissed by the latter a few years later. Taking the view that he had been dismissed without just cause, the director sued for compensation.

To understand the issue addressed by this ruling of October 12, 2022, we need to point out that two deeds dealing with the indemnification of the CEO in the event of dismissal contradicted each other. On the one hand, the company's bylaws stated that the CEO could be dismissed ad nutum and that the termination of his duties would not entitle him to any compensation. On the other hand, the decision of the sole shareholder appointing the CEO stipulated that the terms of his remuneration and his collaboration with the company would be those set out in the letter of dismissal. However, the latter specifies that, in the event of dismissal, the Managing Director will be entitled to a lump-sum payment equal to 6 months' gross fixed remuneration.

Faced with the sole shareholder's refusal to honor his commitment, the CEO sued him for payment. However, the French Supreme Court (Cour de cassation) did not rule in his favor, considering that the SAS bylaws set the conditions under which the company is managed, in accordance with articles L 227-1 and L 227-5 of the French Commercial Code.

Extra-statutory deeds can supplement the articles of association

Extra-statutory agreements may supplement the bylaws, but they may not derogate from them. In this ruling, the French Supreme Court reaffirms the pre-eminence of the bylaws in determining the conditions under which an SAS director may be removed from office. The scope of this ruling goes beyond the question of the terms and conditions governing the management of an SAS, and covers all commitments made by the partners concerning the operation of the company, in particular those set out in a partners' agreement.

As a result, the Cour de cassation dismissed the appeal lodged by the managing director of an SAS and ordered him to pay his partner the sum of 3,000 euros. It is therefore important to be vigilant as to the coherence between statutory and extra-statutory acts.

In another case decided on May 25, 2022, the high magistrates had occasion to point out that the Managing Director may have the power to represent the company, provided that the bylaws expressly stipulate this.