In Cass. com., June 17, 2026, No. 25-13.855, the French Cour de cassation held that the manager of a SARL owes a duty of loyalty and fidelity that, as a matter of principle, prohibits the manager from creating a competing company while still in office.
The company does not have to wait for evidence of customer diversion, misuse of confidential information, or another act of unfair competition.
The creation of the competing company itself can be enough.
For U.S. founders, the broader lesson is particularly relevant: holding several founder or board roles in France can create duties that do not depend solely on an express non-compete clause.
The analysis is more nuanced for a French SAS or SASU. French courts already recognize a duty of loyalty for SAS executives, but the June 2026 ruling states the categorical competing-company rule specifically for SARL managers.
By contrast, a person who is merely a shareholder of a SAS, without serving as an executive, is generally free to compete unless a contract or the bylaws provide otherwise, subject to ordinary unfair-competition rules.
The Case: Starting the Next Venture Before Leaving the Current One
The facts are familiar to serial founders.
A manager was still serving as the legal manager of a French SARL active in real estate.
On September 25, 2018, he formed two new companies.
One of them operated in a competing real-estate business.
He resigned from his management position on October 31, 2018, just over a month later.
The original company argued that the manager had breached his duty of loyalty.
The Rennes Court of Appeal disagreed.
It reasoned that merely forming competing companies was not enough, because no specific act of unfair competition had been established.
The French Supreme Court rejected that approach.
The Rule: The Company Does Not Have to Wait for Unfair Competition
The Cour de cassation relied on Article L. 223-22 of the French Commercial Code.
That provision governs the civil liability of SARL managers for management faults.
The Court drew a very clear rule from it:
The duty of loyalty and fidelity owed by a SARL manager prohibits, as a matter of principle and independently of any act of unfair competition, the creation of a competing company while the management mandate is still in force.
This changes the timing of the risk.
The company does not have to wait for:
- a diverted customer;
- a stolen opportunity;
- misuse of confidential information;
- or proven commercial damage.
The competing company can itself become the problem if it is formed before the manager’s mandate ends.
Why This Matters for Serial Founders
The decision is highly relevant to modern startup governance.
Founders commonly:
- sit on multiple boards;
- launch side ventures;
- advise other companies;
- invest in adjacent businesses;
- or begin building their next company while still holding an executive role in the previous one.
A common assumption is:
“If my bylaws or shareholders’ agreement contain no express non-compete clause, I remain free to start another business.”
The June 2026 decision shows why that assumption is dangerous for the manager of a SARL.
The duty arises from the management office itself.
It is not simply the product of a negotiated non-compete covenant.
What About the President of a French SAS or SASU?
The answer requires more nuance.
A French SAS is a flexible corporate form frequently used by startups and venture-backed companies. A SASU is simply a SAS with one shareholder.
Under Article L. 227-8 of the French Commercial Code, the liability rules applicable to directors and executive officers of French public limited companies are extended to the president and other executives of a SAS. Article L. 225-251 of the French Commercial Code is part of that liability framework.
French case law has already recognized a duty of loyalty for SAS executives.
In Cass. com., December 18, 2012, No. 11-24.305, the Cour de cassation upheld liability involving a SAS executive who secretly pursued for his own benefit a real-estate opportunity that the other shareholders intended to acquire together.
In Cass. com., May 22, 2019, No. 17-13.565, the Court again expressly reasoned in terms of directors’ duties of loyalty in a SAS environment.
There is therefore a strong legal basis for treating loyalty as a real obligation of SAS executives.
However, one distinction should be preserved.
Cass. com., June 17, 2026, No. 25-13.855 expressly formulates the prohibition on creating a competing company for the manager of a SARL.
It would be too categorical to say that French courts have already stated the exact same rule, word for word, for every SAS or SASU president.
For founders, the practical conclusion is caution, not equivalence.
Executive vs. Shareholder: The Difference Matters
French law distinguishes between holding equity and holding management power.
A shareholder who has no executive role does not automatically owe the same duties as a company director.
In Cass. com., September 10, 2013, No. 12-23.888, the Cour de cassation held that, unless otherwise agreed, a shareholder of a SAS is not required merely because of shareholder status to refrain from conducting a competing business.
The shareholder must, however, avoid acts of unfair competition.
That creates a useful practical distinction:
For serial founders, titles and roles therefore matter as much as ownership percentages.
Can the Bylaws or Shareholders’ Agreement Solve the Problem?
They can help significantly.
Governance documents can identify:
- pre-existing outside activities;
- permitted investments;
- excluded sectors;
- disclosure duties;
- conflict-of-interest procedures;
- board or shareholder approval mechanisms;
- recusal obligations;
- and consequences of unauthorized competitive activity.
These provisions should not be treated as a guaranteed way to contract out of every mandatory duty of loyalty.
Their real value is to make conflicts visible and manageable before a dispute arises.
For founders with several ventures, that is often more valuable than a broad generic non-compete clause.
Should a Multi-Project Founder Prefer a SAS Over a SARL?
The answer is not simply “yes.”
A SAS offers significantly more flexibility in structuring internal governance and is often better suited to venture-backed or multi-founder businesses.
But its president remains a corporate executive.
Corporate-form flexibility does not eliminate executive duties.
The better questions are:
- Which founders actually need executive authority?
- Which individuals can remain shareholders or advisors instead?
- Which outside activities must be disclosed?
- Which competing projects should require prior approval?
- When should an executive resign before launching a directly competing business?
For serial founders, corporate form is only one component of the architecture.
Can the manager of a French SARL create a competing company while still in office?
As a matter of principle, no. The June 17, 2026 ruling expressly prohibits it under the manager’s duty of loyalty and fidelity.
Must the company prove customer diversion?
No. The Cour de cassation expressly stated that the rule applies independently of any act of unfair competition.
Does an express non-compete clause have to exist?
No. The SARL manager’s duty recognized by the Court arises from the management office itself.
Does the same rule automatically apply to a SAS president?
A duty of loyalty clearly applies to SAS executives, but the June 2026 ruling states the specific competing-company prohibition for SARL managers. Exact transposition should therefore be treated with caution.
Can a non-executive SAS shareholder compete with the company?
Generally yes, unless the governing documents provide otherwise. The shareholder must still avoid acts of unfair competition.
What should serial founders put in their governance documents?
They should identify permitted outside activities, conflict procedures, disclosure duties, approval mechanisms, and the treatment of future competing ventures.
Conclusion
The June 17, 2026 decision turns what may look like a simple competition issue into a corporate-governance issue.
For a SARL manager, the boundary arises early: forming a competing company during the mandate can itself constitute a breach before any customer has been diverted.
For serial founders, choosing between a SARL and SAS is therefore not enough.
The real task is to align executive office, outside ventures, conflicts of interest, disclosure procedures, and exit timing.
That work is easiest to do when the company is formed, not after the second venture has already become a dispute.