The facts of this case are straightforward, and that is precisely what makes it dangerous.
🔎 Commercial Chamber of the French Supreme Court (Cour de cassation), 5 November 2025 (No. 24-18.359)
🔹 The facts, as strictly established by the decision
1️ A sole shareholder creates an EURL (single-member limited liability company) and acts as its managing director.
2️ His partner is appointed co-managing director and subsequently enters into an employment contract with the company.
3️ Following the death of the sole shareholder, his daughter becomes the sole shareholder and is appointed co-managing director.
4️ The partner is then removed from her position as co-managing director and dismissed.
5️ A subsequent decision rules that the employment contract was fictitious.
6️ The company then brings an action against the former co-managing director for management fault, alleging that she irregularly granted herself remuneration in her capacity as managing director.
👉 The Court makes no reference to illness or incapacity of the sole shareholder.
👉 The issue is purely legal, not circumstantial.
🔹 The legal issue before the Supreme Court
Can a managing director be exempt from liability for a management fault on the grounds that:
- she effectively performed her duties,
- the remuneration corresponded to actual work,
- and the company did not suffer any “economically unjustified” loss?
👉 The answer is no.
🔹 The ruling: formal compliance as a condition of legality
The Supreme Court quashes the appellate decision and reiterates a fundamental rule derived from Article L. 223-18 of the French Commercial Code:
➡️ The remuneration of an EURL managing director must be set either by the articles of association or by a formal decision of the sole shareholder.
In the absence of such a decision:
- the remuneration is legally undue,
- the payment constitutes a management fault,
- regardless of the usefulness of the work performed or the absence of fraudulent intent.
🔹 The damage: a strictly objective approach
The Court adopts a classical but rigorous analysis:
🔸 the payment of unauthorized remuneration results in a financial loss to the company,
🔸 that loss exists in itself,
🔸 without any need to demonstrate that hiring a third party would have been less costly.
👉 Formal irregularity alone is sufficient.
🎯 Key takeaway plainly stated
✅ In an EURL, a managing director’s remuneration is a legal act, not an automatic consequence of work performed.
✅ The absence of a duly formalized decision exposes the managing director to personal liability for management fault.
✅ Good faith, actual involvement, or apparent benefit to the company are legally irrelevant.
🧭 Conclusion
This decision underscores a truth that is too often underestimated:
Corporate law does not sanction inaction it sanctions irregularity.
For business leaders, risk does not always arise from manifest abuse, but from ordinary acts that are insufficiently structured from a legal standpoint.
It is precisely in these everyday grey areas that the role of in-house or external legal counsel becomes strategic: securing decisions, formalizing acts, anticipating sensitive situations.
Not to complicate management, but to prevent a routine situation from becoming a legally established management fault.
