The Criminal Chamber of the Court of Cassation, in a ruling dated 12 February 2025 (appeal no. 23-86.857), ruled on the question of the criminal offence of not submitting accounting documents to the shareholders’ meeting and then on the shareholder action brought by a shareholder for the damage suffered by the company.
The obligation to publish accounts and the penalty for the manager
The manager of a limited liability company (SARL) is required, under Article L. 241-5 of the Commercial Code, to submit the annual accounts, the inventory and the management report for the approval of the shareholders’ meeting.
Article L241-5 of the Commercial Code: ‘Managers who fail to submit the inventory, annual accounts and management report drawn up for each financial year to the approval of the meeting of partners or sole partner shall be liable to a fine of €9,000.’
In this court case, Mr K., the manager of the company, was prosecuted for failing to comply with this obligation over several financial years (2013-2016). Although a general meeting had been convened in 2017, the accounts for previous years were only subsequently approved by a court-appointed agent, after the company had been put into liquidation.
However, the Court of Cassation points out that the delay in submitting the company accounts does not in itself constitute a criminal offence. Only the total failure to submit the accounting documents can be sanctioned.
In this case, the documents had admittedly been submitted late, but they had finally been presented to the partners. This regularisation, albeit late, therefore prevented the manager from being criminally convicted on the basis of Article L241-5 of the Commercial Code.
‘ Firstly, since the entry into force of the law of 22 March 2012, which amended Article L. 241-5 of the Commercial Code, the failure to hold the meeting of the partners’ assembly within six months of the end of the financial year or, in the event of an extension, within the period set by court decision, is no longer a punishable offence.
It follows that the mere delay in submitting the accounting documents to the meeting of the partners or the sole partner of a limited liability company does not constitute a criminal offence.
Secondly, the court of appeal contradicted itself by stating that it has been established that the defendant convened a general meeting which was held on 26 May 2017 in order to approve the annual accounts as at 31 December 2016, while noting that the submission for approval of the 2013 to 2016 corporate accounts was finally made at the initiative of the court-appointed administrator designated by the Basse-Terre commercial court during the extraordinary general meeting held on 19 December 2017.’
The Court of Cassation therefore overturned the decision of the Court of Appeal that had convicted the manager on this basis.
The shareholder action : requirement to implicate the company in the proceeding correctly
At the same time, the decision also rules on the question of the admissibility of an shareholder action, i.e. an action in liability brought to obtain compensation for the damage suffered by the company due to the faults committed by its managers.
A partner or shareholder who holds more than one-tenth of the share capital may decide to claim damages on behalf of the Company against a manager of that company. This action allows a partner to procedurally claim compensation for the company’s loss even though he is not its legal representative.
This action also requires that the company be regularly implicated in the proceedings.
Article R223-32 of the Commercial Code
‘When the company action is brought by one or more partners, acting either individually or under the conditions provided for in Article R. 223-31, the court may rule only if the company has been duly sued through its legal representatives.
The court may appoint an ad hoc representative to represent the company in the proceedings where there is a conflict of interest between the company and its legal representatives.«
In the first instance, the company’s claim for damages had been accepted and the manager ordered to pay 110,496 euros in compensation for financial loss. This had also been validated by the Court of Appeal.
The Court of Cassation ruled that the company had not been validly implicated.
According to the Court, its implication resulted from the summons received by the manager and the submissions also received by the manager.
However, the manager and the company are two distinct entities. The company represented by the legal representative had to be summoned. Summoning the legal représentative does not constitute summoning the company that he represents.
In practice
This judgement provides several practical lessons for companies, their shareholders and their managers:
- The deadline for submitting accounts is an important obligation, but a delay is not enough to characterise a criminal offence since the 2012 reform.
- The partners have a course of action in the event of mismanagement and can take corporate action, but it is then necessary to be vigilant about the rules of representation of the company in this procedure.
- Given the risk of a conflict of interest in this type of dispute where a director is prosecuted, it is preferable to appoint an ad hoc representative to represent the company during the proceedings and thus enable independent management of the company.
By Olivier Vibert,
Lawyer at the Paris Bar association
Partner at KBESTAN, business law firm in Evreux and Paris.
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