Corporate law 

Disputes relating to a commercial company: the director does not have the choice of jurisdiction

As a rule, the commercial courts have exclusive jurisdiction to hear disputes relating to commercial companies. By way of exception, non-commercial parties who are not members of the company's governing bodies may choose to bring their disputes before the consular or civil courts. When a dispute arises between the director or another corporate officer or partner of a commercial company and that company or another of its partners or corporate officers and concerns a dispute relating to that commercial company, it therefore falls within the exclusive jurisdiction of the commercial court.

The conditions for taking over an act performed in the name of or on behalf of a company under formation: a major change in case law

Under articles L. 210-6 and R. 210-6 of the French Commercial Code, commercial companies acquire legal personality from the date of their registration in the Trade and Companies Register. Persons who have acted in the name of or on behalf of a company under formation before it has acquired legal personality are jointly and severally liable for all acts performed, unless the company, after having been duly formed and registered, takes over the obligations entered into, which are then considered to have been undertaken by the company from the outset. In the case of an act in which it is not expressly stated that it has been entered into in the name of or on behalf of the company being formed, it is for the judge to assess, in a sovereign manner, by examining all the circumstances, both intrinsic to the act and extrinsic, whether it was not the common intention of the parties that it should be entered into in the name of or on behalf of the company and that the company could then, after acquiring legal personality, decide to take over the commitments entered into

Liability of the manager of a limited liability company (“société à responsabilité limitée, SARL”) and cancellation of his current account: limitation period

Liability claims against a former SARL manager and shareholder are subject to a three-year limitation period. A claim for damages brought against the manager for the cancellation of a current account agreement is subject to the same limitation period, and not to the five-year limitation period under ordinary law.

A creditor of a dissolved civil company (“société civile”) must take action against the company before taking legal action against a partner

A creditor of a civil company may only take action against the partners to recover a company debt after having unsuccessfully taken legal action against the company, even if the company is being voluntarily liquidated.

Statutory auditors (“commissaires aux comptes”) cannot be relieved of their duties without serious misconduct or a serious impediment

The removal of a statutory auditor requires proof of sufficiently serious misconduct. In addition, the mere fact that the entity within which the auditor carries out his duties brings an action for liability against the auditor does not constitute an impediment justifying his removal. 

IP/IT and Communication 

Non-pecuniary damage resulting from a material error in the communication of personal data

In a ruling handed down on 25 January 2024, the Court of Justice of the European Union confirmed that in the event of a personal data breach, the data subject may seek compensation for his or her loss under the conditions of ordinary liability law. A purely hypothetical risk of misuse by an unauthorised third party cannot, however, give rise to compensation.This is not the first time that the Court of Justice of the European Union has shed light on the interpretation of Article 82 of the General Data Protection Regulation, under which any person who has suffered material or non-material damage because of unlawful data processing has the right to obtain compensation for the damage caused by the data controller.

Electronic prescribing: conditions for implementation and entry into force

French decree no. 2023-1222 of 20 December 2023 formalises the entry into force of electronic prescribing by specifying the conditions for its implementation by healthcare professionals, the exercise of patients' rights and the cases in which, by way of derogation, electronic prescribing may not be applied.

Employment law

 It is up to the employer to prove the provision of business premises in order to avoid paying compensation to the employee

According to the Social Law Chamber of the French Supreme Court (“chambre sociale de la Cour de Cassation”), the burden of proving the provision of business premises to determine whether to award compensation for home occupation for business purposes lies with the employer and not the employee.

Untaken leave according to European law

The Court of Justice of the European Union has ruled on the interpretation of the directive about “working time” (“temps de travail”). A worker who has not been able to take all his paid annual leave before resigning is entitled to financial compensation. Member States may not limit this right on the grounds of controlling public expenditure.

A new formality for employers offering a permanent contract to an employee who has completed a fixed-term contract or assignment

The “loi Marché du travail” of 21 December 2022 introduced an obligation for employers offering employees a permanent contract in the same or a similar role as the completed fixed-term contract, to notify such an offer in writing. This obligation applies from 1st January 2024.

Lack of a resumption medical visit by the employee: reversal of case law

Until now, if an employee's resumption medical visit was not organised, he could not claim payment of his remuneration. However, he could be compensated for the loss suffered. In a ruling dated 24 January 2024, the French Supreme Court (“Cour de Cassation”) changed its position on compensation for employees whose resumption medical visit is not scheduled: they are now entitled to payment of their remuneration.

2024 Olympic Games: introduction of a derogation from weekly rest periods

In a decree issued on Friday 24 November, the French government authorised companies involved in broadcasting or organising the Paris 2024 Olympic Games that are experiencing an extraordinary increase in workload to suspend their employees' weekly rest periods "two or more times" between 18 July and 14 August.

Declaration of the professional equality Index before 1 March

By 1st March 2024, all companies with 50 or more employees must have calculated and published their professional quality Index on their website. The professional equality Index enables companies to measure the pay gap between women and men and highlights the areas for improvement where these disparities are unjustified.

The conditions under which foreign nationals can become “entrepreneurs individuels” have been clarified

The Immigration Law (“loi immigration”) n. 2024-42 of 26 January 2024 now stipulates that foreign nationals of countries that are not members of the European Union, the European Economic Area (EEA) or the Swiss Confederation may not work as “entrepreneurs individuels” if they do not have a legal residence permit. 

Real estate law

 It is not a violation to rent a furnished tourist accommodation more than the legal annual limit when it is justified by a professional reason, such as a work placement or the pursuit of a course of study

It should be remembered that, in municipalities that have implemented the “prior declaration registration procedure” (“procédure d'enregistrement de la déclaration préalable”) set out in article L 324-1-1 of the French Tourism Code, any person who offers for rent a furnished tourist accommodation that is declared as their principal residence may not do so for more than 120 days per calendar year, except in the case of a professional reason, health reason or case of force majeure. The legal tribunal ruled that an internship or the pursuit of a course of study can also be considered as a professional reason if it is for a specific and limited period. This exception must be demonstrated by the coincidence in time between the business trips and the periods of rental of the furnished tourist accommodation.

Commercial tenants are not liable for damage caused by obsolescence, unless expressly stated otherwise

A clause in a commercial lease requiring the tenant to return the premises in their original condition does not require him to pay for any damage caused by obsolescence. If an inventory of fixtures was drawn up when the tenant entered the premises, he must return the premises as he received them on the original inventory, except for anything that has perished or been damaged by obsolescence or force majeure. 

Tax 

An act may be considered abusive even if a lawful act could have had the same result

The abuse of rights procedure allows the tax authorities to disregard transactions that may not have been inspired by any motive other than that of evading or mitigating the tax charges that the taxpayer would normally have incurred in view of his actual situation or activities. This procedure can only be applied if the transaction resulted in a tax gain for the taxpayer. The French Council of State (“Conseil d'Etat”) clarifies that acts which have no impact on the taxpayer's burden cannot be dismissed as constituting an abuse of rights even if their sole purpose was to evade or mitigate that burden.

Financial sanctions and penalties taxed abroad are not in principle deductible

The French Council of State (“Conseil d’Etat) has recently ruled that the legal provisions which provide for the non-deductibility of tax sanctions and penalties may apply to sanctions imposed by foreign authorities for breaches of foreign legal obligations.

Sale of a business and retirement: only one year left to benefit from the 500,000 € allowance

French Finance Act (“loi de finances”) 2017-1837 of 30 December 2017 introduced an exceptional allowance of 500,000 € on the capital gain on the sale of an executive who sells his or her business and retires. This scheme, which had already been extended, expires on 31 December 2024. Senior company directors planning to sell their business and retire still have a year to take advantage of this attractive tax window.

Corporate law

 General meetings: under no circumstances can a decision taken unanimously by the shareholders constitute an abuse of the majority

In a decision delivered on 8 November 2023, the French Supreme Court (Cour de cassation) firmly states that a decision taken unanimously by the shareholders cannot constitute an abuse of the majority.  The case law considers that an abuse of majority voting is constituted by a combination of two elements: the decision adopted by the majority shareholders must be contrary to the company's interests, and the decision must have been taken for the sole purpose of favouring the majority shareholders to the detriment of the other shareholders. In rejecting the plaintiffs' arguments, the Court seems to consider the fact that the decision was taken unanimously prevents it from being considered to have been taken to the detriment of the minority shareholders, as it cannot create a breach of equality between the shareholders. However, such reasoning can only apply to decisions taken unanimously by all the members, but not to decisions taken unanimously by the shareholders present or represented, as in such a situation the decision could have been taken to the detriment of those absent.

Transfer of company shares: reaffirmation of the effects of the presumption of joint and several liability

In its decision dated 30 August 2023, the French Supreme Court (Cour de cassation) confirmed the existing case law on the question of joint and several liability between the transferors of commercial companies. It pointed out that agreements involving the transfer of control of a commercial company are commercial in nature, even if they are not entered into between merchants, and the obligations entered into by the sellers are therefore performed jointly and severally. In this case, as it was a commercial agreement, in the absence of a clause expressly excluding the presumption of joint and several liability, all the sellers, without exception, were jointly and severally liable for the commitments arising from the transfer, including the obligation to make restitution under the price clause in the agreement.

A non-competition clause judged to be disproportionate to the protected interest

A non-competition clause contained in an IT subcontracting contract, even if limited in time and to a single client, has been declared null and void by the Versailles Court of Appeal (Cour d’appel de Versailles) on the grounds that it was disproportionate to the beneficiary's legitimate interest, given the duration of the contract and the value of the service.

Extension of compulsory liquidation proceedings to directors on grounds of fictitious existence

The compulsory liquidation of an association must also be extended to its former directors on the grounds of fictitious existence, once it has been established that the association's existence is nothing more than an artifice designed to serve the interests of its directors, that it is devoid of any affectio societatis, is composed solely of its founding members and has no members or social life of its own.

Société par actions simplifiée (SAS) in compulsory liquidation: liability for insufficiency of assets

When an SAS that is de facto managed by a legal entity goes into liquidation, not only that legal entity but also its legal representative is liable for insufficient assets, in the absence of any legal or statutory obligation to appoint a permanent representative of the managing legal entity within an SAS.

Transmission Universelle du Patrimoine (TUP): standing for the acquiring company as soon as the merger takes place

In the event of a merger without the creation of a new legal entity, the operation takes effect on the date of the last general meeting approving the merger, unless the contract provides for the merger to take effect on another date. Once the acquiring company has taken over all the assets and liabilities of the acquired company on the date of the merger, it is entitled to take enforcement action against a debtor, regardless of whether the formalities applicable to the merger have been completed. 

IP/IT and communication

 Regulating the use of Artificial Intelligence (AI) in the legal system

Over the last months, things have speeded up with the rise of generative AI and LLMs (large language models). These systems, which can generate content - text, sound, and images - have given new energy to discussions and work aimed at providing a framework for the use of AI in general. The European Union has played a pioneering role in efforts to create a regulatory framework for the use of AI, but the final negotiations on the draft European regulation, the law on AI, were very tense in early December. At issue: disagreements over the regulation of "foundation models" (the large-scale language or image processing systems used to create services such as ChatGPT or Midjourney), which some countries, including France, Germany and Italy, consider to be too strict.

Employment law 

The difficult cohabitation of employee privacy and the employer's right to evidence

The production of unlawful evidence to justify the dismissal of an employee is admissible even if it infringes privacy, provided that it is essential and proportionate to the aim pursued. The unlawfulness of a piece of evidence does not necessarily mean that it should be rejected, as the court must, when asked to do so, assess whether the use of that evidence undermined the fairness of the proceedings, by balancing the employee's right to privacy against the right to evidence. 

The salaire minimum de croissance (SMIC) hourly rate rises to €11.65 on 1 January 2024

The SMIC hourly rate is raised from €11.52 to €11.65 on 1 January 2024, an increase of 1.13%. This increase will only have an impact on salaries that fall below the SMIC as a result of the rise, in which case the employer will be obliged to increase them accordingly. However, there is no legal obligation to increase salaries above the minimum wage proportionately.

How do employers reimburse public transport

Employers are obliged to reimburse part of the cost of season tickets for employees using public transport to commute to and from work. The reimbursement amounts to 50% of the cost of public transport or public bicycle hire services purchased by employees. This scheme has been introduced to encourage the use of more environmentally friendly modes of transport, and applies to all employees, regardless of the type of employment contract they have, including trainees and apprentices.

Luncheon vouchers: extended to cover all food products until 31 December 2024

The exceptional measure allowing employees to use their meal vouchers to purchase food products that are not directly consumable has been extended until 31 December 2024. These products must, however, be purchased from a person or organisation practising the profession of restaurateur, hotel and restaurant owner or a similar activity, or the profession of fruit and vegetable retailer. Since 1 October 2022, the maximum amount that can be spent on restaurant vouchers has been raised from €19 to €25 to cover rising food prices. It will remain at 25 euros for 2024. 

Real estate law

Commercial tenants' preferential right dismissed in the event of a foreclosure sale

When the owner of a leased commercial or craft premises is considering selling it, the tenant has a statutory preferential right to buy. However, the French Supreme Court (Cour de cassation) has ruled that commercial tenants cannot exercise their statutory preferential right when the premises in question have been the subject of an auction as part of a property seizure procedure. 

Restructuring 

Restructuring plan: abusive refusal by minority shareholders

The minority shareholders' refusal to vote in favour of the restructuring plan is unfair if it prevents the implementation of financial restructuring measures deemed essential to the company's recovery and, consequently, its survival, by exposing the company to a risk of compulsory liquidation contrary to the company's interests.

Corporate law

 General meetings: under no circumstances can a decision taken unanimously by the shareholders constitute an abuse of the majority

In a decision delivered on 8 November 2023, the French Supreme Court (Cour de cassation) firmly states that a decision taken unanimously by the shareholders cannot constitute an abuse of the majority.  The case law considers that an abuse of majority voting is constituted by a combination of two elements: the decision adopted by the majority shareholders must be contrary to the company's interests, and the decision must have been taken for the sole purpose of favouring the majority shareholders to the detriment of the other shareholders. In rejecting the plaintiffs' arguments, the Court seems to consider the fact that the decision was taken unanimously prevents it from being considered to have been taken to the detriment of the minority shareholders, as it cannot create a breach of equality between the shareholders. However, such reasoning can only apply to decisions taken unanimously by all the members, but not to decisions taken unanimously by the shareholders present or represented, as in such a situation the decision could have been taken to the detriment of those absent.

Transfer of company shares: reaffirmation of the effects of the presumption of joint and several liability

In its decision dated 30 August 2023, the French Supreme Court (Cour de cassation) confirmed the existing case law on the question of joint and several liability between the transferors of commercial companies. It pointed out that agreements involving the transfer of control of a commercial company are commercial in nature, even if they are not entered into between merchants, and the obligations entered into by the sellers are therefore performed jointly and severally. In this case, as it was a commercial agreement, in the absence of a clause expressly excluding the presumption of joint and several liability, all the sellers, without exception, were jointly and severally liable for the commitments arising from the transfer, including the obligation to make restitution under the price clause in the agreement.

A non-competition clause judged to be disproportionate to the protected interest

A non-competition clause contained in an IT subcontracting contract, even if limited in time and to a single client, has been declared null and void by the Versailles Court of Appeal (Cour d’appel de Versailles) on the grounds that it was disproportionate to the beneficiary's legitimate interest, given the duration of the contract and the value of the service.

Extension of compulsory liquidation proceedings to directors on grounds of fictitious existence

The compulsory liquidation of an association must also be extended to its former directors on the grounds of fictitious existence, once it has been established that the association's existence is nothing more than an artifice designed to serve the interests of its directors, that it is devoid of any affectio societatis, is composed solely of its founding members and has no members or social life of its own.

Société par actions simplifiée (SAS) in compulsory liquidation: liability for insufficiency of assets

When an SAS that is de facto managed by a legal entity goes into liquidation, not only that legal entity but also its legal representative is liable for insufficient assets, in the absence of any legal or statutory obligation to appoint a permanent representative of the managing legal entity within an SAS.

Transmission Universelle du Patrimoine (TUP): standing for the acquiring company as soon as the merger takes place

In the event of a merger without the creation of a new legal entity, the operation takes effect on the date of the last general meeting approving the merger, unless the contract provides for the merger to take effect on another date. Once the acquiring company has taken over all the assets and liabilities of the acquired company on the date of the merger, it is entitled to take enforcement action against a debtor, regardless of whether the formalities applicable to the merger have been completed. 

IP/IT and communication

 Regulating the use of Artificial Intelligence (AI) in the legal system

Over the last months, things have speeded up with the rise of generative AI and LLMs (large language models). These systems, which can generate content - text, sound, and images - have given new energy to discussions and work aimed at providing a framework for the use of AI in general. The European Union has played a pioneering role in efforts to create a regulatory framework for the use of AI, but the final negotiations on the draft European regulation, the law on AI, were very tense in early December. At issue: disagreements over the regulation of "foundation models" (the large-scale language or image processing systems used to create services such as ChatGPT or Midjourney), which some countries, including France, Germany and Italy, consider to be too strict.

Employment law 

The difficult cohabitation of employee privacy and the employer's right to evidence

The production of unlawful evidence to justify the dismissal of an employee is admissible even if it infringes privacy, provided that it is essential and proportionate to the aim pursued. The unlawfulness of a piece of evidence does not necessarily mean that it should be rejected, as the court must, when asked to do so, assess whether the use of that evidence undermined the fairness of the proceedings, by balancing the employee's right to privacy against the right to evidence. 

The salaire minimum de croissance (SMIC) hourly rate rises to €11.65 on 1 January 2024

The SMIC hourly rate is raised from €11.52 to €11.65 on 1 January 2024, an increase of 1.13%. This increase will only have an impact on salaries that fall below the SMIC as a result of the rise, in which case the employer will be obliged to increase them accordingly. However, there is no legal obligation to increase salaries above the minimum wage proportionately.

How do employers reimburse public transport

Employers are obliged to reimburse part of the cost of season tickets for employees using public transport to commute to and from work. The reimbursement amounts to 50% of the cost of public transport or public bicycle hire services purchased by employees. This scheme has been introduced to encourage the use of more environmentally friendly modes of transport, and applies to all employees, regardless of the type of employment contract they have, including trainees and apprentices.

Luncheon vouchers: extended to cover all food products until 31 December 2024

The exceptional measure allowing employees to use their meal vouchers to purchase food products that are not directly consumable has been extended until 31 December 2024. These products must, however, be purchased from a person or organisation practising the profession of restaurateur, hotel and restaurant owner or a similar activity, or the profession of fruit and vegetable retailer. Since 1 October 2022, the maximum amount that can be spent on restaurant vouchers has been raised from €19 to €25 to cover rising food prices. It will remain at 25 euros for 2024. 

Real estate law 

Commercial tenants' preferential right dismissed in the event of a foreclosure sale

When the owner of a leased commercial or craft premises is considering selling it, the tenant has a statutory preferential right to buy. However, the French Supreme Court (Cour de cassation) has ruled that commercial tenants cannot exercise their statutory preferential right when the premises in question have been the subject of an auction as part of a property seizure procedure. 

Restructuring 

Restructuring plan: abusive refusal by minority shareholders

The minority shareholders' refusal to vote in favour of the restructuring plan is unfair if it prevents the implementation of financial restructuring measures deemed essential to the company's recovery and, consequently, its survival, by exposing the company to a risk of compulsory liquidation contrary to the company's interests.