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.
Country
France
