The fundamental importance of regulated agreements lies in their preventive role and protection of the social interest. These agreements make it possible to anticipate and prevent possible conflicts of interest, while guaranteeing the protection of the collective interest of the company.
Aware of this issue, the legislator has thus instituted a specific procedure, known as “regulated agreements” (“conventions réglementées”), allowing the corporate bodies to exercise rigorous control over these agreements. By definition, a regulated agreement is a contract concluded between an SAS (Simplified joint-stock company, “Société par actions simplifiée”) and its chairman, its other managers if applicable, or one of its shareholders with a fraction of the voting rights greater than 10% or, in the case of a shareholder company, the company controlling it within the meaning of Article L. 233-3, must be subject to the prior authorization of the board of directors.
The legal framework of the regulated agreement also applies when the contract is concluded between the SAS and one of the aforementioned persons, who is indirectly interested. So far, no definition has been given regarding the interested character mentioned in Article L225-38. However, the case law attempts to delimit this concept.
The specificity of regulated agreements is that they require a reasoned authorization from the board of directors, which must justify the interest of the agreement for the company. In this sense, neither the articles of association / by-laws (“statuts”) of the SAS nor the shareholders’ agreement may derogate from the rules of procedure applicable to regulated agreements.
Some conventions are said to be common and prohibited. Article L225-38 of the French Commercial Code provides that current agreements or agreements concluded under normal conditions are not subject to control by the board of directors and therefore do not require authorization. A routine operation is by definition an operation that is not exceptional, which must therefore be repeated at a certain frequency (Cass Com 11 March 2003 n°01-01-290: JurisData n° 2003-018566 Bull). Under Article L225-43 of the French Commercial Code, certain agreements are also directly prohibited. In particular, loans from the company and for the benefit of the chairman or a company manager (“dirigeant”). Consequently, the above-mentioned agreements are null and void and thus engage the civil or even criminal liability of the director who entered into them.
Regarding the control mechanism for regulated agreements, according to Article L. 225-40 of the French Commercial Code, the person directly or indirectly interested is required to inform the Board as soon as he or she becomes aware of an agreement to which Article L. 225-38 is applicable. It may not take part in the deliberations or the vote on the authorisation requested. Thus, in accordance with Article L.227-10 of the French Commercial Code, it is the responsibility of the statutory auditor to present to the partners a report on the agreement concluded between the director and the company. In SAS companies that have not appointed an auditor, it is up to the chairman to present this report.
Then, as specified in Article L225-41 of the French Commercial Code, the partners are free to approve or not the agreement. However, in both cases, the agreement will continue to have effect, but the person concerned will be liable in the event of damage caused to society.
Finally, Article 225-42 of the French Commercial Code refers to the nullity of agreements entered into without the prior authorization of the board of directors if they have had harmful consequences for the company. However, it is settled case law that this is a relative nullity. Indeed, the absence of automatic nullity remains as long as the nullity is not prosecuted is announced (Cass com 3 May 2000 JurisData n°2000-001913).
Nicolas BRAHIN Avocat
Master’s Degree in Banking and Financial Law / Université Panthéon-Sorbonne
Cabinet BRAHIN Avocats
Advokatfirma i NICE, Lawyers in NICE
Mob: 00 33 6 63 51 47 70
Email : nicolas.brahin@brahin-avocats.com
1, Rue Louis Gassin – 06300 NICE (FRANCE)
Tel : +33 493 830 876 / Fax : +33 493 181 437
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