Key points
- Issue: A 25 % partner accused the majority manager of misusing the cash reserves of a limited liability company (SARL) that was not carrying on any business.
- Decision: the court ruled that his remuneration and personal transactions had depleted the company’s assets, and that his appointment as liquidator was improper.
- Outcome: The manager must pay approximately €205,000 to the company, an independent liquidator is appointed, and the partner receives €10,000 towards his costs.
Remuneration without work and costly legal proceedings: the manager must reimburse the company
By a judgement of 26 March 2024 (RG No. 2022030418), the Paris Commercial Court ordered the majority manager of a limited liability company (SARL) to pay approximately €205,000 to the company and annulled his appointment as liquidator, at the request of a minority partner. A minority partner therefore has practical remedies available against the majority manager.
A majority manager who was siphoning off funds from a dormant company
The dispute was between the two partners of a limited liability company (SARL): the manager, who held approximately 75 per cent of the shares, and a minority partner holding 25 per cent. For nearly twenty years, the minority partner had, in fact, run the company under the terms of an agreement. The manager subsequently sold the business and declared it to have ceased trading on 31 December 2021.
However, he continued to receive €4,000 per month and made the company bear the cost of legal proceedings against his partner. In November 2023, the general meeting voted in favour of the company’s voluntary liquidation and appointed him as liquidator, with a monthly remuneration of €2,000, by his majority alone.
The minority partner, represented by Goldwin Avocats, sought compensation on behalf of the company and the annulment of these appointments. The manager, for his part, requested that the matter be put on hold pending the outcome of a criminal complaint.
The ruling in favour of the minority partner against the majority manager
The court ruled in favour of the minority partner against the majority manager on three counts:
- the repayment of two years’ remuneration received without any work having been carried out, amounting to approximately €96,000;
- approximately €109,000 in damages for proceedings conducted contrary to the company’s interests;
- the annulment of his appointment as liquidator and of his remuneration.
Article L223-22 of the Commercial Code holds the manager liable for his management errors.Article 1843-5 of the Civil Code allows a partner to bring such an action on behalf of the company. The sums are therefore payable to the company, not to the partner.
The appointment of the manager as liquidator constituted an abuse of majority power, as it impoverished the company without any consideration in return. The court appointed an independent liquidator, tasked in particular with recovering the sums awarded.
What the ruling means for a minority partner
A minority partner may seek sanctions against a manager who misuses the company’s assets, provided they can prove that the company has suffered loss. The court took into account documented facts: the cessation of business, the cost of the proceedings, and the absence of any consideration. Gather the accounts, minutes and expense statements before seeking to hold the manager liable.
Voting at general meetings is just as important as legal proceedings. Remuneration for previous years, which had been approved at general meetings, was not called into question. Vote against any resolution you dispute and ensure your reservations are recorded in the minutes.
Each situation must be analysed on a case-by-case basis. Are you a minority partner and is the majority manager misusing the company’s assets? Contact one of our solicitors specialising in disputes between partners to examine your options.
Related areas of expertise
Company law › Lawyer in partnership disputes
Frequently asked questions about remedies available to minority partners
Yes, regardless of their share of the capital. The right of action on behalf of the company, known as ‘ut singuli’, enables them to take action against the manager in the name of the company. They must prove fault, damage suffered by the company, and the link between the two. Damages are paid to the company, which uses them for the benefit of all the partners.
No, not automatically.Article 4 of the Code of Criminal Procedure provides that criminal proceedings do not require other civil proceedings to be suspended. The judge has discretion to assess whether it is appropriate to wait. In this case, the judge refused to stay proceedings, as the complaint had not led to any prosecution after two and a half years.
In principle, within three years.Article L223-23 of the Commercial Code stipulates that this time limit runs from the date of the event giving rise to the loss, or from the date of its discovery if it was concealed. You should therefore take action as soon as the disputed remuneration or expenditure appears in the accounts. Any delay may render the claim inadmissible.
Jonathan BELLAICHE
