A guarantee granted without the authorization of the board of directors cannot be ratified

It is common for limited liability companies (sociétés anonymes) to guarantee the debts of a subsidiary, partner, or third party, particularly in the context of financing, public contracts, or public aid.

However, for this guarantee to be legally enforceable against the company, French law imposes a strict formality: prior authorization by the board of directors.

I. Reminder of the legal framework

Article L. 225-35 of the French Commercial Code states:

Sureties, endorsements, and guarantees given by companies other than those operating banking or financial institutions are subject to authorization by the board, which limits the amount, under the conditions determined by decree of the Council of State. This decree also determines the conditions under which exceeding this authorization may be enforced against third parties.

Article R225-53 of the French Commercial Code states:

The supervisory board may, within the limits of a total amount that it sets, authorize the management board to give sureties, endorsements, or guarantees on behalf of the company. This authorization may also set, by commitment, an amount above which the company's surety, endorsement, or guarantee may not be given. When a commitment exceeds either of the amounts thus set, the authorization of the supervisory board is required in each case.

II. Lack of authorization results in unenforceability

In a ruling dated March 31, 2021 (No. 19-13.974), the French Supreme Court (Cour de cassation) has already specified that in the absence of authorization, the guarantee is unenforceable against the company:

In view of Article L. 225-35, paragraph 4, of the French Commercial Code:
5. It follows from this text that guarantees given by limited liability companies other than those operating banking or financial institutions must be authorized by the board of directors, failing which the acts entered into by the corporate officers on behalf of these companies are not enforceable against them.

On this occasion, the Court specified that a guarantee granted without authorization remains unenforceable even if there was an apparent authority to sign the disputed guarantee.

III. The impossibility of regularizing the lack of authorization

In a recent case (Com., December 3, 2025, No. 23-19.623), a company had signed, without prior authorization from its board of directors, a guarantee in favor of a regional council, as part of public aid to a subsidiary. When the subsidiary defaulted, the region attempted to enforce the guarantee against the company.

Despite the lack of authorization, the appeal judges applied the guarantee on the grounds that the company's board of directors had clearly and unequivocally ratified the stipulated guarantee commitment.

The French Supreme Court quashed the decision on this point and recalled, pursuant to Article L. 225-35 of the French Commercial Code, that:

sureties, endorsements and guarantees given by limited liability companies other than those operating banking or financial institutions must be subject to prior authorization by the board of directors, failing which the acts entered into by the corporate officers on behalf of such companies are not enforceable against them.

It is therefore not possible to ratify a posteriori a guarantee granted by a company without prior authorization from the board of directors. In the absence of voluntary performance by the company, the guarantee is therefore irreversibly compromised.

IV. Practical consequences for companies and their creditors

For executives:

• Always have the board of directors vote on the authorization of the guarantee/surety before signing.
• Document the deliberation precisely (purpose, amount, beneficiary, duration).
• Refuse to sign anything before formal authorization.

For creditors or beneficiaries of guarantees:

• Always require proof of prior authorization (copy of the minutes of the board of directors' meeting).
• Do not accept a statement from the manager, an apparent mandate, or subsequent ratification.

V. Summary

The ruling of December 3, 2025 clarifies the situation: the enforceability of a guarantee given by a company requires prior authorization from the board of directors. Otherwise, the guarantee is unenforceable and the board of directors cannot validly ratify it. This rule protects the company and its shareholders against unauthorized commitments.

Key points:

• Authorization must be given before the guarantee is signed.
• Neither ratification, apparent authority, nor the beneficiary's good faith can allow to enforce the guarantee.

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