Civil liability of company directors and officers

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Civil liability of directors in France: understanding the principles

Whether they are managers, directors or chairpersons, company officers incur personal liability when they commit faults in the exercise of their duties. This applies to both de jure directors (officially appointed) and de facto directors (acting without an official mandate).

Note: Approval granted by the general meeting does not release the director from liability towards the company or third parties.

What conditions must be met to establish a director’s civil liability in France?

Three cumulative conditions must be satisfied:

Fault: mismanagement, breach of the articles of association, failure to act loyally, reckless risk-taking...
Damage: suffered by the company, its shareholders or a third party
Causal link: the fault must be the direct cause of the damage

Who can bring a civil liability claim against a director in France?

A director’s civil liability may be pursued by:

the company itself, in cases of mismanagement
shareholders, when they suffer distinct personal harm
third parties, such as creditors or business partners, in cases of a fault separable from the director’s duties

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Frequently Asked Questions

Who is subject to directors’ civil liability?

Case law adopts a broad interpretation of the term “director”:

de jure directors: duly appointed officers (managers of private limited companies, chairpersons of public limited companies, directors, chief executives...)
de facto directors: any person who, in practice, independently and on a lasting basis, performs management functions, even without an official mandate

All may be held liable, including after their term ends, for faults committed during their tenure.

What remedies are available to the company and shareholders against a director?

The action depends on whether the harm was suffered by the company or by the shareholder personally:

corporate action: brought by the company (or by shareholders acting ut singuli) to compensate damage suffered by the company
individual action: available to shareholders when they suffer personal harm distinct from that suffered by the company‍

Note: a shareholder’s individual action may be compromised if they knowingly discharged the director.

What remedies are available to third parties against a director?

As a general rule, third parties (creditors, business partners, clients, etc.) must act against the company, which is a legal entity with its own assets. Company directors benefit from this “shield” protecting them from third-party claims.

Exceptionally, a director’s liability may be engaged when they commit a serious fault incompatible with the normal exercise of corporate duties (fraudulent manoeuvres, deliberate concealment of information, embezzlement of assets...).