Company law, duty of loyalty, Vilgrain judgment, Baldus jurisprudence, contract law, deceitful maneuver, corporate governance, Cassation Court, commercial chamber
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Abstract
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Abstract
Analysis of the 1996 Vilgrain judgment and its impact on company law, highlighting the duty of loyalty of company directors and its implications.
Extract
[...] But in the Vilgrain case, the manager does not hide a simple 'estimation' or an intimate intuition about the potential of the box. He conceals a material, objective and concrete fact: the existence of advanced negotiations with a third party. Keeping silent about a firm offer, it's absolutely not the same thing as refusing to share a personal financial analysis. In addition, we must not forget the principles of our corporate law. The duty of loyalty of the manager is a special rule linked to the institution. However, in law, special rules derogate from general rulesspecialia generalibus derogant). [...]
[...] On the one hand, it maximally protects the company and its associates, but on the other hand, it creates a real and growing legal insecurity, which no longer really gives him the right to have any initiative to develop his own assets for fear of being attacked. B. The necessary judicial brake: the recasting by the judgment of 12 April 2016 Faced with the risk of seeing a plethora of disputes and leaving a sword of Damocles permanently hanging over the heads of managers, the Cour de cassation finally reacted. Twenty years after the shock of the Vilgrain ruling, it was necessary to rationalize and frame a little this duty of loyalty which was becoming truly omnipresent. [...]
[...] It specifies that the intentional concealment of a determining information constitutes a deceit. The end of the simple discovery of judges, the faulty silence becomes a legal category in its own right, giving a textual basis in concrete to future actions against disloyal managers. But the law is never simple. If the code has enshrined ethics, it has also had to reassure economic liberalism by integrating the strict limit set by the 2000 Baldus case law. The second paragraph of article 1112-1 specifies that this famous duty of information 'does not relate to the estimate of the value of the service'. [...]
[...] The Radiation and Metamorphoses of the Duty of Loyalty Post-Vilgrain A. The Spectacular Expansion: From Share Transfers to Business Opportunities The scope of the Vilgrain judgment did not stop abruptly after its publication in the bulletin in 1996. On the contrary, this famous duty of loyalty has evolved over time into a real legal standard with variable geometry. It has become a formidable weapon that lawyers and judges increasingly use to attack other aspects of business life. Initially, the scope of this loyalty was limited to the sole transfer of shares between a boss and his associates. [...]
[...] But by taking two minutes to dissect all this, we realize that these two judgments do not contradict each other at all. On the contrary, they perfectly fit into a logic of principle and exception. The Baldus judgment is the basic rule in common law: in a classic sale, the buyer does not have to do the seller's work. It is up to the owner to inform himself about the value of the thing of which he is the owner. Justice is not there to protect negligent sellers, and the acquirer's skill is not a crime in itself. [...]
