Court Ruling on Manager's Power to Sell Company Property

Extract

[...] Hamelin - Note of judgment In France, the SARL is the most represented social form in the Commercial Courts services with over a million and a half companies, but it is increasingly in competition with the SAS which sees its number of creations increase year after year. In fact, the manager of a limited liability company signed on June a promise of sale on a building whose ownership is that of the company. The promise was made subject to the condition of obtaining a loan. [...]

[...] One can then wonder if the transfer of a part of a business asset is the exclusive competence of a manager alone or that of the partners. It is to this question that the Court of Cassation responds in its decision with the affirmative. It considers that the transfer of a part of this business asset necessarily implied a modification of the corporate purpose since this purpose was directly referenced with the social denomination of the SARL, we could not therefore dissociate the two. [...]

[...] The Court of Cassation responds that the court of appeal in its decision has indeed investigated whether the social object of the company, following the sale of the building, had been modified. In fact, the social object of the joint-stock company is quite broad and the simple sale of the building does not extinguish its object in its entirety. It is therefore not demonstrated that, due to the transfer authorized by the board of directors, the company would no longer have any activity and therefore that the statutes would be modified. [...]

[...] By this decision, the Court of Cassation merely confirms a consistent case law. In the sense that if the third party is in good faith and the disputed act is not one provided for by the company's purpose, then a promise of sale or even a sale of a property held by a company can be sold by a manager without the other partners having intervened in the contract. This consistent case law recalls the interest of correctly drafting the statutes of one's company, since a clause relating to the powers of the managers can be integrated into it, which makes it possible not to find oneself confronted with this type of situation which could jeopardize an entire structure. [...]

[...] The Court of Appeal confirmed by its decision that the manager of a limited liability company did not have the power to commit the company to the sale of a real estate property owned by the company. It also recalled that the company's purpose did not allow the manager to enter into such a contract with a third party either. The SARL then filed an appeal in cassation in order to be recognized the validity of this contract. The plaintiff in power invokes Article L223-18 of the Commercial Code, which states the most extensive powers for the manager of a SARL outside of the powers explicitly attributed to the legally associated partners. [...]