You have just been appointed manager of a limited liability company (SARL). Or you have been in that position for ten years and a partner suddenly challenges your remuneration. In both cases, the same question arises: how far does your power extend, and when is your personal wealth at risk?
The Commercial Code grants the manager of a limited liability company (SARL) very broad powers in relation to third parties. It also exposes them to civil, criminal, and tax liability. Many managers only discover these rules when faced with a conflict between partners or financial difficulties.
Our position is simple: a manager is primarily protected by their formalities, not by the extent of their powers. Remuneration never voted on, an agreement never submitted to the partners, accounts approved after the deadline: these accusations are substantiated by the evidence.
Here are the rules in force, the recurring pitfalls and the protective reflexes, whether you are a manager, co-manager or partner.
Who can be the manager of a SARL and how is he/she appointed?
A natural person, whether associated or not
Article L. 223-18 of the French Commercial Code stipulates that a limited liability company (SARL) is managed by one or more natural persons. A company cannot therefore be the manager of an SARL. The manager may be chosen from outside the shareholders.
This freedom has a practical consequence. A non-partner manager has no voting rights. He depends entirely on the confidence of the partners who appointed him.
Appointment in the articles of association or by decision of the partners
The manager is appointed by the partners, either in the articles of association or by a subsequent act. The decision follows the majority rule of Article L. 223-29: partners representing more than half of the shares.
If this majority is not reached, a second consultation may be held with a majority of votes cast. The bylaws may preclude this second consultation.
When the manager's name appears in the articles of association, their departure does not require a major amendment. The partners can remove the mention of their name under the same majority conditions, regardless of the reason for the termination.
A duration fixed by the statutes
If the articles of association are silent on the matter, the manager is appointed for the duration of the company. Many standard articles of association adopt this rule without further consideration. However, a limited-term mandate obliges the partners to review the situation at fixed intervals.
The appointment and termination of employment must be published. Until they are, the company cannot rely on them against third parties (Article L. 210-9 of the French Commercial Code). We will return to the issue of unpublished resignations below.
What are the powers of the manager of a limited liability company (SARL)?
Faced with third parties, the most extensive powers
In dealings with third parties, the manager is vested with the broadest powers to act on behalf of the company. The only exception concerns the powers expressly granted to the partners by law.
The company is bound even by an act that falls outside its corporate purpose. It can only escape liability by proving that the third party knew, or could not have been unaware, that the act exceeded this purpose. The mere publication of the articles of association is insufficient to constitute such proof.
Between partners, the articles of association set the limits
In relations between partners, the manager's powers are determined by the articles of association. Failing that, Article L. 221-4 applies: the manager may perform all management acts in the interest of the company.
The articles of association often stipulate that significant actions require prior approval from the partners. For example, taking out a loan exceeding a certain amount, selling an asset, or hiring an executive. These clauses have limitations that many are unaware of.
A limitation clause does not protect against third parties
Article L. 223-18 is unambiguous: statutory clauses limiting the powers of managers are unenforceable against third parties. If the manager signs a contract alone that required the agreement of the partners, the company remains bound in principle.
The clause, however, remains fully enforceable internally. A manager who violates it is breaching the company's bylaws. They are liable and risk dismissal for just cause.
What the manager can do alone, subject to ratification
The law allows the manager to make certain decisions alone, provided that they are then ratified by the partners:
- move the head office to French territory;
- to bring the statutes into line with the mandatory provisions of the law and regulations;
- to include in the articles of association a reference to a lease relating to company shares.
| Situation | Applicable rule | Practical consequence |
|---|---|---|
| Agreement signed with a third party within the company's purpose | Most extensive powers | The company is committed |
| Act outside the scope of the company | The company is bound unless the bad faith of the third party is proven | Third parties are protected in principle |
| The document was signed without the authorization stipulated in the bylaws | Clause not enforceable against third parties | Committed company, at-fault internal manager |
| Approval of the accounts, amendment of the articles of association | Powers reserved for partners | The manager prepares, the partners decide |
Co-management: how co-managers share power
Disagreement between co-managers
One co-manager opposes the other's action.
Did the third party have knowledge of this?
The company is committed
The only remaining option is internal action: liability of the co-manager, judicial dismissal, negotiation of an exit.
The opposition can have an effect
The proof of this knowledge rests with the one who invokes it.
The reflex: notify the other party of the objection in writing, before signing.
Each co-manager binds the company individually
A limited liability company (SARL) can have several managers. Article L. 223-18 stipulates that they then hold the manager's powers separately. Each co-manager can therefore sign any document that the law does not reserve for the shareholders.
The partners can divide the roles in the articles of association. One manages the commercial side, the other the finances. But this division applies between them, not with regard to third parties.
The opposition of a co-manager offers little protection
A co-manager may object to an action taken by the other. This objection has no effect with regard to third parties, unless it is established that they were aware of it. The burden of proof of this awareness rests with the party alleging it.
In practice, only a written objection notified to the other party before signing has any chance of being effective. A disagreement recorded in an email between co-managers is not binding on the third party.
Organizing co-management before the conflict
Co-management works as long as the co-managers agree. The day they no longer agree, each can commit the company against the other's wishes. Three tools can help anticipate this:
- a written allocation of each person's domains, in the statutes or a decision of the partners;
- a list of acts subject to the joint agreement of the co-managers or partners;
- a shareholders' agreement that organizes the exit in the event of a prolonged deadlock.
Failure to comply with these rules does not render the act unenforceable against third parties. However, it provides the partners with a clear basis for taking action against the co-manager who disregarded them.
Majority or minority shareholder, what really changes?
The same manager, two interpretations
Social status: the shares of the household and co-managers are added together
Majority
In the assembly: each person votes with their own shares
30% of the votes
This adds up to social status
- The manager's shares
- Those of her spouse
- Those of his civil partner
- Those of his unemancipated minor children
- Those of the other co-managers
Less than 50%, minority
50%, equal
More than 50%, majority
A calculation that often surprises
For social security purposes, the status of majority shareholder does not depend solely on one's own shares. According to Bpifrance Création, the shares of the shareholder and those of their spouse are added together, regardless of the marital property regime.
This includes the shares of his civil partner and his unemancipated minor children. In the case of multiple managers, the shares of all co-managers are also added together.
Each co-manager becomes a majority shareholder as soon as they collectively hold more than half of the capital. A manager holding exactly 50% is considered an equal shareholder and follows the rules governing minority shareholders.
What the status changes in social and tax terms
| Point | Minority, equal or non-partner manager remunerated | Majority shareholder |
|---|---|---|
| Social security scheme | Assimilated to an employee, general scheme, without unemployment insurance | Self-employed worker, social protection for the self-employed |
| Contributions without remuneration | No contribution | Minimum contributions due |
| Taxation of remuneration in a limited liability company (SARL) subject to corporate income tax | Salaries and wages | Executive compensation, article 62 of the French General Tax Code |
| Dividends | General legal regime for dividends | Social security contributions on the portion exceeding 10% of the capital, share premiums and current accounts |
| Combining with an employment contract | Possible under strict conditions | Excluded |
These social and tax rules change frequently. Before making any decisions regarding capital distribution or remuneration, have the figures validated by your accountant.
Being in the majority in a social sense does not mean being in control of the assembly
Confusion is easy to see. The "majority" manager, in the corporate sense, may very well only personally hold 30% of the shares. His spouse or co-manager holds the rest.
In a general meeting, each person votes with their own shares. If the spouse or co-manager votes against them, that manager can be outvoted and even removed. Conversely, a manager who holds more than half the shares can block their own removal.
Before you think you're protected, look at who votes, not who counts for the Urssaf.
Manager's remuneration: how to set it without risk?
Mandate and employment contract: the three conditions
All three are required.
technical functions
Clearly distinct from the mandate
Separate remuneration
Separate from that of the mandate
Real relationship of subordination
The most fragile condition
Cumulation possible for a minority or equal manager
Majority managing partner: no additional involvement.
The bylaws or a collective decision, never the manager alone
The law does not mandate any remuneration. The manager's role can be unpaid. When remuneration is involved, the amount and terms are determined by the articles of association or by a collective decision of the partners.
The manager cannot unilaterally set their own remuneration. A raise decided unilaterally, even a modest one, even if justified by the work performed, is an irregularity. It can form the basis for a claim for reimbursement and dismissal for just cause.
The managing partner's vote on his own remuneration
The managing partner can in principle take part in the vote that sets his own remuneration, as Bpifrance Création points out .
This rule has a limit. Excessive remuneration in relation to the company's situation can be challenged by minority shareholders. They can then allege an abuse of majority power.
Forms of remuneration
Compensation can be fixed, variable, or a combination of both. It may include benefits in kind, such as a vehicle or housing. Each element must be stipulated in a decision by the partners, not just the base salary.
For a managing partner, remuneration is combined with dividends. The allocation between the two has different social and tax implications depending on the status, as shown in the table above.
Combining a manager's mandate and an employment contract
A minority or equal shareholder can also be an employee of the company. Three conditions are required: technical functions clearly distinct from the management role, separate remuneration, and a genuine relationship of subordination.
The hierarchical relationship is the most fragile condition. A manager who runs the company alone often has no one above them. France Travail verifies these conditions before granting unemployment insurance benefits.
For a majority managing partner, combining roles is not permitted: they control the company and cannot be subordinate to it, as Bpifrance Création. This is a limitation to keep in mind before any capital reorganization.
Agreements and current accounts, risky transactions
Article L. 223-19
Permitted, under the control of the partners
- Lease of the manager's premises
- Service billed by his own company
- Sale to the manager of a company vehicle
Report to the assembly, without a vote from the person concerned. If not approved, the agreement takes effect, but the manager bears the detrimental consequences.
Article L. 223-21
Prohibited, under penalty of invalidity
- Loan from the company
- Overdraft, current account or otherwise
- Guarantee or endorsement by the company for its commitments to third parties
The prohibition also applies to the spouse, ascendants, descendants and any intermediary person.
Regulated agreements under Article L. 223-19
Any agreement concluded directly or indirectly between the company and one of its managers or partners must be the subject of a report. This report is presented to the general meeting, which then votes on it.
The manager presents this report himself, unless there is an auditor. The manager or the interested partner cannot participate in the vote. His shares are not counted towards the majority.
Common examples: the lease of the manager's premises, a service billed by his own company, the sale to the manager of a company vehicle.
A stricter rule applies when there is no auditor. Agreements entered into by a non-partner manager must then be approved by the shareholders' meeting before they are finalized.
The unapproved agreement takes effect, but it costs
An unapproved agreement is not automatically void. It remains in effect. However, the manager, and where applicable the contracting partner, personally bear the consequences of the contract that are detrimental to the company.
The risk is therefore delayed. It often appears during a transfer of shares, a conflict between partners or insolvency proceedings, when a third party reviews the accounts.
The absolute prohibitions of article L. 223-21
Certain operations are prohibited under penalty of contract nullity. Managers and partners who are natural persons are prohibited from:
- to take out loans from the company;
- to obtain an overdraft facility, whether in a current account or otherwise;
- to have their commitments to third parties endorsed or guaranteed by the company.
The prohibition extends to the spouse, ascendants and descendants of these persons, as well as to any intermediary. Only companies operating a financial institution are exempt for their routine transactions carried out under normal conditions.
Two co-managers in conflict
Two co-managers with equal shares are no longer speaking to each other. One signs a five-year equipment lease agreement that the other considers unnecessary. The lessor was never informed of the disagreement. The company is bound by the agreement, and the dissenting manager can only take action internally.
An increase without a vote
A minority shareholder increases their compensation by simple bank transfer after a successful year. Two years later, a partner discovers the discrepancy in the accounts. They can request reimbursement and cite just cause for dismissal.
A current account that has become overdrawn
A manager charges some personal expenses to her current account as a partner, which becomes overdrawn at the end of the fiscal year. This is an illegal overdraft. A swift, documented rectification, approved by the partners, remains the strongest defense.
When is the manager of a limited liability company (SARL) personally liable?
How long does it take to take action against the manager?
Scale in years, article L. 223-23
3-year
liability action, general case
Departure:
The harmful act, or its disclosure if it has been concealed
10 years.
Act classified as a crime.
Penal
Misuse of company assets: up to 5 years imprisonment and a fine of 375,000 euros
Tax
Joint liability for corporate taxes, article L. 267 of the French Tax Procedures Code (LPF)
Liquidation
Liability for which the company is responsible if mismanagement, and not mere negligence, contributed to the asset shortfall
Civil liability towards the company and partners
Article L. 223-22 of the Commercial Code stipulates that managers are liable to the company or to third parties for three types of faults:
- violations of the legal and regulatory provisions applicable to limited liability companies;
- violations of the statutes;
- the mistakes made in their management.
If several managers participated in the same actions, the court determines each manager's share of the compensation. Partners can also sue for their personal damages.
They can also take social action, alone or in groups. They then obtain compensation for the harm suffered by society itself.
Neither clause nor discharge protects the manager
Any clause in the articles of association that makes corporate action subject to approval by the general meeting is deemed null and void. The same applies to any advance waiver of such action.
No decision of the general meeting can extinguish a liability claim for misconduct in the performance of the duties of the office. The discharge voted on annually therefore does not protect the manager against subsequent legal action.
Liability towards third parties
When dealing with a client, supplier, or landlord, it is generally the company that is responsible for the actions of its manager. The Court of Cassation only recognizes personal liability for a fault separable from their official duties (Cass. com., May 20, 2003, No. 99-17.092).
This constitutes an intentional error of particular gravity, incompatible with the normal exercise of corporate functions, as Lefebvre Dalloz. A simple management error is therefore insufficient.
A three-year deadline for action
Article L. 223-23 sets forth the statute of limitations for actions based on Articles L. 223-19 and L. 223-22. The action is barred after three years from the date of the harmful act or, if it was concealed, from the date of its discovery. The period is ten years if the act is a crime.
The concept of concealment is at the heart of many disputes. An agreement never presented to the partners may start the limitation period from the day of its discovery, and not from the day it was concluded.
Criminal liability
The manager of a limited liability company (SARL) is subject to criminal penalties specific to their role. The best-known of these is misuse of company assets, as defined by Article L. 241-3 of the French Commercial Code.
It consists of using company assets or credit in bad faith for personal gain, in a manner contrary to the company's interests. The penalty is five years' imprisonment and a fine of €375,000.
Tax liability
Article L. 267 of the Book of Tax Procedures allows the manager to be held jointly liable for taxes and penalties owed by the company.
It is necessary that fraudulent maneuvers or serious and repeated non-compliance with tax obligations have rendered recovery impossible. Repeated failure to declare or pay VAT is a prime example.
If the company is in judicial liquidation
When liquidation proceedings reveal an asset shortfall, the court may hold the director liable for all or part of the debts. Article L. 651-2 of the French Commercial Code requires proof of mismanagement that contributed to this shortfall.
Since the Sapin 2 law of December 9, 2016, simple negligence in management is not sufficient. The Court of Cassation reiterated this on October 2, 2024 (Cass. com., no. 23-15.995).
The manager also risks beingbarred from managing a company, particularly if they failed to declare the cessation of payments in a timely manner. safeguard proceedings early remains the most effective protection for the manager.
How can the manager of a limited liability company (SARL) be dismissed or leave?
Does the manager alone own more than half of the shares?
No
Removal by assembly
Majority as defined in Article L. 223-29, or a higher majority as provided for in the statutes.
Before the vote: the manager presents his observations
Without just cause: possible damages and interest
Abrupt dismissal or damage to reputation: compensation is possible, even with just cause
Yes
Legal channels only
Legitimate cause, at the request of any partner. The judge expects documents: accounts, minutes, written exchanges.
Revocation by the partners
Article L. 223-25 of the French Commercial Code allows the partners to remove the manager by the majority required under Article L. 223-29. The articles of association may require a higher majority. The managing partner votes on their own removal.
This has a practical consequence: a manager who alone holds more than half the shares cannot, in fact, be removed by a shareholders' meeting. The other shareholders then have only legal recourse.
Without just cause, damages and interest
The revocation does not need to be justified to be valid. However, if it is decided without just cause, it may give rise to damages.
A valid reason for dismissal may be misconduct by the manager or behavior that jeopardizes the company's interests. Failure to comply with legal and statutory obligations is a frequently cited reason.
Even if based on just cause, dismissal may give rise to compensation if it is abrupt or damages the manager's reputation. In particular, the manager must have been given the opportunity to present their observations before the vote (Cass. com., October 14, 2020, No. 18-12.183).
Assembly or court, how to choose
The manager can also be removed by the courts for legitimate cause, at the request of any partner. This option is available to minority partners, regardless of their shareholding.
The decision is determined by the arithmetic of votes. If the opposing side obtains the required majority, the assembly proceeds more quickly. Otherwise, the court becomes the only option, and it demands supporting documents: accounts, minutes, written correspondence.
The manager's resignation
The manager can resign. The articles of association may stipulate a notice period and a specific form, for example, a registered letter to the shareholders. Adhere to these provisions strictly.
In a tax dispute, the Court of Cassation ruled that the functions end upon resignation, even if unpublished (Cass. com., December 2, 2020, No. 18-21.597). The tax authorities then had to prove that the former manager had remained a de facto director.
We have detailed this ruling in our article on the liability of a resigning manager.
Challenging the decision since the 2025 reform
Ordinance No. 2025-229 of March 12, 2025, reformed the rules governing nullity in company law. It entered into force on October 1, 2025. The grounds for nullifying corporate decisions are now more limited.
For a dismissed manager, the strategy often shifts from annulment to compensation. For the partners, due process remains the surest protection against a challenge.
A dismissal not included on the agenda is not necessarily irregular, according to the same ruling of October 14, 2020. On the other hand, voting without allowing the manager to explain exposes the company to a claim for compensation, even with a serious reason.
Costly mistakes for LLC managers
Three common mistakes
- Paying oneself without a shareholder vote is not permitted. A monthly transfer does not constitute a collective decision. Without minutes, each payment can be contested.
- Failing to approve the financial statements. Article L. 223-26 requires that they be submitted to the shareholders within six months of the financial year-end, unless extended by a judge. Failure to comply gives rise to an application for an injunction.
- To believe that approval erases everything. No shareholders' decision extinguishes a liability claim for mismanagement.
Three reflexes that protect
- Keep an up-to-date record of decisions. Appointments, remuneration, agreements, approval of accounts: every important decision has its written and dated record.
- Submit every agreement you have with your partners. Lease, service agreement, sale of property: the annual report on agreements prevents personal risk.
- Review the articles of association when the situation changes. Arrival of a co-manager, entry of an investor, departure of a partner: specify the powers, majorities and duration of the mandate.
How we approach a case involving a manager of a limited liability company (SARL)
Our first instinct is not to discuss the substance of the management. We begin with the register of decisions and the minutes of the last three financial years.
From the manager's perspective, this review reveals the issues that need to be addressed before a partner can use it. From the partners' perspective, it distinguishes between valid reasons and those that would not hold up in court.
The four written records to keep up to date
Nomination, decided and then published
Remuneration, set by the articles of association or voted on by the partners
Agreements with the manager, submitted to the assembly
Accounts, approved within 6 months of the closing date
Frequently asked questions about the manager of a limited liability company (SARL)
Is the manager of a limited liability company (SARL) personally liable?
Not in principle, but he is liable for his own mistakes: violation of the law or articles of association, mismanagement, or criminal offense. In judicial liquidation, he may bear part of the liabilities. This requires mismanagement that goes beyond simple negligence (Article L. 651-2 of the French Commercial Code).
Can a minority shareholder have the manager dismissed?
Yes, through legal channels. Article L. 223-25 of the French Commercial Code allows any shareholder, regardless of their share of the capital, to request the removal of the manager for legitimate reasons. It must be proven, with supporting documents, that maintaining the manager is detrimental to the company. A simple strategic disagreement is rarely sufficient.
Can the manager set his own remuneration?
No. It is set by the articles of association or by a collective decision of the partners. Remuneration that the manager awards or increases unilaterally is irregular: the partners can demand reimbursement. The managing partner can, in principle, vote on their own remuneration, subject to the prohibition of abuse of majority power.
Do two co-managers have to sign together?
No. Each co-manager holds the manager's powers separately and is solely responsible for binding the company. One co-manager's objection to the other's actions has no effect on third parties, unless they were aware of it. Establish the division of powers in writing and inform your partners.
How long do the partners have to take action against the manager?
Three years, according to Article L. 223-23 of the French Commercial Code, for mismanagement or an unapproved agreement. The limitation period begins from the date of the harmful act, or from its discovery if it was concealed. It increases to ten years when the act constitutes a crime.
The register of decisions provides better protection than the powers
The manager of a limited liability company (SARL) has very broad powers vis-à-vis third parties. This is precisely why the law multiplies internal controls: voted remuneration, declared agreements, approved accounts, and social action that cannot be neutralized.
Whether you are a manager or a partner, the decisive issue is rarely one of powers. It's one of written records. A manager whose every decision is voted on and archived is difficult to challenge.
The corporate law department, led by Romain Picard, assists managers and partners from the drafting of articles of association to litigation related to their removal. Discover our expertise in corporate law and mergers and acquisitions.