Newsletter 1st quarter 2018 – Business Law – April 2018
Summary
Case law
Contracts – commercial law
- Survival of the limitation of liability clauses in the event of termination of the contract
- Compliance of the clauses of the franchise contract with competition law
- Consequences of the inaccuracy of the turnover in the deed of transfer of goodwill
Commercial leases
- What is the content of the eviction indemnity?
- Exceptions to the rent ceiling in the event of renewal
- The nullity of the lease-management contract entails the forfeiture of the right to renewal of the commercial lease contract
Corporate law
- A shareholders' agreement can be terminated at any time if no term is provided
- A contract may be terminated by the salaried director on behalf of the company, even in the absence of delegation of power, if the company tacitly ratifies the termination decision.
- EIRL and asset allocation rules: Caution
- Intra-Community transfer of a company's registered office and freedom of establishment
- Failure to take over acts performed on behalf of a company in formation cannot be automatically noted by the judges of the fund.
- The principle of intangibility of the agenda
- Survival of the delegation of powers after the termination of the functions of the executive having granted it
- No appeal is possible against the application of article 1843-4 of the Civil Code with regard to the transfer of shares
- The lack of effective reconstitution of own funds and mismanagement
- The consequences of an act performed contrary to the social interest
- Opposability of the manager's power limitation
Contracts – commercial law
Survival of the limitation of liability clauses in the event of termination of the contract
Com. February 7, 2018 (n°16-20.352) FS-P+B+I:
The termination of the contract entails the retroactive annihilation of the contract.
It is on this basis that the trial judges considered that the party responsible for the damage could no longer rely on the clause limiting its contractual liability.
Which had been approved by the Court of Appeal. The Court of Cassation considers that the clauses limiting contractual liability remain applicable even in the event of termination of the contract.
Compliance of the clauses of the franchise contract with competition law
Cas. Com December 20, 2017 (No. 16-20.500):
Are exclusive supply clauses in a franchise agreement contrary to competition law?
The Court of Cassation recalls that the clauses which organize the control essential to the preservation of the identity and the preservation of the reputation of the network do not constitute restrictions of competition.
More specifically, if an exclusive supply clause is necessary so that each franchisee has a uniform quality and taste of the products manufactured by a particular supplier according to a process of its own, it is therefore necessary for the image and identity of the network.
Cas. com 8 June 2017, n° 15-27.146, n° 843 FD
It should also be remembered that for a clause of non-reaffiliation of the franchisee after the end of the contract to be valid, it must be limited in its object and in space.
In this case, the non-reaffiliation clause not being geographically limited, the Court of Cassation approved the judgment of the Court of Appeal having considered it to be invalid.
Consequences of the inaccuracy of the turnover in the deed of transfer of goodwill
Cas. com., March 21, 2018, n° 16-24.245, n° 240 FD
In case of inaccuracy of the mentions appearing in the deed of sale of the goodwill, the purchaser has one year to actuate the action in guarantee, as from the date of possession of the goodwill.
Commercial leases
What is the content of the eviction indemnity?
Cas. 3rd civ. December 7, 2017 (No. 15-12.452, 15-12.578 and 15-12.912) FD:
The lessor notified the lessee of a leave with refusal of renewal and an offer of eviction compensation taking effect 9 months after this leave.
During this period, the lessee transfers his business and informs the transferee that the lease is coming to an end.
The question then arose as to whether, in order to determine the amount of the eviction compensation, it was appropriate to take into account, in addition to the market value of the property plus additional costs (such as moving costs, reinstallation, transfer duties to acquire a new fund), compensation for the commercial disturbance.
It is generally accepted that an indemnity for commercial disturbance, intended to repair the damage suffered by the trader on the occasion of the redemption of the fund, is included in the eviction indemnity.
The Court of Appeal had considered that the assignee of the fund, having knowledge of the notice given by the lessor, could not claim compensation for commercial disturbance.
The Court of Cassation censured this decision considering that the compensation for eviction must necessarily include compensation for commercial disturbance.
Exceptions to the rent ceiling in the event of renewal
Cas. 3rd civ., 15 Feb. 2018, No. 17-11866, No. 17-11.867, No. 170 FS-P + B + I
The principle: ceiling on rents in the event of renewal of the commercial lease.
However, there are certain exceptions provided for by the Commercial Code and in particular in the event of modification:
- the characteristics of the premises considered;
- the destination of the premises;
- local marketability factors;
- but also of the respective obligations of the parties.
The contractual modification of the rent constitutes a significant modification of the obligations of the parties justifying in itself the removal of the ceiling from the rent.
In this case, the parties have agreed, by amendment, to modify the rent for the current lease and to waive proceedings to review the rent at the rental value during the lease in the context of a review action based on article L. 145-39, which had been initiated.
The endorsement constituting a conventional modification of the lease, it characterizes the implicit renunciation of the lessee to the capping rule.
The nullity of the lease-management contract entails the forfeiture of the right to renewal of the commercial lease contract.
Cas. 3rd civ., March 22, 2018, n° 17-15.830, n° 284 F- P + B
The lessee of a commercial lease gives his business in lease-management without having operated his business for two years before the conclusion of the said contract even though it is a condition provided for in Article L. 144-3 of the Commercial Code.
The lessor gives notice to the lessee with refusal of renewal and without compensation for eviction on the grounds of the nullity of the lease-management contract.
The Court of Cassation rules that the penalty for a lease-management contract concluded in violation of the conditions of Article L. 144-3 being absolute nullity, this results in the forfeiture of the right to renewal of the commercial lease. provided for in Article L. 144-10 of the Commercial Code.
Corporate law
A shareholders' agreement can be terminated at any time if no term is provided
Cass, Com, December 20, 2017, n°16-22.099
The solution adopted by the Paris Court of Appeal, then adopted by the commercial, financial and economic chamber of the Court of Cassation on December 20, is a very instructive reminder that when a shareholders' agreement does not mention no limitation of duration and does not include any determined or determinable term, said agreement may be terminated unilaterally at any time.
A contract may be terminated by the salaried director on behalf of the company even in the absence of delegation of power if the company tacitly ratifies the termination decision.
Cas. com. 17-1-2018 n 16-22.285
The commercial, financial and economic chamber of the Court of Cassation, dismissed in a judgment delivered on January 17, 2018, the argument that had been put forward by the commercial partner of the company who had been opposed to the termination of a protocol brokerage had sued the company for cancellation of the said termination on the grounds that the salaried director did not have a delegation of power.
The Court considers that the company having tacitly ratified the termination decision taken on its behalf by the salaried director, there was therefore no need to examine whether the latter had been given power to proceed with the termination of the said contract.
EIRL and asset allocation rules: Caution
Cass, Com, February 7, 2018, n°16-24.481
The interest of this judgment delivered by the Commercial, Financial and Economic Chamber of the Court of Cassation on February 7, 2018 is in particular to recall that in accordance with the provisions of Article L.526-6 of the Commercial Code, the individual entrepreneur with limited liability may allocate to his professional activity assets separate from his personal assets.
The constitution of this heritage results in particular from the filing in a register of legal publicity and from a declaration which must in particular include a descriptive statement of the property, rights, obligations or securities relating to the professional activity, in kind, quality, quantity and value (articles L526-7 and L.526-8 of the Commercial Code). In the absence of such a declaration or in the event of the filing of an incomplete declaration, in the event that the individual entrepreneur with limited liability is notably placed in judicial liquidation, the confusion of assets could be operated so that this latter is liable for debts contracted during the exercise of his activity on his personal assets.
The greatest caution is therefore called for.
Intra-Community transfer of a company's registered office
CJEU, 25 October 2017, case C-106/16 Polbud – Wykonawstwo sp. zoo
The Court of Justice of the European Union considers that the regulations of the Member States cannot impose any obligation of liquidation on companies wishing to transfer their registered office to another Member State.
In addition, the transfer of the registered office of a company without moving its real seat comes under the freedom of establishment.
Failure to take over acts performed on behalf of a company in formation cannot be automatically noted by the judges of the fund.
Cas. 3rd civ., 25 Jan. 2018, n° 17-10.885, n° 44 FD
Reminder: Acts performed on behalf of a company in formation may be required by the annexation to the articles of association of a statement of commitments, either by giving mandate to one of the partners to make commitments on behalf of the company. , or by decision taken, unless otherwise agreed, by a majority of the partners.
In this case, an architect's contract was concluded between a client who is a natural person and an architect.
This natural person has set up an SCI. Given certain breaches of contract, SCI sued the architect and his insurer for compensation. The Court of Appeal ruled that SCI's action was inadmissible not because of the lack of a contractual link invoked by the insurer but because of the absence, noted ex officio, of taking over the disputed contract according to one of the procedures for taking over commitments provided for by the applicable regulations.
The Court of Cassation censured the decision of the judges on the merits considering that they cannot automatically raise the plea of the absence of resumption of the acts by the SCI without first inviting the parties to present their observations.
The principle of intangibility of the agenda
Cas. com., 14 Feb. 2018, n° 15-16.525, n° 131 F-P+B
The general meeting of an LLC is convened for the purpose of appointing auditors.
The corresponding resolution is rejected by the majority shareholder who proposes the appointment of auditors different from the first ones, which appointment is then submitted to a vote.
The manager refuses to take into account the vote on the amended resolution. The Court of Cassation recalls that by virtue of the principle of the intangibility of the agenda, the general meeting cannot deliberate on a draft resolution not registered on the agenda. Any decision taken in violation of this rule is void except in the following cases:
- the meeting may modify by means of amendments proposed during the meeting, if it does not take out the agenda of the draft resolutions submitted to it.
- dismissal of corporate officers who may intervene on a simple meeting incident or on the basis of an agenda mentioning only the examination of the situation of the company or the approval of the accounts and the discharge of the management;
- matters of minor importance attached to the rubric of miscellaneous matters and matters which are the necessary consequence of the deliberations entered on the agenda.
Survival of the delegation of powers after the termination of the functions of the executive having granted it
CA Paris, ch. 5-9, 25 Jan. 2018, No. 17/01883
The Court of Appeal recalls that in the event of a change of management, the delegations of powers granted by the former manager remain as long as they are not revoked by his successor.
No appeal is possible against the application of article 1843-4 of the Civil Code with regard to the transfer of shares
Cass, Com, February 14, 2018, n°16-24790
The Court of Cassation recalls in particular in this judgment that when the parties have agreed to use the provisions of article 1843-4 of the Civil Code in order to have the sale price of the shares fixed by an expert, no appeal is possible, neither against the ordinance taken on the basis of this text, nor against the decision interpreting it.
The lack of effective reconstitution of own funds and mismanagement
Cas. com., 24 Jan. 2018, n° 16-23.649, n° 43 FD
The manager of a limited liability company may be condemned to bear part of the insufficiency of assets of the company, placed in judicial liquidation, for having committed several management faults which contributed to this insufficiency.
The question here was whether the failure to effectively replenish equity constituted a mismanagement.
The Court of Cassation considers that "the absence of effective regularization, within the legal period, of the situation of the equity capital of a SARL can only be attributed to the partners and not to the managers, to whom it can only be blamed for their abstaining from summoning the shareholders to decide on the consequences of this situation. ".
The consequences of an act performed contrary to the social interest
Cas. com. 14 Feb 2018, n° 15-24.146, n° 132 FD
A deed concluded in the name of an LLC is contrary to its corporate interest when it compromises the very existence of the company.
This conflict with the corporate interest is not a cause of nullity if the act in question falls within the corporate purpose of the company.
In this case the act will be valid.
Opposability of the manager's power limitation
Cas. com., 14 Feb. 2018, n° 16-21.077, n° 143 FD
In this case, the partners of a company had limited the powers of the manager in the context of an extraordinary general meeting, particularly with regard to the conditions under which she could take legal action on behalf of the company.
To do so, she had to obtain prior authorization from the partners. The opposing party, in order to have the summons issued to it, mentioned the limitation of the powers of the manager, who had not obtained the prior authorization of the partners.
The Court of Cassation recalls that a third party may rely on the statutes of a legal person to justify the lack of power of a person to appear in a dispute as its representative.
