In a company, if legal documents are signed or decisions are made in violation of specific legal or statutory requirements, they may be annulled by the court. To enhance the legal predictability of company formations and decisions, public authorities issued an order on March 12, 2025, clarifying and simplifying the regulations concerning nullities. The reform aims to reduce the likelihood of court annulments of such decisions and maintain their legal stability.
Note: These rules took effect on 1 October last year.
The main changes are as follows.
Grounds for Declaring a Company Null and Void
A company may now be declared null and void only on the following grounds:
- Legal incapacity of all founders.
- Violation of the requirement for a minimum of two partners, excepting EURLs and SASUs.
Previously, the grounds for declaring a company null and void were broader. For example, nullity could arise from an unlawful corporate purpose or non-compliance with the rules governing the formation of the company contract, such as defects in consent.
Causes of Nullity of Corporate Decisions
Unless otherwise stipulated by law, breaches of the articles of association are no longer grounds for nullifying corporate decisions. A corporate decision, whether taken collectively by shareholders or executed internally by company directors, may only be declared null and void if it violates a mandatory provision of company law or falls under recognized causes of contract nullity.
An important exception exists for simplified joint stock companies (SAS
Three conditions for declaring nullity
The annulment of a decision is now subject to stringent regulation, requiring the court to consider the actual consequences of any irregularity associated with the contested decision.
Accordingly, unless specified otherwise, a decision made within a company may only be declared null and void by judicial authority if the following three conditions are fulfilled:
- the party seeking annulment must demonstrate that the identified irregularity has caused them harm.
- the irregularity cited must have affected the fundamental substance of the decision.
- the consequences of making the decision null and void should not be disproportionate to the detriment suffered by the company’s interests.
Limitation of Cascading Nullities
A notable development is the restriction imposed on cascading nullities, which have the potential to significantly impact corporate operations. Specifically, the nullity resulting from the irregular appointment or retention of a company organ (such as the chairperson or managing director) or a member of a collegial body (including board members) no longer automatically invalidates the decisions made by that organ.
Furthermore, if the retroactive application of a decision’s nullity would result in clearly disproportionate consequences for the company’s interests, the court may, at its discretion, defer the effects of such nullity.
Reduction of the limitation period
The limitation period for filing a request to annul a company or a corporate decision made after incorporation has been shortened, except in certain cases, from three years to two years.
(1) Sociétés par Actions Simplifiées (SAS)
Order No. 2025-229 of 12 March 2025, Official Journal of 13 March
Copyright : Les Echos Publishing 2025
Crédits photo : BrianAJackson