Management Bodies in the SAS: Actors, Powers, and Liability

The Société par Actions Simplifiée (SAS) is today one of the most widely used corporate forms in France, both by start-ups seeking flexibility, by family groups wishing to preserve control, and by joint ventures created between industrial or financial partners. Its success rests largely on the freedom it grants to shareholders in the design of governance. Unlike the Société Anonyme (SA), where the law imposes rigid boards and controls, or the SARL, where the law constrains the manager’s powers, the SAS offers statutory flexibility which allows tailor-made structures.

But this freedom also brings responsibility. The law imposes only one mandatory organ – the president – while leaving all other governance bodies to the discretion of the shareholders. This requires careful drafting of the bylaws to avoid gaps, conflicts, or hidden liabilities. To understand the SAS’s governance system, one must examine the roles of the president, optional directors, internal bodies, the scope of directors’ liabilities, the risks associated with de facto managers, and the intervention of judicial administrators in case of crisis.

1. The President: the Only Mandatory Management Body

A legal obligation under Article L. 227-6 Commercial Code

French law is clear: an SAS cannot exist without a president. Article L. 227-6 of the Commercial Code states that the president is the legal representative of the company. This means that he or she is the only person recognized by law as having the authority to bind the company in dealings with third parties. The appointment of the president is not optional: without it, registration of the SAS at the RCS (Registre du Commerce et des Sociétés) is impossible.

The president may be:

• A natural person (individual), whether or not a shareholder;

• A legal person (such as a holding company) represented by its own legal representative;

• A founder, an outside investor, or a professional manager recruited after incorporation.

This wide choice allows for great flexibility in structuring corporate groups, in separating ownership from management, and in organizing succession. However, it also requires shareholders to draft bylaws that clearly regulate appointment procedures, duration of mandate, conditions of dismissal, and rules for succession, in order to prevent governance deadlocks.

The president’s powers: broad externally, limited internally

Externally, the president’s powers are almost unlimited. He may sign contracts, hire employees, sell assets, or borrow money, without any special delegation. His acts bind the SAS even if he has exceeded the limits set internally in the bylaws. Article L. 227-6, paragraph 2, specifies that internal limitations are unenforceable against third parties acting in good faith.

Internally, however, the bylaws can restrict his powers: requiring shareholder approval for major investments, sales of strategic assets, or fundraising. These restrictions are valid only between shareholders and the president; if violated, the president incurs liability toward the company, but third parties remain protected.

Case law has repeatedly confirmed that a third party acting in good faith may rely on the apparent powers of the president, even if the bylaws required shareholder approval.

2. Optional Directors: a Statutory Creation

Managing Directors (DG) and Deputy Managing Directors (DGD)

The SAS bylaws may provide for the appointment of additional executive officers: managing directors (directeurs généraux, DG) and deputy managing directors (directeurs généraux délégués, DGD). These officers do not exist by law; they exist only if the bylaws create them.

If the bylaws grant them representation powers, they become legal representatives of the company with the same external authority as the president. They may therefore bind the SAS in all acts vis-à-vis third parties. This was confirmed by the Mixed Chamber of the Cour de cassation, 19 November 2010, no. 10-10.095, which held that a managing director duly empowered by the bylaws is a full legal representative of the SAS.

This solution is particularly useful in:

• Large groups, where a DG may manage daily operations while the president ensures strategic control;

• Fast-growing start-ups, where different DGs may be assigned geographic areas, product lines, or financial supervision;

• Joint ventures, where DGs appointed by different partners ensure balance of powers.

Internal limits and dismissal

The bylaws may regulate the appointment, dismissal, remuneration, and scope of powers of DGs and DGDs. However, just as for the president, internal restrictions are not enforceable against third parties. If a DG exceeds internal limits, the company remains bound, and recourse lies in an action for liability against the DG.

3. Internal Committees and Bodies: Towards Tailor-Made Governance

Beyond statutory directors, the SAS allows shareholders to create internal bodies with advisory or decision-making powers. These are not legal representatives but play a central role in strategic decision-making.

Examples include:

• Management committees, bringing together several directors and key managers to decide on strategy, budgets, or recruitment;

• Supervisory boards, inspired by the dualist system of SAs, tasked with monitoring management decisions without exercising direct power;

• Founders’ committees, used to reserve veto rights for founding shareholders on major issues such as amendment of bylaws, transfer of shares, or entry of new investors.

Although these bodies have no external powers unless expressly given representation authority, they are fundamental in practice for distributing internal control, avoiding conflicts, and reassuring investors.

4. The Corporate Mandate: Status and Liability of SAS Directors

Status of corporate officers

The president and directors of the SAS exercise a corporate mandate. This status is distinct from employment:

• They are not employees, unless a separate employment contract exists for distinct technical functions, under conditions of subordination and remuneration;

• They do not benefit from labor law protections such as minimum wage, redundancy rules, or paid leave;

• Their remuneration is not a salary but a corporate officer’s compensation, freely set in the bylaws or by collective decision of shareholders.

Civil, criminal, and tax liability

SAS directors incur three main types of liability:

1. Civil liability: under Article 1240 Civil Code, directors may be held liable for management faults that cause harm to the company or to third parties. Example: imprudent investments or concealment of losses.

2. Criminal liability: directors are exposed to offences such as misuse of company assets, fraudulent presentation of accounts, tax fraud, or obstruction of audits. Penalties may include fines, imprisonment, and disqualification.

3. Tax liability: directors may be personally liable for unpaid taxes where fraud or gross negligence is proven. Article L. 267 of the Livre des Procédures Fiscales allows tax authorities to transfer liability to managers who deliberately caused tax evasion.

In insolvency, a president found guilty of gross mismanagement may be ordered to bear part of the company’s debts (comblement de passif) or be subject to a management ban.

5. The De Facto Director: Power Exercised Without Title

Definition

A de facto director (dirigeant de fait) is someone who, without being legally appointed, actually manages the company on a continuous and independent basis. This can be a majority shareholder, a shadow manager, or even a former director who continues to act after dismissal.

Legal consequences

French courts treat de facto directors as if they were de jure directors. They may therefore be held liable:

• Civilly, for mismanagement;

• Criminally, for company offences such as misuse of assets;

• Fiscally, for unpaid taxes where they participated in fraudulent schemes.

Case law is strict: anyone who behaves as a director assumes the full liabilities of a director, even without official appointment.

6. Judicial Intervention: The Interim Administrator

In case of paralysis – conflict among shareholders, vacancy of the presidency, or serious fraud – the Commercial Court may appoint an interim administrator (administrateur provisoire).

This is an exceptional measure, justified only when:

• The company’s functioning is impossible,

• The corporate interest is in imminent danger,

• Appointment of a temporary manager is the only way to protect the company.

The administrator’s powers are defined by the court and may cover all management acts or be limited to specific missions. During his tenure, he is the legal representative of the SAS.

7. How Does SAS Management Differ from SA and SARL?

The Société par Actions Simplifiée (SAS) occupies a unique position in French company law. It borrows certain elements from joint stock companies, such as the Société Anonyme (SA), but also offers the operational simplicity found in private limited liability companies (SARL). Its distinctive feature lies in its unprecedented flexibility in governance, which makes it stand apart from both the SA and the SARL. Below are the major differences:

Conclusion: A Governance Model of Freedom and Vigilance

The SAS is unique: it imposes only one mandatory organ, the president, and leaves everything else to the will of the shareholders. This allows customized governance, adaptable to each project. But this flexibility requires rigorous drafting of bylaws and constant attention to actual practices.

• Externally, the president (and possibly DGs) bind the company broadly.

• Internally, shareholders may create committees, supervisory boards, or founders’ councils to balance powers.

• Directors incur heavy civil, criminal, and tax liability, even if they are not formally appointed.

• In case of crisis, courts may impose a temporary administrator.

In short, the law sanctions acts, not titles. Governance of an SAS must therefore be designed with precision, implemented with vigilance, and supervised with legal advice to avoid hidden liabilities.