Related party agreements lawyer in Paris: securing contracts between director, shareholder and company.

An ordinary agreement (convention courante) is concluded in the normal course of the company's business and on usual market terms. It is outside the authorisation and approval procedure for related-party agreements (Article L. 227-11 for the SAS, Article L. 225-39 for the SA). A related-party agreement, by contrast, concerns an unusual transaction or one concluded on specific terms: a lease between the director and the company, services between related companies. The boundary is not always obvious: a rent set at the market price may be ordinary, while the same rent, if overvalued, becomes a related-party agreement.

In a traditional SA, prior authorisation is given by the board of directors or the supervisory board, and final approval by the ordinary general meeting on a special report of the statutory auditor (Article L. 225-38). In an SAS, prior authorisation is not mandatory unless the articles of association provide for it: the shareholders decide on a report of the statutory auditor or the chairman (Article L. 227-10). In an SARL, the shareholders' meeting decides on a report of the manager or the statutory auditor; the manager or shareholder concerned does not take part in the vote (Article L. 223-19).

An agreement that is not approved nevertheless takes effect: it is not automatically annulled. However, the person concerned and, where applicable, the other directors bear the harmful consequences for the company (Article L. 227-10 for the SAS, Article L. 223-19 for the SARL). In an SA, Article L. 225-42 allows the company to bring an action for nullity within three years of the agreement, extended if it was concealed. The nullity may be cured by a later vote of the general meeting on a special report.

The proof rests on three documentary pillars dated before signature. First pillar: an independent study (property valuation, sector expert opinion, transfer pricing study). Second pillar: traceability of the service actually provided, in particular through time sheets for management fees and monthly monitoring of performance. Third pillar: comparison with the terms applied to comparable third parties. The absence of any one of these pillars weakens the defence if the agreement is challenged.

Yes, and it is the most frequent case. Article L. 225-38 expressly covers agreements in which the director is indirectly interested. These include: agreements with a company in which the director holds a stake, holds a corporate office or has a spouse involved; agreements with a close relative; agreements with a family SCI of which the director or the director's spouse is a partner. A director who is in doubt should have the characterisation decided by the board or the statutory auditor before signature.

Very often, yes. If the subsidiary's director is also a shareholder or director of the holding company, the services agreement falls within the scope of Article L. 227-10 (SAS) or L. 223-19 (SARL). The agreement must be documented by a precise contract, time sheets showing the work actually done, a pricing method consistent with a market cost, and annual approval. Failing this, the agreement is exposed to tax requalification and to an action for the interested director's liability for mismanagement.

A shareholder current account is not in itself systematically a related-party agreement, but its terms almost always are. A blocking agreement, remuneration at a rate above the tax rate, the grant of a guarantee or the setting of repayment terms must follow the related-party agreement procedure. In an SARL, an unremunerated advance by a manager who is not a shareholder is subject to prior approval by the shareholders' meeting where there is no statutory auditor. The firm's practice: have the terms of the current account approved each year at the same time as the annual accounts.

For an SA, an action for nullity of an agreement concluded without prior authorisation is subject to a three-year limitation period running from the agreement (Article L. 225-42). If the agreement was concealed, the period runs from its disclosure. For an action for liability against the interested director, the five-year limitation period of Article 2224 of the French Civil Code (Code civil) applies. A minority shareholder who discovers a suspect agreement must therefore act quickly, starting with a management expert report (Article L. 223-37 for the SARL, L. 225-231 for the SA).

The statutory auditor prepares the special report on related-party agreements presented to the general meeting. This report describes the agreements and states their purpose, their essential terms and the identity of the persons concerned. The auditor does not pass judgment on whether the agreement is advisable; the auditor informs the shareholders. Where there is no statutory auditor, it is the chairman who prepares this report in an SAS. A careless or incomplete report exposes the auditor to civil and professional liability, and weakens the agreement.

Yes, in several cases. For an SA, the nullity of an unauthorised agreement may be cured by a later vote of the general meeting on a special report of the statutory auditor setting out the circumstances. For the SAS and the SARL, an agreement that has not been approved is not void; it is enough to present it at the next meeting for it to be duly approved. Regularisation does not, however, wipe out the director's possible liability for the harmful consequences already suffered.

Article L. 225-43 (SA) and L. 223-21 (SARL) prohibit the company from granting directors who are individuals (and certain close relatives) a loan, an overdraft on a current account or a guarantee. These agreements are void by operation of law, and cannot be cured by later approval. The prohibition does not apply to directors that are legal entities (parent companies, holding companies). For the SAS, Article L. 227-12 extends these prohibitions to the chairman and the directors.

No, where the remuneration is set by the competent collegiate body (the shareholders' meeting in an SARL, the board of directors or the general meeting in an SA depending on the articles of association). The Court of Cassation has ruled this clearly (Cass. com., 4 May 2010, No. 09-13.205). The director may therefore take part in the vote on their own remuneration in an SARL, provided it is an institutional determination. By contrast, a specific agreement on a particular benefit (stock options, supplementary pension, severance pay) falls within the related-party agreement regime.

No. The statutory threshold is set at 10% of the voting rights. Only agreements concluded between the company and a shareholder exceeding this threshold fall within the scope of Article L. 225-38 (SA) or L. 227-10 (SAS). In an SARL, the regime covers all shareholders with no threshold (Article L. 223-19). This difference is crucial: a minority shareholder of an SAS holding 7% may freely enter into an agreement with the company, whereas a shareholder of an SARL is always subject to the procedure.

Fees vary with the scope and the number of agreements to be audited. For a standard SME with 5 to 15 agreements over three financial years, the fixed fee is around €3,000 to €6,500 excl. VAT for a full audit, the characterisation of the agreements and a regularisation memo. For a group with a holding company and several subsidiaries, the assignment is billed on time spent, with a capped budget. Litigation is billed separately, depending on the stakes and the court. A detailed quote is provided after a first analysis of the file.

Yes, where the company has its registered office within its territorial jurisdiction. The commercial court of Paris (tribunal de commerce) is competent for actions for nullity of a related-party agreement, actions for liability against the interested director and management expert reports. For companies with their registered office outside the Paris region, the commercial court of the registered office is competent. Shareholders' agreements may provide for a jurisdiction or arbitration clause. The firm regularly pleads before the Paris commercial court, both for claimants and for defendants.