In a ruling handed down on November 26, 2025,[1] the Commercial Chamber of the French Cour de Cassation (Supreme Court for Judicial Matters) held that an abuse of power (abus de pouvoir) by a corporation’s board of directors may result in the board’s decisions being declared null and void. Although it did not find that such an abuse of power was established in the case before it, the French supreme court nevertheless formally recognized a new ground for nullity in corporate law. This development aligns with the well-established principle of corporate veil and serves as a reminder that the company’s interest must always guide decision-making within corporations.
Case Facts
A French société anonyme (public limited liability company) operated a casino under a public service delegation agreement and owned the buildings in which the casino was located. As the agreement was coming to an end, the company’s board of directors concluded that the corporation faced a risk of losing the buildings, as they could potentially be classified as “reversion assets” belonging to the public domain. To mitigate this risk, the board decided to separate ownership of the real estate from the operation of the casino. Acting on this decision, the company did not apply for renewal of the service contract for the casino and instead leased the premises to a newly incorporated “sister” company specially set up by the majority shareholder, which was subsequently awarded the new public service delegation by the municipality.
Minority shareholders contended that the board’s decision effectively caused the corporation to relinquish a profitable line of business in favor of a newly formed entity controlled exclusively by the majority shareholder. On this basis, they initiated litigation against the corporation and its controlling shareholder, seeking annulment of the corporate decision and related agreements on the ground of abuse of majority power.
Statement of Principle
The court set forth the following principle:
[I]n accordance with Article 1833 of the French Civil Code, a decision of the board of directors of a limited company may be declared null and void for abuse of power only if it is demonstrated that such decision is contrary to the company’s interests and was taken for the exclusive benefit of members of the board of directors or any other specific person, in particular shareholders. The existence of an abuse of power is assessed as of the date on which the challenged decision was made.[2]
In this case, the Commercial Chamber dismissed the appeal, declining to find that abuse of power had occurred. Even though the restructuring adopted by the board resulted in lower corporate profits and benefited the controlling shareholder, it was not demonstrated that the decision was contrary to the corporation’s interest, since it enabled the company to protect a strategic asset.
Scope of the Ruling
This ruling establishes a new ground for declaring corporate decisions null and void. The scope of the ruling extends beyond the mere board of directors of the French société anonyme. The broadened reach of the abuse-of-power doctrine therefore calls for heightened vigilance from corporate managers and their advisers, including where decision-making rules are governed by shareholder agreements or voting agreements. However, the concept remains difficult to establish in practice, as the case at hand illustrates. While the court’s confirmation that an abuse of power may give rise to nullity is unsurprising, the decision raises significant questions, particularly in light of the recent legislative reform governing the nullity of corporate decisions under French law.
Definition of Abuse of Power in a Board of Directors: Substantive Conditions and Terminology
In this ruling, the Cour de Cassation draws on terminology from criminal law[3] to establish a new concept, as evidenced by the extensive publicity given to its decision. The ruling’s statement of principle clearly sets out two cumulative conditions for a board decision to be characterized as abusive. The decision must be
- contrary to the corporation’s interest (intérêt social); and
- taken for the exclusive benefit of certain persons, such as directors or shareholders.
This definition is close to that of the concept of abuse of majority power (abus de majorité), though it is not identical.
Abuse of Majority Power
In the well-known principle laid down in the judgment of April 18, 1961,[4] the court defined the conditions required to characterize an abuse of majority power: a decision taken (i) for the exclusive benefit of the majority shareholder, (ii) to the detriment of the company’s interest.
In the past, French case law has used the concept of abuse of majority power to examine decisions made by a board of directors,[5] or even by a noncollegial body such as a managing partner,[6] and determine whether such decisions should be declared null and void.
In substance, the conditions for abuse of power closely parallel those of abuse of majority power. It should be noted that the claimants actually brought their case on the basis of an alleged abuse of majority power.
Abuse of Power: Clarifying the Terminology
The terminological distinction between abuse of majority power (abus de majorité) and abuse of power (abus de pouvoir) reflects the need to differentiate between decisions made by a board of directors and decisions made by shareholders. Accordingly, abuse of power refers to a decision taken in the interests of “specific persons,” with board members cited first among them.
As stated in the explanatory note to the judgment, directors “are not, legally speaking, the representatives of the shareholders who appointed them”;[7] they must exercise their mandate in the interests of the company and not in the interests of shareholders,[8] with the legal entity acting as a buffer between the board and the shareholders.
Beyond a terminological clarification, the court appears to confirm the view that directors are vested with a specific “power,” the abuse of which may lead to judicial sanction.[9]
Date of Assessment of the Abuse of Power
The court further clarifies that the abuse of power is assessed as of the date on which the challenged decision was made. This distinction is significant because it precludes the court from considering the actual consequences of the alleged abusive decision when determining whether an abuse of power occurred.
The Broad Scope of Abuse of Power: Vigilance Needed
Applicability to Other Corporate Forms
The ruling was rendered in relation to decisions made by the board of directors of a société anonyme. However, the court’s decision to provide extensive publicity for the judgment suggests that its scope may go beyond this specific context. Substantively, the reference to Article 1833 of the French Civil Code, a provision falling under the section known as “common corporate law,” reinforces the idea that the ruling on abuse of power could apply to all types of corporations.[10]
Extending Abuse of Power to Other Corporate Bodies
This shift from abuse in the exercise of a shareholder’s voting rights to abuse in the exercise of powers attached to a corporate function suggests that abuse of power could extend to all corporate bodies, whether collegial or not. Accordingly, it could apply to the decisions made by the president of a simplified joint stock company (société par actions simplifiée) or the manager of a limited liability company (société à responsabilité limitée).
Ultimately, abuse relates to the exercise of power by any corporate officer, regardless of the legal form of the corporation.
Abuse of Power: No Contractual Avoidance
The likely mandatory nature of this prohibition should serve as a warning to practitioners. Indeed, nothing appears to allow directors, or the shareholders who appoint them, to contractually shield themselves from the risk of a decision being characterized as an abuse of power. This is particularly relevant to shareholder agreements, which often reserve special rights for certain shareholders within management bodies, such as the boards or committees of sociétés par actions simplifiées, whose functions are similar to those of the board of directors of a société anonyme. It is also relevant to individual commitments, voting agreements, etc.
As such, it appears that the contractual agreements among shareholders, whose primary purpose is to protect the company itself, may not prevent a decision from being challenged as an abuse of power. A corporate decision may be challenged on the grounds of abuse of power if it meets both required conditions, even if it complies with the provisions of a shareholder agreement.
Challenges in Establishing the Concept on the Merits
Judicial Reluctance to Recognize Abuse of Majority Power
An examination of case law shows that it is rare for courts to find abuse of majority power[11] and to declare corporate decisions of a shareholder’s meeting null and void on that basis. This reluctance can be explained by the principle that judges should not interfere in the natural affairs of a company. Considering that this case addresses the validity of a decision by a management body (rather than a general meeting), one could expect even greater judicial caution.
The case at hand illustrates precisely the difficulty plaintiffs face in having abuse recognized in the context of a decision adopted by a director.
In this case, the contemplated restructuring involved ending the direct operation of the casino by the corporation that owned the premises—due to the risk to the real estate ownership—and entrusting the operation to a corporation wholly owned by the majority shareholder. The project, which was adopted by the board of directors within the framework of related party transactions, was clearly in the interests of the controlling shareholder. However, its objective was to preserve the company’s strategic real estate assets. Therefore, in the eyes of the judges, abuse of power was not established as the decision did not go against the company’s interests.
Practical Challenge: Should Any Reference to a Majority Be Abandoned?
Through its choice of the term abuse of power, the Cour de Cassation shifted the focus away from the notion of a majority and toward the exercise of an individual director’s prerogatives. In this case, it was the misuse of these prerogatives that the court sought to sanction.
Does this mean that reference to a majority is no longer necessary? That does not appear to be the case since, without the support of a majority, a collective body cannot adopt a resolution. The question of calculating a majority therefore remains in practice when assessing abuse of power. For the purpose of this calculation, the court appears to apply an individualized vote-counting approach, i.e., one vote per director.
Yet, it is legitimate to consider the board’s specific composition. For example, how should the majority of votes be calculated on a board composed partly of independent directors and/or of employee representatives? And what if the directors were pursuing their own separate interests while adopting the same resolution?
Defining the Scope of Nullity
A New Ground for Nullity Without a Statutory Basis
While rejecting the plaintiff’s arguments, the judges affirmed that a decision taken by company directors or officers could be declared null and void where an abuse of power is established. This outcome comes as no surprise, as it is consistent with prior case law related to abuse of majority power.[12] In both cases, the decision may be declared null and void without a specific statutory provision.
Abuse of Power and Reform of the Rules Governing Nullity
Although the decision was rendered under the legal framework in force prior to the entry into force of Order No. 2025-229 of March 12, 2025, which reformed the rules governing nullity of corporate decisions, nothing appears to prevent the sanction from being applied to corporate decisions under the new regime.
That said, applying the “triple test” under Article 1844-12-1 of the French Civil Code regarding the nullity of a corporate decision challenged for abuse of power raises legitimate questions:
- In its preliminary review of an alleged abuse of power, the judge will have to verify, in particular, that “the consequences of nullity for the company’s interests are not excessive, as of the date of the ruling, compared to the harm to the interests it is meant to protect.”[13] Where abuse of power is established, could the judge refuse to declare the decision null and void, on the grounds that doing so would disproportionately harm the company’s interests at the time the sanction is pronounced, even though the challenged decision itself impaired those very interests at the time it was taken?
- What about chains of nullities? Could a judge limit the effects of the nullity of a decision for abuse of power, in accordance with the discretionary power granted under Order No. 2025-229 of March 12, 2025?
Irrespective of how these questions may ultimately be settled by future case law, directors and officers are bound to ensure that their decisions are made solely in the interest of the company, without favoring any third party, be it shareholders or directors. The corporate interest must remain the abiding compass guiding all decision-making within the company.
Cass. com., Nov. 26, 2025, No. 23-23363, FS-BR. ↑
Id. ¶¶ 10–11. ↑
The term abuse of power is not new as such. It is used to refer to several criminal offenses, including those attributable to company directors who, “in bad faith, make use of the powers they possess or the votes they hold in that capacity in a manner they know to be contrary to the interests of the company, for personal gain or to benefit another company or undertaking in which they have a direct or indirect interest.” Code de commerce [C. com.] [Commercial Code] art. L. 242-6 (Fr.). ↑
Cass. com., Apr. 18, 1961, Bull. civ. III, No. 175. The principle states that “there is abuse of majority when a resolution has been taken contrary to the general interest and with the sole aim of favoring the members of the majority to the detriment of those of the minority.” ↑
For an example of refusal to annul a board decision on the grounds of abuse of majority, see Cass. com., Feb. 24, 1975, No. 73-14.141. ↑
Cass. com., Jan. 21, 1997, No. 94-18.883. ↑
Notice No. 593 of Nov. 26, 2025. ↑
Id. ↑
According to established doctrine, the prerogatives granted to company directors are based on authority whose misuse must be sanctioned. See, in this regard, Gérard Cornu, Preface to Emmanuel Gaillard, Le pouvoir en droit privé (Economica 1985). ↑
In this regard, see B. Dondero, Note on Cass. com., Nov. 26, 2025, No. 23-23363, JCP E 2025, 1345, FS-BR. ↑
See, for example, the refusal to characterize an abuse of majority power in the case of a merger. Cass. com., June 3, 2003, No. 99-18707. ↑
Nullity confirmed in the context of abuse of majority power in relation to compulsory distribution of profits. See Cass. 3e civ., Feb. 7, 2012, No. 10-17.812, F-D. ↑
Code civil [C. civ.] [Civil Code] art. 1844-12-1, 3° (Fr.). ↑
