By authorization given by article 26 of law no. 2024-537 of June 13, 2024 aimed at increasing the financing of businesses and the attractiveness of France (known as the “loi Attractivité”), the French government reformed the nullity regime in French company law with Ordinance no. 2025-229 of March 12, 2025, published in the Official Journal of the French Republic on March 13, 2025.
According to article 70 of the Ordinance, most of the measures will come into force on October 1, 2025. The only exception concerns article L. 821-5 of the French Commercial Code, a provision, transposing the Corporate Sustainability Reporting Directive (CSRD), relating to the nullity of decisions incurred in the event of failure to appoint a statutory auditor or an OTI in sustainability matters, which is applicable from January 1, 2027 (art. 67).
As specified in the report to the President of the Republic, the Ordinance pursues two main objectives.
I.- Securing Company Decisions and Limiting Nullities
Introduction of a Triple Test. The Ordinance provides for a refinement of the judge’s control over nullities, with the end of the distinction between mandatory and optional nullities of company decisions, in favor of a new mechanism known as the “triple test” (new art. 1844-12-1 of the Civil Code). Before declaring a company decision nul and void, the judge will have to control the (i) plaintiff’s grievance (who will have to establish that the irregularity has harmed their interests), (ii) influence of the irregularity on the decision-making process, and (iii) proportionality, which weighs the consequences of the irregularity against those of annulling the decision. This will probably reduce the number of nullities being declared, which is appreciated in practice.
However, the report to the President specifies that “the set of grounds for nullity was reviewed in order to identify those which it appeared necessary to remove from the control of the judge”. In these cases, the application of the “triple test” set out in the new article 1844-12-1 of the Civil Code is expressly ruled out, and the company decisions may only be declared null and void by the courts on the sole grounds of their irregularity.
Controlling the effects of nullity. In response to comments from practitioners highlighting the risks for the good functioning of companies of “cascading nullity” of subsequent company decision, with a potentially devasting nature, the Ordinance provides for two welcome mechanisms.
First, the rule that irregularities in the appointment or composition of a company body do not in themselves invalidate of subsequent decisions, is established as a general principle, unless otherwise stipulated (new art. 1844-15-1 of the Civil Code). Second, the judge is empowered to defer the effects of the nullity for the future by an assessment of proportionality with regard to their manifestly excessive character for the company’s interest (new art. 1844-15-2 of the Civil Code).
Reduction of the limitation period. The limitation period for nullity actions under ordinary law, currently three years, is reduced to two years by the Ordinance (new art. 1844-14 of the Civil Code). The shorter limitation periods specifically provided for capital increases and mergers remain however essentially unchanged
Capital increases. The Ordinance of March 12, 2025 also amends the nullity rules applicable to capital increases in joint-stock companies. Given the fungibility of shares and the order centralization in listed companies, a capital increase once the securities are issued is practically impossible to annul, as it is not possible to identify with certainty the securities that should be annulled when they are in circulation. Therefore, the Ordinance modifies the nullity provisions in this specific area.
More precisely, in listed companies, nullity actions will not be possible anymore once the capital increase is completed (new art. L. 22-10-55-1 of the Commercial Code); in other companies, nullity actions may be introduced for a limited period of three months (new art. L. 225-149-4 of the Commercial Code).
II.- Simplifying and Clarifying the Legal Provisions on Nullities
End of the dual general regime of the Civil Code and the Commercial Code. Currently, the nullity regime in France is based on two sets of general provisions within the Civil Code (Arts. 1844-10 et seq.) and the Commercial Code (Arts. L. 235-1 et seq.), and some had pointed out the resulting redundancies and legal uncertainty. The Ordinance reclassifies the applicable provisions, with the inclusion of the general law on nullities in companies in the Civil Code (new art. 1844-10 et seq. of the Civil Code); the general provisions contained in the Commercial Code are abrogated. Regarding specifically the provisions relating to restructuring and capital transactions, they are maintained in the Commercial Code.
French law brought in accordance with EU law. As some practicians and academics had noted, the legal provisions, currently in force, on (joint-stock) company nullities, derived from the law of 24 July 1966, were not fully compliant with the EU Directive 2017/1132 of 14 June 2017, which strictly limits the cases of nullity for reasons of legal certainty. The Ordinance unifies the causes of nullity for all companies, and not only joint stock companies, irrespective of the legal form, and groups them under a single provision now in line with EU law: “the nullity of the company can only result from the incapacity of all the founders or from the violation of provisions setting a minimum number of two partners or shareholders” (new art. 1844-10 (1) of the Civil Code). Following, the unlawfulness of the company purpose is no longer a nullity ground for companies; regarding fraud and fictitiousness, they are not mentioned in article 1844-10 (1) of the Civil Code, but in the past some French courts considered them as grounds for nullity of companies.
A far-reaching reform of the rules governing causes of nullity during the company’s lifetime. Before the 2025 reform, “the nullity of the acts or deliberations of the company’s governing bodies can only result from the violation of a mandatory provision of the present title, with the exception of the last paragraph of article 1833, or from one of the causes of nullity of contracts in general” (art. 1844-10, par. 3 of the Civil Code). Two major changes are made by the Ordinance to this fundamental provision.
First, it proceeds to a terminology update, replacing the concept of “acts and deliberations” with that of “company decisions” (décision sociale) (notably new arts. 1844-10 and 1844-17 of the Civil Code, and new art. L. 22-10-45 of the Commercial Code). The new concept excludes agreements entered into with third parties, as well as opinions or recommendations issued by any collective body established within the company by law, the articles of association, or any other means, so that “the regime governing the nullity of company decisions therefore applies exclusively to the company’s internal decision-making acts”.
The second major change is the replacement of the term “mandatory provision [of the present title][1] (or [of the present book][2]) by “mandatory provision of company law” (“disposition imperative de droit des sociétés”), a notion referred to in 2010 by the Cour de cassation, the highest of the judiciary courts in France. In other words, the ordinance does not only unify the causes of nullity in art. 1844-10 (3) of the French Civil Code, but also provides that, in addition to the causes of nullity of contracts in general, these are to be found solely in the violation of a “mandatory provision of company law“.
Nullity for violation of the articles of association. In the past, French judges (see decisions Larzul I and II ruled by the Cour de cassation respectively in 2010 and 2023) admitted the possibility to annul a company decision adopted in violation of a clause in the articles of association, in cases where such a clause constituted a conventional arrangement of a mandatory decision, something that rarely happened in practice. The Ordinance proposes a clarification, as the new article 1844-10 (4) of the Civil Code lays down a general principle excluding nullity in cases of violation of the articles of associations, while providing for the possibility of derogating by legal provisions (“Unless otherwise provided by law, violation of the articles of association does not constitute grounds for nullity”).
There is however an exception to this latter rule solely for simplified joint-stock companies (SAS). New article L. 227-20-1 of the Commercial Code allows its shareholders to specify, in the articles of association, the clauses whose violation would give rise to nullity of a company decision taken in violation of the rules they have established (“The articles of association may provide for the nullity of company decisions taken in violation of the rules they have established”). It is important to note that the triple test mechanism will continue to apply to this nullity action.
While such a possibility granted to SASs is likely to generate a great deal of litigation in the future, the French legislator’s intention was clearly to put an end to the Larzul case law.
[1] Title IX of the Civil Code “De la société”.
[2] Book II of the Commercial Code “Des sociétés commerciales et des groupements d’intérêt économique”.
