Error of Management by the Officer (SARL Manager / SAS President): When and How to Engage Liability

A minority partner discovers that the manager has signed, without consulting anyone, a ruinous commercial lease in favour of a company in which he holds shares. A shareholder of an SAS notes that the president has let the cash position slip for months without reacting, until the insolvency filing. In these situations, one question recurs: has the officer committed an error of management (faute de gestion), and who can act to engage his or her liability? This analysis sets out the legal contours of the error of management of the manager of a SARL (French private limited company) and of the president of an SAS (simplified joint-stock company), illustrates with concrete cases the conduct that is sanctioned, and explains the often overlooked mechanism of the corporate action ut singuli, which allows a mere partner to act in the place of the company.

What an error of management means legally

Error of management has no single statutory definition. It is deduced from a standard: the officer must behave as a prudent, diligent and informed professional, acting in the corporate interest. Any departure from that standard, provided it causes loss, may constitute a fault engaging the officer's liability.

The central provision for the SARL is Article L. 223-22 of the French Commercial Code, which provides that managers are liable individually or jointly, as the case may be, towards the company or towards third parties, either for infringements of the legislative or regulatory provisions applicable to limited liability companies, or for breaches of the articles of association, or for faults committed in their management.

For the SAS, the regime is that of public limited companies (sociétés anonymes) by cross-reference. Article L. 227-8 of the French Commercial Code provides that the liability rules applying to members of the board of directors and the management board of SAs apply to the president and the officers of SASs. One therefore returns to Article L. 225-251, which retains the same three grounds: infringement of the legislation, breach of the articles of association, error of management.

It is necessary at the outset to distinguish three blocks of liability that practice often confuses:

• ordinary civil liability towards the company or the partners, based on error of management (L. 223-22 for the SARL, L. 225-251 for the SAS)
• liability for insufficiency of assets in the event of compulsory liquidation (liquidation judiciaire), governed by Article L. 651-2, which also presupposes an error of management but in a distinct procedural framework
• civil liability towards third parties, subject to a fault separable from the officer's functions

The error of management referred to in Article L. 223-22 and in Article L. 651-2 is not exactly the same notion as applied. In the context of the action to make up the shortfall in assets (comblement de passif), the court assesses the fault by reference to the situation of the business in difficulty. In the context of the corporate action, it assesses it by reference to the corporate interest and the conduct expected of a normally diligent officer.

The crucial distinction: error of management and fault separable from the functions

A technical point conditions the whole litigation strategy. Where a third party (supplier, customer, bank) wishes to hold the officer personally liable, it cannot merely invoke an error of management. The case law requires it to demonstrate a fault separable from the functions, that is to say a fault of particular seriousness, intentional, incompatible with the normal exercise of corporate functions. Failing that, it is the company, as a legal entity, that is solely liable.

By contrast, within the company, between the company and its officer or between the partner acting on behalf of the company and the officer, a simple error of management is sufficient. This asymmetry explains why the corporate action ut singuli is a far more accessible lever for a partner than the individual action of a third party.

Practical cases of sanctioned errors of management

The case law, regularly enriched, outlines families of faulty conduct. The principles laid down by the Cour de cassation remain stable and are found in the decisions rendered in 2025 and 2026. Here are the configurations most frequently sanctioned, illustrated by anonymous situations typical of commercial litigation.

Failures of supervision and prudence

An officer who lets the cash position deteriorate without reacting, who continues a loss-making activity with no prospect of recovery, or who neglects the recovery of significant receivables commits a clear error of management. It is accepted in French law that passivity can be a fault in the same way as a positive act.

Take the case of the president of an SAS who, informed of chronic late payments by a customer representing the bulk of turnover, continues to deliver without requiring security or suspending the relationship. When that customer defaults and drags the company down with it, the fault of supervision is established: a diligent officer would have diversified the risk or secured the receivables.

Conflict of interests and unbalanced agreements

The manager of a SARL who makes the company bear personal expenses, who pays himself a remuneration unrelated to results and without following the procedure in the articles, or who concludes a manifestly unfavourable contract with another company that he controls, exposes himself to liability. These situations amount to confusion between the officer's personal interest and the corporate interest.

The classic example is that of a manager who has his SARL rent premises that he owns personally, at a rent well above the market price. The additional cost is a loss for the company and an error of management, even irrespective of the regime of regulated agreements.

Failure to declare cessation of payments

Failing to declare cessation of payments within the forty-five-day period provided for by Article L. 631-4 of the French Commercial Code is both an infringement of the applicable provisions and an error of management that may be retained in an action for insufficiency of assets. An officer who artificially prolongs the activity, aggravating the liabilities, engages his or her liability under Article L. 651-2.

Attention should nevertheless be paid to an important development: since Law No. 2016-1691 of 9 December 2016, known as Sapin II, Article L. 651-2 specifies that in the event of mere negligence by the de jure or de facto officer in the management of the company, his or her liability for insufficiency of assets cannot be engaged. Mere negligence has therefore become insufficient for this type of action, which has narrowed the scope of liability in liquidation. This limitation does not, however, concern the ordinary corporate action, where culpable negligence remains punishable. What an officer risks in terms of liability for insufficiency of assets in compulsory liquidation is detailed in our article devoted to Article L. 651-2.

Risky investments and manifestly unreasonable decisions

The officer has freedom of management, and the court does not sanction mere commercial failure. Fault presupposes a decision that a normally prudent officer would not have taken. Committing the company to an investment disproportionate to its financial capacity, without prior study or validation by the competent bodies, illustrates this type of fault.

The manager of a construction-sector SARL who commits the company to a project whose amount is several times its equity, with no financing guarantee or surety, commits a fault if the transaction precipitates the company into insolvency. Conversely, a reasonable commercial gamble that fails because of unforeseeable economic conditions will not be held to be a fault.

Failure to comply with legal and statutory obligations

Failure to hold meetings, failure to draw up the annual accounts, exceeding the powers conferred by the articles, failure to respect an approval clause: these breaches engage the officer's liability even without immediate financial loss, provided that damage results. The president of an SAS who alone enters into a commitment that the articles made subject to the prior agreement of the shareholders breaches the articles within the meaning of Article L. 225-251.

The corporate action ut singuli: acting in the place of the company

Here is the central mechanism of the litigation angle. Where an officer has caused loss to the company, it is in principle the company, represented by its officer, that should act. But how can the defaulting officer be made to sue himself? The legislature resolved this paradox by giving partners the right to act in the name and on behalf of the company: this is the corporate action ut singuli.

The legal basis and how it works

For the SARL, Article L. 223-22, paragraph 3 of the French Commercial Code provides that partners may, either individually or by grouping together, bring the corporate action in liability against the managers. For the SAS, the cross-reference to the regime of SAs leads to Article L. 225-252, which gives shareholders the same right against directors and, by extension, the president and the officers.

The essential feature of this action: the partner does not act for himself or herself but for the company. The damages obtained are paid to the company, not to the claimant partner. The latter bears the costs and risk of the proceedings but derives no direct benefit, only the indirect increase in the value of his or her shares through the restoration of the company's assets.

This action is clearly distinct from the individual action, by which a partner claims compensation for a personal loss distinct from that suffered by the company. The case law is consistent: the mere reduction in the value of the shares, which is only the reflection of the corporate loss, is not a personal loss recoverable by an individual action. It must go through the corporate action.

Procedural conditions and rules

The action ut singuli is subject to precise rules laid down by regulatory texts. For the SARL, Article R. 223-31 governs the procedure. For the SAS, Articles R. 225-169 to R. 225-170 apply by cross-reference. Several points of vigilance deserve emphasis.

First, any clause in the articles that made the exercise of the corporate action subject to a prior opinion or authorisation of the meeting, or that contained an advance waiver of this action, is deemed unwritten. The texts expressly so provide: the partners' right to act cannot be locked down by the articles.

Next, the partner must join the company itself, represented by its officers, alongside the officer being sued. The company is indeed the beneficiary of any judgment. This joinder conditions the admissibility of the action.

Finally, the burden of proof lies on the claimant partner, who must establish three cumulative elements: an error of management, a loss suffered by the company, and a causal link between the two. Reconstructing the fault often involves analysing the accounts, the minutes and the cash movements, which makes the evidence phase decisive.

Limitation: a period to monitor closely

The action in liability against the officer is time-barred after three years from the damaging act or, if it was concealed, from its disclosure. This period results from Article L. 223-23 for the SARL and from Article L. 225-254 for SAs and, by cross-reference, SASs. Where the act can be characterised as a crime, the period is ten years.

Determining the starting point is a major issue in litigation. For a concealed fault, such as misappropriations hidden in the accounts, the period runs only from actual discovery. A partner who delays acting after becoming aware of the facts risks having the action declared inadmissible.

Interaction with other actions and cumulation of liabilities

Civil liability for error of management may be cumulated with other regimes. The same conduct may simultaneously found a corporate action, a criminal action (misuse of corporate assets (abus de biens sociaux), fraudulent bankruptcy (banqueroute)) and, in the event of liquidation, an action for insufficiency of assets brought by the liquidator. On the partner's standing to act and the procedural pitfalls of the criminal aspect, see our guide for the partner who wishes to act for misuse of corporate assets.

A procedural rule must however be taken into account: when collective insolvency proceedings have been opened, the monopoly of action in respect of insufficiency of assets passes to the liquidator or, in certain cases, to the public prosecutor and the supervisors (contrôleurs). The partner can no longer freely exercise the corporate action for faults that contributed to the insufficiency of assets, because that action is absorbed by the specific regime of Article L. 651-2. He or she retains, however, the action for losses distinct from the insufficiency of assets.

This interaction requires the partner's counsel to characterise precisely the loss relied on and to check the state of the company before bringing the action. An action that is ill-founded or directed at the wrong basis risks being declared inadmissible.

The officer's defence: how to challenge the error of management

The officer being sued is not without resources. Several lines of defence are classically deployed and deserve to be known, if only to assess the chances of success of an action.

The first consists in invoking freedom of management and the uncertainty inherent in business. The court does not sanction a decision which, assessed at the time it was taken and not with hindsight, fell within a reasonable management choice. Showing that the decision rested on serious elements, advice and prior studies weakens the characterisation of fault.

The second line concerns the absence of loss or of a causal link. Even an established fault does not engage liability if the company has suffered no quantifiable damage or if the damage results from an external cause. The breaking of the causal link, for example an unforeseeable sector-wide crisis, is frequently invoked.

The third line is limitation, often the first reflex of the defence. Challenging the starting point of the three-year period, by arguing that the partner knew of the facts well before he or she claims, may be enough to defeat the action.

Finally, in matters of insufficiency of assets, the officer may fall back on the limitation arising from the Sapin II Law, arguing that the conduct complained of amounts to mere negligence, now excluded from the scope of Article L. 651-2.

Conclusion: a powerful but demanding action

The corporate action ut singuli is one of the few mechanisms allowing a partner, even a minority one, to compel a defaulting officer to answer for his or her management. It is a real counterweight, which the articles of association cannot neutralise. But it is also a demanding action: the partner assumes the financial risk of the proceedings without directly receiving the fruit, must prove a clear error of management, and is racing against a three-year limitation period whose starting point is fiercely debated.

The position is clear: before bringing an action against the manager of a SARL or the president of an SAS for error of management, the absolute priority is to secure the evidence. A poorly documented error of management is a lost action, whatever its economic reality. Reconstruction of the accounts, collection of the minutes and precise establishment of the corporate loss condition everything else.

In practical terms, before any litigation, have a chartered accountant (expert-comptable) or an adviser prepare a detailed statement of the facts complained of, quantify the loss suffered by the company, and check that the limitation period has not expired by reference to the date the facts were disclosed. It is on this evidential foundation, and not on a sense of injustice, that actions in liability against officers are won.

Frequently asked questions

Can a minority partner alone engage the liability of the manager of a SARL?

Yes. Article L. 223-22, paragraph 3 of the French Commercial Code authorises any partner, whatever his or her holding, to bring the corporate action ut singuli individually against the manager. No shareholding threshold is required for the SARL. The partner acts on behalf of the company, and the compensation obtained goes to the company, not to him or her personally.

What is the difference between an error of management and a fault separable from the functions?

An error of management is sufficient to engage the officer's liability towards the company, in the context of the corporate action. By contrast, a third party (supplier, bank) who wishes to hold the officer personally liable must demonstrate a fault separable from the functions, that is an intentional fault of particular seriousness, incompatible with the normal exercise of the functions. Without that seriousness, only the company's assets are liable, not those of the officer.

What is the time limit for acting against the president of an SAS for error of management?

The action is time-barred after three years from the damaging act, pursuant to Article L. 225-254 of the French Commercial Code, applicable to the SAS by cross-reference. If the act was concealed, the period begins only on its disclosure. Where the conduct can be characterised as a crime, the period is extended to ten years. Determining the starting point is often the first ground of debate.

Does the corporate action ut singuli bring money to the partner who brings it?

No, not directly. The damages obtained are paid to the company, whose assets are restored. The partner derives only an indirect benefit, through the increase in the value of his or her shares. He or she nonetheless bears the costs and risk of the proceedings, which explains why this action remains relatively rare in practice despite its interest in principle.

Is a management decision that fails commercially a fault?

No, not in itself. The court respects freedom of management and the uncertainty inherent in business. There is fault only if the decision was manifestly unreasonable at the time it was taken, without prior study or validation by the competent bodies. A reasonable gamble that fails because of unforeseeable economic conditions does not engage the officer's liability.

Can the officer's mere negligence be sanctioned?

It depends on the action. In the context of the action for insufficiency of assets under Article L. 651-2 of the French Commercial Code, the Sapin II Law of 9 December 2016 excludes mere negligence: a clear error of management is required. By contrast, in the context of the ordinary corporate action based on Articles L. 223-22 or L. 225-251, culpable negligence that has caused loss to the company remains punishable.

Can the articles of association include a clause prohibiting partners from acting against the officer?

No. Any clause in the articles that made the corporate action subject to prior authorisation of the meeting, or that contained an advance waiver of this action, is deemed unwritten. The texts expressly protect the partners' right to bring liability actions against officers. This right is a guarantee of public policy that cannot be neutralised by the articles.