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Abuse of corporate assets

Definition of abuse of corporate assets

The offence of abuse of corporate assets is a form of misappropriation of assets, first sanctioned by the decree-laws of August 8 and October 30, 1935. This offence does not appear in the Penal Code but is nevertheless a criminal offence. It is codified in articles L.241-3 and L.242-6 of the Commercial Code, since the law of July 24, 1966.

This offence, intended to remedy the shortcomings of the repressive system revealed during political and financial scandals has become the most well-known offence in business law, and is widely covered by the media today.

The offense of abuse of corporate assets is constituted when the director of a commercial company (SAS, SARL, etc.) knowingly uses the assets of this company for personal purposes, contrary to the company’s interest. The company’s interest must be understood as the interest of the company in question, therefore an infringement of this company’s interest is constituted as soon as there is impoverishment of the company or renunciation of an enrichment..

This criminal offense applies only to the directors of these companies and is characterized by a voluntary action or omission that is detrimental to the interests of the company.

For non-trading companies (notably SCIs) and associations under the 1901 law, the offense of abuse of corporate assets does not exist, and other offenses such as the offense of breach of trust may apply.

The abuse of corporate assets can be illustrated in different ways : for example, a manager who grants himself an excessive remuneration in relation to the work he provides, payments made in remuneration of fictitious services, the fact of having the company bear personal expenses (travels…)…

In order for the offense of abuse of corporate assets to be constituted, it is necessary that the bad faith of the director be demonstrated. It is considered that the director is acting in bad faith when he acts in his personal interest or in the interest of a company or an association in which he has a direct interest, while being aware that his act is detrimental to his company. This bad faith may result from the voluntary concealment of some of his acts or from the falsification of documents.

Alexandre-M. BRAUN, as a lawyer, assists his clients who are victims of corporate misuse throughout the procedure, until the compensation is paid. He accompanies those who wish to file a complaint for this offense and uses his skills to demonstrate the bad faith of the accused manager and the damage caused to the company.

Similarly, he defends the accused managers and endeavors to demonstrate the absence of elements constituting the offense, while verifying the regularity of the procedure and the respect of their rights and individual liberties.

What is the penalty?

Misuse of corporate assets is an offense punishable under Articles L.241-3 and L.242-6 of the French Commercial Code. These articles punish this offense with a maximum of 5 years imprisonment and a fine of up to 375,000 euros.

The statute of limitations for this offense is set forth in Article 8 of the Code of Criminal Procedure, which provides that the public prosecution of offenses is statute-barred after six years from the date on which the offense was committed.

Who can bring this action?

A partner who has been the victim of an abuse of corporate assets by his manager may bring a civil action by exercising the ut singuli action when he believes that he has been harmed by the criminal acts.

Alexandre-M. BRAUN advises its clients on the appropriateness of bringing such an action by denouncing an abuse of corporate assets and assists them throughout this procedure.

The legal representative of the abused company, who can be the new director or the new manager, can exercise the social action ut universi against the former director. This action is also available to the liquidator when the company is in judicial liquidation.

Similarly, Alexandre-M. BRAUN assists its clients in the ut universi action against a former director who is guilty of misuse of corporate assets.

Conversely, a civil action for abuse of corporate assets is not admissible when a personal prejudice distinct from that of the company is not demonstrated: the Court of Cassation recalled this for a partner (Cass. crim, The Court of Cassation has reiterated this for a partner (Cass. crim., February 25, 2014, n°12-85.693), for creditors (Cass. crim., April 24, 1971, n°69-93.249), for a works council (Cass. crim., June 7, 1983, n°83-91.210) and for employees, even for moral prejudice (Cass. crim., March 23, 2005, n°04-84.756).

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Alexandre-M. BRAUN receives clients at his law firm, by appointment only. He can be reached, preferably, through the form.