"The house always wins" ...But beware of abuse of power! Abuse of power: a new ground for declaring corporate decisions null and void
In a ruling handed down on 26 November 2025¹, the Commercial Chamber of the French Cour de cassation 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 the corporate veil and serves as a reminder that the company’s interest must always guide decision-making within corporations.
Facts
A French société anonyme (public limited 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 these decisions, 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 decisions 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 decisions and related agreements on the ground of abuse of majority power.
Statement of principle
The Court set forth the following principle:
“In 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.”
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 decision establishes a new ground for declaring corporate decisions null and void. The scope of the ruling extends beyond the board of directors of a French société anonyme. The Court’s decision to give extensive publicity to the ruling suggests that the abuse-of-power doctrine may have broader implications.
This broadened reach therefore calls for heightened vigilance from corporate managers and their advisors, 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 nevertheless raises significant questions, particularly in light of the recent legislative reform governing the nullity of corporate decisions under French law.
1. 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 law² 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 abuse of majority power (abus de majorité), though it is not identical.
In the beginning there was abuse of majority power
In the well-known judgment of 18 April 1961³, the Court defined the conditions required to characterize an abuse of majority power as a decision taken (i) for the exclusive benefit of the majority shareholder and (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 directors⁴, or even by a non-collegial body such as a managing partner⁵, and to 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 shareholders and those made by a board of directors.
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.” They must exercise their mandate in the interests of the company (intérêt social), and not in the interests of shareholders⁶, 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 sanction⁷.
Date of assessment of the abuse of power
The Court further clarifies that abuse of power is assessed as of the date on which the challenged decision was made. This distinction is significant, as it precludes the Court from considering the actual consequences of the decision when determining whether an abuse of power occurred.
2. THE BROAD SCOPE OF ABUSE OF POWER CALLS FOR VIGILANCE
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 give extensive publicity to the judgment suggests that its scope may go beyond this specific context.
Substantively, the reference to Article 1833 of the French Civil Code, which forms part of “common corporate law,” reinforces the idea that the ruling on abuse of power could apply to all types of corporations⁸.
Extending abuse of power to other corporate bodies
This shift from abuse in the exercise of shareholder 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 decisions made by the president of a société par actions simplifiée or the manager of a 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 cannot be contractually avoided
Abuse of power cannot be contractually avoided through shareholder agreements, individual commitments, or voting agreements.
The likely mandatory nature of this prohibition should serve as a warning to practitioners. 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 that reserve special rights for certain shareholders within management bodies, such as boards or committees of sociétés par actions simplifiées. A corporate decision may therefore be challenged for abuse of power even if it complies with the provisions of a shareholder agreement.
3. CHALLENGES IN ESTABLISHING THE CONCEPT ON THE MERITS
Judicial reluctance to recognize abuse of majority power
Case law shows that courts are reluctant to find abuse of majority power⁹ and to annul corporate decisions on that basis. This reluctance stems from the principle that judges should not interfere in the internal affairs of companies.
Since the present case concerns a decision adopted by a management body rather than a shareholders’ meeting, one could expect even greater judicial caution.
The case at hand illustrates the difficulty faced by plaintiffs in having abuse recognized in the context of decisions adopted by directors.
Practical challenge: should any reference to a majority be abandoned?
By using the term abuse of “powers,” the Cour de cassation shifts the focus away from the notion of majority and towards the exercise of individual prerogatives by directors.
However, this does not mean that reference to a majority becomes irrelevant. Without majority support, a collective body cannot adopt a resolution. The calculation of a majority therefore remains relevant when assessing abuse of power.
The Court appears to favor an individualized vote-counting approach (one vote per director), but questions remain as to how this applies in boards composed of independent directors or employee representatives, or where directors pursue distinct personal interests while adopting the same resolution.
4. DEFINING THE SCOPE OF NULLITY
A new ground for nullity without a statutory basis
While rejecting the plaintiffs’ arguments, the Court affirmed that a decision taken by company directors or officers could be declared null and void where an abuse of power is established.
This result is consistent with earlier case law on abuse of majority power¹⁰, in which nullity was recognized without an express statutory basis.
Abuse of power and the reform of the rules governing nullity
Although the decision was rendered under the legal framework applicable prior to Order No. 2025-229 of 12 March 2025, which reformed the rules governing the nullity of corporate decisions, nothing appears to prevent this sanction from being applied under the new regime.
However, applying the “triple test” set out in Article 1844-12-1 of the French Civil Code raises important questions, including:
- whether a judge could refuse to annul a decision for abuse of power if the consequences of nullity would be excessive for the company’s interests at the time of the ruling; and
- whether a judge could limit the effects of nullity, particularly in the case of chains of nullities, in light of the discretionary powers granted by the 2025 reform.
- Cass. Com., 26 Nov. 2025, No. 23-23363, FS-BR
- The term “abuse of power” is used in criminal law to refer to directors who, in bad faith, misuse their powers or votes for personal gain or to benefit another company in which they hold an interest.
- Cass. Com., 18 April 1961, Bull. civ. III, No. 175 – “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.”
- Cass. Com., 24 Feb. 1975, No. 73-14.141 – Example of refusal to annul a board decision on grounds of abuse of majority.
- Cass. Com., 21 Jan. 1997, No. 94-18.883 – Decision involving a managing partner.
- Notice No. 593 of 26 November 2025.
- E. Gaillard, Le pouvoir en droit privé, pref. G. Cornu, Economica, 1958.
- B. Dondero, note on Cass. Com., 26 Nov. 2025, No. 23-23363, FS-BR.
- Cass. Com., 3 June 2003, No. 99-18707 – Refusal to characterize an abuse of majority in a merger context.
- Consistent with prior case law on abuse of majority power.
