Reed Smith Client Alerts

The current crisis will undoubtedly bring with it a number of company reorganisations as well as forced or opportune managerial reshuffles. This topic is sensitive not only because leadership in times of turmoil is essential, but also because, at first glance, companies have great freedom to act insofar as most company directors can be dismissed at will, i.e., without notice or compensation.

Authors: Daniel Kadar Iness Sakhi


The current regulatory environment may be misleading in that respect. Indeed, the measures adopted in recent weeks,1 which are designed to ensure that companies and their constituent parts continue to operate, facilitate procedures for meetings of shareholders and corporate bodies and allow for them to be more flexible. These measures are intended to compensate for the obstacles to physical meetings. One might expect that such flexibility, together with the absence of immediate judicial review, the activities of courts being greatly reduced, would give companies the opportunity to dismiss executive directors. However, the current situation does not relieve companies of the obligation to carry out dismissals in a manner that is not vexatious, abusive or unfair. Furthermore, certain measures usually validly taken by companies in the context of the dismissal of a director may, in the wider current context, be more difficult to carry out and even be considered vexatious.

First, it should be recalled that the body that has the competency to dismiss a director is generally the one in a position to appoint them. These bodies are precisely those whose meeting procedures have been eased to cope with the current lockdown measures: in large part, the arrangements adopted by the new legal measures set out the procedures for allowing meetings of the administrative, supervisory and management bodies of companies both remotely and by written consent. Shareholders’ meetings and deliberations can take place behind closed doors or by phone-conference, videoconference or written consultation. These new provisions remain, for the time being, applicable until 31 July 2020.

There is a risk that the new legal framework and the current exceptional circumstances could result in companies wishing to dismiss a director being remiss in their duties. However, companies should bear in mind that these new mechanisms must comply with other principles provided by French company law, which remain in force. While the freedom to dismiss directors applies as a general principle, there are safeguards protecting them from what might be viewed as an abusive use of the right to dismiss.