France’s highest court has established a new legal ground for challenging corporate decisions. The Commercial Chamber of the Cour de Cassation ruled on November 26, 2025, that abuse of power by a board of directors can render their resolutions null and void. However, the court declined to apply this new principle to the case at hand.
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The Casino Dispute
A French société anonyme (public limited liability 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 this decision, 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 decision 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 decision and related agreements on the ground of abuse of majority power.
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The Court’s Principle
The court set forth the following principle:[I]n 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 when the challenged decision was made.[2]
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.
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Scope of the Ruling
This ruling establishes a new ground for declaring corporate decisions null and void. The scope of the ruling extends beyond the mere board of directors of the French société anonyme. The broadened reach of the abuse-of-power doctrine therefore calls for heightened vigilance from corporate managers and their advisers, 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.
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