French Government Ordinance No. 2025-229 of March 12, 2025, implements a significant reform of the nullity regime in corporate law. This reform aims to enhance legal certainty by clarifying the rules while regulating the conditions under which the courts may decide the nullity of companies and corporate decisions.
French corporate law has traditionally adopted a prudent approach toward the sanction of nullity, aiming to contain its potentially disruptive effects. Indeed, a company brings together a wide range of stakeholders—shareholders, directors, employees, clients, lenders, and suppliers—who may be directly or indirectly affected by the nullity of the legal entity itself or its corporate decisions.
In this context, the reform implemented by the Government Ordinance dated March 12, 20251 seeks to clarify the nullity regime and enhance legal certainty, drawing on the conclusions of the 2020 Report by the Haut Comité Juridique de la Place financière de Paris (HCJP)2 and the recommendations of the French Conseil d’État dated July 4, 20243. It also aligns French corporate law with the European Directive dated June 14, 20174.
The ordinance unifies the nullity regime in corporate law by removing general provisions from the Commercial Code, now integrated into the Civil Code. Articles 1844-10 et seq. of the Civil Code become the common law applicable to all companies, regardless of their corporate form. Specific provisions remain in the Commercial Code for certain types of companies, as well as for restructuring and equity operations.
The reform also introduces terminological clarification by referring to the nullity of “corporate decisions” rather than “acts and deliberations.” This distinction is meaningful, as it narrows the scope of the specific nullity regime to the company’s internal decision-making acts, thereby excluding mere opinions and recommendations. It also excludes contracts with third parties, whose nullity is governed by general contract law. Notably, Article L.228-59 of the Commercial Code expressly extends the nullity regime applicable to corporate decisions to resolutions adopted by bondholders’ general meetings.
Under the new regime, a company may only be declared null on two grounds: the incapacity of all founding shareholders or a breach of the rule requiring a minimum of two shareholders to incorporate the company, when applicable (Article 1844-10, para. 1, Civil Code). This formulation eliminates numerous grounds for nullity, aligning French law with the European Directive dated June 14, 2017 and the case law of the French Cour de cassation. However, the reform goes further by implicitely excluding nullity in cases involving the absence of essential elements of the company (Article 1832, Civil Code), breaches of general contract law, or an unlawful corporate purpose. Instances of fraud or fictitious companies are also not addressed by Article 1844-10, but nullity might still be pursued on other legal grounds in such circumstances.
The new Article 1844-10-1 of the Civil Code aligns the grounds for nullity of capital contributions with the new regime applicable to corporate decisions. The nullity of a contribution results in the cancellation of the shares issued in return and the restitution by the company of any obligations already performed by the contributor. If all contributions are declared null, the company must be dissolved and undergo liquidation.
Corporate decisions may now be declared null only on the grounds of “violation of a mandatory provision of corporate law (excluding the last paragraph of Article 1833) or one of the general grounds for contracts nullity.” Thus, whereas nullity previously required an explicit legal provision, the new regime allows for nullity in cases of violations of mandatory corporate law provisions (so-called “virtual nullities”). This shift grants judges greater discretion to determine the mandatory nature of a provision and its relevance to corporate law. To structure this judicial discretion, the reform introduces a “triple test” mechanism and seeks to limit the occurrence of cascading nullities (read below).
To be noted that the nullity of corporate decisions for breach of the bylaws is now excluded unless otherwise expressly provided by law. However, in simplified joint-stock companies (SAS), the bylaws may provide the nullity of decisions made in violation of their provisions, in accordance with Article L.227-20-1 of the Commercial Code. Such actions for nullity are governed by Articles 1844-10 et seq. of the Civil Code.
Article 1844-12-1 of the Civil Code introduces the “triple test” mechanism. A judge may declare an irregular corporate decision null and void only if all three of the following criteria are met:
This mechanism ends the automatic declaration of nullity, allowing for a more balanced assessment of disputed cases. However, exceptions apply where the ordinance explicitly excludes the application of Article 1844-12-1, thereby preserving automatic nullity in specific instances.
In order to mitigate the disruptive effects of “cascading nullities” and enhance the stability of corporate decisions, the reform introduces two mechanisms in Articles 1844-15-1 and 1844-15-2 of the Civil Code:
The general limitation period for nullity actions in corporate matters is reduced from three to two years (Article 1844-14, Civil Code). This measure aims to enhance legal certainty by encouraging parties to act within shorter timeframes.
Regarding the nullity of joint-stock companies’ share capital increases, the ordinance introduces specific limitation periods under Articles L.22-10-55-1 and L.225-149-4 of the Commercial Code:
Additionally, Article L.225-149-5 of the Commercial Code provides that the nullity of a share capital increase decision is enforceable against all subscribers, by exception to Article 1844-16 of the Civil Code.
With respect to restructuring transactions involving joint-stock companies, the provisions governing their nullity regime have been relocated to Articles L.236-2-1 (for mergers) and L.236-19-1 (for demergers) of the Commercial Code.
The nullity of a restructuring transaction may only result from the nullity of the resolution adopted by one of the approving general meetings or from the failure to file the required certificate of compliance. Legal action is time-barred six months from the date of the last registration in the Trade and Companies Register required by the transaction. The court may grant the companies concerned a period to remedy the irregularity, where regularisation is possible.
Importantly, nullity does not affect obligations arising between the effective date of the annulled transaction and the publication of the court’s nullity decision. Participating companies remain jointly liable for fulfilling these obligations.
The ordinance dated March 12, 2025, will come into effect on October 1, 2025. Its application to companies formed and corporate decisions made before this date must be analyzed specificaly, taking into account the act whose nullity is sought and the legal grounds invoked.
