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The leader and the lack of management: what responsibility?

Home > French Business Law | Published 2014-11-18

The leader and lack of management: whose responsibility is it?

Being a CEO is not a trivial profession. In addition to exposure to economic risks associated with its business, the officer is not immune to see his personal liability as a result of negligence in the management of the company or fraud.

What is mismanagement?

By definition, a management fault is a fault committed by the boss in the general administration of the company, wholly contrary to public interest. It may be simple negligence, especially when the leader has passive work ethic, for example by failing to make the meetings of the Board of Directors. The fault management may also be made by fraud: bail by the company of a personal debt officer or failure to establish proper accounting records.

However, the concept of fault management does not punish the decisions taken by the executive in the administration of his company. A manager cannot be sanctioned and even if he was, it cannot be solely on the basis of a fiscal "miscalculation".

Management problems and collective procedure

Instead, letting the financial situation of the company deteriorate, for example by failing to declare a cessation of payments, is much more problematic. Many mismanagement situations are thus revealed at the time of bankruptcy proceedings, often as part of a liquidation which brings about social suffering. The leader may be accused of having left a large deficit and to have continued to work in such conditions.

What is the responsibility for the manager in case of mismanagement?

Who is responsible for mismanagement?

Every business leader must commit to personal liability for breaches of laws or regulations applicable to violations of statutes or negligence in their management.

The responsibility of the entrepreneur applies to both executive law, as the manager of a limited liability company, as well as exercising functions direction.

Sanctions for mismanagement

Liability for the executive management fault is supposed to prove misconduct and the existence of an injury caused by the fault. You should know via third parties, that the leader cannot be held liable for the misconduct of its detachable functions, namely willful misconduct of particular gravity incompatible with the proper discharge of the functions of management.

The recognized leader in charge of a lack of management may be required to pay damages or to pay the debts of the company in the event of insufficient assets in the context of a liquidation procedure. The impact on their personal assets can then be heavy.

Moreover, the leader also exposes himself to criminal responsibility, especially in cases of misuse of corporate assets. He faces up to five years imprisonment and a fine of € 375,000, as well as additional penalties.

What to do in case of suspicions of mismanagement?

As a partner, you can see abnormal behavior in the general administration of the company by the officer, threatening the economic health of the business. Surround him with the advice of counsel in corporate law then allows you to develop a strategy for action to protect your interests and those of society.

When you yourself are suspected of mismanagement by one of your partners, identify the facts that are alleged are actually possible and anticipate possible action for damages. Bad decisions in the conduct of business affairs, such as a few flourishing contracts does not necessarily expose you to sanctions. Similarly, you can be held responsible for acts committed by a third party, who holds a stake in the company.

Use a business lawyer which provides you with an effective defense against charges that are brought about you mistakenly.

This article is available online for public information purposes. It is updated regularly, as needed. Due to the constant evolution of the laws and the legal system, we cannot guarantee that the information in this article is still applicable. We invite you to contact us with any legal questions or concerns you have regarding this topic at +33 1 56 79 11 00. In no way can this firm be held liable for articles that contain inaccuracies or are now out of date.

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