Misuse of Corporate Assets in France: Elements of the Offense and Defense Strategies for Executives

Abus de biens sociaux (misuse of corporate assets) is one of the central offenses in French business criminal law. Its apparent simplicity conceals a complex legal reality, in which each element of the offense has generated extensive case law. For an executive under investigation, the defense must be built from the inquiry stage onward.

TL;DR

• Four cumulative elements: an act of use, contrary to the corporate interest, committed in bad faith, for personal purposes or to benefit another entity.
• Maximum sentence: 5 years' imprisonment and a 375,000-euro fine.
• Statute of limitations: 6 years from discovery, capped at 12 years from commission.
• Defense is possible on each element of the offense and on the regularity of the proceedings.

The Statutory Provision

Abus de biens sociaux is defined in article L242-6 3° of the Code de commerce (French Commercial Code) for sociétés anonymes (public limited companies), and in article L241-3 4° for sociétés à responsabilité limitée (private limited companies). The wording is identical in both:

The act by which the chairmen, directors, or chief executive officers of a société anonyme make, in bad faith, use of the company's assets or credit in a manner they know to be contrary to the company's interests, for personal purposes or to benefit another company or enterprise in which they have a direct or indirect interest.

Four elements must all be present. The absence of even one precludes a conviction.

The Four Elements of the Offense

An Act of Use of Corporate Assets or Credit

The use may take any form: direct withdrawals, payment of personal expenses, provision of a company vehicle, payment of fictitious invoices, or a guarantee granted to another company. The concept of corporate credit is broadly construed and encompasses reputation, trade name, and borrowing capacity.

Contrary to the Corporate Interest

This is the most contested element. Case law assesses the corporate interest in concreto, taking into account the company's financial position, any consideration received in exchange, and the risks assumed.

The criminal chamber of the Cour de cassation (France's highest court for criminal matters) established a strong presumption: any act that exposes the company to an abnormal risk without sufficient counterpart is presumed to be contrary to the corporate interest (Crim. 27 October 1997, no. 96-83.698).

Bad Faith

This is the mental element of the offense. The executive must have been aware that the act was contrary to the corporate interest. Case law applies a flexible standard for establishing such awareness, inferred from the circumstances of the case: concealment, the unjustified nature of the expenditure, and opacity in the accounting records.

A Personal Interest or the Benefit of Another Entity

The interest may be direct (personal enrichment) or indirect (benefit to a close associate or a related company). It may be financial or non-financial. The Cour de cassation has held that merely maintaining good relations with another company in which the executive has an interest is sufficient to establish personal interest (Crim. 16 December 2015, no. 14-85.118).

Standard Lines of Defense

"A case of abus de biens sociaux is often won through accounting reconstruction and through an analysis of the corporate interest at the time of the act, not with the benefit of hindsight."

Challenging the Material Facts

The first reflex is to identify precisely which acts are charged. Far too often, the indictment targets current account movements, advances, or regulated related-party agreements that fall under an entirely different legal regime. Recharacterization is a powerful lever.

Demonstrating a Real Counterpart

An act that carries an economic counterpart, even a deferred one, falls outside the scope of the offense. An economic analysis of the file, sometimes supported by a private expert report, allows the prosecution's claim of an absence of consideration to be challenged.

Attacking Bad Faith

The mental element is often the weakest link in the prosecution's case. Transparent accounting, disclosure to shareholders, and prior consultation with the commissaire aux comptes (statutory auditor) are all elements that undermine the demonstration of bad faith.

Raising the Statute of Limitations

Since the law of February 27, 2017, the statute of limitations for criminal prosecution is six years from the date the facts were discovered, capped at twelve years from the date of commission. The date of discovery, long a source of litigation, must be established precisely by the prosecution.

The Applicable Penalties

Article L242-6 punishes the offense with five years' imprisonment and a fine of 375,000 euros. These principal penalties are accompanied by additional penalties of significant practical consequence for an executive:

• a ban on serving as a company director (article L654-5 of the Code de commerce);
• ineligibility for public office (article L7 of the Code électoral);
• deprivation of civil rights;
• posting and publication of the judgment.

These additional penalties are often more damaging financially than the principal penalty. They are never imposed automatically and must be specifically reasoned by the court.

In Summary

Abus de biens sociaux is a technical offense. Its defense requires mastery of both corporate law and criminal law. The personal, professional, and financial stakes at play justify seeking legal representation from the preliminary inquiry stage or at the first voluntary interview (audition libre).

If you have been summoned in connection with abus de biens sociaux proceedings, having a lawyer present from the very first hearing is essential. Every statement you make can be used to establish bad faith.