There are no provisions in the French Commercial Code regarding the remuneration of managers of limited liability companies’.

Therefore, the remuneration of such managers may either be determined by the by-laws of such companies or by the shareholders’ general assembly. Further, it may either be provided that the functions of the manager are free or that they are subject to remuneration. In any case, the judge may not substitute his decision to the shareholders’ in order to fix the manager’s remuneration.

It may be decided that the managers’ remuneration will be either a fixed remuneration, or proportional to the profits or to the turnover, or a mix of the two. Regardless of the remuneration by cash, the manager may also have benefits in kind (avantages en nature) (such as an apartment, a car…).

One question arises when the manager is also a shareholder: whether the calculation of his remuneration is a regulated transaction in accordance with Article L.223-19 of the French Commercial Code. If such is the case, such manager (being also a shareholder) may not vote at the shareholders’ general assembly which will fix his remuneration.

Until last year, this question had not been clearly resolved by the courts.

Indeed, Article L.223-19 of the French Commercial Code provides for a control, after the event, of the transactions executed between the company and its managers or shareholders.

Consequently, the Secretary for Justice had considered that the remuneration of a limited liability company’s manager was apparently subject to the control procedure mentioned under such Article L.223-19.

As a result, until the Supreme Court’s decision dated May 4th, 2010, it was more cautious not to allow the manager (who is also a shareholder) to vote the resolution in connection with his remuneration, even if such resolution could possibly benefit from Article L.223-20 of the French Commercial Code allowing the transactions conducted under normal conditions not to be subject to any control by the shareholders.

This uncertainty belongs to the past. In fact, in its decision dated May 4th, 2010, the Supreme Court decided that the determination of the remuneration of the manager of a limited liability Company by the shareholders’ general assembly does not constitute a regulated transaction between the company and the manager. As a consequence, the manager (and shareholder) may now participate and vote to the shareholder’s general assembly which determines, among others, his own remuneration.