Concerning the company director’s tax liability

June 30th 2015

Article L.267 of the French Tax Procedure Code sets forth that when a director of a company is liable for corrupt practices or serious and repetitive non-compliance with the tax obligations which rendered impossible the collection of taxes and penalties due by the company, this director may, if he is not already obliged to pay the company debts pursuant to another provision, be declared jointly liable for the payment of these taxes and penalties by the President of the tribunal de grande instance (French Civil lower court).

The non-compliance with tax obligations therefore must be repetitive and be sufficiently serious, with the courts having a sovereign discretionary power in this regard.

Yet, it must be recalled that this liability is not incompatible with a liability action for shortfall of assets.

Recently, the Cour de cassation (French Civil Supreme Court) upheld the liability of a director on the basis of Article L. 267 of the French Code of Civil Procedure by establishing “that the control made by the tax administration indicated an established practice of reduction in the turnover statements, delays in the value added tax statements and failure to make repayment of this tax invoiced and recorded, having enabled Mr. X… to fraudulently maintain a part of the funds collected in this regard in the company’s cash flow and delay the procedure for the collection of the tax debt to a date subsequent to the company’s court-ordered liquidation”.

Julien Combier

(Cass. Com. May 12, 2015)