Gaudriot

Recently the French Supreme Court (‘Cour de cassation') rendered an interesting and innovative decision regarding the liability of directors in a matter that was brought forward by shareholders of the company Gaudriot SA, a company under French law, specialized in consulting and engineering in the field of environment.

 

Deminor has united those shareholders who initiated civil proceedings in March 2006 against the former directors of Gaudriot, including Pierre-Henri Gaudriot, in order to recover the losses they incurred.

 

Gaudriot SA was since July 2004 benefiting from a restructuring procedure, before it got liquidated. Deminor made an analysis pointing out that the financial information disseminated by Gaudriot SA did not disclose the financial problems the company encountered and misrepresented the real situation of the company.

The Court of Appeal of Limoges confirmed on 6 October 2008 the ruling of the Tribunal de Grande Instance of Gueret, and ordered the compensation of shareholders for 1.4 million EUR, which represented their entire investment.

 

The directors of Gaudriot SA appealed this decision before the French Supreme Court.

 

In its decision of 9 March 2010, the French Supreme Court dismissed the appeal regarding the admissibility of claims and the liability of directors, validating hereby the financial analysis of Deminor.

 

However, the decision of the French Supreme Court did not validate the manner according to which the Court of Appeal had assessed the damage. The Court of Appeal provided that the damage suffered by each shareholder was equal to the full amount invested, while the Supreme Court says the damage should only be assessed on the basis of a "loss of chance" to make a better investment.

 

This matter has now been referred to the Court of Appeal of Limoges which will have to decide on this issue on how to assess the damage.

 

Regardless of the outcome of these proceedings, the decision of the French Supreme Court is already a huge step forward for the defence of shareholders in France, and will hopefully allow an easier access to justice to shareholders invoking the liability of directors, even when the company is not bankrupt.