During the formation phase of a Societe Anonyme (S.A.), or company limited by shares, the company is treated as a partnership among its founders. This classification carries significant legal implications, particularly regarding liability for actions taken before the company’s official incorporation.
Liability of Founders
During the incorporation process:
- The founders bear unlimited and joint and several liability for any actions taken on behalf of the company under formation.
- This liability covers both actions and omissions by the founders.
Transfer of Liability to the Company
After the official incorporation of the company:
- The S.A. becomes liable only for actions expressly undertaken in its name.
- To assume liability for such acts, the company must formally accept them within three (3) months from the date of incorporation (Article 10(1), Law 4548/2018).
- Once the company is incorporated, liability automatically shifts from the founders to the legal entity itself.
Additional Obligations of the Founders
According to Article 10(2) of Law 4548/2018, founders are also liable for:
- Damages suffered by the company or third parties (whether shareholders or not) arising from:
- Omission of mandatory provisions in the articles of association.
- Inaccurate or misleading information during capital registration.
- Non-compliance with valuation or contribution requirements.
- Annulment of the company, if they knew or should have known about the irregularities.
- Claims for compensation are subject to a five (5) year statute of limitations from the date of incorporation.
Conclusion
A clear understanding of the legal obligations and liabilities of founders during the pre-incorporation phase is essential to mitigate legal risks and to ensure a smooth transition of responsibility to the incorporated company.
