Lawsuit for personal liability brought against a director of a listed company by minority shareholders

Issue

The director of a listed French company, who had launched an innovative aerospace programme, was sued personally by minority shareholders after the project was halted. At the heart of the matter was the sudden withdrawal of promised public funding, which brought an end to an initiative undertaken in good faith. The minority shareholders held him liable on the combined grounds of company law and stock market law, seeking compensation for their financial loss from the person who had embodied the project. This type of personal liability claim against a director, based on alleged breaches of disclosure and governance obligations, is becoming increasingly common in listed companies facing reversals in public funding.

Challenges

To respond to this action was, first and foremost, to reject any conflation of a project’s failure with the fault of its director. The stakes were both financial, with the potential for a severe personal penalty, and reputational, in a sector where credibility is not easily rebuilt. The legal grounds put forward, which combined securities litigation and company law, also required a technically precise and perfectly coordinated response. Protecting the director meant fighting on several fronts simultaneously, without allowing the case to become fragmented to the advantage of the claimants.

Solution

The firm structured the defence around a central theme by refocusing the debate on the issue of causation, rather than responding point by point to the claimants’ allegations. By reconstructing the chronology of public commitments and their withdrawal, and then precisely defining the director’s obligations in relation to his corporate mandate, the defence demonstrated the absence of any personal breach that might give rise to his liability. The director was cleared of any wrongdoing. In complex disputes involving corporate governance, directors’ liability and securities law, the quality of the initial position often determines the outcome of the proceedings just as much as the strength of the arguments put forward during the proceedings.