The manager signed outside the corporate purpose: is the SARL bound?
In short: Under Algerian law, the powers of a SARL manager are read on two layers. Towards shareholders, the articles of association govern. Towards third parties, article 577 of the commercial code grants the manager "the broadest powers": the company is bound even by an act outside its corporate purpose, restrictive clauses in the articles cannot be raised against outsiders, and one co-manager's opposition has no effect. This article sets out what the text actually decides, what the company can still invoke — the third party's bad faith, which it must prove — and what replays internally against the manager under articles 578, 579 and 800.
Keywords in this article
1. Why are a manager's powers always read on two separate layers?
This is the key to the whole subject, and the source of most misunderstandings between shareholders, managers and suppliers. Article 577 of the Algerian commercial code does not describe one power of the gérant: it describes two, with different sources, different scope, and different consequences.
| Internal layer — among shareholders | External layer — towards third parties | |
|---|---|---|
| Text | Art. 577 §1, referring to art. 554 | Art. 577 §2 |
| Source of the power | The articles of association; failing that, the law | The law alone |
| Scope | Whatever the articles allow | "The broadest powers" |
| Restrictions in the articles | Fully effective | Cannot be raised against third parties |
| Sanction for exceeding them | The manager is liable | None — the company is bound |
On the internal layer, the articles of association govern. Article 577 §1 says so plainly: "in relations between shareholders, the powers of the managers are determined by the articles of association." And where the articles are silent, the reference to article 554 supplies the default rule: the manager may perform "all acts of management in the interest of the company." A broad formula, but bounded by two words — management and interest of the company.
On the external layer, the articles no longer govern. The manager "is vested with the broadest powers to act in all circumstances in the name of the company, subject to the powers the law expressly grants to the shareholders." The only reserve is therefore statutory, never contractual: what the law reserves to the general meeting — amending the articles, approving the accounts, consenting to a transferee — remains beyond the manager's signature. Everything else falls within it.
The practical consequence fits in one sentence. A manager can validly bind the company towards a supplier and, by that very same act, commit a wrong against the shareholders. The two propositions do not contradict each other: they sit on two different layers. The contract stands; the manager answers for it.
2. Does an act outside the corporate purpose still bind the company?
Yes — and this is probably the least known rule in Algerian company law. Article 577 §2 states it in black and white: "the company is bound even by acts of the manager that do not fall within the corporate purpose."
The rest of the sentence sets out the only way out, and it is a narrow one: "unless it proves that the third party knew that the act exceeded that purpose, or could not have been unaware of it given the circumstances." Three elements follow, and each of them matters.
The burden of proof lies with the company
It is the company that must establish the third party's bad faith, not the third party that must show diligence. A decisive reversal: in case of doubt, the contract stands.
What must be proved is a state of mind, not a material fact
The text targets what the third party "knew" or "could not have been unaware of given the circumstances." You do not prove that with a commercial register extract; it requires context — correspondence, exchanges, an operation manifestly foreign to the business.
Publication of the articles is not proof
The text excludes it expressly: "it being excluded that mere publication of the articles of association suffices to constitute such proof." Filing the corporate purpose with the commercial register therefore puts no one on notice. That is the opposite of the common reflex.
Why a rule so favourable to third parties? Because it is the price of transactional security. If the corporate purpose could be raised against outsiders, every supplier, bank and landlord would have to verify, before every order, that the transaction really falls within a clause drafted by a notary years earlier. The cost of that verification, multiplied across every transaction in the country, far exceeds the occasional loss of a company bound outside its purpose.
What this means for a director. Do not rely on your corporate purpose to shield you from a commitment made by a co-manager, by a former manager not yet struck off the register, or by yourself in a moment of enthusiasm. The corporate purpose organises the company's internal life; it builds no wall on the outside. Protection is built elsewhere — in how bank signatures are allocated, in written delegations, and in deregistering a former manager in good time.
3. What use are restrictive clauses if they cannot be raised against third parties?
The code is categorical: "clauses in the articles of association limiting the powers of managers arising from this article cannot be raised against third parties." A DZD 500,000 signature cap, a requirement of prior shareholder approval to sell a vehicle, a ban on giving guarantees: none of it prevents the act from taking effect towards the party that contracted.
Does that make such clauses useless? No — they simply change function. They are not a barrier; they are evidence.
| What the clause does not do | What it actually does |
|---|---|
| Void a contract concluded above the cap | Establish that the manager breached the articles — one of the three grounds of liability under art. 578 |
| Relieve the company of payment | Open a claim for damages against the manager |
| Oblige the third party to verify | Supply "just cause" for removal, avoiding the indemnity of art. 579 §2 |
It is a shift, not a disappearance. The company will pay the supplier, then turn against its manager. And a clear, dated, published clause turns a debate about "mismanagement" — a notion the code never defines — into an objective finding that the articles were breached.
Only one technique makes a restriction genuinely enforceable, and it does not run through the articles of association: direct notice to the counterparty. A bank formally notified in writing that the manager may not bind the company beyond a given amount without a second signature can no longer claim ignorance. At that point we leave the ground of the articles' enforceability and enter that of actual knowledge — precisely the exception the text preserves.
Review your articles before the next commitment
Allocation of signatures, written delegations, bank mandates, deregistration of a former manager: we review your articles of association and commercial register extract to identify where the company is exposed.
Request a review4. Where a SARL has several managers, is one signature enough?
Yes. Here too the answer fits in one line of the code: "where there are several managers, they hold separately the powers provided for in this article." Each co-manager therefore holds, alone, the full external power. There is no joint signature by operation of law.
The text goes further, and this is the part usually discovered too late: "opposition by one manager to the acts of another manager has no effect towards third parties, unless it is established that they were aware of it." A co-manager who objects to an order does not stop the order — unless he took the trouble to inform the supplier, and can prove it.
Internally, however, the right of opposition genuinely exists. Article 554, which applies where the articles are silent, gives each manager "the right […] to oppose any transaction before it is concluded." Three words carry the whole mechanism: opposition is a prior veto, not a right of annulment. Once the act is done, there is nothing left to oppose — only liability remains.
Two operational consequences for a SARL with joint management:
- The useful rule is not in the articles, it is at the bank. A dual-signature clause in the articles binds no supplier; a dual-signature mandate filed with the bank actually blocks the transfer. The effective lever is the one the third party knows about and applies itself.
- Opposition must be written and addressed. Disagreement voiced in a meeting counts for nothing externally. A letter to the supplier, with proof of receipt, brings the opposition within the exception the text provides.
5. What does a manager risk after binding the company beyond his powers?
The contract stands, but the matter is not closed: it replays internally. Article 578 sets out three independent, cumulative grounds of liability — "either for breaches of the provisions of this code, or for violations of the articles of association, or for faults committed by them in their management." Exceeding one's powers typically falls under the second, sometimes the third.
Liability arises "individually or jointly and severally as the case may be, towards the company and towards third parties" — the wording is broad: an injured third party may sue the manager directly, without going through the company.
Making good a shortfall of assets
If bankruptcy reveals a shortfall of assets, the court may, on the receiver's application, place all or part of the company's debts on the managers — "whether or not shareholders, whether or not salaried." And the burden of proof is reversed: to be discharged, the manager "must prove that he devoted to the management of the company's affairs all the activity and diligence of a salaried agent." It is not for the receiver to prove fault; it is for the manager to prove diligence.
Removal, and what it costs
Article 579 allows shareholders representing more than half the share capital to remove the manager, and strikes down any clause tightening that majority. Removal "without just cause" remains valid — it merely opens a right to compensation. A documented excess of powers is precisely what turns an expensive removal into a justified one.
Finally, the criminal layer is never far away. Article 800(5) punishes with one to five years' imprisonment and a fine of DZD 20,000 to 200,000 the manager who, in bad faith, "made use of the powers he held […] in a way he knew to be contrary to the interests of the company, for personal ends or to favour another company or business in which he had a direct or indirect interest." Point 4 of the same article targets, in identical terms, the use of the company's assets or credit. What is punished is no longer exceeding one's powers, but diverting them.
6. What to check before contracting with a SARL — and what is pointless
This section addresses the other side of the table: the supplier, the landlord, the business partner. Article 577 protects them broadly, but it does not dispense with three checks — and it makes two others pointless.
| Check | Useful? | Why |
|---|---|---|
| Is the signatory the registered manager? | Yes | The statutory power under art. 577 belongs to the manager. An employee, even a director, acts only under written delegation. |
| Is the manager still in office? | Yes | A published removal ends the power. The commercial register extract is the right document here. |
| Do the legal mentions appear on the document? | Yes | Article 804 requires the company name followed by "SARL", the share capital and the registered office address on every document intended for third parties. Their absence is a signal. |
| Does the transaction fall within the corporate purpose? | No | The company is bound even outside its purpose. Checking gives you no more protection — and not checking does you no harm. |
| Do the articles contain a signature cap? | No | The clause cannot be raised against you. Worse: reading it could help show that you "could not have been unaware." |
The last point deserves emphasis because it is counter-intuitive. Since the company must prove that the third party knew, knowledge becomes a liability: a counterparty who was handed the articles of association is in a worse position than one who was handed nothing. The text does not invite wilful ignorance, but it clearly shifts the risk onto the company.
The de facto manager. One last situation, common and poorly understood: the person who actually runs the company without appearing on the commercial register. Article 805 extends all the offences of articles 800 to 804 "to any person who, directly or through an intermediary, has in fact managed a limited liability company under cover of or in place of its legal manager." A nominee does not erase liability: it merely adds a name to a form.
Disclaimer. This article sets out the legal framework applicable at the date shown, for general information. It is not legal advice and does not replace an examination of a specific situation. The articles cited are those of Book V of the Algerian commercial code in force at the verification date shown at the end of the page; they must be re-checked before any decision.
FAQ — Frequently asked questions
No. Article 577 of the commercial code expressly provides the opposite: "the company is bound even by acts of the manager that do not fall within the corporate purpose." The company escapes only if it proves that the third party knew the act exceeded the purpose, or could not have been unaware of it given the circumstances. The text adds that mere publication of the articles of association does not suffice as proof.
Internally yes; towards third parties no. The code declares such clauses unenforceable against outsiders. The contract concluded above the cap therefore stands, but the manager has breached the articles: that is one of the three grounds of liability under article 578, and it constitutes just cause for removal under article 579. To make a restriction genuinely effective, it must be notified directly to the counterparty — a bank, for instance — and that notice must be provable.
Only before it is concluded, and only internally. Article 554 gives each manager the right to oppose a transaction "before it is concluded." Once the act is done, article 577 applies: "opposition by one manager to the acts of another manager has no effect towards third parties," unless those third parties are shown to have known of it. In practice, the only lock that works is a dual-signature mandate filed with the bank.
No. Article 576 is explicit: "the limited liability company is managed by one or more natural persons." The same article adds that managers "may be chosen from outside the shareholders" — holding shares is not a condition.
More than half the share capital, and that majority cannot be tightened: article 579 treats any contrary clause as unwritten. A removal decided without just cause remains valid but may give rise to compensation for the loss suffered. A third route exists for minority shareholders: the manager "may be removed by the courts for legitimate cause, at the request of any shareholder," whatever the size of the holding.
No — that is the point of article 805. The offences in articles 800 to 804 — misuse of company assets, fictitious dividends, inaccurate balance sheet, failure to hold the general meeting — apply "to any person who, directly or through an intermediary, has in fact managed a limited liability company under cover of or in place of its legal manager." Criminal liability follows actual management, not registration.
Sources and references
- Ordinance No. 75-59 of 26 September 1975 on the commercial code, Book V "Commercial companies" — articles 554, 574, 576 to 590 (SARL) and 800 to 805 (offences relating to SARLs), consolidated version of legislative decree No. 93-08 and ordinance No. 96-27 — Ministry of Trade and Export Promotion, Algeria · Verified on 19/08/2026
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