All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

The warranty against eviction due to personal actions, also stemming from sales law , aims to protect the transferee from potential competitive actions by the transferor , the legal entity, its manager, and any person the seller might use to evade their obligations. While the freedom of commerce and the freedom to conduct business can be restricted by the effect of the warranty against eviction to …

Prohibition on the transferor from re-establishing.

The warranty against eviction due to personal actions, also stemming from sales law , aims to protect the transferee from potential competitive actions by the transferor , the legal entity, its manager, and any person the seller might use to evade their obligations. While the freedom of commerce and the freedom to conduct business can be restricted by the effect of the warranty against eviction to which the seller of shares is bound towards the buyer, it is on the condition that the prohibition for the seller to reestablish themselves is proportionate to the legitimate interests to be protected . Indeed, the implementation of this warranty involves significant consequences for the transferor, who may be required to return the sale price to the transferee when a judicial decision deprives the latter of the ability to operate the business represented by the shares and renders them worthless .

In the event of a transfer of shares in a company, the implementation of the warranty against dispossession is contingent upon the existence of acts likely to constitute recoveries or attempts to recover the sold asset or infringements on activities, such that they prevent the purchaser from continuing the economic activity of the company and achieving the corporate purpose . Indeed, the opening of judicial liquidation of the transferred company is not sufficient to characterize dispossession of the transferee by the transferor, when after the transfer, it continued its economic activity and achieved its corporate purpose for several years . Conversely, the transferor, who, upon the expiration of a non-compete clause, creates a new company and then offers services to the almost exclusive client of the transferred business, thereby depriving it of its substance, violates the legal warranty against dispossession . Similarly, the establishment by the transferor of a company with almost the same name as the transferred one, responsible for distributing products for which it has notified a supply disruption, constitutes a breach of its obligation to guarantee the purchaser against dispossession . It is important to emphasize that the judge always assesses dispossession with regard to the activity of the transferred company, without regard to that of the transferee .

The transferor is not, however, required to guarantee the transferee when the eviction is attributable to the latter. Thus, the transferee's action for warranty against eviction following the penalties imposed on the transferred company in a labor court proceeding initiated by the transferor is inadmissible when they do not result from the transferor's actions, but from the transferred company's failure to comply with dismissal rules .

Cass. com., 9 July 2002, LawLex202300000600JBJ, holding that only the transferee of shares, to the exclusion of the transferred companies, can bring an action for warranty against dispossession against the transferor.

Cass. com., 10 November 2021, LawLex202100005879JBJ, Contrats Conc. Consom. 2022, No 26, obs. MALAURIE-VIGNAL; D. 2021, 2086 and 2262, obs. BELLINO; RTD com. 2022, 95, obs. MOURY; Rev. sociétés 2022, 348, obs. BARBIERI; D. 2022, 2256, obs. PICOD, emphasizing that the warranty against dispossession to which the seller of shares is bound towards the purchaser cannot prohibit them from establishing a competing company more than three years after the transfer.

Cass. com., 12 December 1972, LawLex202300000346JBJ.

Cass. com., 15 December 2009, LawLex202300000601JBJ, holding that after the expiration of a non-compete clause, the transferee of the shares of a publishing company is entitled to rely on the legal warranty against eviction owed by the transferor, notwithstanding the buyback of his non-compete commitment, as long as the creation by the latter of a new company and the announcement of the forthcoming publication of works by authors published by the transferred company is likely to prevent him from continuing the activity of the acquired company and achieving its corporate purpose; 9 July 2002, LawLex202300000600JBJ. - See a contrario, Cass. com., 21 January 1997, LawLex202200000277JBJ, JCP E 1997, 936, note GUYON; RTD civ, 1997, 443, note GAUTIER; RTD com, 1997, 277, note CHAMPAUD and DANET; RTD com, 1997, 469, note PETIT and REINHARD; D. 1998, 393, note HALLOUIN.

Cass. com., 20 September 2017, LawLex202300000618JBJ.

Cass. com., 16 January 2001, LawLex202200000770JBJ, D. 2002. 712, note ARCHER; D. 2001. Somm. 1312, note SERRA; 12 May 2015, LawLex202300000617JBJ, considering that the transferor, who, after leaving the transferred company, resumes a clientele generating a high annual turnover, violates the warranty against eviction provided in a transfer agreement as it thereby deprives the transferee.

Cass. com., 20 February 2007, LawLex200700000285JBJ, Contracts Conc. Consom., 2007, No 123, note MALAURIE-VIGNAL; Cass. 1re civ., 24 January 2006, LawLex202300000612JBJ, holding that the relocation of a transferor to another urban area at a date earlier than contractually agreed, and the use of tactics to capture the clientele of the transferred company, deprives the transfer of its purpose and constitutes a breach of the warranty against eviction owed both to the legal entity and to the former partner.

Cass. com., 16 November 2022, LawLex202300002340JBJ, RJDA 2023, No 88.

Cass. com., 3 March 2015, LawLex202300000619JBJ.

Company Law (en cours)

296. Prohibition on the transferor from re-establishing.

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296. Prohibition on the transferor from re-establishing.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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