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

Company Law (en cours)

As a result of the merger by absorption without the creation of a new company, the absorbed company transfers, from the date of the last meeting approving the operation , the entirety of its assets and liabilities to the absorbing company, which includes its claims  as well as its debts . This transfer, which leads to the consideration that the absorbing and absorbed companies are one and the same …

Implications of the universal transfer of assets and liabilities.

As a result of the merger by absorption without the creation of a new company, the absorbed company transfers, from the date of the last meeting approving the operation , the entirety of its assets and liabilities to the absorbing company, which includes its claims  as well as its debts . This transfer, which leads to the consideration that the absorbing and absorbed companies are one and the same, automatically grants the former the rights enjoyed by the latter  as well as the legal standing  to initiate legal action concerning the latter , without the need for any particular formalities .

As the universal successor of the absorbed company, the absorbing company acquires by operation of law, as of the effective date of the merger, the status of party to proceedings previously initiated by the absorbed company and may avail itself of judgments rendered in its favor . Actions brought against the absorbed company before the merger-absorption, completed during the proceedings, continue with the universal transfer of its assets and liabilities to the absorbing company, provided that the latter intervenes in the appeal .

The universal transfer of the absorbed company's assets was, until recently, subject to a significant limitation. Indeed, case law traditionally held that, pursuant to the principle of the personal nature of penalties, the absorbing company could not be subject to criminal prosecution for acts committed by the absorbed company before the latter lost its legal existence due to the merger . Under the influence of European law, the Criminal Chamber of the Court of Cassation was led to revise its position. Indeed, the Court of Justice first held that a merger by absorption involving two joint stock companies results in the transfer to the absorbing company of the obligation to pay a fine imposed, by a final decision after this merger, for labor law violations committed by the absorbed company before the operation . Then, the European Court of Human Rights held that the imposition of a civil fine on an absorbing company for anti-competitive acts committed before the merger by the absorbed company does not violate the principle of the personal nature of penalties, as long as there is economic continuity between the absorbed company and the absorbing company . By its judgment of 25 November 2020, the Criminal Chamber made a reversal of case law: it now considers that in the case of a merger by absorption, the economic and functional continuity of the legal entity leads to not considering the absorbing company as distinct from the absorbed company, so that the former can be sentenced to a fine or confiscation for acts constituting an offense committed by the latter before the operation . It adds that the existence of fraud allows for the imposition of a criminal sanction on the absorbing company when the merger by absorption was intended to allow the absorbed company to escape its criminal liability, including for operations concluded before 25 November 2020 .

Before this reversal, since it considered that the public action was extinguished with respect to the absorbed company, to which the merger-absorption had caused the loss of all legal existence , the Criminal Chamber held that the civil action, ancillary to the public action, could not be transferred to the absorbing company when the merger had taken place before a ruling on the public action . However, it had challenged this solution when the declaration of guilt of the absorbed company occurred before the restructuring . With the reversal by the Criminal Chamber, it is no longer necessary to question the date of the merger since the public action, which can now be directed against the absorbing company, is no longer extinguished.

However, certain contracts escape the principle of universal transfer of assets and liabilities: these include intuitu personae contracts, concluded in consideration of the person. Case law specifies that such contracts cannot be automatically transferred to the absorbing company  without the consent of the co-contractor. The principle particularly applies to distribution law: agency, franchise , or concession  contracts cannot be transferred without the distributor's consent. By extension, a company holding a property management mandate cannot deprive co-owners of their exclusive power to appoint the manager through a merger-absorption operation resulting in the disappearance of its legal personality and substitution by the absorbing company, a distinct legal entity . Finally, case law opposes the transfer of insurance contracts, as these were concluded in consideration of a previously assessed risk .

Cass. com., 7 July 2021, LawLex202200009709JBJ.

Cass. com., 30 November 2022, LawLex202200010570JBJ, RJDA 2023, No 85, considering that the company, which, as a result of a merger by absorption, acquires all the assets of the absorbed company, has standing to enforce performance against a debtor of the latter, from the date of the last general meeting approving the operation, regardless of the completion of the publicity formalities applicable to it; 8 November 2023, LawLex202300014261JBJ, RJDA 2024, No 103, holding that a company that has undergone a merger by absorption, without the creation of a new entity, has the standing to issue a payment order equivalent to a real estate seizure to the debtors of a prior loan.

CJEU, 5 March 2015, LawLex201500000273JBJ, French Company Law 2015, No 89, note ROUSSILLE; JCP E 2015, No 1234, note BARRIERE; Criminal Law 2015, No 74, note NOTTE; JCP G 2015, No 605, note DETHOMAS; BJS 2015, 393, note LE NABASQUE; RJ com. 2022, No 4, 399, note LE GROG; RJDA 2015, 491, SOULARD.

ECHR, 1 October 2019, LawLex201900001472JBJ; LD November 2019, 5, note BORIES; Contracts Comp. Consom. 2020, No 8, note MATHEY; LEDICO January 2020, 1, note CHONE-GRIMALDI; D. 2020, 475, note GALLOIS; Concurrences 1/2020, 111, note BUY. - Cf. already, in France, Cass. com., 21 January 2014, LawLex201400000092JBJ; JCP E 2014, No 1124, note ARCELIN LECUYER; Contracts Comp. Consom. 2014, No 91, note MATHEY; RJDA 4/2014, Studies, 283, note RIFFAULT-SILK; AJ Business Contracts April 2014, 41, note CONSTANTIN; Concurrences 2/2014, 122, note CHAGNY; RLDA 2014, No 5157, note BRETZNER; JCP E 2014, No 1351, note GRIGNON; RDC 2014, 415, note BEHAR-TOUCHAIS; LPA 26 January 2015, 11, note ARHEL, holding that the principle of the personality of penalties does not preclude the civil fine from being borne by the legal entity that absorbed the perpetrator of the offense.

Cass. crim., 25 November 2020, LawLex202200001375JBJ, Dr. pén. 2021, No 2, obs. CONTE; JCP E 2021, No 1006, obs. STASIAK; AJ pénal 2020, 576, obs. APELBAUM and BATTAGLIA; Rev. Sociétés 2021, 79, obs. BOULOC and 115, obs. MATSOPOULOU; Gaz. Pal. 26 January 2021, 21, obs. BRENAUT and TOUZAIN; D. 2021, 379, obs. FOUQUET; Dr. sociétés 2021, No 13, obs. SALOMON; RTD com. 2020, 961, obs. SAENKO; D. 2021, 167, obs. BEAUSSONIE; 22 May 2024, LawLex202400003775JBJ, JCP E 2024, No 1218, obs. SALOMON; JCP G 2024, No 840, obs. SAINT-PAU; D. 2024, 1445, obs. DUCHESNE and LE MOULEC; RJDA 2024, No 459, extending the solution to an absorbing SARL.

Cass. crim., 25 November 2020, LawLex202200001375JBJ, préc.; 13 April 2022, LawLex202200002127JBJ; JCP G 2022, No 603, obs. LORRAIN; RJ com. 2022/4, 399, obs. JULLIAN, emphasizing that the criminal liability of an absorbing company can be engaged for criminal acts committed by the absorbed company before the merger operation, at a time when only the classic interpretation of the criminal liability of legal entities could be considered, if, ex officio or at the request of one of the parties, the judge finds the existence of a fraud on the law.

Cass. crim., 18 February 2014, LawLex202200011474JBJ; 9 September 2009, LawLex202200009718JBJ.

Cass. crim., 23 April 2013, LawLex202200009525JBJ.

Cass. crim., 28 February 2017, LawLex202200009224JBJ.

Cass. com., 11 March 2020, LawLex202200006559JBJ, considering that if a contract concluded in consideration of the person of the absorbed company ends at the latest by the effect of its dissolution, the absorbing company nonetheless acquires, by the effect of the universal transfer of the assets and liabilities of the dissolved company, the claims and debts previously arising in this estate under this contract, whether or not they are already liquid or due; 8 November 2017, LawLex202200009232JBJ, establishing that a collaboration contract not concluded intuitu personae can be taken over by the absorbing company following the universal transfer of the assets and liabilities of the absorbed company in the context of a merger operation, without the consent of the co-contractor being required.

Cass. com., 13 December 2005, LawLex200600000243JBJ, Contrats Conc. Consom. 2006, No 61, obs. LEVENEUR; RTD civ., 2006, 310, obs. MESTRE et FAGES, holding that an "agent-distributor contract" concluded intuitu personae, which stipulates that the rights and obligations of the distributor are "not assignable or transferable, whether in whole or in part, without the prior written consent of the supplier," is not transferable, due to a merger, without the approval by the latter of the absorbing company.

Cass. com., 3 June 2008, LawLex200800000974JBJ; RTD civ. 2008, 478, obs. FAGÈS; Contrats Conc. Consom. 2008, No 200, obs. MALAURIE-VIGNAL; D. 2008, Act. jur., 1623, obs. LIENHARD; RJ com. 2008, 457, obs. LEBRETON-DERRIEN; RDC 2008, 1278, obs. BÉHAR-TOUCHAIS; JCP E, 2009, No 1479, obs. MAINGUY; D. 2009, Pan., 2896, obs. FERRIER, and, on referral, Lyon, 11 June 2009, LawLex201000000022JBJ, Contrats, Conc., Consom. 2010, No 42, obs. MALAURIE-VIGNAL.

Cass. com., 28 June 2017, LawLex202200009506JBJ, considering that the date of birth of the debt for the repayment of a loan, which is that of the conclusion of the contract, is not affected by the subsequent intervention of a merger by absorption operation that effects the universal transfer of the assets and liabilities of the absorbed company, debtor of the loan, to the absorbing company; Cass. crim., 2 April 2003, LawLex202200009720JBJ, considering that by the effect of the merger, the shareholders of the absorbing company, substituted actively and passively for the rights and obligations of the absorbed company, are admissible to seek compensation for the damage resulting from tortious acts committed to the detriment of the latter and its subsidiaries by their corporate officers; Cass. soc., 29 April 1980, LawLex202200009229JBJ.

Paris, 15 October 2009, LawLex200900003201JBJ, considering that a manufacturer may implement the extraordinary termination clause of the automobile dealership contract concerning the transfer of shares or interests when, disregarding its opposition, the distributor proceeds with a merger by absorption with another company of the same group.

Cass. 3e civ., 28 January 2021, LawLex202200008784JBJ; 29 February 2012, LawLex202300002631JBJ, ruling that the law of 10 July 1965, which excludes any substitution of the property manager without a vote of the general meeting of co-owners, does not allow a company holding a property manager mandate to deprive the co-owners of their exclusive power to appoint the property manager by means of a merger-absorption operation resulting in the disappearance of its legal personality and the substitution of the absorbing company, a distinct legal entity.

Cass. 3e civ., 26 November 2020, LawLex202200007291JBJ. - Cf. Cass. 2e civ., 1 September 2016, LawLex202200009955JBJ, considering that the personal nature of the penalty does not preclude its liquidation, which aims at a monetary condemnation, from being pursued against the absorbing company for acts committed by the absorbed company prior to the date of publication of the merger-absorption.

Cass. 2e civ., 16 December 2010, LawLex202200009230JBJ, holding that the benefit of the reduction in social charges resulting from a collective agreement negotiated by the absorbed company, which entered into the assets of the absorbing company that received it from the former, cannot be removed; Cass. 3e civ., 11 October 2006, LawLex202200009721JBJ, considering that the renewal of a mortgage registration carried out by the absorbing company in the name of the absorbed company by virtue of the universal transfer of assets and liabilities resulting from the merger by absorption is valid, even if it contains an irregularity regarding its exact identification, as long as it does not result in any worsening of the debtor's situation; Cass. com., 10 July 2007, LawLex202200009950JBJ, considering that in the absence of a contrary contractual stipulation, the absorbing company, which is by law substituted in all the rights and obligations of the absorbed company by the effect of the merger by absorption, can avail itself of the liability guarantee clause stipulated in favor of the latter.

Cass. com., 4 May 1981, LawLex202200009722JBJ, considering that a company has the standing to demand payment of a promissory note, as long as the company for whose benefit it was subscribed has become one of its branches following a merger by absorption, and it is now the holder of the disputed note; Cass. crim., 22 June 1988, LawLex202200009719JBJ, emphasizing that by the effect of the merger, the absorbing company, universally substituted for the rights and obligations of the absorbed company and having acquired in the latter's assets the right to compensation for the damage caused to it, can regularly resume in its name the civil action previously initiated by the absorbed company.

See in particular, for actions concerning the right to lease: Cass. 3e civ., 19 February 1997, LawLex202200009445JBJ, holding that in the context of a merger by absorption, the absorbing company is, notwithstanding any contrary stipulation, automatically substituted for the company for whose benefit a lease was granted in all the rights and obligations of that lease, therefore, notification to the lessor of the transfer of the contract is not required; 23 April 1976, LawLex202200009723JBJ, indicating, however, that the prohibition on the transfer of a rural lease does not allow the absorbed company to validly transfer its lease rights to the absorbing company by means of a merger agreement.

Cass. com., 30 November 2022, LawLex202200010570JBJ, considering that the company, which, by the effect of a merger by absorption, acquires the entirety of the absorbed company's assets, has standing to enforce execution against a debtor of the latter, from the date of the last general meeting approving the operation, regardless of the completion of the publicity formalities applicable to it; 11 December 2007, LawLex202200009234JBJ, emphasizing that the merger between two companies results in the universal transfer of the absorbed company's assets to the absorbing company, without the need to establish a specific act for the takeover of a ship by the latter; 1 June 1993, LawLex202200009231JBJ, indicating that the merger by absorption, which results in the universal transfer of the absorbed company's assets to the absorbing company, is not analyzed as a lease assignment subject to notification to the lessor.

Cass. com., 21 October 2008, LawLex202200009522JBJ, holding that as the universal successor of the absorbed company, the absorbing company acquires by operation of law, as of the effective date of the merger, the status of party to proceedings previously initiated by the absorbed company and may avail itself of judgments rendered in favor of the latter; 18 February 2004, LawLex202200009956JBJ, considering that the absorbing company, which acquires the entirety of the absorbed company's assets by effect of the merger, may, as a universal successor, be subject to res judicata with respect to that company.

Cass. com., 13 March 2019, LawLex202200009233JBJ.

Cass. crim., 20 June 2000, LawLex202200009717JBJ; 14 October 2003, LawLex202200001480JBJ, holding that since no one is criminally responsible except for their own actions, the absorbing company cannot be declared guilty or convicted for offenses committed by the absorbed company before the merger, which caused it to lose its legal existence; 25 October 2016, LawLex202200001481JBJ, Dr. sociétés 2017, No 34, note SALOMON; JCP E 2017, No 1087, No 1, note DEBOISSY and WICKER.

Company Law (en cours)

228. Implications of the universal transfer of assets and liabilities.

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Les notions juridiques connexes

228. Implications of the universal transfer of assets and liabilities.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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