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

Company Law (en cours)

As in the case of a merger by absorption, a spin-off results in the dissolution without liquidation of the spun-off company, which disappears following the operation. Consequently, the chairman and CEO of a spun-off company, who, through his maneuvers, maintains creditors' belief in the survival of the former company, commits fraud .
Furthermore, the spin-off results in the universal transfer of a …

Classic effects of the merger

As in the case of a merger by absorption, a spin-off results in the dissolution without liquidation of the spun-off company, which disappears following the operation. Consequently, the chairman and CEO of a spun-off company, who, through his maneuvers, maintains creditors' belief in the survival of the former company, commits fraud .

Furthermore, the spin-off results in the universal transfer of assets and liabilities from the spun-off company to the beneficiary companies. The contribution agreement determines the assets and liabilities transferred to each of these companies. However, it has been ruled that one of the beneficiaries of a spin-off operation may be deemed to have acquired the liabilities of the initial employer related to the dismissal of an employee, even if the spin-off plan provided for a different allocation of charges, as long as, in the absence of regular publication, its provisions are unenforceable against third parties .

Furthermore, as in the case of a merger, certain acts, such as an old internal regulation  or an independent guarantee , are not automatically transferred by the effect of the spin-off.

Regarding the fate of guarantors, the solution is the same as in the case of a merger. Indeed, if the guarantee granted in favor of a demerged company ceases on the date of the demerger, the guarantor remains liable for the payment of commercial paper signed by the principal debtor and not settled by them before the operation and maturing after it . Hypothetically, a guarantor engaged towards a creditor who is subsequently subject to a demerger is only liable to the newly created legal entity for existing claims at the date of the restructuring operation that have been transferred to it, and not for subsequent claims, in the absence of an expression of intent on their part to commit directly to the beneficiary company of the demerger .

Regarding the transfer of liability, case law generally considered that the principle of the personal nature of penalties opposed the imposition of financial sanctions on companies resulting from a spin-off, as long as the sanctioned practices were committed solely by the dissolved company and the restructuring operation was not carried out with the fraudulent intent to evade prosecution . However, it is not excluded that, as in the case of mergers, this solution may be challenged. Indeed, the ECHR considered that the imposition of a civil fine on an acquiring company for anti-competitive acts committed before the merger by the acquired company does not violate the principle of the personal nature of penalties, as long as there is economic continuity between the acquired company and the acquiring company . Subsequently, this solution was extended to criminal matters, with national courts reversing their case law and now considering that in the event of a merger by absorption, the economic and functional continuity of the legal entity leads to not considering the acquiring company as distinct from the acquired 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 .

Cass. com., 28 June 1971, LawLex202200010808JBJ.

Cass. com., 11 May 2023, LawLex202300008285JBJ, RJDA 2023, No 432.

Cass. soc., 17 October 2018, LawLex202100003486JBJ, holding that the internal regulations that applied to employees before the automatic transfer of their employment contracts to a newly created company resulting from a spin-off, are not transferred with them.

Cass. com., 31 January 2017, LawLex202200010809JBJ, considering that the independent guarantee, which does not follow the guaranteed obligation, is not transferred in the event of a demerger of the beneficiary company, unless otherwise agreed.

Cass. com., 29 February 2000, LawLex202200010851JBJ; 17 July 2001, LawLex202200010848JBJ, considering that guarantees subscribed before a spin-off-absorption benefit the beneficiary company of the operation, as long as it is the same legal entity.

Cass. com., 22 January 1985, LawLex202200004801JBJ, considering that a guarantor engaged with a creditor, which is subsequently subject to a spin-off, is only liable to the newly created legal entity for the debts existing at the date of the restructuring operation that were transferred to it, and not for subsequent debts, in the absence of any expression of intent on their part to commit directly to the beneficiary company of the spin-off.

Cass. com., 15 June 1999, LawLex202200010849JBJ, regarding the sanctions of the former Commission des opérations de bourse, now the AMF.

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.

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 et BATTAGLIA; Rev. Sociétés 2021, 79, obs. BOULOC et 115, obs. MATSOPOULOU; Gaz. Pal. 26 January 2021, 21, obs. BRENAUT et TOUZAIN; D. 2021, 379, obs. FOUQUET; Dr. sociétés 2021, No 13, obs. SALOMON; RTD com. 2020, 961, obs. SAENKO; D. 2021, 167, obs. BEAUSSONIE.

Company Law (en cours)

250. Classic effects of the merger

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

250. Classic effects of the merger

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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