Two recent rulings by the Court of Cassation have served to reiterate a major principle regarding the universal transfer of assets, which occurs both after a dissolution without liquidation (Article 1844-5 of the Civil Code) and after a simplified merger (Article L.236-3 of the Commercial Code):
The right of the absorbed company to take legal action is immediately transferred to the absorbing company.
The effect of a company's dissolution without liquidation on the time limits of an ongoing appeal procedure
The first ruling, issued by the 2nd Civil Chamber of the Court of Cassation on May 20, 2021 ( Civ. 2, May 20, 2021, No. 20-15.098, Published in the Bulletin ), addresses the effect of a dissolution without liquidation of a company on the time limits of an ongoing appeal procedure.
In this case, a company appealed a judgment rendered by a commercial court. The appeal judgment was overturned by the Court of Cassation, with notification of the reversal occurring on September 26, 2017.
This company has since been dissolved without liquidation, which became final on November 22, 2017, as no objection was raised within the legal time limit.
The acquiring company, succeeding to the rights of the acquired company by virtue of the universal transfer of assets, registered its notice of appeal on the following December 5.
However, she had a period of two months from the notification to the party of the judgment rendered by the Court of Cassation, i.e. until November 26, 2017, to register the said declaration of appeal at the registry of the referral court (article 1034 of the Code of Civil Procedure , amended by the decree of May 6, 2017 (no. 2017-891 – it was 4 months previously!).
In its decision of May 20, 2021, the 2nd Civil Chamber dismissed the appeal against the judgment by which the referral Court of Appeal declared inadmissible the appeal registered on December 5, 2017.
The question was : is the operation of dissolution without liquidation a cause of interruption of proceedings?
Article 370 of the Code of Civil Procedure provides that " proceedings are interrupted by:
- the death of a party in cases where the action is transferable; ( )
- the recovery or loss by a party of the capacity to sue or be sued. »
The Court of Cassation responds, directly and carefully, to these two points:
- The dissolution of a legal entity is not equivalent to the death of a natural person. Therefore, it does not constitute grounds for interrupting legal proceedings.
- The dissolution of the absorbed company entails the universal transfer of its assets to the absorbing company, which automatically acquires, from the date of the general meeting that approved the operation, the right to continue the proceedings initiated by the absorbed company.
Therefore, there is no loss of the capacity to sue, but simply a transfer of said capacity to the benefit of the acquiring company.
Thus, as soon as the universal transfer of assets becomes final following the dissolution without liquidation of the absorbed company, the absorbing company must take over and proceed with the necessary steps to continue the ongoing proceedings , including filing a notice of appeal within the legal time limit, even though the notification which starts the time limit has been made to the absorbed company.
This ruling is published in the bulletin, the Court having wished to highlight this solution.
The transfer of the acquiring company's right to act upon the final completion of the simplified merger operation
The second ruling, issued by the Commercial Chamber of the Court of Cassation on July 7, 2021 ( Com. July 7, 2021, No. 19-11.906, unpublished ), addresses the transfer of the right to sue of the acquiring company upon the final completion of the simplified merger operation.
In this case, an acquiring company had sued a natural person, jointly and severally liable for a loan granted by the acquired company (following an assignment of receivables between two banking institutions).
The debtor argued before the Court of Appeal that the simplified merger between the absorbed company and the absorbing company, resulting in the universal transfer of assets to the absorbing company, was not enforceable against him from the date of final completion of the operation, for lack of having been the subject of a legal publication.
The Court of Appeal accepted this argument on the grounds that the acquiring company had not provided any evidence of publication of the simplified merger, making the operation unenforceable against the debtor.
By ruling on the quashing of this judgment, the High Court recalls the principle that, by virtue of the universal transfer of assets, the acquiring company has, by right, from the date of the general meeting approving the operation, the capacity to take legal action, thus coming to the rights of the acquired company.
Beyond the fact that the Court of Appeal had not taken into account the documents demonstrating the timely filing with the registry of the competent Commercial Court of the minutes of the general meeting approving the operation, the Court of Cassation considers that the universal transfer of assets had taken place automatically as a result of the general meeting approving the operation.
The result was that the acquiring company had the capacity to take action for payment against the debtor of the acquired company, having received the latter's claim through the universal transfer of assets.
