Our previous articles dealt with the most common precautionary measures, those relating to movable property, traditional debts such as bank balances, or even securities on buildings and business assets. However, the legal landscape is broader and more complex. Certain types of asset, such as shares, and certain situations, such as international disputes or a company's financial difficulties, call for specific rules that are important to know.
Here we will look at three specific areas that fall outside the general framework:
- How to deal with shares and other securities held by your debtor?
- How to act effectively on a bank account located in another European Union country ?
- What is the impact, often formidable, of a collective procedure (safeguard, receivership or compulsory liquidation) opened against your debtor regarding the precautionary measures you have taken or intend to take?
These questions are particularly relevant for businesses, investors or anyone with commercial or financial relationships that go beyond the local level or involve companies.
Seizing or pledging shares or securities
Shares in listed companies, limited liability companies, non-trading companies, bonds and other financial securities often represent a large proportion of a debtor's assets. Can they be "blocked" as a precautionary measure? The answer is yes, but with rules adapted to their intangible nature and the way they are held (often via financial intermediaries or the issuing company itself). The Code of Civil Enforcement Procedures (CPCE) provides for two approaches: protective attachment and protective judicial pledging.
Attachment of partners' rights and securities
As in the case of other assets, the purpose of the seizure is to return the securities to the owner. unavailable (article L. 521-1 of the CPCE).
- Procedure: The bailiff, with the authorisation of the judge or a document exempting you from this authorisation, serves a writ of attachment not directly to the debtor, but to the issuing company securities or the financial intermediary who maintains the debtor's securities account (bank, broker, etc.). Articles R. 524-1 and R. 232-1 to R. 232-4 of the CPCE specify who to contact depending on the nature of the securities (registered, bearer, etc.). Next, this entry must be denounced to the debtor by bailiff's deed within eight days, on pain of nullity (article R. 524-2 of the CPCE).
- Effects : Seizure makes the pecuniary rights attached to the seized securities. This includes the right to sell the securities, but also the right to receive the proceeds (dividends, interest) or the proceeds of their liquidation (article R. 524-3 referring to R. 232-8 of the CPCE). On the other hand, subject to certain exceptions, the debtor retains his or her political rights, such as the right to vote at general meetings. The unavailability applies to all securities of the category in question held by the debtor with the garnishee.
- Conversion : Once a final writ of execution has been obtained, if the debtor fails to pay, the attachment may be converted into a foreclosure of the securities (articles R. 524-4 to R. 524-6 of the CPCE). The forced sale procedure will then follow specific rules depending on whether or not the securities are listed on the stock exchange (reference to articles R. 233-3 et seq. of the CPCE).
Judicial protective pledge
Rather than blocking the shares completely, you may prefer to take security over them, in the form of a judicial pledge (article L. 531-1 of the CPCE). This will give you priority in the event of a sale, without totally preventing the debtor from managing his portfolio (subject to certain conditions).
- Procedure (Publicity) : La provisional advertising is carried out, as for data entry, by meaning a document to the issuing company or financial intermediary (articles R. 532-3 and R. 532-4 of the CPCE). For shares in certain companies (such as registered non-trading companies), registration with the Registre du Commerce et des Sociétés (RCS) may also be required. The debtor must be informed within eight days. The definitive advertisingOnce the final writ of execution has been obtained, the payment is made by means of a new meaning within the required two-month period (article R. 533-3 of the CPCE).
- Effects : The pledge creates a preferential right for the creditor over the value of the securities. The debtor may still dispose of the securities (article L. 531-2 of the CPCE), but if they are sold, your right is transferred to the price, which must be deposited (article R. 532-8 of the CPCE). The final advertisement retains the rank acquired by the provisional advertisement.
- Special feature: approval : For shares in certain companies (SARLs, non-trading companies in particular), even if you have a definitive pledge, the compulsory realisation (sale) or allotment of the shares may be subject to the "Caisses d'Epargne".approval other partners or the company, in accordance with the Articles of Association and the law (e.g. Article 1867 of the French Civil Code, L. 223-15 of the French Commercial Code). This is a constraint that must be anticipated.
European seizure of bank accounts: action beyond borders
Does your debtor have well-funded bank accounts... but in another EU country? Until recently, getting these funds frozen was a complex and often inefficient process. To remedy this, the European Union has adopted the Regulation (EU) no 655/2014which came into force in January 2017, creating a procedure forEuropean order for the precautionary seizure of bank accounts (OESC or EAPO in English). This regulation is part of a wider framework for judicial cooperation in civil matters within the EU, which also includes the management of cross-border bankruptcies.
What is the objective?
Enable creditors to obtain, via a single, rapid procedure before a judge in their own country (or the country with jurisdiction over the dispute), an order to freezing funds held by its debtor in bank accounts located in other Member States of the EU (except Denmark). This is indeed a conservatory It freezes the funds but does not yet allow the creditor to be paid.
Main conditions:
- It must be a cross-border litigation The account to be seized must be in a Member State other than that of the court hearing the ESO application or that of the creditor's domicile (Article 3 of the Regulation).
- The creditor must demonstrate that its claim appears to be well-founded.
- It must prove a urgent need of precautionary measures because there is a real risk that, without this measure, the subsequent recovery of its debt would be prevented or made significantly more difficult (Article 7). If the creditor does not yet have a judgment, this requirement to prove the risk is reinforced.
How does it work?
- Standardised procedure : Applications are made via standard forms (Article 8).
- Not contradictory at the outset: To maintain the element of surprise, the debtor is not informed of the initial application (Article 11).
- Speed : Judges must rule within very short deadlines (5 or 10 working days depending on the case) after receipt of the complete application (Article 18).
- Financial guarantee : The judge may (and often must, if the creditor does not have a judgment) require the creditor to provide a financial guarantee to cover any damage caused to the debtor if the CSEO proves to be unjustified (Article 12). The creditor is liable for the damage caused (Article 13).
- Search for information : If you do not know the exact bank details of your debtor in another Member State, you can ask the court to use the mechanisms provided for in the Regulation to obtain this information from the authorities of the other State (Article 14).
The effects of the order :
- Direct recognition and execution : That's the big advantage! A CSEO issued in a Member State is recognised and enforced in other Member States without the need for any local procedure (no exequatur) (Article 22).
- Implementation by the bank : The foreign bank that receives the CSEO must implement it without delay and freeze funds up to the amount indicated (Article 24). Funds in excess of this amount remain available to the debtor. The bank must then declare whether it has been able to execute the measure (Article 25).
- Information and recourse of the debtor : The debtor is informed of the seizure after that it has been carried out (Article 28). He then has specific remedies under the regulations to challenge the order (Articles 33, 34) or to propose a replacement guarantee (Article 38).
Please note that the Regulation does not apply to all matters (in particular, matrimonial property regimes, succession, bankruptcy and arbitration are excluded - Article 2).
Conservatory measures and companies in difficulty (collective proceedings)
When a debtor (company, trader, craftsman, liberal profession, etc.) is the subject of an backupof turnaround or compulsory liquidationFor creditors, the rules of the game change radically. The primary objective becomes the survival of the business (if possible) and the collective and equal treatment of creditors, under the aegis of the commercial or judicial court.
This has direct and often severe consequences for precautionary measures:
- Stopping individual prosecutions : The judgment opening the collective proceedings stops or prohibits any legal action by creditors to obtain payment of a claim that has arisen before this judgment. This includes a ban on initiate new precautionary measures for these prior claims (article L. 622-21 of the French Commercial Code).
- Prohibition on registering new security interests : It is also forbidden to register new mortgages or pledges (including judicial pledges) after the opening judgment (article L. 622-30 of the French Commercial Code).
- Fate of precautionary measures taken BEFORE judgment :
- Attachment of movables, receivables, etc. : If they have not been converted as an enforcement measure (seizure for sale, attachment for payment) before the opening judgment, they generally become ineffective. The judicial representative may request the release. According to established case law, the protective attachment of a debt that has not been converted loses even the benefit of the lien that it conferred (based on Com. 22 Apr. 1997 and subsequent decisions). Only a conversion finalised before the judgment saves the measure.
- Judicial sureties (mortgages, pledges) : The situation is more favourable. If the provisional advertising has been validly carried out before the opening judgment (and ideally before the date of cessation of payments), the creditor retains his rank. It can even carry out the definitive advertising after the opening judgment, once it has obtained its final writ of execution (based on Com. 3 May 2016).
- Invalidity of the suspect period : If a protective measure or a court order has been taken after the date of cessation of payments (the date, set by the court, on which the company was already in a state of insolvency) but before the opening judgment, it runs the risk of being cancelled by the court as a "suspect act" (article L. 632-1 of the French Commercial Code). The main exception is if the act of seizure or the provisional registration itself predates the date of cessation of payments.
- Some notable exceptions:
- Creditors can take precautionary measures against guarantees for individuals of the debtor in collective proceedings, even during the observation period (article L. 622-28 of the French Commercial Code).
- The insolvency court has specific powers to order precautionary measures itself, including against third parties, in the event of confusion of assets or fictivity of the company (article L. 621-2 of the French Commercial Code).
In short, the opening of collective proceedings paralyses most individual initiatives by creditors, including protective measures that have not yet been finalised. The date at which a measure is taken and converted (for seizures) or published (for security interests) is therefore absolutely decisive.
Navigating the intricacies of securities seizures, European procedures or the impact of collective proceedings requires careful legal analysis. Precise advice on your specific situation can prove decisive in safeguarding your rights, whether you are a creditor seeking to take action or a debtor facing these procedures. Do not hesitate to contact us to discuss.
Sources
- Code of Civil Enforcement Procedures (CPCE)
- Commercial code
- Civil Code
- Regulation (EU) No 655/2014 of the European Parliament and of the Council of 15 May 2014
EN 
FR