Your company has delivered goods or performed a service, but your customer is delaying payment. Worse still, you learn that they appear to be selling their assets or emptying their business accounts to avoid meeting their obligations. This situation, which is unfortunately common, can jeopardise the financial health of your business. Faced with this legitimate anxiety, French law offers tools for taking preventive action: precautionary measures. These are legal mechanisms that make it possible to "freeze" certain assets of your debtor to guarantee future payment of what he owes you.
Understanding these tools is essential for any creditor, whether a business or an individual, wishing to secure their rights before it's too late. This article looks at these mechanisms: what exactly they are, why use them and, above all, what conditions need to be met before they can be used.
What is a precautionary measure?
A precautionary measure, as its name suggests, aims to keep your debtor's assets. The fundamental objective, defined by article L. 511-1 of the Code of Civil Enforcement Procedures (CPCE), is to safeguard your rights by making certain assets belonging to the person who owes you money unavailable. Think of it as a sort of legal "hold" on these assets, preventing the debtor from organising his insolvency while you assert your rights.
In accordance with the general principle of the right of pledge set out in article 2284 of the Civil Code, your debtor's assets constitute a guarantee of payment for his creditors. Protective measures make it possible to preserve this guarantee.
There are two main types of precautionary measures:
- The precautionary seizuresThese are designed to physically block property (furniture, money in a bank account, etc.).
- The judicial sureties (mortgage or pledge), which involves taking out a specific guarantee on a valuable asset (building, business, etc.) to obtain priority in the event of a sale.
These various measures will be explained in detail in other articles on our blog. The key point here is that they are provisional. They are taken pending either a final court decision ordering the debtor to pay, or the implementation of a compulsory enforcement procedure (such as an attachment for sale). They are not ends in themselves, but stages in the process of securing a debt.
Why use a precautionary measure?
There are a number of situations in which it may be advisable to take precautionary measures:
- The urgent need to act : When you have serious reason to believe that your debtor is trying to become insolvent, a protective measure allows you to act quickly to protect what can still be protected.
- The surprise effect : The procedure for obtaining authorisation to take protective measures generally takes place without the debtor initially being informed. This surprise effect is often decisive in preventing the disappearance of assets and may also encourage the debtor to pay his debt voluntarily in order to have the measure lifted.
- Securing claims during legal proceedings : A trial can last a long time. During this time, the debtor could empty his accounts or sell his assets. A protective measure "freezes" part of the debtor's assets, ensuring that there will be something left to seize if you win your case.
- Take out specific cover : Judicial sureties (mortgage, pledge) allow you to obtain a preferential right over a specific asset, giving you priority over other creditors for the proceeds of the sale of that asset.
What are the essential conditions for taking action?
Taking a protective measure is a significant action that affects the debtor's assets. This is why the law strictly regulates its use. You must meet two cumulative conditions, set out in article L. 511-1 of the CPCE: a debt that appears to be well-founded in principle and circumstances that are likely to threaten its recovery. It is up to you, the creditor, to prove to the judge that these two conditions have been met.
A claim that appears to be well-founded (the appearance of good right)
The first condition is that you have a claim that appears to be well-founded in principle. What does this mean in practice? The legislator deliberately uses a flexible formula. Unlike compulsory enforcement measures (such as seizure of assets after a final judgment), which require a claim that is certain, liquid (precisely quantified) and due (when it falls due), protective measures can be authorised on the basis of a claim that is appears fair, i.e. the existence of which is sufficiently likely or credible in the eyes of the judge.
It is therefore not necessary for your claim to be absolutely incontestable at this stage. A mere appearance of right is sufficient. For example:
- An unpaid invoice accompanied by a signed purchase order and delivery note.
- A written contract that you can prove has been breached by the debtor (e.g. failure to comply with a payment obligation).
- An acknowledgement of debt signed by the debtor.
- A guilty verdict, even if it is not yet final because it has been appealed.
Similarly, it is not necessary for the amount of the claim to be determined with absolute precision. If your claim is not yet liquid (for example, a claim for damages, the exact amount of which will be determined by the trial judge), you will need to provide a provisional estimate. The judge will assess whether this assessment is reasonable in the light of the information provided.
Lastly, the debt does not have to be immediately due and payable. A precautionary measure may be authorised to secure a term claim (one that is not yet due), if the other conditions are met.
The role of the judge hearing the application for authorisation is essential: he or she must assess the plausibility of your claim, its "appearance of merit". The judge does not rule on the merits of the case at this stage, but assesses whether your claim is based on sufficiently serious grounds to justify a precautionary measure. His assessment is sovereign, but it is based on the documents you submit to him. A claim that is purely hypothetical or manifestly disputable will not be eligible for authorisation.
A real threat to debt recovery
The second condition, which is just as important, is that you can demonstrate circumstances likely to threaten recovery of your claim. It is not enough to say "my debtor has not paid me on time". A simple delay in payment, if the debtor is otherwise solvent, does not in itself constitute a sufficient threat.
You need to show that there is a particular risk that you will never be paid unless something is done quickly. This threat can result from a variety of factors, assessed on a case-by-case basis by the judge. Here are a few examples taken from real-life situations:
- The debtor's precarious financial situation : Recent major losses, a systematically overdrawn bank account, failure to publish annual accounts, accumulated debts to other creditors (Treasury, social security bodies, etc.).
- The debtor's behaviour :
- He sells his assets (car, building, etc.) in a hurry.
- He moves without leaving an address or goes to live abroad.
- He remains silent in the face of your repeated reminders and formal notices, without justifying his refusal to pay.
- He has already tried in the past to organise his insolvency.
- He or she is not in employment and has no known income (this criterion must be handled with care and combined with others).
- The legal or economic context : Other creditors have already registered liens or mortgages on the debtor's assets, further reducing your chances of being paid. The absence of compulsory insurance to cover liability (in certain sectors such as construction) can also be a threat to future compensation.
However, certain factors alone are generally not sufficient to prove the threat:
- The simple fact that the debtor is contesting the claim, if he otherwise presents guarantees of solvency.
- The mere fact that you already have a writ of execution (even if this exempts you from prior authorisation, the threat must still exist).
It is up to the creditor to demonstrate the existence of these threatening circumstances, by providing the judge with concrete evidence (balance sheets, unanswered reminder letters, evidence of suspicious sales, etc.). If the debtor subsequently contests the measure, the burden of proving that the conditions, including the threat, were indeed met (and still are) will still be on the creditor.
These two conditions - a claim that appears to be well-founded and a threat to recovery - are the essential basis for considering a precautionary measure. When these two conditions are met, it is possible to justify a provisional attack on the debtor's assets with the legitimate aim of protecting the creditor's rights.
Precautionary measures are powerful tools, but their implementation requires a precise analysis of the situation and compliance with strict conditions. For a personalised analysis of your situation and to determine whether a precautionary measure is appropriate to protect your debt, our team is at your disposal.
Sources
- Code of civil enforcement procedures
- Civil Code
- Penal code
- Code of judicial organisation
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