Initiating debt collection proceedings often involves seizing the debtor's assets. In addition to tangible assets, a person's or company's assets often include intangible rights, which can be of considerable value. Seizure of these assets, particularly partnership rights and securities, is an effective remedy for creditors. However, this procedure is far from a smooth ride. There are exceptions, legal loopholes and technical complexities that require careful analysis. Understanding the seizure of intangible rights as a whole is a prerequisite for dealing with these situations. This article looks at the specific cases that raise questions, the limits of seizability and the practical issues for creditors wishing to secure their claims. For a more general overview, it may be useful to begin with the general operation of the seizure of partnership rights and securities before diving into these more complex cases.
Understanding the purpose of seizing partnership rights and securities
Before exploring the exceptions, it is necessary to clearly define the concepts of shareholder rights and securities. Their distinct legal nature has a direct impact on the ways in which they can be seized and the difficulties that can arise.
Attachable shareholder rights and their specific features
Shareholder rights represent an individual's or legal entity's stake in the capital of a company. They confer on their holders political (voting rights at general meetings) and financial (entitlement to dividends) prerogatives. In principle, these rights, which form part of the debtor's assets, can be seized. They may be shares in limited liability companies (SARLs), general partnerships (SNCs) or non-trading companies. The purpose of the seizure is to capture the value of this shareholding in order to pay off the creditor. The procedure makes it possible either to bring about the forced sale of these shares, or to obtain their allocation in payment. The complexity often lies in valuing these rights, especially when the company is not listed, and in managing the approval clauses, which may make the entry of a new partner (the successful bidder) subject to the agreement of the others. For more information, visit find out more about seizing shareholder rightsA detailed reading of the mechanisms is recommended.
Securities: concepts and specific features of seizability
Securities are financial instruments that may be issued by joint stock companies (SA, SAS), the State or other public bodies. They confer identical rights by category and are, by nature, negotiable. Shares and bonds are the most common examples. Unlike shares, which are often in registered form and can only be sold within certain limits, securities are generally dematerialised and held in a securities account with a financial intermediary. Their seizure is subject to a specific procedure, the seizure of receivables by the account holder. Their liquidity, when they are listed on a regulated market, theoretically facilitates their sale. However, the diversification of financial instruments has led to the emergence of complex products whose seizability or valuation raises new questions. Find out how to seize securities provides a better understanding of these procedural issues.
Cases of unseizability and legal debates
The principle of the seizability of any element of the debtor's assets is subject to notable exceptions, based on the specific nature of certain rights. These exceptions protect either the personal nature of the undertaking or the structure of certain professions.
Industry shares: exemption from seizure
Industry shares are in a class of their own. They do not correspond to a contribution in cash or in kind, but remunerate a contribution in "industry", i.e. know-how, technical skills or services. Article 1843-2 of the French Civil Code defines them as being attached to the person of the contributor. They are non-assignable and non-transferable. This characteristic, known as intuitu personaeThis is why they cannot be seized. A creditor cannot therefore sell them, as their value is inseparable from the work provided by the debtor. Attempting to seize such shares would be futile, as the procedure would be systematically doomed to failure. It is therefore essential for a creditor to identify the exact nature of the rights held by its debtor before incurring any costs.
Sociétés civiles professionnelles (SCP): ambiguous seizability
Sociétés civiles professionnelles (SCP) are structures reserved for the regulated liberal professions (lawyers, doctors, notaries, etc.). The issue of seizing shares in an SCP is a delicate one, and has been the subject of heated debate. On the one hand, these shares have an obvious asset value. On the other hand, the practice of the profession within an SCP is strongly influenced by the "legal" nature of the profession.intuitu personae. The entry of a new partner is subject to strict approval by the existing partners, and even by the professional bodies. Case law hesitated for a long time. Today, it is accepted that shares in an SCP may be seized, but the process of seizure is complex. The successful bidder (the buyer in a forced sale) must obtain the agreement of the other partners. If they refuse, the company is obliged to buy back the shares or have them bought back by an approved third party. This procedure protects the integrity of the professional partnership while enabling the creditor to recover his debt, but it does lengthen the time taken and introduces uncertainties.
Companies without legal personality: doctrinal uncertainties
Some forms of company, such as the société en participation (SEP) or the société créée de fait, have no legal personality. They therefore have no assets of their own, separate from those of their partners. In this context, how can a partner's 'rights' be determined? The answer is that, strictly speaking, there are no shares. The partner has a claim on the other partners or on the undivided assets acquired for the joint business. The creditor cannot therefore use the procedure for seizing partners' rights. He must turn to other avenues, such as seizing the debt that his debtor holds against the other participants. The situation is even murkier for de facto partnerships, where the very existence of the partnership is a matter of proof. This legal grey area requires in-depth analysis to determine the most appropriate collection strategy.
Securities subject to seizability limits
While traditional securities such as shares are easy to identify, the sophistication of financial markets has created hybrid instruments that raise practical and legal difficulties.
Undertakings for Collective Investment in Transferable Securities (UCITS)
Units or shares in UCITS, such as mutual funds (FCP) or open-ended investment companies (SICAV), can in principle be seized. They represent a fraction of a portfolio of securities and have a net asset value calculated on a regular basis. Seizure is carried out in the same way as for any other security, by making a declaration to the institution holding the account. The difficulty is not so much legal as practical. The creditor must ensure that the value of these shares, which can fluctuate daily, justifies the cost of the procedure. In addition, some types of UCITS may contain clauses limiting redemption, which could delay effective recovery.
Warrants and negotiable debt securities (TCN)
Warrants are options that give the right to buy (call warrant) or sell (put warrant) an underlying asset (a share, a currency or a commodity) at a fixed price until a specified date. Negotiable debt securities are short- or medium-term debt instruments issued by companies or credit institutions. Both categories of instrument are transferable securities and can therefore be seized. However, their speculative nature and sometimes very short lifespan complicate the creditor's task. The value of a warrant can become zero if the option is not exercised in time or if the market moves unfavourably. The seizure must therefore be carried out with great speed, and the creditor must be able to assess the risk of rapid depreciation of the seized asset.
Guaranteed Value Certificates (GVCs)
Certificates of guaranteed value are complex securities, often issued in connection with mergers and acquisitions, which guarantee the holder a minimum value for their shares at a future date. They are considered to be transferable securities and may therefore be subject to seizure. What makes them special is the way they are valued. Their value depends on future market conditions and sometimes opaque calculation formulas. For a creditor, seizing a CVG means not only mastering the procedure, but also enlisting the help of financial experts to determine its current and potential value. Without this expertise, it is difficult to know whether the seizure will make economic sense.
Issues and consequences for creditors
Navigating the complexities of seizing partnership rights and complex securities requires a strategic and cautious approach on the part of the creditor. The decisions taken upstream will largely determine the success of the operation.
The importance of prior valuation of securities
One of the main pitfalls of these procedures is the valuation of the assets seized. While the value of a listed share is easy to determine, the value of shares in a family-owned SME or a derivative financial instrument is a different matter. Incorrect valuation can have serious consequences. An overvaluation may make the sale impossible for lack of buyers, while an undervaluation may damage the debtor and open the way to liability litigation. Valuation is often a major sticking point, with the debtor having every interest in minimising it. Creditors must therefore anticipate this debate and prepare a solid case, drawing on accounting and financial expertise to objectively assess the value of the rights they intend to seize.
Legal support to secure the procedure
Given the diversity of situations and the technical nature of the applicable rules, a lawyer is essential. His role is not limited to drafting the seizure deed. They intervene well upstream to audit the debtor's assets and identify the most appropriate assets to seize. They draw up the recovery strategy, choosing the procedure best suited to the nature of the rights involved (shares in an SCP, complex securities, etc.). During the procedure, he anticipates any disputes the debtor may have, particularly over the ownership or valuation of the securities, and defends the creditor's interests before the enforcement judge. His expertise is the best guarantee of transforming a claim into an effective payment.
The seizure of company rights and securities is a powerful tool, but one that requires a detailed analysis of each situation. Exceptions and areas of uncertainty can turn a procedure that seems simple at first sight into a veritable legal and financial obstacle course. To help you secure your debt collection efforts and obtain an analysis tailored to your situation, contact our law firm.
Sources
- Civil Code
- Commercial code
- Code of civil enforcement procedures
- Monetary and Financial Code
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