The seizure of company shares or securities is a particularly effective means of enforcement for creditors seeking to recover their debt. By directly targeting the assets held by the debtor in a company, this procedure makes it possible to freeze and then sell valuable assets. However, the formalities are demanding and each stage must be carried out with precision to ensure its validity. Navigating this process without the assistance of a professional can be risky. This article details the various stages of the procedure, in addition to our general presentation on seizure of intangible rights. For any action or defence in this context, the intervention of a lawyer responsible for seizing shares is a key asset.
The data entry process: a rigorous procedure
There is a strict timetable for the seizure of shareholder rights and securities, as set out in the Code of Civil Enforcement Procedures. While our guide to how to seize intangible rights The first fundamental stage is the service of the writ of seizure by a judicial officer (formerly a bailiff). The first and fundamental stage is the service of the writ of attachment by a commissioner of justice (formerly a bailiff).
Service of the attachment: determining the garnishee
The initial act of the procedure is not addressed directly to the debtor, but to a third party who holds or manages the seized rights. Identifying this "garnishee" is therefore essential and varies according to the nature of the securities. In the case of shares (in a SARL, SCI or SNC, for example), the writ of attachment is served directly on the issuing company. It is this company that is the custodian of the articles of association and the register of share movements that evidences ownership of the shares. However, for securities (shares, bonds) held in a securities account, service must be made on the financial or banking intermediary that holds the debtor's account.
Mandatory forms and particulars of the seizure document
In order to be valid, the attachment deed must contain a set of particulars prescribed by article R. 232-2 of the Code of Civil Enforcement Procedures. Failure to do so may invalidate the entire procedure. The deed of attachment drawn up by the court commissioner must fully identify the creditor and the debtor, state the enforcement order on which the proceedings are based, and give a precise breakdown of the sums claimed (principal, costs and accrued interest). It must also state that the seizure renders the pecuniary rights attached to the shares or securities unavailable. Lastly, the deed must state that the garnishee is required to provide information on the extent of the debtor's rights and on any previous seizures.
Direct effects of service: unavailability of pecuniary rights
Service of the writ of seizure on the third party has an immediate and powerful effect: it renders the seized rights unavailable. In practical terms, this means that the debtor who owns the shares or securities can no longer sell them, give them away or use them as collateral (pledge). The pecuniary value of their corporate assets is frozen in favour of the seizing creditor. Any transfer carried out in breach of this unavailability would be unenforceable against the creditor. This blocking effect is at the heart of the system. It can also be used as a preventive measure, even before a final judgment, in the context of seizure of securities and partnership rights.
Obligations and responsibilities of the garnishee
The garnishee, whether the company or the financial institution, becomes a central player in the procedure as soon as the document is served. They are not simply "letterboxes"; the law imposes specific duties on them, failure to comply with which may incur their own liability.
Duty to cooperate and information on previous pledges/seizures
The main obligation of the garnishee is a duty to inform and cooperate. The court commissioner who serves the deed on the garnishee immediately asks the garnishee to declare the extent of the debtor's rights. The company must therefore indicate the number of shares that the debtor holds in its capital. Similarly, the financial intermediary must disclose the size of the securities portfolio. What's more, the garnishee is required to declare the existence of any pledges or previous seizures that have already encumbered the debtor's rights. This information is vital for the creditor, as it enables him to assess his real chances of recovery and the ranking of his claim in relation to other potential creditors.
Penalties for failure to provide information and limits of the obligation
The legislator has provided for penalties to ensure that this obligation to provide information is effective. A garnishee who refuses to respond, provides inaccurate information or deliberately lies may face serious consequences. The enforcement judge may order the third party to pay the sums owed to the distraining creditor, without prejudice to additional damages. However, there are limits to this obligation. The garnishee does not have to rule on the validity of the claim or the procedure. His role is limited to providing the factual information he has about the debtor's assets. Nor can he be compelled to provide information that is not directly related to the seized rights.
Notifying the debtor of the seizure: an essential step
Once the unavailability of rights has been ascertained and the information gathered from the garnishee, the procedure turns to the debtor. The debtor must be officially informed of the measure taken against him. This stage, known as denunciation, is governed by very strict conditions of form and deadline.
Deadlines, formalities and information required on pain of expiry
The creditor has eight days from service of the writ of attachment on the third party to report the attachment to the debtor. This period is mandatory. If the eight-day period is not respected, the seizure lapses. In other words, the procedure is annulled and the unavailability of the shares or securities disappears retroactively. The notification must be made by a court-appointed official and must include a number of compulsory details, including a copy of the seizure deed, a statement of the debtor's right to contest the seizure and the deadline for doing so, as well as the competent court (the enforcement judge in the place where the debtor lives).
Disputes by the debtor and the role of the enforcement judge
From the date of notification, the debtor has one month in which to contest the seizure. The dispute is brought before the enforcement judge (JEX). The grounds for challenge may be varied. The debtor may dispute the very principle of the claim (arguing that it has already been paid), the amount claimed, or the legality of the seizure procedure itself (failure to comply with the compulsory particulars, for example). The JEX is then responsible for settling disputes. It may validate the seizure, annul it or modify its effects. If there is no dispute within the one-month time limit, the creditor may then request payment or initiate proceedings for the compulsory sale of the seized rights.
Deposit of sums and fate of political rights
The seizure of shares and securities mainly affects their economic value. The procedure does, however, provide options for the debtor and preserves some of his fundamental rights as a partner or shareholder.
The possibility of release by consignment
A debtor who wishes to contest the seizure while at the same time wanting to regain free disposal of his securities can make use of an option provided for by law. They can ask the enforcement judge for authorisation to deposit a sum of money sufficient to pay off the creditor. This sum, which must cover the principal of the debt, costs and interest, is then blocked with the Caisse des Dépôts et Consignations. If authorised by the judge, this deposit puts an end to the unavailability of the shares or securities. The debtor may once again sell or pledge them, while the creditor is protected by the sum deposited. Discussions on the merits of the claim can then continue without paralysing the debtor's assets.
Maintaining the political rights of the partner/shareholder
One essential point should be emphasised: the seizure does not deprive the debtor of his status as a partner or shareholder. Only pecuniary rights (the right to receive dividends, the proceeds of sale) are rendered unavailable. The debtor therefore retains his political rights. They continue to be invited to general meetings and, above all, they retain their right to vote. It is the debtor who participates in the company's collective decisions, not the distraining creditor. This distinction is fundamental and protects the social life of the company from direct interference by the creditor in its management.
The procedure for seizing social security rights is a powerful but complex weapon, with each stage determining the success of the recovery. From the service of documents to the management of disputes, the assistance of a law firm specialising in enforcement procedures is essential to secure the creditor's interests or to effectively defend the debtor's rights. If the seizure is not contested or is validated by the judge, the next step for the creditor will be to initiate forced sale of intangible rights to obtain actual payment.
Sources
- Code of Civil Enforcement Procedures (in particular articles L. 231-1 et seq. and R. 231-1 et seq.)
- Commercial code
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