What you need to know about seizing shareholder rights

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Are you a creditor of a debtor who owns shares in a company? Seizing these rights could be an effective way of obtaining payment. However, this complex procedure is subject to strict rules that you need to master.

Shareholder rights: assets subject to seizure under certain conditions

Shareholder rights represent the fraction of share capital allocated to each member of a company. Their legal nature varies according to the type of structure.

In partnerships (SNC, SCS, SARL), these are known as shares. In the case of limited companies (SA, SAS), these are known as shares.actions. In principle, they can all be seized, but there are important nuances.

The Code of Civil Enforcement Procedures provides that any creditor in possession of a writ of execution may seize the intangible rights of its debtor, including its shares.

Cases of unseizability: notable exceptions

Some shares are not subject to seizure:

• Shares in sociétés civiles de moyens (SCM), because they are linked to professional practice
• Industry shares, because of their intuitu personae nature
• Temporarily non-transferable securities (bonus shares during the vesting period, etc.)

The complex case of SCPs and companies without legal personality

Professional civil partnerships (SCP) pose a particular challenge. In 2003, the Court of Cassation ruled that the prohibition on pledging and auctioning shares in notaries' SCPs did not prevent them from being seized, but made it impossible to sell them by force.

As for joint ventures, which have no legal personality, the doctrine remains divided on the seizability of their shares. The practical difficulty lies in the absence of an entity to which the seizure deed can be served.

Specific procedure: a two-stage mechanism

1. Input phase service of the document on the company or issuer of the securities
2. Notice to the debtor within 8 days of the seizure, failing which the seizure lapses
3. Immediate effect unavailability of pecuniary rights (shares cannot be sold)
4. Sales phase Amicable or forced, depending on the circumstances

For listed companies, the sale is simplified thanks to the objective market price. For unlisted companies, a award procedure more complex, including specifications and advertising.

Protection of the debtor and other partners

The legislator has provided a number of guarantees:

• One month to contest the seizure
• Possibility of amicable sale before auction
• Maintaining the debtor's political rights (voting, information)
• Compliance with the approval procedures set out in the Articles of Association

This last point is crucial: even the winning bidder will have to obtain the approval of the shareholders, which is a major obstacle to the effectiveness of the procedure.

Practical advice

For the creditor :

• Check the nature of the shares to be seized and their seizability
• Scrupulously respect notification deadlines
• Anticipate the obstacles linked to approval

For the debtor partner :

• Use the one-month period to propose an amicable sale
• Consider a deposit to obtain release
• Bear in mind that your political rights remain intact

For other partners :

• Consult the Articles of Association to find out about pre-emption mechanisms
• Be prepared to exercise your right of substitution if necessary
• In non-trading companies, assess whether dissolution is appropriate

For personalised legal advice and assistance with share seizure procedures, whether you are a creditor or debtor, please contact contact our specialist lawyers.

Practical limits of the procedure

In practice, the entering shareholder rights is more often used as a pressure tactic than as a genuine enforcement procedure. Obstacles relating to the approval and valuation of unlisted shares can discourage bidders.

For listed companies, the procedure is more effective but is hampered by the difficulty of accessing asset information.

Sources

• Code of civil enforcement procedures, articles L. 231-1 to L. 233-3 and R. 231-1 to R. 233-9
• Court of Cassation, Civil Division 1, 4 November 2003, No. 99-13.965
• Court of Cassation, Civil Division 2, 21 October 2010, No. 09-69.867
• LAHER Rudy, "Saisie des droits incorporels", Répertoire de procédure civile, Dalloz, July 2023

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