Judicial Liquidation: The Manager Is Divested, but Not for Personal Claims

Imagine a property owner in Le Cannet who signed a preliminary sale agreement for his flat. The buyer is a company, but before the final signing, that company is placed in judicial liquidation. Who can act to claim damages if the sale falls through? The liquidator, or the manager of the company in his personal name? That is exactly the question that arose in this case, and the answer is not intuitive.

Many think that once liquidation is ordered, the liquidator (the officer responsible for realising the assets) can do everything: sell the assets, bring lawsuits, collect debts. Yet the Court of Cassation has drawn a clear line: the liquidator can only exercise actions that concern the company's estate, and not those that are linked to the manager's person. A nuance that can change everything for a creditor or a contracting party.

In this article, I will tell you the story of this case, break down the judges' reasoning, and above all tell you what this changes concretely for you, whether you are a property owner, tenant or real estate professional. And I will do so with concrete examples, particularly in Vallauris, where I have already seen similar situations.

The facts: a story like those that happen every day

Mr X, a property owner in Le Cannet, had signed a preliminary sale agreement for his property with a company represented by its manager, Mr Y. The preliminary agreement provided for a penalty clause (a sum of money due in case of breach of contract) in the event of default by the buyer. But before the sale was finalised before the notary, the company was placed in judicial liquidation. The sale therefore did not take place.

Mr X, unhappy, sued the liquidator to obtain payment of the penalty clause. The liquidator, for his part, considered that it was for him to act, or rather that the action should be brought against the company in liquidation. But the court had to decide: who, the liquidator or the manager, had standing to sue?

The case was brought before the Court of Cassation, which delivered its judgment on 19 June 2012. The reasoning is simple but fundamental: the judgment of judicial liquidation divests the debtor (here the company) of the administration and disposal of its assets. The liquidator manages them. But actions linked to the manager's function – for example, a personal fault of the manager in concluding the contract – do not concern the company's estate, but the manager's person. The liquidator therefore does not have standing to exercise them.

The reasoning of the court — dissected

The Court of Cassation relies on Article L. 641-9 of the Commercial Code (which governs judicial liquidation): "The judgment which opens or pronounces judicial liquidation entails divestment for the debtor of the administration and disposal of his assets." In clear terms, as soon as liquidation is ordered, the company can no longer manage its affairs; it is the liquidator who does so. But attention: this divestment only concerns the company's estate, not the personal rights of the manager.

In this case, the penalty clause was provided for in the preliminary sale agreement signed by the company. The action for payment of this clause therefore concerns a debt of the company (the right to claim money), and not a personal fault of the manager. Consequently, it is indeed the liquidator who has standing to sue, not the manager. The Court thus quashed the appeal judgment which had ordered the seller to pay damages to the manager, holding that only the liquidator could exercise this action.

This is not a change in case law: the Court confirms a consistent position. But it provides a useful clarification: the distinction between patrimonial actions (which fall within the liquidator's remit) and personal actions (which remain specific to the manager). For example, if the manager has committed a fault separable from his functions (such as misuse of corporate assets), the liquidator cannot sue for damages for that fault; only the shareholders or the company itself (before liquidation) could do so.

What this changes for you — concretely

If you are a landlord and your tenant is a company in judicial liquidation, you need to know who to claim unpaid rent from. From the liquidator, of course, for the rent owed by the company. But if the manager has given a personal guarantee, it is from him that you must claim the sums, and the liquidator has nothing to do with that.

Let's take an example in Vallauris: a buyer (company) signs a preliminary agreement to buy a commercial premises for €200,000. It pays a deposit of 10%. The company is liquidated before the sale. The seller wants to keep the deposit as a penalty clause. Who should bring the action? The liquidator, because the penalty clause is a debt of the company. But if the manager personally lied about the company's solvency, the seller can sue him on the basis of tort liability (Article 1240 of the Civil Code).

For tenants, if you are in a building owned by a company in liquidation, the liquidator is your contact for everything relating to the lease (rent, repairs). But if you have a dispute with the manager personally (e.g., insulting remarks), the liquidator is not competent.

In practice, if you are a creditor of a company in liquidation, check the nature of your claim: is it linked to the company's estate or to the manager's person? If the former, declare it to the liquidator within two months of the publication of the opening judgment. If the latter, you can sue the manager directly, but beware of limitation periods (5 years in civil matters).

Four tips to avoid this type of dispute

• Check the capacity of the person you are contracting with. If you sign a preliminary agreement with a company, ensure that the manager has the authority to bind the company. Ask for a recent Kbis extract. In Le Cannet, I saw a case where the manager signed without authority, and the company refused to pay the penalty clause.
• Include a clear penalty clause in your contracts. Specify that the sum is due even in the event of judicial liquidation, and that the liquidator must pay it. This will avoid debates on standing to sue.
• Declare your claim within the time limits. As soon as you learn of the liquidation, immediately declare your claim to the liquidator. The deadline is 2 months from publication in the BODACC (Official Bulletin of Civil and Commercial Announcements).
• Consult a lawyer if in doubt. The distinction between patrimonial and personal action is subtle. A quick consultation can prevent you from suing the wrong defendant and losing a case.

Further details: related case law and developments

The Court of Cassation has already ruled on similar issues. For example, in a judgment of 8 March 2011 (No. 10-11.123), it held that the liquidator cannot bring an action for liability against the manager for mismanagement, because that action belongs to the shareholders or the company itself. The same logic applies here.

Conversely, in a judgment of 12 February 2013 (No. 11-28.497), the Court considered that the liquidator could bring an action to nullify a contract concluded by the manager to defraud creditors. There, the action concerns the company's estate, so the liquidator is competent.

The trend is therefore clear: the liquidator is master of patrimonial actions, but personal actions remain the province of the manager or third parties. In the future, the courts will probably continue to draw this line on a case-by-case basis, depending on the object of the action.

Frequently asked questions

1. Can the liquidator demand accounts from the manager? Yes, but only for acts of management of the company's estate, not for personal faults.
2. Can I sue the manager personally if the company is liquidated? Yes, if you allege a personal fault of the manager (e.g., fraud, abuse of right).
3. What are the time limits for declaring my claim? 2 months from the publication of the opening judgment in the BODACC.
4. What if the liquidator refuses to act? You can apply to the supervising judge (juge-commissaire) to order the liquidator to act, or act yourself if you have a direct interest.
5. Does this rule also apply in administration (redressement judiciaire)? Yes, the principle is the same: the debtor is divested, but the liquidator does not have standing for personal actions.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →