Transfer plan: when the buyer can appeal the court's refusal

Imagine: you are in Évron, you have just taken over a business in difficulty via a transfer plan. The court validated the takeover, but a key contract (for example, a finance lease) was excluded from the scope. You ask the judge to modify the plan to include it. Refusal. Can you appeal? Until this judgment of the Court of Cassation of 3 May 2006, the answer was unclear. Some courts considered that only the public prosecutor (the parquet) could appeal decisions relating to the transfer plan. But then, the buyer, although a party, found himself without an effective remedy. This decision puts an end to the uncertainty: the transferee can appeal a judgment rejecting his request to modify the plan, unless the law expressly prohibits it. And it is not an excess of power (abuse of right) on the part of the court of appeal to declare such an appeal admissible. Let's dive into the details.

The facts: a story that happens every day

The case begins with a company in difficulty, placed in judicial reorganisation (collective procedure aimed at saving the company). A transfer plan (sale of all or part of the company to a buyer) is approved by the commercial court. The transferee, the company Bail Acte, takes over certain assets. But quickly, it realises that finance lease contracts (lease with option to purchase) entered into with GE Capital and Banque Populaire Lorraine Champagne (formerly Lorequip Bail) were excluded from the scope of the transfer. For it, these contracts are essential for the continuation of the business. It therefore seises the court to request a modification of the transfer plan, to include these contracts. The court rejects its request. Dissatisfied, Bail Acte appeals. The court of appeal declares the appeal admissible and, above all, modifies the plan by integrating the disputed contracts. The public prosecutor appeals to the Court of Cassation: it argues that the judgment of the court of appeal is an excess of power, because according to it, only judgments rendered on appeal against decisions approving, rejecting or modifying the transfer plan are subject to appeal to the Court of Cassation by the public prosecutor, and that the transferee did not have the right to appeal. The Court of Cassation must decide.

The reasoning of the court — dissected

The Court of Cassation, in its judgment of 3 May 2006, dismisses the public prosecutor's appeal. It relies on Article L. 621-69 of the Commercial Code (in its version prior to the Law of 26 July 2005 on business rescue), which gives the court of appeal the power to modify the transfer plan. But above all, it strictly interprets the rule limiting remedies. This rule, derived from Article L. 623-6 of the same code, provides that judgments rendered on appeal against decisions approving, rejecting or modifying the plan are only subject to appeal to the Court of Cassation by the public prosecutor. The Court specifies: this rule concerns the appeal to the Court of Cassation (recourse before the Court of Cassation), not the appeal (recourse before the court of appeal). Nothing prevents the transferee from appealing a judgment that rejects his request for modification. And it is not because the public prosecutor alone has the right to appeal to the Court of Cassation against the appellate judgment that the transferee cannot appeal. In other words, the avenue of appeal is open to any person with a legitimate interest, unless a text expressly prohibits it. However, no text prohibits the transferee from appealing. The court of appeal therefore did not commit any excess of power by declaring the appeal admissible and modifying the plan. The decision confirms a liberal interpretation of remedies in collective proceedings, for the benefit of buyers.

What this changes for you — concretely

If you are a business buyer under a transfer plan, this decision gives you an effective right of appeal. Concrete example: in Évron, you take over an SME with 20 employees. The transfer plan excludes a finance lease on an essential building, with a rental value of €2,000 per month. Without this contract, you cannot operate. You request a modification of the plan, the court refuses. Before this judgment, you might have hesitated to appeal, thinking that only the public prosecutor could do so. Now, you know that your appeal is admissible. The court of appeal may even modify the plan if it considers your request justified. For owners of buildings let under commercial leases, this decision is less direct, but it illustrates that the remedies of interested parties (such as a creditor, a co-contractor) are preserved. If you are a tenant of a professional premises in a transferred company, know that the buyer can defend your interests on appeal, for example to obtain the maintenance of your lease. In practice, if you are concerned, you must: 1) check whether the judgment rejecting your request is subject to appeal; 2) act within the appeal period (generally 1 month); 3) motivate your appeal by demonstrating the interest of the modification for the sustainability of the business. The costs? A lawyer specialised in collective proceedings, count €2,000 to €5,000 for a simple appeal, but the stakes may justify the expense.

Four tips to avoid this type of dispute

• Negotiate the scope of the transfer in advance: before the plan is approved, list precisely all contracts, leases, finance leases you wish to take over. Have them validated by the judicial administrator (representative of creditors).
• Obtain a revision clause: in the transfer plan, request the insertion of a clause providing that if a contract is omitted, you can request a modification without going through a new judicial procedure.
• Keep a record of your requests: if you discover a forgotten contract after the judgment, immediately send a registered letter to the court and the public prosecutor to request an amicable modification. This will facilitate proof of your good faith on appeal.
• Consult a lawyer as soon as the judgment is issued: as soon as the court renders a decision unfavourable to you, do not delay. A lawyer specialised in the law of distressed businesses can assess your chances of appeal and prevent a rejection for foreclosure (expiry of the deadline).

Further reading: related case law and developments

This 2006 judgment is part of a jurisprudential trend favourable to expanding the remedies of parties in collective proceedings. Before it, the Court of Cassation had already had the opportunity to specify, in a judgment of 24 February 1998 (No. 95-18.682), that the debtor himself could appeal the judgment approving the transfer plan, contrary to a previous restrictive reading. The logic is the same: allow economic actors to defend their interests. Since the Law of 26 July 2005 on business rescue, the Commercial Code has been amended, but the rule of Article L. 661-6 (new) maintains the limitation of appeal to the Court of Cassation to the public prosecutor for decisions relating to the plan. The 2006 judgment therefore retains all its relevance. In practice, courts of appeal now apply this principle without difficulty: the transferee who requests a modification of the plan and suffers a refusal can appeal, and the court can reform the judgment if it deems it necessary. However, be careful: if it is the judgment approving the plan itself that the transferee contests (not a simple modification), the appeal is not automatically open; it is necessary to demonstrate an excess of power. But for a request for modification, the way is clear.

Frequently asked questions

1. Who can appeal a judgment rejecting a request to modify the transfer plan? The transferee (buyer) can appeal, like any person with a legitimate interest. The public prosecutor can also appeal, but this is not exclusive.
2. What is the deadline to appeal? The appeal period is one month from the notification of the judgment. This period is short: do not delay consulting a lawyer.
3. What happens if I do not appeal? The judgment becomes final. You can no longer request a modification of the plan, except in new circumstances (e.g., discovery of a contract after the deadline).
4. Can the court of appeal modify the plan as it wishes? Yes, within the limits of the requests made by the parties and subject to respect for the rights of creditors and the viability of the plan. It can also confirm the refusal.
5. Does this rule also apply to safeguard or reorganisation plans? The rule on appeal to the Court of Cassation limited to the public prosecutor specifically concerns transfer plans. For safeguard or reorganisation plans, other texts apply. Consult a lawyer for your specific situation.

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