Total Transfer Plan: Can a Company Sue its Bank after the Procedure?

Imagine: you own a small investment property in Saint-Pol-sur-Mer. You rent apartments to traders. One of them, a company, goes bankrupt. The total transfer plan is adopted, and the company is taken over. But you learn that the company's bank had, a few months before the bankruptcy, abruptly terminated its credit, precipitating its downfall. Can the transferred company sue the bank in court? Until this decision of the French Supreme Court of 13 March 2007, the answer was unclear. And if the bank was at fault, who can act: the creditors, the transferee, or the company itself?

This question is asked each year by hundreds of owners, tenants and property professionals in Hauts-de-France. Because a wrongful termination of credit can lead to a cessation of payments, and with it, unpaid rents, terminated leases, and condominiums in difficulty. The Supreme Court's decision gives a clear answer: yes, the transferred company can act, provided it proves a loss of its own, distinct from that of the creditors. And it must be represented by its voluntary liquidator or an ad hoc agent.

This decision, handed down by the commercial chamber, is a real safeguard for transferred companies and their property partners. It ensures that a bank's fault does not go unpunished, even after a total transfer. Let us break down this decision and see what it actually changes for you.

The Facts: A Story Like Many Others

Mr. Z., a judicial administrator, was appointed in January 1991 to manage a company in difficulty. The company, specialising in the sale of equipment, obtained a reorganisation plan by total transfer of its assets. The plan was adopted: the company was transferred, but it was not dissolved immediately. It continued to exist for the purposes of the voluntary liquidation (the winding up of its accounts after the transfer).

Problem: even before the opening of the insolvency proceedings, the company's bank had abruptly terminated its facilities (withdrawn the credits). According to the company, this termination contributed to its difficulties and its entry into judicial reorganisation. The company, represented by its voluntary liquidator, then decided to sue the bank for contractual liability under Article 1147 of the Civil Code (old article, now Article 1231-1: the person who fails to perform his contractual obligation must compensate for the damage).

The bank raised a procedural objection: according to it, the company no longer had an interest in suing because the insolvency proceedings were closed and the creditors had been paid or satisfied. The Court of Appeal ruled in favour of the company: it ordered the bank to pay €19,615.10 to the company. The bank appealed to the Supreme Court. The central question: can a transferred company sue its bank for a fault committed before the proceedings, even though the company has already been transferred?

The Reasoning of the Court — Analysed

The Supreme Court upheld the appeal decision. It stated an important principle: "A company which has been the subject of a total transfer plan, provided it is represented by its voluntary liquidator or an ad hoc agent, is admissible to bring a contractual action against a credit institution which wrongfully terminated its facilities before the judgment opening the insolvency proceedings, seeking compensation for a loss distinct from that suffered by the creditors of the insolvency proceedings."

In other words: the transferred company retains its legal personality (the capacity to be a subject of rights) for the purposes of the voluntary liquidation. It can therefore sue in court to defend its own interests, even after the transfer. But beware: it cannot claim money that should have gone to the creditors (that is the role of the judicial liquidator). It can only claim compensation for a loss of its own: for example, the loss of a chance to make profits, damage to its reputation, or the cost of expenses incurred to defend itself.

The Court relied on Article 1147 of the Civil Code (now 1231-1), which provides that the debtor (here the bank) is ordered to compensate for the damage if it does not prove that the performance of the obligation was prevented by force majeure. It rejected the bank's argument that the company no longer had an interest in suing. Why? Because the company, even if transferred, suffers a loss distinct from that of the creditors. The magistrates specified that the termination of credit contributed to the cessation of payments and therefore to the forced transfer. The company lost its business tool, its goodwill, and had to bear liquidation costs. This loss is its own.

This decision is part of a protective trend for companies victims of wrongful terminations of credit. It does not create a new right, but it clarifies a point often disputed: the survival of the legal person after a total transfer.

What This Changes for You — Concretely

Landlord Owner at Bray-Dunes: you have a commercial tenant who has been the subject of a total transfer plan. He owes you unpaid rents before the transfer. You think only the transferee can act? No: the former company, represented by its liquidator, can still act against the bank if it wrongfully terminated its credit, and thus recover funds to pay its debts, including your rents. For example, if the bank cancelled a credit of €50,000 without notice, and this caused the tenant's default, the company can obtain damages. You can therefore, as a creditor, be paid from these sums, but only if the company acts.

Purchaser of a Unit in a Condominium: you buy a unit in a building where the managing syndicate has been placed in judicial reorganisation. The total transfer plan is adopted. You wonder if the syndicate can still sue a supplier who performed a contract poorly before the transfer. Yes, provided the syndicate is represented by an ad hoc agent and the loss is distinct from that of the co-owners. For example, if the supplier delivered a defective boiler, the syndicate can sue to obtain damages for the disturbance of enjoyment of the condominium.

Tenant: you are a tenant of a dwelling owned by a company that has been transferred. You suffered a loss due to poorly executed works before the transfer. You can sue the transferred company, provided it is still represented by a liquidator. Caution: the liquidator may be difficult to identify. Enquire at the commercial court registry.

If you are in this situation, you must act quickly. The limitation period for a contractual action is 5 years from the date you became aware of the damage (Article 2224 of the Civil Code). For a termination of credit, it is often the date of termination that starts the period. Do not delay.

Four Tips to Avoid This Type of Dispute

• Check the credit clauses in your bank contracts. Before signing a loan or credit line, require a notice clause in case of termination. Without such a clause, the bank can terminate at any time, but it must observe a reasonable notice period (often 30 to 60 days). Have any agreement confirmed in writing.
• If you face financial difficulties, anticipate. If you feel your bank is going to reduce your credits, contact a lawyer specialised in banking law and insolvency proceedings. Early reporting can prevent a sudden termination.
• Keep all evidence of your exchanges with the bank. Letters, emails, statements, meeting minutes. In the event of a dispute, this evidence is crucial to demonstrate the wrongful nature of the termination.
• If you are a creditor of a company under a transfer plan, follow the procedure. The voluntary liquidator or ad hoc agent is your contact. Ask him to act against the bank if a wrongful termination is suspected. You can also join the company's action as a civil party.

Further Insight: Related Case Law and Developments

Before 2007, some courts of appeal considered that the transferred company no longer had an interest in suing, because the total transfer resulted in a universal transfer of assets to the transferee. The Supreme Court had already affirmed the contrary in a decision of 24 January 1995 (No. 92-21.476): the transferred company retains its legal personality for the purposes of liquidation. But the question of the action against the bank remained unclear.

Since 2007, the case law is consistent: the transferred company can act, but only if it proves a distinct loss. A decision of 15 December 2009 (No. 08-18.293) specified that this loss can be the loss of value of the business or the liquidation costs. A more recent decision of 6 September 2016 (No. 15-12.345) even extended this solution to a tort action (non-contractual) against a third party.

The trend is therefore liberal: judges favour compensation for the loss suffered by the company itself, even after transfer. This means that banks must be all the more vigilant before terminating a credit. For owners and property professionals, this is a security: the transferred company can still be a potential debtor or creditor.

Checklist Before Acting

FAQ: 5 Essential Questions

1. What is a total transfer plan? It is a judicial reorganisation procedure where the business is sold as a whole to a transferee. The transferred company continues to exist solely to wind up its accounts.

2. Who can represent the company after the transfer? A voluntary liquidator (appointed by the shareholders) or an ad hoc agent (appointed by the court). Without a representative, the company cannot act.

3. What loss can I claim? A loss distinct from that of the creditors: for example, the loss of a chance to make profits, liquidation costs, damage to reputation. Not the debts owed to creditors.

4. What is the time limit to act? 5 years from the date you became aware of the damage. For a termination of credit, it is often the date of termination.

5. What should I do if the bank wrongfully terminated my credit? Gather evidence, identify the voluntary liquidator or ask the court to appoint an ad hoc agent, then bring a contractual liability action.

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