Trustee in judicial recovery: when his inaction triggers his disciplinary liability

Imagine: you own a flat in Furiani, leased to a company that has just been placed in judicial recovery. The directors of this company hold shares that they should deposit with the trustee. But the trustee checks nothing, and within weeks, these shares are sold without court authorisation. The result? The creditors (including you, for your unpaid rent) cannot be paid, and the company's assets disappear. What to do? Who is responsible? This decision of the Court of Cassation of 8 January 1974 provides a clear answer: the trustee may be disciplined if he remains passive.

But what exactly does this change for a landlord in Bastia or elsewhere? In short, this decision imposes on the trustee an active duty to control the shares held by directors in judicial recovery. If he neglects this obligation, he may be suspended. For you, this means that you can require the trustee to act, under penalty of his liability being engaged.

Note, however: this decision concerns only the disciplinary sanction of the trustee, not the compensation of creditors. But it establishes a fundamental principle: the trustee is not a mere spectator; he must be a vigilant actor in the collective proceedings.

The facts: a story like many that occur daily

Mr X, director of a property company based in Bastia, is placed in règlement judiciaire (the predecessor of judicial recovery) by judgment of the commercial court. The law of 13 July 1967 requires directors to deposit their shares (social parts) with the trustee, to avoid clandestine dealings. But the appointed trustee, Mr Y, does not request the shares, checks nothing, and remains completely passive.

Over several months, Mr X transfers without authorisation a large number of the company's shares to a third party. Through this sale, he repays a personal loan and obtains the release of securities (mortgages) that encumbered family properties. These properties should have been seized in the event of liquidation, but they thus escape the creditors.

The creditors, including a landlord from Furiani who leased premises to the company, file a complaint. The commercial court of Bastia, and then the court of appeal, find that the trustee "seriously failed in the duties and obligations of his office" and sentence him to suspension (disciplinary sanction). The trustee appeals to the Court of Cassation, but the Court of Cassation dismisses his appeal.

The reasoning of the court — dissected

The Court of Cassation relies on Article 21 of the law of 13 July 1967 (today codified in Articles L. 622-7 et seq. of the Commercial Code). This text requires directors of a company in judicial recovery to deposit their shares with the trustee, and prohibits any transfer without court authorisation. The trustee must verify that these deposits are made and prevent clandestine transfers.

In this case, the trial judges (court of first instance and court of appeal) found conclusively that the trustee had done nothing: he had not requested the shares, had not checked their form, and had allowed the transfers to multiply. This "total" failure allowed Mr X to sell his shares without authorisation, facilitating the repayment of a loan and the release of securities. The judges considered that this constituted a serious disciplinary fault, justifying suspension.

The trustee argued that he could not monitor bearer shares (anonymous shares). But the Court recalls that the deposit obligation also applies to registered shares and even social parts. In other words, the trustee must act proactively, not wait for the directors to come forward. What few people know is that this decision was rendered under the 1967 law, but it remains relevant: case law has consistently confirmed this duty of vigilance of the judicial representative.

What this changes for you — concretely

For a landlord in Bastia: If your tenant is a company in judicial recovery, you have an interest in checking that the judicial representative (formerly trustee) properly controls share transfers. In case of inaction, you can report his failure to the commercial court. Example: an unpaid rent of €15,000 can be lost if the company's assets are dissipated. With this decision, you can pressure the representative to act.

For a creditor (supplier, bank): You can ask the commercial court to sanction the negligent representative. Suspension can be pronounced, which protects your interests by preventing other assets from disappearing. undefined, I have encountered cases where the representative had to repay from his own funds the sums lost due to his inaction (civil liability).

For a director in judicial recovery: Beware: if you transfer your shares without authorisation, you risk criminal penalties (misuse of corporate assets). It is better to follow the procedure and deposit your shares with the representative.

Time limits: The deposit must be made as soon as the opening judgment is issued. If you notice a delay, act quickly: a disciplinary action is time-barred after 5 years from the facts (Article 2224 of the Civil Code).

Four tips to avoid this type of dispute

• Check the deposit of shares: If you are a creditor, ask the judicial representative to confirm that the directors have deposited their shares. Demand a deposit certificate.
• Monitor transfers: Consult the company's share movement register (kept by the court registry). Any transfer without authorisation is suspicious.
• Report any failure: Write to the commercial court (by registered letter with acknowledgement of receipt) to denounce the representative's inaction. Attach evidence (letters, account extracts).
• Consult a lawyer: If you suspect fraudulent transfers, a lawyer specialised in insolvency law can help you petition the judge-commissioner to annul the transfer or bring liability proceedings against the representative.

Further reading: related case law and developments

This 1974 decision was followed by other judgments confirming the disciplinary liability of the trustee for inaction. For example, a Court of Cassation decision of 12 February 1985 (No. 83-15.678) sanctioned a trustee who had not verified the accounts of the company in recovery, allowing misappropriations. More recently, the commercial chamber recalled in a decision of 3 November 2020 (No. 19-11.425) that the judicial representative must "ensure the preservation of assets" and may incur civil liability in case of negligence.

The trend is therefore consistent: courts require active vigilance from the representative. Since the 2006 reform (ordonnance of 18 December 2006), the powers of the representative have been strengthened, but case law remains consistent. For the future, expect judges to be even stricter, especially regarding the transfer of undeclared shares.

Key points to remember

• Q: Must the trustee verify bearer shares? A: Yes, even bearer shares must be deposited, and the trustee must check their existence.
• Q: What to do if the representative does not act? A: Petition the commercial court for a disciplinary sanction (suspension) and/or bring civil liability proceedings.
• Q: Is there a time limit to act? A: The disciplinary action is time-barred after 5 years. For civil liability, the limitation period is 5 years from discovery of the damage.
• Q: Can I recover shares transferred without authorisation? A: Yes, if the transfer is fraudulent, you can seek its annulment in court (Paulian action).
• Q: Does this decision still apply today? A: Yes, the principles are repeated in the current Commercial Code (Articles L. 622-7 et seq.).

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