Sale without authorisation of the supervising judge: absolute nullity and role of the Public Prosecutor

Imagine: you are the owner of commercial premises in Saint-Raphaël, leased to a company that goes bankrupt. The liquidator (the person responsible for selling the assets to repay the creditors) transfers the business without seeking authorisation from the supervising judge (the magistrate who oversees the proceedings). Is the sale valid? And if you want to challenge it, must you notify the Public Prosecutor (the State representative who safeguards the general interest)?

This is exactly the question put to the Court of Cassation on 11 January 1994. A question that may seem technical, but has very concrete consequences for any owner, tenant or purchaser faced with a judicial liquidation.

The answer of the highest French court is clear: yes, the Public Prosecutor must be informed of any proceedings where the powers of the syndic (former name of the liquidator) are challenged on the grounds of unauthorised sale. Otherwise, the decision may be quashed (annulled). Let us analyse this case together.

The facts: a story that happens every day

In 1985 and 1987, a company (whose name we will not disclose) operated a business from leased premises. Unfortunately, it was placed into liquidation des biens (the former procedure equivalent to today's judicial liquidation). The syndic, Mr. A..., was responsible for realising the assets (selling the property) to pay the creditors.

Without requesting authorisation from the supervising judge, the syndic transferred the business to a third party. He then also transferred the commercial lease to a SCI (property investment company). Problem: the lessor (owner of the walls) did not agree. He took the matter to court to have these transfers declared inopposable (not valid against him) and the sale of the business declared void.

The Court of Appeal of Paris, seised of the matter, declared the transfer of the business void with absolute nullity (total annulment). But it did not communicate the case to the Public Prosecutor. The syndic appealed to the Court of Cassation (challenged the decision). He argued that the Public Prosecutor should have been informed, because the liquidation des biens was at stake.

The Court of Cassation upheld his argument: the appeal judgment was quashed (annulled) and the case referred to another court. Why? Because the question of whether the syndic exceeded his powers by selling without authorisation is directly linked to the collective proceedings (liquidation). And the Public Prosecutor, as guardian of public policy, must be able to intervene.

The reasoning of the court — explained

The Court of Cassation relied on a simple principle: in any proceedings where the state of liquidation des biens (or today's judicial liquidation) has an influence on the dispute, the Public Prosecutor must receive communication of the case (be informed and able to present observations).

Here, the dispute concerns the validity of the sale of the business. Yet this sale was carried out by the syndic, who derives his powers from the collective proceedings. If the syndic sold without the authorisation of the supervising judge, he violated the rules of liquidation. The nullity of the sale directly affects the debtor's estate (the liquidated company) and therefore the creditors.

The Public Prosecutor has a supervisory role in collective proceedings. He must be able to check that the rules are respected. By not informing him, the Court of Appeal violated a fundamental procedural principle.

This decision is not a reversal: it confirms consistent case law. But it forcefully reminds us that nullities in the context of a liquidation are not private matters. The general interest is at stake.

What this means for you — in practice

If you are a landlord-owner in La Garde or elsewhere, and your tenant is in judicial liquidation, any sale of its business without authorisation from the supervising judge is potentially void. But beware: to bring a nullity action, you must ensure that the Public Prosecutor is informed of your action. Otherwise, your victory may be overturned on appeal.

Example: a bakery business valued at €80,000 is sold by the liquidator to a buyer. The owner of the walls considers the sale rushed and detrimental to his interests (unpaid rent, etc.). He claims nullity. If the Public Prosecutor is not notified, the Court of Appeal could quash the judgment. Result: months of proceedings wasted and additional legal fees.

If you are a buyer, be vigilant: check that the liquidator actually obtained the supervising judge's authorisation before the sale. Ask to see the order. Otherwise, you risk having the sale annulled and having to return the business.

If you are a creditor, this decision protects you: the Public Prosecutor can intervene to defend your interests if the liquidator acts beyond his powers.

Four tips to avoid this type of dispute

• Check the supervising judge's authorisation: before any acquisition of a business in liquidation, ask for a copy of the order authorising the sale. Without it, the sale is void.
• Systematically inform the Public Prosecutor: if you bring a nullity action against a sale carried out by a liquidator, state in your claim that the Public Prosecutor must be called to the case. Your lawyer will know how to do this.
• Negotiate with the liquidator: if you are a landlord, discuss the terms of the lease transfer in advance. An amicable agreement avoids lengthy and costly litigation.
• Keep all documents: leases, amendments, correspondence with the liquidator. In the event of a dispute, they will be your best evidence.

Further reading: related case law and developments

This 1994 decision is part of a consistent line: the Court of Cassation has always ensured that the Public Prosecutor is informed of disputes concerning collective proceedings (e.g., Cass. com., 12 May 1992, no. 90-18.547). More recently, Article R. 661-1 of the Commercial Code requires communication to the Public Prosecutor of all decisions rendered in matters of collective proceedings.

Since 1994, the law on business difficulties has been reformed (2005 Act, 2014 Order). But the principle remains the same: the Public Prosecutor is a key player in ensuring the regularity of liquidation operations. The courts are therefore very strict about this communication obligation.

In future, expect judges to systematically annul decisions rendered without the Public Prosecutor having been notified, even if the nullity is not raised by the parties. This is a matter of public policy.

Key points to remember

• When must the Public Prosecutor be informed? In any dispute where the collective proceedings have an influence, particularly if the liquidator's powers are challenged.
• What is the penalty if forgotten? The decision may be quashed, even if it is favourable on the merits.
• Who must inform the Public Prosecutor? The judge, but the parties may point it out. Your lawyer must ensure that the claim mentions this communication.
• Does this rule still apply today? Yes, fully. The current texts (C. com., art. R. 661-1) adopt the same principle.
• What if I have already won a case without the Public Prosecutor being informed? Contact a lawyer: an appeal to the Court of Cassation may still be possible within the time limits.

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