Assignment of goodwill in fraud of a creditor's rights

The Paulian action, organized in Article 1341-2 of the Civil Code, makes unenforceable the transfer of goodwill having the effect of transfer it by replacing it with ath sum of money more difficult to seize, and depriving the creditor of the ability to assert his rights.

The creditor requests the unenforceability of the assignment of the business

A Brewery is assigned by a chartered accountant to pay its fees.

Business assets

She is then ordered to pay a certain amount as a fee, but she is put into liquidation.

The accountant then decides to assign the parties to the assignment of goodwill, so that this assignment is rendered unenforceable against it.

The Court of Appeal rejected his application for unenforceability, based on the provisions of Article 1341-2 of the Civil Code organizing paulian action.

Before the High Court, the chartered accountant maintains that the Court of Appeal, after noting that the transfer of goodwill had replaced the said fund with a sum of money, a value more easily concealable, could not rule out the action paulienne on the grounds of the lack of proof of the apparent insolvency of the Brewery.

Is the actio pauliana subject to proof of the debtor’s insolvency?

The Court of Cassation recalls the conditions of an action paulienne:

• It is well founded since the transfer has the effect of evading its prosecution by replacing it with funds that are easier to conceal.

• This prejudice is sufficient and the success of the Paulian action is not subject to proof of the debtor’s impoverishment.

It reverses the decision of the Court of Appeal which added a condition to the Law and violated Article 1341-2 of the Civil Code by considering that the creditor did not provide proof of the insolvency, at least apparent, of the Brewery at the time of the sale of its business.

The prejudice of the creditor, who acts on the basis of paulian action, is characterized when the assignment of goodwill, although granted at the normal price, has the effect of escaping the pursuit of its creditors by replacing it with liquidity that is easier to conceal. The creditor is not required to provide proof of the debtor’s impoverishment.

JUDGMENT OF the COURT OF CASSATION, COMMERCIAL, FINANCIAL and ECONOMIC Division, OF 29 JANUARY 2025 Appeal No. 23-20.836