Assignment of goodwill in fraud of a creditor's rights

The Paulian action, organized in Article 1341-2 of the Civil Code, makes it possible to make unenforceable the transfer of goodwill having the effect of transferring it by replacing it with a sum of money more difficult to seize, and depriving the creditor of the faculty 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. 

She sells her business. 

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

The chartered accountant then decides to summon the parties to the transfer of the business, so that this transfer is rendered unenforceable against him. 

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

Before the High Court, the chartered accountant maintains that the Court of Appeal, having found that the transfer of business assets had replaced the said fund with a sum of money, a value more easily concealed, could not dismiss the action paulienne on the grounds of the absence 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 reversed 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 transfer of its business. 

The prejudice of the creditor, who acts on the basis of the paulian action, is characterized when the transfer of the goodwill, although granted at the normal price, has the effect of making the goodwill escape the prosecution of its creditors by replacing it with cash 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