Legal set-off and assignment of claims in the event of collective proceedings

The Court of Cassation specifies that the legal compensation can only be carried out for the benefit of the assignee in respect of an assigned receivable after notification of the assignment to the debtor, which must take place before the judgment opening the collective proceedings of the latter which takes effect from the day of its pronouncement.

The present case highlights the issues related to the assignment of receivables and compensation in the event of collective proceedings.

In accordance with Article L. 622-7 of the French Commercial Code, it is prohibited to proceed with the payment of claims prior to the opening of the collective proceedings. 358. The rule applies automatically. This prohibition thus extends to legal compensation, which can only be carried out if all the legal conditions are met before the opening judgment. This measure aims to preserve equal treatment between creditors and to avoid any dissipation of the debtor’s assets to the detriment of the mass of creditors.

Under these conditions, the comparison of the compensation with the guiding principles of the law of companies in difficulty is understood differently depending on whether its conditions are met before the opening judgment or after it.

In this case, the companies Trimax Développement and Espace Conseil obtained the order of the company Ecossev to pay them damages by a judgment that became final on March 24, 2017. On 29 May 2019, they assigned their claim to the company Triel Seine Amont, of which the company Ecossev was also a partner. However, on 25 July 2019, the company Ecossev was placed in liquidation. And it was not until 29 July 2019, i.e. 4 days after the opening of the collective proceedings, that the assignments of receivables were notified to him.

A dispute ensues between the liquidator of the company Ecossev and the company Triel Seine Amont. The liquidator claimed to the second the payment of the balance of the partner’s current account of the company Ecossev, while the company Triel Seine Amont intended to avail itself of a compensation of this debt with the receivables acquired on May 29, 2019.

This case thus gave the judges the opportunity to specify the conditions of application of the legal set-off of the assigned claims in the event of collective proceedings of the debtor.

In this case, the Versailles Court of Appeal upheld the set-off objection, considering that the conditions for legal set-off had been met before the opening of the collective proceedings, as early as 29 May 2019, the date of the completion of the assignment of the claims (and not of its notification).

This position is censured by the Court of Cassation, which clarifies that in the absence of prior notification of the assignment of claims, on the date of the judgment opening the debtor‘s collective proceedings, the assigned claim cannot be offset, in accordance with the provisions of Articles 1324 and 1347 of the Civil Code, as well as Articles L. 622-7 and R. 621-4 of the Commercial Code.

Indeed, it should be recalled that:

• Compensation is defined as “the simultaneous extinction of two reciprocal obligations between two persons. It operates, subject to being invoked, to the extent necessary, on the date on which its conditions are met. “(Civil Code, Art. 1347). In accordance with Article 1347-1 of the Civil Code, to implement legal offsetting, reciprocal claims must meet the conditions of fungibility, certainty, liquidity and enforceability. Also, under the terms of Article 1347-7 of the Civil Code, compensation cannot take place to the detriment of the rights acquired by third parties.
• If the assignment of the receivable carries out the transfer of the receivable on the date of the deed of assignment (Civil Code, art. 1323), it is only enforceable against the assigned debtor, if he has already consented to it, if it has been notified to him or if he has taken note of it (Civil Code, Art. 1324).

Therefore:

• It is therefore only from the date of its notification that the assigned receivable can be automatically offset against a debt owed by the assignee to the assigned debtor, reciprocity of obligations being an essential condition of legal compensation.
• In the event of collective proceedings, taking into account the mandatory provisions of Article L. 622-7 of the Commercial Code, to allow compensation, the notification of the assignment of debt must imperatively be prior to the date of the judgment opening the collective proceedings of the assigned debtor.

(Court of Cassation, 23 October 2024, No.23-17.704)