Key points
- The law gives the creditors of the seller of a business (fonds de commerce) a right to oppose payment of the price, which blocks the funds until their rights are settled.
- This clearance mechanism protects third parties by applying the price first to paying off registered and opposing creditors.
- The opposition must be lodged within ten days of the last publication, under Article L141-14 of the French Commercial Code (Code de commerce), a mandatory time limit.
- It is made by extrajudicial act or by registered letter with acknowledgement of receipt, and must state the amount and grounds of the claim, failing which it is void.
- A valid opposition makes the price unavailable in the hands of the escrow agent, and no assignment of the price can be relied on against the creditors.
- A buyer who pays too early risks having to pay a second time, hence the practice of holding the price in escrow until the oppositions are cleared.
When a business is sold, the seller’s creditors are not left without protection. The law gives them a right to oppose payment of the price (a creditor objection, known in French law as opposition), which blocks the funds in the hands of the escrow agent while their rights are settled. They must still act quickly and in the proper form: the time limit is short and the formal requirements are strict. Here is how to proceed, and why the buyer has every reason not to pay too early.
Why this right exists
The sale of a business removes the seller’s most liquid asset from their estate. Without protection, their creditors could see the price disappear before being paid. The legislator therefore organises publication of the sale and a right of opposition, so that the price serves first to pay off registered and opposing creditors. It is a claims clearance mechanism that protects third parties.
The ten-day time limit
The starting point is the publication of the sale. Under Article L141-14 of the Commercial Code, “within ten days following the last of the publications provided for in Article L. 141-12, any creditor of the previous owner, whether or not the claim is due, may lodge at the address for service (…) an opposition to payment of the price” (unofficial translation). This ten-day time limit is mandatory: once it has expired, the creditor loses the benefit of the opposition procedure, even if the claim is certain.
The form of the opposition
The opposition is not a simple informal letter. It is made “by extrajudicial act or by registered letter with request for acknowledgement of receipt” (unofficial translation), at the address for service (domicile élu) stated in the legal notices. It must state the amount and grounds of the claim, failing which it is void. An imprecise opposition, or one sent to the wrong recipient, may be set aside: here, formal rigour is the condition of effectiveness.
The effect: the price is blocked
A validly lodged opposition has a powerful effect: the price becomes unavailable in the hands of whoever holds it, usually the escrow agent (séquestre). Article L141-14 states that no amicable or court-ordered assignment of the price can be relied on against creditors who have come forward within the time limit. The price therefore cannot be paid to the seller until the oppositions are withdrawn or settled. It is this unavailability that ensures the creditors are paid.
The risk for a buyer who pays too early
This mechanism explains a key rule for the buyer: paying the seller before the opposition period expires, or while oppositions are pending, does not discharge the buyer as against the creditors. The buyer may have to pay a second time. Hence the practice of holding the price in escrow, kept by the drafter of the deed until the oppositions are cleared and the period expires during which the buyer can be held jointly liable for certain taxes of the seller (Article 1684 of the French General Tax Code (Code général des impôts) (in French)). A prudent buyer never releases the price prematurely.
After the opposition
Once the opposition has been lodged, the fate of the price is settled either amicably (release against payment) or through the courts. The seller may challenge an opposition they consider unjustified and seek its release (mainlevée). Failing agreement, distribution of the price among the creditors follows the rules on clearance and liens. The strategy differs depending on whether you are an opposing creditor, the seller or the buyer.
The central role of the escrow agent
The escrow agent is the cornerstone of the system. This is a third party, most often the drafter of the deed of sale, who receives the price and holds it until the situation has been cleared. The role carries great responsibility: the escrow agent may release the funds only once the oppositions have been settled or withdrawn, and after expiry of the joint tax liability period that weighs on the buyer. A well-organised escrow, governed by a precise agreement, protects the seller, the buyer and the creditors alike.
The escrow agreement must set out the conditions for releasing the funds, the handling of oppositions and what happens to interest earned during the blocking period. Careful drafting avoids later disputes between the parties and with the escrow agent itself.
Creditor, seller, buyer: three strategies
The same procedure calls for opposite strategies depending on your position. The creditor must act quickly, within the ten-day time limit, and lodge an opposition that is flawless in form to preserve their rights. The seller seeks the release of unjustified oppositions and the swift release of the price. The buyer, finally, takes care never to part with the price prematurely, as they would remain exposed to a second payment. Anticipating these diverging interests from the drafting of the deed of sale onwards makes the transaction run smoothly and prevents deadlocks.
Points to watch
- Monitor the legal notices so as not to miss the ten-day time limit.
- Lodge the opposition by a deed served by a commissaire de justice (judicial officer) or by registered letter with acknowledgement of receipt (LRAR), at the address for service.
- State the amount and grounds of the claim precisely.
- As buyer, never pay the price before the oppositions are cleared and the joint tax liability period has expired.
- As seller, seek the release of unjustified oppositions.
How we act
- Lodging valid oppositions for creditors.
- Making the escrow and the distribution of the price legally sound.
- Challenging and obtaining the release of unjustified oppositions.
- Advising the buyer on the risks of early payment.
FAQ
What is the time limit for a creditor to oppose payment of the price?
Ten days from the last of the legal publications of the sale (Article L141-14). Once this time limit has passed, the right of opposition is lost.
Is an ordinary letter enough?
No: the opposition must be made by extrajudicial act or LRAR, at the address for service, and must state the amount and grounds of the claim, failing which it is void.
Can the buyer pay the seller immediately?
This is strongly discouraged: paying before the oppositions are cleared does not discharge the buyer as against the creditors, who may demand a second payment.
Official sources
- Article L141-14 of the Commercial Code, opposition to payment of the price: Légifrance (in French)
- Article L141-12 of the Commercial Code, publication of the sale: Légifrance (in French)
Every situation is different and we make no promise of outcome. To lodge or challenge an opposition to the price of a business (fonds de commerce), our fonds de commerce sale and purchase lawyers assist you.
For assistance: fonds de commerce sale and purchase lawyer.
