Creditors' Opposition Period in the Sale of a Business (Fonds de Commerce)

You have sold goods to a trader who has never paid you, or you hold an acknowledgement of debt from a restaurant operator. One day, you learn that he is selling his business (fonds de commerce). The price of that sale is often the only liquid asset your debtor has: once it has been received and spent, your claim becomes irrecoverable. The law gives you a fast and powerful tool to freeze that price in the hands of a third party, provided you comply with a tight timetable set by the statutory publications. This guide sets out, from the creditor's point of view, how the creditors' opposition period works in the sale of a business (fonds de commerce), from the BODACC (French official gazette of civil and commercial announcements) through to the distribution of the price, including the little-known tool of the one-sixth overbid (surenchère du sixième).

Why the sale price is your best security

When a trader sells his business, he turns an asset that is hard to seize (a customer base, a leasehold right, a trade name, equipment) into a sum of money paid by the buyer. That sum is volatile: nothing prevents the seller from making it disappear as soon as it is received. The legislature has therefore put in place specific protection in Articles L. 141-12 to L. 141-22 of the French Commercial Code, which allows the seller's creditors to freeze the price before it is handed over to him.

The principle is simple. For a short window after the sale is published, any creditor may lodge an opposition. That opposition makes the price unavailable: the buyer can no longer pay it directly to the seller, and must hold it or pay it to an escrow agent (séquestre) until the creditors have been dealt with. The opposition does not make you a preferred creditor, but it places you among those who will be paid out of the price before the seller can dispose of it.

Two situations that non-lawyers often confuse need to be distinguished. A creditor's opposition against the sale of a business does not call the sale itself into question: the buyer does become the owner of the business. What is blocked is only the payment of the price. Your debtor remains the seller, the purchaser remains the purchaser, but the money is held back.

The statutory timetable: from the sale to publication in the BODACC

Everything turns on dates. The opposition period does not run from the signature of the sale agreement, but from publicity measures that the seller and the buyer are required to carry out. Monitoring these publications is therefore the first reflex of a well-informed creditor.

Publication in a legal notices newspaper

Article L. 141-12 of the French Commercial Code requires every sale of a business to be published, at the buyer's initiative, in a newspaper authorised to receive legal notices in the département where the business is operated. This publication must take place within fifteen days of the date of the agreement. It states in particular the date of the agreement, the names and addresses of the parties, the nature and location of the business, the price, the period for oppositions and the choice of address for service within the jurisdiction of the court.

Publication in the BODACC

In addition to this first insertion, there is a publication in the BODACC (French official gazette of civil and commercial announcements), made by the registry of the commercial court at the buyer's request, in accordance with Article L. 141-13. It is the combination of these two publications that starts the period running. In practice, a vigilant creditor regularly checks legal notices publications and the BODACC, especially if he knows that his debtor is in difficulty or in the process of selling. The obligations to publish in the BODACC attached to the sale of a business and the corresponding formalities are set out in our guide on that subject.

The BODACC can be consulted freely online. For a creditor who fears the sale of his debtor's business, monitoring the debtor's name and that of its business makes it possible not to miss the opposition window, which is short. On the organisation of the creditor's monitoring of difficulties and insolvency proceedings affecting his debtor, see our article on that subject.

The opposition period: ten days to act

This is the core of the mechanism. Article L. 141-14 of the French Commercial Code gives the seller's creditors a period of ten days to lodge an opposition to payment of the price. This is a clear-days period and it runs from the later of the two publications, that of the legal notices newspaper and that of the BODACC. In practice, since the BODACC publication often comes after the insertion in the legal notices newspaper, it is frequently the BODACC publication that constitutes the starting point.

Ten days is very short. A creditor who discovers the sale after the period has expired loses the benefit of freezing the price, even if his claim is perfectly well founded. Hence the importance of monitoring publications.

Who may lodge an opposition

The right of opposition belongs to all creditors of the seller of the business, whether they hold security (preferred or secured creditors) or are simply unsecured creditors (chirographaires). Importantly, the claim need not be due or established by an enforceable instrument (titre exécutoire) to justify an opposition. An unpaid supplier, a landlord, a lender, an employee in respect of wage claims: all may act. The only condition is being able to establish the existence and amount of the claim.

Take an example. A wholesaler has delivered several months of goods to the operator of a convenience store who has never paid and does not dispute the debt. On learning from the BODACC of the sale of the store, the wholesaler has ten days to lodge an opposition and block the price up to the amount of its claim, without waiting to obtain a judgment ordering payment.

How to lodge an opposition

In the context of the sale of a business, an opposition is not subject to any prior authorisation by a judge, which makes it quick to implement. It takes the form of a document sent, in practice by a commissaire de justice (bailiff), to the address for service stated in the publications, that is, most often the office of the person who drew up the sale agreement.

The opposition document must, on pain of nullity, state the amount and the grounds of the claim and include a choice of address for service within the jurisdiction of the court. These particulars allow the escrow agent and the other creditors to know the exact extent of your claims. An opposition that is imprecise or overstated is open to challenge and to a court-ordered release (mainlevée).

When the period starts to run

Keep in mind the typical chronology:

• day of signature of the sale agreement;
• publication in a legal notices newspaper within fifteen days (Article L. 141-12);
• publication in the BODACC by the registry (Article L. 141-13);
• ten days for opposition from the later of these two publications (Article L. 141-14);
• on expiry of the period, opening of the distribution or challenge phase.

The effects of the opposition: blocking and escrow of the price

Lodging an opposition within the period has an immediate and concrete effect: the price becomes unavailable in the hands of the buyer.

Unavailability of the price

As long as the oppositions have not been lifted or settled, the buyer cannot validly discharge his debt by paying the seller. Article L. 141-14 provides precisely for this unavailability for the benefit of opposing creditors. The price, or at least the portion corresponding to the claims declared, is frozen.

The role of the escrow agent

In practice, to prevent the price from sitting with the buyer, the sale agreement almost always provides for the price to be held in escrow (séquestre). The person who drew up the agreement, a lawyer or a notary, or a professional third-party escrow agent, holds the funds in a dedicated account. The funds are released only once the oppositions have been cleared and, where applicable, the rights of the French Treasury (Trésor public) and social security bodies have been dealt with. The operation of the escrow of the price and its interaction with the asset and liabilities warranty (garantie d'actif-passif) are covered separately in our dedicated article.

This escrow protects everyone: the seller, who remains entitled to the price subject to the creditors; the buyer, who discharges his debt for the price by paying it to the escrow agent; and the opposing creditor, who has the assurance that the money will not evaporate. For you, as a creditor, knowing who holds the funds and notifying your opposition to that person is decisive.

The danger for a buyer who pays despite the opposition

Article L. 141-15 penalises the imprudent buyer heavily: a buyer who pays the seller without regard to the oppositions, or before the period has expired, is not discharged as against the opposing creditors. In other words, he risks having to pay twice, once to the seller and a second time to the creditors. This rule explains the systematic caution of those who draft such agreements and the almost universal use of escrow. For the creditor, it is also an indirect guarantee: the buyer has every interest in respecting the oppositions.

The one-sixth overbid: forcing a sale by auction

Blocking the price is of no use if the price is derisory. A seller may be tempted to undervalue his business in order to reduce the base on which his creditors can be paid. The French Commercial Code then offers a formidable tool: the one-sixth overbid (surenchère du sixième), provided for in Articles L. 141-19 et seq.

The mechanism is as follows. Where an opposing creditor considers the declared price insufficient to pay all the creditors, he may require the business to be put up for public auction, undertaking to raise the price to an amount one sixth higher than the principal price of the business, calculated on the intangible elements alone, excluding equipment and goods. The overbidding creditor must offer this increase and provide a guarantor securing payment of the price and costs.

This right must be exercised within a short and strict period set by Article L. 141-19, in the order of twenty days after publication. Once this period has passed, the declared price is deemed accepted. The one-sixth overbid leads to an auction of the business: if no one covers the overbidding creditor's offer, he may find himself the successful bidder for the business at the price he himself proposed.

The value of this tool is twofold. On the one hand, it genuinely makes it possible to increase the price where it has been understated. On the other hand, the mere threat of an overbid encourages the seller and the buyer to set a realistic price. Take the example of a small restaurant business sold for a price manifestly lower than the value of its customer base and its location: a major creditor, convinced that it has been undervalued, may bring a one-sixth overbid to trigger an auction and hope for a price reflecting the true value of the business, out of which he will be paid.

The overbid remains a technical and risky procedure, which requires a guarantor to be available and the possibility of ultimately becoming the owner of the business to be accepted. It deserves a precise cost-benefit analysis before being triggered.

From opposition to distribution of the price

The opposition is only one stage. It secures the price, but does not yet pay you. The distribution phase follows.

Distribution by agreement

Most often, if the price is enough to cover all the declared claims, the escrow agent makes a distribution by agreement, respecting the order of preferences. Preferred creditors (the French Treasury, social security bodies, secured creditors, employees in respect of their super-preferred claims) are paid before unsecured creditors. If the price is sufficient, all the opposing creditors are paid and the balance goes to the seller.

Judicial distribution

If the price is insufficient to pay all the creditors, or if there is disagreement on the order of payments, a judicial distribution procedure, known as a ranking procedure (procédure d'ordre), is opened. A judge then fixes the rank of each claim and the amount due to each creditor. An unsecured creditor will receive nothing there until after the preferred creditors, and only within the limit of the price available.

This is where the limit of the opposition appears: it includes you in the distribution, but does not change your rank. A simple opposing unsecured creditor may be paid only in part, or not at all, if the preferred creditors absorb the whole of the price. The opposition is nonetheless indispensable: without it, you would be excluded from the distribution altogether.

Release of the opposition

The seller is not defenceless against an abusive or excessive opposition. Article L. 141-16 allows him to ask the judge, in summary proceedings (référé), for release of the opposition (mainlevée), the seller having to show that the opposition is irregular (missing mandatory particular, late opposition) or that the claim relied on is manifestly unfounded. The judge may also authorise the seller to receive the price on condition that a sufficient sum is set aside to secure the disputed claims. A creditor who artificially inflates the amount of his claim therefore exposes himself to a challenge, and even to damages.

Special cases and pitfalls to avoid

A business arising from ring-fenced assets (EIRL)

An important exception appears in Article L. 526-17 of the French Commercial Code. Articles L. 141-1 to L. 141-22, and therefore the opposition mechanism we have just described, do not apply to the sale or contribution to a company of a business that occurs as a result of the transfer or contribution of ring-fenced assets (patrimoine affecté) (the former EIRL regime, a sole trader with ring-fenced assets). In that case, a specific opposition regime applies, and the text states that an opposition lodged by a creditor does not have the effect of prohibiting the transfer of the ring-fenced assets. In other words, the opposition does not block the transfer in that context. As the EIRL status has no longer been open to new creations since the law of 14 February 2022 on sole traders, this situation concerns ring-fenced assets set up before that date, but it remains a trap to be checked.

The privilege of the Treasury and social security bodies

The private creditor is not alone in coveting the price. The tax authority has its own regime. Under Article 1684 of the French General Tax Code, the buyer of a business may be held jointly and severally liable with the seller for payment of certain taxes owed by the seller in respect of the business sold, during a joint liability period that may be reduced where the filing formalities have been properly completed. In practice, part of the price is often held in escrow while the Treasury and the URSSAF (social security collection body) confirm that there are no debts. These public creditors rank ahead of most private creditors.

The creditor's classic mistakes

Three errors recur regularly. First, acting too late, for lack of monitoring of publications: the ten-day period cannot be made up. Second, notifying the opposition to the wrong recipient, by sending it to the seller rather than to the address for service chosen at the office of the person who drew up the agreement. Third, drafting an incomplete opposition, without clearly stating the amount and the grounds of the claim or choosing an address for service, which exposes it to nullity and release.

Conclusion

The creditors' opposition period in the sale of a business is one of the few tools that allows a creditor, even an unsecured one and even without an enforceable instrument, to freeze an asset of his debtor before it disappears. Its strength lies in its speed: ten days after the last publication to freeze the price, a few more days to consider a one-sixth overbid if the price has been understated. Its weakness lies in its formality and brevity: an opposition that is late, badly notified or imprecise protects no one.

My view is clear: for a creditor, the matter is won beforehand, through systematic monitoring of legal notices and the BODACC concerning at-risk debtors, and not in a rush once the sale has been published. If you learn of the sale of your debtor's business, do not lose a day: identify the address for service in the publication, quantify your claim precisely and have the opposition served by a commissaire de justice within the ten-day period. Before bringing a one-sixth overbid, have the relationship between the cost, the guarantee required and your real prospects of recovery assessed by an adviser experienced in commercial litigation.

Frequently asked questions

What is the period for lodging an opposition to the sale of a business? The period is ten days, under Article L. 141-14 of the French Commercial Code. It runs from the later of the two mandatory publications, that of the legal notices newspaper and that of the BODACC. It is a very short period: once it has passed, the creditor loses the benefit of freezing the price, even if his claim is perfectly well founded.

Is an enforceable instrument or a judgment needed to lodge an opposition? No. The right of opposition belongs to any creditor of the seller, including an unsecured creditor, without it being necessary to hold an enforceable instrument or for the claim to be due. It is enough to be able to establish the existence and amount of the claim in the opposition document, which must state its amount and grounds on pain of nullity.

Does the opposition block the sale of the business? No, the opposition does not call the sale itself into question. It only makes the price unavailable: the buyer becomes the owner of the business, but can no longer pay the seller directly. The price is held, in practice by an escrow agent, until the opposing creditors have been paid.

What is the one-sixth overbid and what is it for? Provided for in Article L. 141-19 of the French Commercial Code, the one-sixth overbid allows an opposing creditor who considers the price insufficient to bring about an auction of the business, undertaking to raise the price to an amount one sixth higher than the price of the intangible elements. It is aimed at combating the undervaluation of the price. It must be exercised within a short period and requires a guarantor to be provided.

Where and to whom should the opposition be sent? The opposition must be sent to the address for service stated in the legal publications, generally the office of the person who drew up the sale agreement (lawyer or notary), and not to the seller himself. In practice it is served by a commissaire de justice. Notification to the wrong recipient carries the risk of an ineffective opposition.

What happens if the buyer pays the seller despite an opposition? Under Article L. 141-15 of the French Commercial Code, a buyer who pays the seller without regard to the oppositions is not discharged as against the opposing creditors. He is exposed to having to pay a second time to the creditors. This is why sale agreements almost systematically provide for escrow of the price.

Does the opposition guarantee that I will be paid first? No. The opposition includes you in the distribution of the price, but does not change your rank. Preferred creditors (the French Treasury, social security bodies, employees, secured creditors) are paid before unsecured creditors. If the price is insufficient, an opposing unsecured creditor may be paid only in part, but without an opposition he would be excluded from the distribution altogether.