The legal consequences of mergers by absorption have been the subject of several judicial clarifications in recent years, whether regarding the fate of guarantors, the transfer of liabilities, or procedural nuances. Recently, in a decision delivered on 15 January 2025 (No. 23-84.906), the Criminal Division of the French Court de Cassation confirmed that merger by absorption results in the extinction of the legal personality of the absorbed company, preventing it from initiating legal proceedings. A procedural irregularity before the first-level court cannot be remedied by the subsequent appearance of the absorbing company at the appeal stage.
The Procedural Consequences of the Loss of Legal Personality Resulting from the Merger by Absorption
A company, absorbed through a merger on 1 January 2016, had joined proceedings as a civil party during a criminal court hearing on 1 February 2017. At the appeal hearing, however, the absorbing company assumed its rights and, in turn, entered the proceedings as a civil party.
In its appeal to the French Cour de cassation, the claimant criticized the Appeal Court for admitting the absorbing company into the proceedings, despite the fact that it had not been a party at first-level court hearing.
The French Cour de cassation cancelled the Appeal Court decision for lack of reasoning. According to the High Court, it should have been verified whether, at the time of the hearing on 1 February 2017, the absorbed company still had a valid legal existence allowing it to act in court. In other words, if the merger had already taken effect and resulted in the loss of the absorbed company’s legal personality, it no longer had the capacity to participate in the proceedings.
A Decision in Line With Established French Case Law
Ultimately, this decision is consistent with well-established case law of the French Cour de Cassation, which consistently holds that the loss of legal personality of an absorbed company results in its inability to act in court. Such an irregularity cannot be remedied by the subsequent intervention of the absorbing company.
The Commercial Division of the French Cour de Cassation had previously ruled that an appeal filed by a company lacking legal personality could not be regularized by the subsequent joinder of the absorbing company (Commercial Division, 13 March 2019, No. 17-20.252). Similarly, the Court held that a summons issued by an absorbed company was irregular if the company had lost its legal existence at the time of initiating proceedings (2nd Civil Division, 12 February 2004, No. 02-13.672).
This decision also echoes a previous decision by the French Cour de Cassation (2nd Civil Division, 8 September, 2022, No. 21-11.892), in which the claimant had sued a company that no longer had legal existence. Although the absorbing company voluntarily joined to the proceedings, the High Court ruled that this fundamental irregularity could not be rectified by the absorbing company’s participation.
More recently, the Court further clarified procedural rules by stating that the opposing party must address claims to the absorbing company when it succeeds the absorbed company (Commercial Division, 18 September 2024, No. 23-13.453).
Thus, the French Cour de Cassation appears to have significantly clarified procedural disputes concerning the consequences of mergers by absorption, particularly regarding the loss of legal personality and capacity to litigate in various situations (summons, continuation of proceedings, etc.).
Although the decision discussed in this article is not published in the Court’s Bulletin, it nonetheless provides valuable clarification on the application of principles previously outlined by the Court.
