This decision marks a change from the earlier case law

While a new directive aimed at facilitating the implementation of transnational mergers was adopted on October 26, 2005, two recent judgments of the Court of cassation are recall the consequences of the realization of a merge operation on the absorbed company contracts.

In the first case (1), a company with a contract entitled "agent reseller contract" was the subject of a merger. This contract stipulated that he was found "intuitu personae" and that the rights and obligations were not assignable or transferable, either totally or partially.

The Court of appeal approved by the Court of cassation had deduced from these specific provisions that they put obstacle to the transfer of the contract to the acquiring company as an exception to the principle of universal transmission of heritage. This principle is, in effect, that in the case of merge all of the heritage of the absorbed company (assets, liabilities, contracts...) is transferred to the acquiring company without any specific formalities required.

The Court of cassation said on this occasion, classical way, that a contract "intuitu personae" can be transmitted in a merger.

However, it states that the "intuitu personae" character can result from the mere declaration of the parties. It is therefore unnecessary to consider whether the nature of the contract or the rights and obligations are defined are likely to characterize the existence of a contract "intuitu personae. Insofar as many including the most important contracts are concluded with the mention "intuitu personae", they will not be able to be transferred in a merger, except agreement of the other party. Therefore, any company involved in a merger operation must respect a formalism sufficiently heavy to ensure the transfer of such contracts.

Remains, although this solution seems logical from a strict point of view legal, it is dependent on the survival of a contract for the meaning of completion of a merger. Indeed, if the merger had been made in the other direction (the absorbed becoming the absorbent), the assets, liabilities and shareholders of the merged entity would have been identical... and the contract transferred.

Guarantee liabilities

In the second case (2), a recipient of a security company was the subject of a merger. First, the Court of Appeal considered that the absorption of a company receiving a bond is a change of creditor for the surety, releasing it from its obligations. However, this judgment was quashed by the Court of cassation, which considered that the benefit of the contract of suretyship is transmitted right to the acquiring company. This decision marks a change from the earlier case law. Indeed, the authorities considered that for merger and absorption of the beneficiary of the surety, the surety could be prosecuted only in respect of debts born earlier in the day of the merger, and not to the title of the posterior to the debts. The drafting of the decision implies an evolution in that the bond could survive now to guarantee the debts subsequent to the merger. (3) Commentators have inferred "now, it's the principle of the universal transmission of heritage of society absorbed to the acquiring company which dictates his act", and it then even if the contract of surety is regarded as "intuitu personae.

This solution is justified insofar as the change of beneficiary of the surety to the merge operation has no effect on the scope of the liability of the surety. Thus, now companies that benefit from bail including in particular the financial institutions not more likely to see the benefit of their securities decreased when they participate in a merge operation.