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Covid-19: Universal Transfer of Assets (TUP) Timeframe Put to the Test

Impact of adjusting time limits in the current public health crisis


The Covid-19 crisis has led the Government to take emergency measures aimed at adjusting many deadlines that expired during the health emergency period.

This applies in particular to the time limits for creditors to object to dissolution operations without liquidation, commonly referred to as universal asset transfers ("TUPs - transmissions universelles de patrimoine”), ongoing since 12 March 2020 or due to be implemented in the very near future. 

As a reminder, the general provisions of Title I of ’Ordinance No. 2020-306 of 25 March 2020 relating to the extension of deadlines are applicable to deadlines and measures that have expired or expire between 12 March 2020 and the end of a one-month period starting from the end of the health emergency status as declared under the terms of article 4 of Act No. 2020-290 of 23 March 2020 on the emergency response to the Covid-19 epidemic.

Except in the event of an extension or early interruption, the end date of the state of emergency is set at 24:00 on 23 May (according to a converging position) by the Council of State - CE, 10 April 2020,No. 439903  – and the Chancellery - circular of 17 April 2020).).

Consequently, the Ordinance No. 2020-306 covers periods that have expired or expire between March 12 and June 23, 2020 at midnight (i.e., during the so-called "legally protected" period).

Pursuant to Article 2 of that Ordinance, any act, action, recourse or legal proceedings, in particular, prescribed by law or regulation which should have been carried out during the protected period, shall be deemed timely if carried out within a period not exceeding, as from the end of that period, the legally prescribed period for taking action, up to a limit of two months.

In other words, for such deeds, appeals, lawsuits and other formalities referred to in the Ordinance, the legally prescribed period for taking action will run again from 24 June 2020, within a limit of two months (cf. circular of 26 March 2020 from the Ministry of Justice).

Extending the deadlines that fall due within the protected period can have a significant impact on operations such as the TUPs.

Indeed, such transactions are subject to a right of objection by the social creditors and, where the period for lodging an objection normally expires during the protected period, that period runs again as from the end of the protected period, i.e. as from Wednesday 24 June 2020.

The lack of clarity in certain provisions of the above-mentioned ordinance raises questions and debates that need to be revisited.

1. Can the creditor objection period begin to run during the protected period?


It should be noted that the provisions referred to above provide for a mechanism to postpone the end of the deadlines concerned and not a postponement of their starting point (cf. the above-mentioned circular of 26 March 2020, which also specifies that the Ordinance provides neither for a general suspension nor a general interruption of the deadlines that have expired during the protected period).

The required procedure to follow to initiate the deadline for creditors to lodge an objection concerning a TUP, i.e. the publication of the notice of dissolution without liquidation in a newspaper of legal notices, may validly be carried out during the protected period (i.e. between 12 March and midnight on 23 June 2020) and thus constitute the starting point of the objection period.

As the time limit for creditors to object is not suspended, this implies that creditors could validly also object during the protected period, at least in theory.

2. Is the creditor objection period, running during the protected period, necessarily impacted by the extension of the term provided for in Ordinance No. 2020-306?

No. It all depends on the date on which this deadline should normally expire.

The provisions of Ordinance No. 2020-306 do not apply to periods whose term or expiry date is set after the end of the protected period, i.e. from 24 June 2020 (unless the said period is extended).

In the case of deadlines which began to run during the protected period, a distinction must therefore be drawn between two cases:

  • either the period for objecting to the transaction was due to expire during the protected period, i.e. by midnight on 23 June 2020 at the latest: in this case, the period open to creditors for objecting will run for a new period identical to the end of the protected period, i.e. 30 days in the case of TUPs; objections filed within this new period will be deemed to have been made on time ;
  • or the period for lodging an objection expires after the end of the protected period, i.e. from 24 June 2020: in this case, the objection period is not affected by the above-mentioned adjustments and expires within the initial legal period (30 days from the completion of the publication formalities), i.e. at the earliest (and potentially) on the day following the expiry of the protected period (i.e. 24 June 2020 at midnight).

Consequently, it might be appropriate to postpone the completion of the publication formalities of certain current UPT operations in order to avoid a significant extension of the period available for creditors to lodge an objection.

3. Is the implementation of the TUP deferred in the event of an extension of the deadline for creditors' opposition?

Diverging opinions have been expressed on this point.

With regard to TUP, Article 1844-5, para. 3 of the Civil Code states that "[t]he transfer of assets is not effected nor does the legal person cease to exist until the end of the opposition period or, as the case may be, when the objection has been dismissed at first instance or when the repayment of claims has been made or the guarantees provided".

It seems to us that, as a result of these provisions, the full completion of the TUPs subject to a postponement of the deadline for creditors' objection pursuant to Ordinance No. 2020-306 must be deferred until the new deadline expires.

In practice, this means that the entry in the RCS of the delisting of the dissolved company following a TUP should be denied upon expiry of the "normal" objection period, when it expires within the protected period. Once the registrar receives such a request, he may make an entry into the RCS only at the end of the new time limit, provided that no objection has been lodged or, in the event of objections, that they are dismissed at first instance or that adequate remedial measures are implemented.

Some registries, such as those of the commercial court of Antibes and Bobigny, have communicated to this effect since the beginning of April.

In circular No. 50G-2020 dated 16 April 2020, the National Council of Commercial Court Clerks (CNG) also confirmed this analysis, stating that "the registrar can only proceed with the company's delisting at the end of the 30-day period following the end of the legally protected period, the end of the period for creditors' objections".

However, it should be noted that, in practice, some companies were able to carry out delisting formalities in the context of a TUP during the protected period at the Paris Registry but before the publication of the CNG circular.

On this point, a note from the Directorate of Civil Affairs and Seals (DACS) dated 14 April 2020 adds further confusion by stating (albeit "subject to the courts' discretion") that "the end of the objection period", which serves as a reference for determining the date of completion of a TUP (pursuant to Article 1844-5 of the Civil Code) occurs at the end of the initial 30-day period, despite the fact that it expires during the protected period.

According to the Chancellery, no provision in the above-mentioned ordinance allowing for an extension of the time limit, it merely "allows an objection to be declared valid if it is lodged after the time limit has expired". On this basis, the Chancellery considers that the deadline for lodging an objection does not change, thereby leaving the date of completion of the TUP unchanged.

From our perspective, this position appears rather audacious.

Such a position suggests that the final completion of the TUP and the delisting of the dissolved company could be allowed, despite the fact that objections to this operation may still be lodged until the expiry of the new time limit set by the ordinance.

In such a case, the Chancellery considers that the creditor who has lodged an opposition within the new deadline would be able to assert his rights against the sole shareholder.

Such an analysis may come as a surprise in view of the provisions of Article 1844-5 of the Civil Code, which make the absence or clearing of possible objections a precondition for the definitive implementation of the TUP and the closure of the dissolved company.

Moreover, applying this analysis to the TUP would also imply applying it to other operations such as capital reductions for cash flow management purpose, which, it is worth mentioning, "may not be initiated during the objection period" or, in the case of joint stock companies only, "before the objection has been ruled on at first instance". L.225-205 for joint-stock companies and art. L.223-34 for limited liability companies).

However, it seems unlikely that companies will be able to decrease shareholders' equity by fully undertaking capital reduction operations while creditors are still able to lodge objections.

However, some level of uncertainty remains, owing to the ambiguity surrounding Article 2 of the Ordinance.

The final version contains convoluted wording centred around a legal fiction (the objection lodged within the new time limit is "deemed to have been made in time"), which is inconsistent both with the title of the Act and the heading of Title I, where the term "extension" of time limits is used.

Furthermore, the report of Ordinance No. 2020-427 of 15 April 2020 amending Ordinance No. 2020-306 states that "Article 2 of this Ordinance constitutes neither a suspension nor an extension of the deadline initially set for taking action. The mechanism set out in this Article paves the way to consider the deed or formalities carried out before the end of the initial period, calculated from the end of the period referred to in Article 1 (state of public health emergency + one month), up to a maximum of two months, as having been validly completed. The purpose here is to make it possible to carry out after the event (and as if the time limit had been respected) an act or formality which could not have been carried out during the period of public health emergency plus one month".

In the letter of Article 2 of the Ordinance where no mention is made of the term "extension", and in view of the position expressed by the DACS, one additional issue arises with regard to the validity of lodging an opposition to an TUP during the protected period, after the 30-day objection period, but before the new period running from 24 June 2020. On the assumption that the ordinance does not lead to an extension of the objection period, one might reasonably expect the objection lodged after the expiry of the 30-day objection period but before the start of the new period running after the end of the protected period to be inadmissible if not confirmed within this new time limit.

Clarifying and standardising practices is more than desirable to put an end to the uncertainty regarding the completion dates of the TUPs being implemented in the current situation.

Until such clarification is provided, due caution must be exercised, particularly given that the registrar, and not the DACS, ultimately bears the responsibility for ensuring that the application for cancellation or amending entry in the RCS is properly carried out and complies with legal and regulatory requirements, all under the supervision of the commercial court judge in charge of overseeing the commercial register.

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