Garnishment of registered company securities

I. Can corporate securities be seized?

Yes, company securities constitute intangible movable property which has a patrimonial value and all the movable and immovable property of a debtor is the common pledge of his creditors. The shares owned by a shareholder can therefore be seized by way of a garnishment procedure.

The creditor garnishes the registered securities of his debtor in the hands of the issuing company. The fact that the shares are not freely transferable does not hinder the validity of the seizure, except where non-transferability is provided for by law [1].

The seized third party company is obliged to declare the existence of registered shares registered in the name of the debtor when it is notified of a seizure of the securities held by one of its shareholders. It is required to make them unavailable[2].

II. Which securities can be seized?

All securities that have sufficient asset value and transferability can be seized:

shares
bonds and convertible bonds
share certificates
profit shares in public limited companies
subscription rights

The seizure of subscription rights is difficult to do in practice, see our dedicated article (in french) for more information.

etc.

III. What is the impact of restrictions on the transferability of securities?

A. Legal restrictions

Legal non-transferability is binding on creditors.

Non-transferability of securities in “partnership” company

Some partnership companies are formed solely on the basis of the person of the partners: the “sociétés simples”, the “sociétés en nom collectif” and the “sociétés en commandite“. In these cases, the law provides for the non-transferability of shares and is binding on seizing creditors.

Restrictions on the transferability of shares in limited liability companies (SRL)

Also in the case of limited liability companies for instance, in the absence of statutory provisions to the contrary, a shareholder who wishes to transfer shares must obtain the approval of the other shareholders. The seizing creditor is obliged to comply with the approval procedure if it is applicable in the company concerned.

If he does not obtain approval, the distraining creditor, or the third party purchaser, may refer the matter to the president of the company’s court. If the refusal of approval is deemed arbitrary by the president, the judgment will be deemed to be approval.

B. Contractual restrictions

Validly published restrictions are binding on the distraining creditor.

Unpublished contractual restrictions, for example in a shareholders’ agreement, cannot be set up against a third party seizing creditor, unless his bad faith is demonstrated.

C. De facto limitations

Finally, the value of certain companies whose securities are legally transferable (or have been made transferable by the partners) is so closely linked to the person of their partners that it is, in practice, difficult to find a purchaser interested in buying the securities.

It is also difficult to imagine what interest a seizing creditor or a third party purchaser would have in imposing his shareholding in a very small or family-owned company after, if necessary, judicial approval.

In these cases, even if seizure is theoretically possible, it is hardly possible to envisage it.

IV. Seizure base

The seizure may relate to the security itself and, therefore, to all the sums owed by the company to the holder of the security.

However, there is nothing to prevent the creditor from limiting the seizure base to only part of the pecuniary rights attached to the security, provided that the claim exists at least in germ at the time of the seizure.

[1] Gand, 14 décembre 1993, D.A.O.R., 1996, n° 38, 85.

[2] Civ. Bruxelles (fr., sais.), 12 mai 2016, J.L.M.B., 2017, 844.