The warranty against eviction (garantie d'éviction) prevents a seller of shares from re-establishing in business (rétablissement) only where that re-establishment is such as to prevent the buyer from continuing the economic activity of the company sold and achieving its corporate purpose. The commercial chamber quashes the ruling of judges who had held sellers liable for disorganisation, disparagement and recapture of the customer base without finding that impossibility. The test is assessed at the level of the company sold.
Key points
- The statutory warranty against eviction under Article 1626 of the French Civil Code prevents the seller of shares from re-establishing in business where that re-establishment is such as to prevent the buyer from continuing the economic activity of the company sold and achieving the corporate purpose.
- Whether the activity can no longer be pursued and the corporate purpose achieved is assessed at the level of the company whose shares were sold, and not at the level of the acquiring company.
- Facts of disorganisation, disparagement, misappropriation of internal documents and recapture of the customer base sold are not, in themselves, sufficient to trigger the warranty against eviction if that impossibility is not established.
- A buyer of shares relying on the warranty against eviction must therefore document the concrete effects of the re-establishment on the company sold itself.
A share sale followed by the sellers re-establishing in business
The commercial chamber quashes in its entirety the decision that had applied the warranty against eviction without finding that the companies sold could no longer pursue their economic activity or achieve their corporate purpose (Com., 11 March 2026, No. 24-17.205). The decisive test is therefore not the seller's disloyal conduct taken in isolation.
Under an agreement dated 24 June 2011, two shareholders sold to an acquiring company the shares they held in the capital of two companies. The price comprised a fixed portion paid in cash on completion of the sale and an additional price payable later, based on the results of the three financial years following the sale. The two sellers became employees of one of the companies sold, in order to support the buyer in its acquisition and to enable the customer base to be transferred.
A dispute arose over payment of the additional sale price. The sellers brought proceedings against the buyer for payment. The buyer made a counterclaim for damages based on the statutory warranty against eviction. The decision under appeal (CA Lyon, 2 May 2024, No. 23/03460), given on remittal after quashing (Com., 16 November 2022, No. 21-15.193 and No. 21-13.561), held the warranty applicable and ordered the sellers to pay several sums.
The commercial chamber raises the ground of appeal of its own motion, after notifying the parties, and refers to Article 1626 of the French Civil Code. It sets out the rule applicable to the seller of corporate rights (free translation):
It follows from that provision that the statutory warranty against eviction entails, for the seller of shares in a company, a prohibition on re-establishing in business where that re-establishment is such as to prevent the buyer of those shares from continuing the economic activity of the company sold and achieving the corporate purpose.
The lower court judges had found that the sellers had disorganised the buyer by failing to pass on requirements or orders, and had then recaptured the customer base sold head-on, disparaging the buyer and misappropriating internal documents for the benefit of a third-party company. Those findings are not sufficient:
In so ruling, without finding that the companies [sold] had found themselves unable to pursue their economic activity and to achieve their corporate purpose, the court of appeal did not provide a legal basis for its decision.
The Cour de cassation (France's highest civil court) remits the case to the court of appeal of Riom. The dispute therefore remains entirely open on the merits.
What the buyer of shares must prove
A buyer claiming damages under the warranty against eviction must establish that the seller's re-establishment is such as to prevent the economic activity of the company sold from being continued and its corporate purpose from being achieved. What has to be proved is not the seller's loyalty, but the effect of the re-establishment.
The scope of that demonstration is precise. The reference company is the one whose shares were sold, not the acquiring company or its group. A buyer that loses customers, sees its margin fall or its image damaged has not, on that finding alone, established eviction. It must show that the company sold can no longer, because of the re-establishment, carry on the activity for which it was acquired.
The threshold is also a high one. The decision under discussion reasons in terms of impossibility of pursuing the economic activity and achieving the corporate purpose. Competitive inconvenience, however serious, is not the same as that impossibility. The conduct alleged against the sellers, however clearly established, does not relieve the court of the need to verify that outcome for the company sold.
What the test of impossibility for the company sold changes
The decision confirms the settled reading of the warranty against eviction in transfers of corporate rights: the test is a test of outcome, measured on the company sold. The solution stands as the case law stood on 11 March 2026.
The decision under appeal states that the earlier quashing, handed down in 2022 in the same dispute, had already rejected reasoning based on the activity of the acquiring company. The quashing of 11 March 2026 closes the symmetrical route: establishing disloyal conduct by the seller is no more sufficient. Both approaches are rejected for the same reason, the absence of any finding relating to the company sold.
What remains open concerns the outcome of the dispute and the other available grounds. The Cour de cassation does not hold that the conduct described is lawful: it holds that the warranty against eviction was not applied in accordance with its conditions. The court of appeal of Riom will have to reconsider the case. In principle, a contractual breach or acts of unfair competition may be sanctioned on their own grounds, distinct from the warranty against eviction.
How to secure a share sale against the risk of re-establishment
The statutory warranty applies only in a narrow situation: effective protection for the buyer comes first from the terms of the sale agreement. The decision under discussion illustrates how fragile a claim built solely on the seller's disloyalty can be.
For the buyer, the preparation of evidence shifts to the target company. The point is to monitor, financial year by financial year, how its activity, its customer base and its ability to achieve its corporate purpose develop after the sale. A dashboard set up from completion, fed with dated accounting and commercial data, carries more weight than a reconstruction carried out several years after the events.
For the seller, the decision is a reminder of limits. The warranty against eviction does not disappear because the company sold survives, but nor is it triggered by the mere resumption of a competing activity. The contractual risk remains undiminished: non-compete and non-re-establishment undertakings, obligations under the employment contract entered into to support the transfer, and clauses linked to the additional price.
Checks to carry out before relying on the warranty against eviction
- Identify the reference company: the one whose shares were sold, never the acquiring company or its group.
- Gather the material showing how the seller's re-establishment prevents that company from pursuing its economic activity and achieving its corporate purpose.
- Check whether the agreement contains a non-compete or non-re-establishment undertaking, breach of which is assessed separately from the statutory warranty.
- Examine the other available grounds before bringing the claim, in particular contractual non-performance and unfair competition.
- Quantify the damage using data linked to the company sold, and not global projections.
Frequently Asked Questions
Can a seller of shares work again in the same sector after the sale?
Yes, in principle, unless the re-establishment is such as to prevent the buyer from continuing the economic activity of the company sold and achieving its corporate purpose. That is the limit set by the statutory warranty against eviction, restated by the commercial chamber on 11 March 2026. A contractual non-compete or non-re-establishment undertaking may, for its part, restrict the seller's freedom further.
Is the buying company's loss of customers enough to obtain damages?
No, that loss alone is not enough under the warranty against eviction. The commercial chamber requires a finding that the company whose shares were sold can no longer pursue its economic activity and achieve its corporate purpose. Difficulties affecting the buyer or its group do not meet that test. Other grounds, such as contractual non-performance, may be relied on separately.
Are disparagement and misappropriation of documents enough to establish eviction?
No. In the case decided on 11 March 2026, the lower court judges had found disorganisation of the buyer, disparagement, misappropriation of internal documents and a head-on recapture of the customer base sold. The Cour de cassation set aside that decision for want of any finding that the company sold could no longer pursue its activity and achieve its corporate purpose. Those facts may, however, fall under other heads of liability.
Should a non-compete clause be included in a share sale agreement?
A non-compete or non-re-establishment clause is of practical value, because it defines contractually what the seller may not do, without depending on the strict conditions of the statutory warranty. Its drafting deserves care: scope of activity, territory, duration, persons covered and the sanction for breach. In principle, such a clause is assessed on its own terms, independently of the statutory protection available to the buyer.
What evidence should be kept to prove customer diversion after a sale?
Keep the data that measures how the acquired company develops: turnover per customer, lost orders, termination letters, price comparisons circulated by the competitor, and exchanges with departing customers. Date each document and link it to the company concerned. A late and global reconstruction rarely persuades. Monitoring set up from completion, financial year by financial year, helps show a link between the conduct complained of and the decline recorded.