Analysis of “I.G.I v Maria Grazia Cicenia” by David Ramos
I.G.I. Srl v Maria Grazia Cicenia et al (Case C-394/18)
Can a Member State’s national court apply Civil Code remedies that may interfere with the ‘neat’ EU rules on corporate divisions? The Court of Justice of the European Union (CJEU) has answered this question with a clear ‘yes’, while leaving other questions open.
In the case I.G.I. the company Costruzioni Ing. G. Iandolo Srl (Costruzioni) used a company division to transfer a part of its assets to a new company (I.G.I). Allegations were made by Ms Cicenia and others that Costruzioni had been left with insufficient assets and its creditors were left unprotected, and so an actio pauliana was brought to request that the division be invalidated. The CJEU had to interpret the compatibility of the actio with the Sixth Council Directive 82/891/EEC, on the division of limited liability companies.
The first problem was whether the Sixth Directive was applicable, and thus whether the CJEU had jurisdiction. The Directive applies to divisions of ‘public limited companies’, such as Italian SpAs, where all the assets and liabilities of the divided company are transferred to newly created companies. Yet, Member States have extended the application of EU rules to both the division of private limited companies, such as SRLs (like Costruzioni and I.G.I., and to ‘divisions’ where some assets and liabilities are left behind in the divided company, as occurred in this case. The CJEU considered itself competent to decide on an issue where ‘in regulating purely internal situations, domestic legislation seeks to adopt the same solutions as those adopted in EU law in order’, to enhance uniformity in interpretation.
The second problem was the relationship of actio pauliana with Article 12 of the Directive’s creditor protection mechanisms: (i) a right to obtain safeguard measures from the companies before the division is completed; and (ii) a creditor of the beneficiary company’s (the company to which the obligation has been transferred) right to hold all the beneficiary companies liable.
As EU rules assume that all assets/liabilities are transferred to the beneficiaries, they leave a blind spot. A beneficiary’s creditor can sue other beneficiaries, which covers cases where the division is used to create a ‘bad company’, with insufficient assets. This does not address the case where the new company receives the ‘good’ assets, while the ‘bad’ assets are left behind in the divided company, because the Directive’s scheme assumes that this does not happen. The creditors alleged that to remedy this wrong, the actio pauliana was needed.
First, the CJEU analysed whether the fact that Article 12 does not include anything like the actio pauliana among its mechanisms implicitly excluded that action. The CJEU found that the actio is not excluded, provided it does not run contrary to the purpose of that provision. On this, the CJEU acknowledged that the Directive does not require creditors of the beneficiary company to be treated equally with creditors of the divided company, thus admitting that priority could be given to the latter’s protection.
Second, the CJEU analysed the compatibility of actio pauliana with the Directive’s rules on nullity, which try to protect legal certainty, by severely limiting the possibility to undo the transaction. The Court held that unlike the erga omnes effects of nullity, the actio pauliana only renders the transaction (division) unenforceable against the claimant.
The case helps the CJEU delineate the roadmap of the relationship between EU Directives and civil law remedies. It confirms the decisions of some national courts on the individualised nature of the actio pauliana, such as the Spanish Supreme Court ruling STS 682/2016, of 21 November, with reference to STS 245/2013, of April 18. The question remains whether the Court of Justice will also confirm the view of that 2016 ruling, which, conversely, held that an action for transaction avoidance in insolvency was excluded by the Directive, because its erga omnes effects rendered it equivalent to nullity.
We will have to wait for that.
David Ramos Muñoz is Professor of Commercial Law at Universidad Carlos III de Madrid. His recent publications include EU Financial Law (CEDAM/Kluwer) 2016 (with Marco Lamandini) and The Law of Transnational Securitization (Oxford University Press) 2010.