Merger-absorption and criminal liability: fraus omnia corrumpit

A fatal accident occurs on a construction site. The employer, under investigation for involuntary manslaughter, is absorbed by another company during the judicial inquiry.

In principle, no one is criminally liable except for their own actions (Article 121-1 of the Penal Code). However, since an absorbed company ceases to exist, public prosecution should theoretically end with it.

However, following a major shift in case law, criminal liability is now automatically transferred to the absorbing company (Cass. Crim., November 25, 2020, No. 18-86.955).

But this principle only applies to mergers occurring after the date of that decision.

For earlier mergers, there is only one path: proving that the transaction constituted a fraud against the law, meaning its objective was to shield the absorbed company from its criminal liability.

In this case, the merger took place in 2018, and the court of appeal found fraud simply by noting that the merger occurred while an investigation was underway.

For the Court of Cassation, this is insufficient; it overturns the ruling and requires a body of evidence to establish fraud.

The outcome is interesting but already dated: litigation regarding mergers prior to the 2020 decision is drying up, and this legal approach is destined to disappear.