Recovery by a family company: an agricultural purpose is still required

Article L. 411-60 of the French Rural and Maritime Fishing Code provides that legal entities, provided they have an agricultural purpose, may exercise recovery rights over property contributed to them in ownership or for use at least nine years before the notice. It adds that these conditions are not required for GAEC farming groups and companies formed between spouses, civil partnership (PACS) partners, relatives or relatives by marriage up to and including the fourth degree. Farming must then be undertaken by one or more company members under Article L. 411-59. Finally, members who acquired their shares for value may farm the recovered property only if they have held those shares for at least nine years.

The question was whether the exemption for family companies also covered the requirement for an agricultural purpose.

An SCI granted a rural lease over a meadow and another contract over a dwelling and a barn, which the court reclassified as a rural lease. It then served two recovery notices for one of its members. The tenant challenged them. The tribunal and then the Court of Appeal upheld the notices, the latter considering that, as a family company, the SCI did not have to demonstrate an agricultural purpose.

The Court of Cassation held that a company, even one formed between spouses, PACS partners, relatives or relatives by marriage up to and including the fourth degree, can exercise recovery rights only if it has an agricultural purpose. In that case, however, the property need not have been contributed at least nine years before the notice, nor must the members who will farm have held shares acquired for value for nine years.

The Court of Appeal was therefore wrong to exempt the SCI from any agricultural purpose requirement. Its ruling was nevertheless upheld on substituted grounds: the SCI’s articles provided for ownership, use and management of property and property rights intended for agriculture, with a view to establishing or preserving one or more holdings by farming directly or leasing them. It therefore did have an agricultural purpose.

The ruling confirms a longstanding solution already adopted in 1978 and gives it clear scope: an agricultural purpose is a universal condition for recovery by a legal entity. The preferential treatment of family companies concerns only holding periods.

The wording of the company’s objects is therefore decisive. An SCI with a purely investment or real-estate purpose, without reference to the agricultural use of the property and its farming, risks being denied any recovery. Before contemplating a notice, it is prudent to review the articles and, if necessary, amend the objects sufficiently early, bearing in mind that the recovery conditions are assessed on the dates of service and effect of the notice.