The price of a company’s shares is often calculated from its excédent brut d’exploitation (EBE, a gross operating surplus close to EBITDA): a multiple applied to the result of a reference year. If that EBE is inflated by an accounting practice unknown to the buyer, so is the price. On 8 July 2026 the Commercial Chamber of the Cour de cassation (French supreme court for civil and commercial matters) upheld a Court of Appeal that had found fraudulent concealment (réticence dolosive, a form of dol, the French notion of fraud) by sellers who had presented the buyer with an EBE distorted by advance invoicing without provision.
The facts
On 2 May 2011 a couple sold to a holding company, set up by an employee of the business, all the shares they held in a locksmith company, “for the price of 300,000 euros, fixed taking into account a gross operating surplus (EBE) for the 2010 financial year, set at the sum of 105,000 euros” (translated from the French). The same day the sellers signed a garantie d’actif et de passif (warranty on the company’s assets and liabilities) capped at €150,000, itself partly guaranteed by a bank up to €75,000.
On 2 August 2011 the holding company entered redressement judiciaire (court-supervised reorganisation). Relying on the inaccuracy of the reference accounts, it sued the sellers for damages, and the bank as guarantor. After the company was placed in compulsory liquidation on 30 April 2013, the liquidator took over the proceedings; the founding employee joined the case voluntarily. During the appeal the husband died; his two children, who inherit with their mother, were joined to the proceedings alongside her, already a party as a seller.
On 14 February 2024 the Colmar Court of Appeal ordered the widow and the two children, each liable for the whole amount (in solidum), to pay the liquidator €300,000 in damages, with statutory interest from 8 December 2014. According to the appeal, the Court of Appeal had failed to examine whether the buyer knew of the practice and had reversed the burden of proof; a victim of fraud who does not seek annulment could only recover a lost chance.
The decision
The Cour de cassation dismissed the appeal (Cass. com., 8 July 2026, appeal no. 24-14.768, unreported, i.e. not published in the Bulletin). The case falls under former articles 1116 and 1382 of the French Civil Code.
Fraudulent concealment. The Court recalls that the decision under appeal “holds that it is established that the sellers knowingly presented to the prospective buyer accounting figures and in particular an EBE calculated inappropriately, not reflecting the reality of the company’s results, from which it deduces that it was for the sellers to draw the prospective buyer’s attention to the existence of this practice and to take it into account in calculating the EBE”.
On the buyer’s knowledge, it answers: “Having thus brought out that the buying company was unaware of the existence of advance invoicing without provision, distorting the accounts and the EBE”, the Court of Appeal, “which thus carried out the inquiry allegedly omitted”, gave a legal basis to its decision. The reasons criticised on the burden of proof are set aside as superfluous: the Court does not rule on that point.
The complaint on the measure of the loss is inadmissible. The lost-chance argument had not been raised before the Court of Appeal: the Court holds it “new and mixed of fact and law”. The amount awarded, equal to the sale price, is therefore not examined on the merits; as the appeal is dismissed, the order to pay €300,000 is final.
What this changes for valuation
An EBE is read with its cut-off rules. Advance invoicing means invoicing, and recording as turnover, work not yet performed at the year end. Without an entry neutralising its effect (the decision speaks of invoicing without provision), the year’s turnover rises without the matching costs, and the EBE with it; the following year bears those costs without the income. A price of €300,000 for an EBE of €105,000 is about 2.9 times the EBE: if the price is derived from the EBE by that multiple alone, every €10,000 of fictitious EBE adds about €29,000 to the price.
The EBE is restated at the reference year end; the shares are valued at the date of the sale. The valuer rebuilds the reference EBE as it should have appeared at the year end: invoices matched to the year in which the work is performed, work in progress listed, income received in advance neutralised. The Charte de l’expertise en évaluation immobilière (French property valuation charter) treats the valuation of businesses and company shares as a speciality (6th edition, November 2025, Title II, § 8.5). On the method binding a third party who fixes the price under the share sale agreement (protocole): Share price set by an expert: the agreed method is binding.
What the buyer knew is a question of fact. The founder of the holding company was an employee of the business; that did not lead the judges to find that he knew of the practice. A similar defence was rejected in the sale of a house (Concealed foundation works: sale annulled, use to be paid for). For contracts concluded from 1 October 2018, article 1137, third paragraph, of the Civil Code, added by the Law of 20 April 2018, states that not disclosing one’s own estimate of the value of the performance is not fraud. Sellers therefore need not say what they think the shares are worth; they cannot, however, keep quiet about a practice that distorts the figures on which the price rests.
The measure of the loss was not reviewed. The Court of Appeal awarded the whole price, twice the cap of the warranty, without the Cour de cassation examining that amount. For the sale of a building, the Third Civil Chamber held on 28 May 2026, in a reported decision, that a buyer deceived by fraud who keeps the property may claim compensation for an excess price (Seller’s fraud: claiming the excess price without annulment). The decision of 8 July does not say whether that solution applies to a share sale. The valuer compares the price paid with the value of the shares calculated on the restated EBE, at the date of the sale; how the gap is characterised is for the judge.
What the valuer takes from it
- The reference EBE is checked before it underpins the price: invoices matched to the year of performance, work in progress, income received in advance.
- The report distinguishes the published EBE from the restated EBE, justifies each correction at the reference year end and turns the gap into value through the method that set the price.
- Concealing an accounting practice that distorts the EBE makes the sellers liable; keeping one’s own estimate of value to oneself is not fraud (art. 1137, third paragraph, of the Civil Code, contracts concluded from 1 October 2018; the decision applies former article 1116).
- The Court did not examine the measure of the loss; the report quantifies the gap, whatever legal characterisation is retained.
Further reading
The Business and company shares page describes the assignment, how it is carried out and its fee. The guide Selling my business in France: what is it really worth? and the glossary entries fonds de commerce, méthode par le revenu and valeur vénale complement this article. On a price fixed by a third party: Share price set by an expert: the agreed method is binding. On the same theme: Article 1843-4 Civil Code: the expert may give two valuations and Pharmacy sale price: the court cannot fix it. The decision is available on Légifrance.
What next
A reference EBITDA to check before or after a share sale?
I restate the EBE at the reference year end, matching each invoice to the year in which the work is performed, then I value the shares at the date of the sale. The report serves the negotiation, the parties' advisers or the court.
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