All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

The principle of autonomy of the companies within the group can be voluntarily mitigated by entering into agreements that promote interconnection among its members and lead them to become involved in each other's affairs. In most cases, this involves one of the companies in the group acting as guarantor to a third party for the compliance by another company in the group with its commitments toward …

Agreements between companies within the same group

The principle of autonomy of the companies within the group can be voluntarily mitigated by entering into agreements that promote interconnection among its members and lead them to become involved in each other's affairs. In most cases, this involves one of the companies in the group acting as guarantor to a third party for the compliance by another company in the group with its commitments towards that third party, thereby enabling the implementation of a project.

This is the case with a parent company's commitment to ensure that no creditor incurs a loss due to engagements with its subsidiaries and the assurance given to a bank that it will take necessary actions so that its subsidiary meets its commitments and has sufficient cash flow for this purpose , or the letter of intent by which it undertakes to support its subsidiary so that it can return a sum to a third company in the context of a dispute .

A dispute may arise regarding the binding force of such commitments. A performance obligation was indeed identified in the case of a parent company that had personally committed to banks, in a "restructuring protocol," to "ensure all the financial needs of its subsidiary through contributions to current accounts" . Conversely, case law has classified as a best-efforts obligation the commitment made by a parent company to make its best efforts to ensure that its subsidiary has sufficient cash flow to meet its obligations to a bank . The wording of the clause can also affect the scope of the commitment undertaken. Thus, a parent company that promises to "do everything possible to cover the financial needs" of its subsidiary does not commit a fault by not fulfilling this commitment, as long as it is not precisely defined . Finally, for the commitment to produce its full effect, it must have been made in accordance with the rules applicable to the company in question. In particular, a parent company constituted as a joint stock company must, when it commits to guarantee the debts of its subsidiary, have obtained prior authorization from its board of directors , failing which the commitment may be annulled and is unenforceable against the company .

The subsidiary can also assist its parent company by granting a guarantee. However, this is only valid if it is not contrary to the subscriber's corporate interest . This may be the case when it immediately deprives the subsidiary of almost all its current assets and any means to continue its activity  or potential resources by heavily encumbering its real estate assets without any compensation . Conversely, when the guarantee is provided by the subsidiary with the aim of maximizing the chances of success of the safeguard procedure initiated against its parent company, it is valid, as long as it aligns with its personal interest .

Cass. com., 18 December 2019, LawLex202200008497JBJ; 19 January 2010, LawLex202200008496JBJ.

Cass. com., 3 July 2019, LawLex202200008483JBJ; 17 May 2011, LawLex202200008499JBJ.

Cass. com., 10 February 2015, LawLex202200008501JBJ.

Cass. com., 24 October 2000, LawLex202200008488JBJ; 21 December 1987, LawLex202200008481JBJ, holding that the parent company, which, through a unilateral declaration of intent, unequivocally and knowingly expresses its willingness to commit to the creditor to repay the loans taken out by its subsidiary if the latter does not fulfill them itself, acts as a guarantor with an obligation to ensure a result; 19 January 2010, LawLex202200008496JBJ, indicating that a parent company that undertakes to do what is necessary for its subsidiary to have sufficient cash flow to meet its obligation to repay a loan to a bank is analyzed as an obligation of result, since proof of the creditor's consent to transform this into a best-efforts obligation is not provided; 20 February 2007, LawLex202200008500JBJ; 26 February 2002, LawLex202200008503JBJ.

Paris, 22 January 2009, LawLex202200008504JBJ; Cass. com., 4 October 1994, LawLex202200008487JBJ, considering that a parent company that undertakes to do everything possible for its subsidiary to continue its activity so that it can fulfill its commitments to a bank is only bound by a best-efforts obligation.

Cass. com., 15 January 1991, LawLex202200008482JBJ; 15 October 1996, LawLex202200008486JBJ, indicating that the commitment undertaken by a parent company to ensure that its subsidiary has sufficient cash flow constitutes a duty of supervision and not a duty to perform that would require it to substitute for the defaulting debtor; 17 November 1995, LawLex202200007741JBJ.

Cass. com., 28 April 1987, LawLex202200008477JBJ; 9 December 1997, LawLex202200008478JBJ.

Versailles, 17 June 1999, LawLex202200008506JBJ, ruling that the letter of intent issued by a parent company, in the form of a joint stock company, in favor of its subsidiary concerning a financing operation in leasing, which was not authorized by an express resolution of the board of directors, but which states that its chairman and CEO has the necessary powers to make commitments of result to the banks, cannot be enforced against it.

Cass. com., 13 November 2007, LawLex202200007663JBJ; 14 February 2018, LawLex202200008502JBJ.

Cass. com., 14 February 2018, LawLex202200008502JBJ.

Cass. com., 13 November 2007, LawLex202200007663JBJ.

Company Law (en cours)

278. Agreements between companies within the same group

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278. Agreements between companies within the same group

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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