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

Company Law (en cours)

The representatives of the body of bondholders have, unless restricted by the general meeting of bondholders, the power to perform on behalf of the body all management acts for the defense of the common interests of the bondholders . Under the first paragraph of Article L. 228-54 of the Commercial Code, when duly authorized by the general meeting of bondholders, the representatives of the body alo …

Defense of bondholders' common interests

The representatives of the body of bondholders have, unless restricted by the general meeting of bondholders, the power to perform on behalf of the body all management acts for the defense of the common interests of the bondholders . Under the first paragraph of Article L. 228-54 of the Commercial Code, when duly authorized by the general meeting of bondholders, the representatives of the body alone have the authority to initiate, on their behalf, actions for the nullity of the company or acts and resolutions subsequent to its formation, as well as any other legal actions aimed at defending the common interests of the bondholders, including requesting the judicial liquidation of the company as provided in Article L. 237-14. The competence of the representative of the body of bondholders is exclusive as soon as one is appointed . In fact, only the representatives of the body, duly empowered to ensure the defense of the common interests of the bondholders, can initiate an action seeking compensation for the damage related to the failure to adjust convertible bonds into shares, when it is likely to concern all bondholders in the same situation , or a liability action for the fault committed by the statutory auditor of the issuing company at the time of the issuance of convertible bonds, when it concerns all subscribers and their successors and aims to defend the common interests of the bondholders . Similarly, the representatives of the body authorized by the general meeting of bondholders alone have the authority to initiate, on their behalf, any actions aimed at defending their common interests, as long as the fault committed during the issuance of the bonds concerns all subscribers and their successors . The general meeting of bondholders may mandate the representatives of the body to oppose the merger .

The monopoly of the bondholders' representative to act on behalf of the bondholders results in the automatic inadmissibility of any legal action brought by any other person , even under the management of affairs . It renders inadmissible any action initiated personally by a security holder, as long as the alleged fault concerns all subscribers or their successors, even if the resulting damage for each bondholder is distinct . However, a bondholder is entitled to take legal action, without being opposed by the monopoly of action of the bondholders' representative, to obtain compensation for a loss that is unrelated to the collective damage of the bondholders, which is personal to him and results from a lack of information from his wealth management advisor on the opportunity not to convert his securities . Similarly, the bondholders' representative is not exclusively competent to act for the compensation of a bondholder's personal loss, which results from a lack of information from his wealth management advisor on the opportunity not to convert his securities . Finally, a bondholder who individually expresses his vote at the single bondholders' meeting can himself contest the decision made by the meeting and appeal the judgment that approves the safeguard plan, without the prerogatives of the bondholders' representative, who initiates actions aimed at defending the common interests of the bondholders, being opposed to him . Conversely, legal actions directed against all bondholders of the same group can only be brought against the representative of that group .

The representatives of the body of bondholders cannot interfere in the management of corporate affairs . They may obtain access to the documents made available to shareholders under the same conditions as them  and participate in the general meetings of shareholders, but without voting rights.

In the event of receivership or liquidation of the company, the representatives of the body of bondholders are authorized to act on its behalf . They are responsible for declaring in the liabilities of the judicial reorganization or liquidation of the company, for all bondholders of this body, the principal amount of the bonds remaining in circulation, increased for reference by the matured and unpaid interest coupons, the calculation of which is established by the judicial representative . They are not required to provide the titles of their principals in support of this declaration . In the absence of a declaration in the liabilities by the representatives of the body, a court decision appoints, at the request of the judicial representative, a representative responsible for ensuring the representation of the body in the judicial reorganization or liquidation operations and declaring the claim . This representative necessarily has the power to pursue the admission of this claim . The representatives of the body may delegate this power to a third party , except for managers, directors, members of the management board and supervisory board, general managers, statutory auditors, or employees of the debtor company or companies guaranteeing all or part of the commitments of said company, as well as their ascendants, descendants, and spouses . This prohibition also applies to the debtor company, companies that own at least one-tenth of the capital of the debtor company or of which the debtor company owns at least one-tenth of the capital, managers, directors, members of the management board, members of the supervisory board, general managers, statutory auditors, or employees of these companies, including their ascendants, descendants, and spouses, companies guaranteeing all or part of the commitments of the debtor company, as well as persons prohibited from practicing the banking profession or who are disqualified from the right to direct, administer, or manage a company in any capacity . The representatives of the body may not delegate their power to persons prohibited from practicing the banking profession or who are disqualified from the right to direct, administer, or manage a company in any capacity .

CA Paris, 12 May 2011, LawLex202200011344JBJ; 15 February 2023, LawLex202300005527JBJ; 21 March 2023, LawLex202300005481JBJ, specifying that the representative of the body of bondholders, whose mission is to carry out management acts for the defense of the common interests of the bondholders, is not bound by a duty of information and advice towards them.

CA Angers, 28 January 2020, LawLex202300005673JBJ.

CA Versailles, 18 November 2010, LawLex202300003356JBJ.

Commercial Code, Art. L. 228-54, para. 2.

Commercial Code, Art. L. 228-54, para. 1.

Commercial Code, Art. L. 228-84. For an application, see CA Douai, 27 April 2010, LawLex202300005689JBJ, specifying that a bondholder has no standing to declare their claim in their own name in the liabilities of the judicial reorganization of the issuing company, even as a precautionary measure, before the appointment of a representative of the body of bondholders.

CA Dijon, 28 January 2016, LawLex202300005676JBJ

Cass. com., 10 December 2013, LawLex202200011346JBJ.

Commercial Code, Art. L. 228-62, by reference to Art. L. 228-53. Additionally, in the event of a violation of this prohibition by the chair, directors, general managers, managers, statutory auditors, members of the supervisory board, or employees of the debtor company or the company guaranteeing all or part of the debtor company's commitments, as well as for their ascendants, descendants, or spouses, they are subject to a fine of 6,000 euros, in accordance with Art. L. 245-12, 1° of the Commercial Code. The offense is punishable by five years of imprisonment and a fine of 18,000 euros when it has been committed fraudulently with the intent to deprive the bondholders or some of them of a portion of the rights attached to their debt securities, in accordance with Art. L. 245-15 of the Commercial Code.

Commercial Code, Art. L. 228-49, as referred by Art. L. 228-53.

Commercial Code, Art. L. 228-63, by reference to Art. L. 228-53.

CA Paris, 27 March 2007, LawLex202200011490JBJ.

Cass. com., 15 June 1999, LawLex202200011359JBJ.

CA Chambéry, 22 January 2019, LawLex202200011353JBJ, holding that the bondholders' general meeting may mandate the body representatives to file an objection to the merger.

Commercial Code, Art. L. 228-54, para. 3.

CA Paris, 25 November 2008, LawLex202300005302JBJ; 17 March 2022, LawLex202200001660JBJ, affirming that a legal action brought against a bondholder must be declared inadmissible when the bondholder is not the representative of the body of bondholders.

CA Paris, 13 March 2012, LawLex202200011489JBJ; CA Versailles, 20 October 2022, LawLex202200011348JBJ, specifying that bondholders cannot act individually, in violation of the monopoly of action of the body of bondholders' representative, against the company that may have committed a fault in the preparation of the information document used as a basis for the issuance contracts, insofar as it concerns all subscribers, even if the damage that may result is distinct from one class to another.

CA Angers, 21 February 2023, LawLex202300005549JBJ.

Company Law (en cours)

120. Defense of bondholders' common interests

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120. Defense of bondholders' common interests

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise