Bankruptcy Law

Confidentiality can be defined as a quality attached to a piece of information that allows access to it to be restricted to a limited circle of people. Confidentiality encourages the debtor to initiate an amicable procedure, in particular an ad hoc mandate, without being worried about the image reflected to the partners. It contributes to the success of amicable proceedings because it prevents all the debtor's creditors from becoming aware of the opening of the proceedings and prematurely breaking the contracts concluded with the debtor or modifying the conditions of execution of the latter.

The ad hoc mandate has been subject to confidentiality since the law on the safeguarding of companies: Article L. 611-15 of the Commercial Code provides that any person called upon to participate in an ad hoc mandate or who, by virtue of his or her functions, has knowledge of it, is bound by confidentiality. This text, which refers to “any person”, includes both natural and legal persons, subject only to the condition that they have been called to the procedure or have knowledge of it by virtue of their functions. In principle, the debtor, its representative if it is a legal person, its partners, the creditors and, more generally, the persons who voluntarily participate in the proceedings are called to the proceedings. The category of individuals who have knowledge of the proceedings by virtue of the functions they perform seems to include magistrates, court registrars, appointed agents, lawyers and, more generally, persons who have powers under the law to participate in or ensure the effectiveness of the proceedings.

Case law has extended the obligation of confidentiality to the press , even though they are not expressly covered by Article L. 611-15, in order to protect companies and their partners while ensuring respect for the right to information and the right to inform. Indeed, it has been held, under Article 10(2), ECHR, that restrictions may be placed by law on freedom of expression, to the extent necessary in a democratic society to protect the rights of others and to prevent the disclosure of confidential information relating to the ad hoc mandate procedure, both by the person subject to a duty of confidentiality and by a third party such as a press organization . Thus, the decision of the interim relief court to order the withdrawal of articles that disclosed confidential figures on the difficulties of the companies members of a group and the details of the negotiations under way to restructure their debt in the context of an ad hoc mandate procedure was not declared contrary to Article 10(2), ECHR since these publications were not of a nature to fuel a debate of general interest on the difficulties of a large industrial group and its repercussions on employment and the national economy, but tended to satisfy the interests of their subscribers, a public specialized in the monitoring of corporate debt, and risked causing considerable harm to the companies concerned as well as to the parties called upon to participate in the amicable preventive procedure and seriously compromising its progress and its outcome .

In response to a request for referral of a priority question of constitutionality, the Court of Cassation held that Article L. 611-15 is not contrary to the Constitution, even though it does not expressly refer to the press, since the obligation of confidentiality is waived when the dissemination of sensitive information contributes to the legitimate information of the public on a debate of general interest and is justified by the necessary protection of companies engaged in a process of negotiation with their creditors . Furthermore, exempting the press from this obligation would render the confidentiality guaranteed by Article L. 611-15  ineffective. Thus, the disclosure of precise figures on the proposals made to creditors in the context of an ad hoc mandate procedure, the status of the discussions underway, the concrete difficulties faced by the company as well as the efforts made by the creditors and the grace periods obtained, information which necessarily comes from the participants in the negotiations, engages the responsibility of its author .  The obligation of confidentiality must be respected even if the debtor has informed the press of the setting up of an ad hoc mandate .

The need to inform the public about matters of general interest cannot be invoked as an exception to the obligation of confidentiality when the information in question is published, not in the general press, but in the specialized press, followed by economic actors likely to be interested in the situation of the company in question .  On the other hand, conditional information published in an article intended for the general public, according to which a major group would be the subject of an ad hoc mandate procedure, and which follows several other articles published in the press on the difficulties encountered by this group, does not appear to be of such a nature as to compromise the chances of success of the ad hoc mandate procedure, so that no violation of the rule can be retained . Similarly, articles mentioning the financial difficulties encountered by a major group in the equipment sector in Europe, which employs 9,000 people in France, concern a subject of general interest which justifies a waiver of the confidentiality obligation provided for in Article L. 611-15 of the Commercial Code .

The violation of the obligation of confidentiality can be sanctioned on the basis of extra-contractual civil liability, in the absence of a contract, provided that the existence of a damage is proven .

Because of the extremely broad wording of Article L. 611-15, the question also arose as to the scope of the information covered by the obligation of confidentiality. The Court of Cassation has held that, justified by the need for discretion regarding the situation of the company concerned and the possible negotiations between its directors, shareholders, purchasers, creditors and guarantors, this obligation extends to all acts and documents relating to the planned transfer, so that the expert appointed by the group committee to examine the company's annual accounts is not entitled to request disclosure of them . In addition, the fact that an accounting firm is itself subject to professional secrecy and an obligation of confidentiality in the exercise of its mission is not such as to call into question the principle of confidentiality which governs the ad hoc mandate procedure and the documents relating to the negotiations in progress . Similarly, a certificate given by an ad hoc agent, in violation of his obligation of confidentiality, to the debtor's guarantor, relating to the behavior of a creditor during the negotiations, must be excluded from the proceedings .

CA Paris, 6 June 2019, LawLex202100002789JBJ.

Cass. com., 15 December 2015, LawLex202100001241JBJ.

CA Paris, 6 June 2019, LawLex202100002789JBJ, excluding the existence of a manifestly unlawful disturbance in the absence of established harm.

Court of Cassation, 9 October 2019, LawLex202100001243JBJ: the Court of Cassation underlines in the same decision that the absence of communication of documents covered by the confidentiality which attaches to the ad hoc mandate, to the group's chartered accountant, does not constitute a manifestly unlawful disturbance a fortiori when the debtor has transmitted to the expert sufficient accounting, financial and social information to enable him to fulfill his mission.

CA Versailles, 15 February 2018,  LawLex202100005539JBJ.

Court of Cassation, 22 September 2015, LawLex202100001232JBJ, emphasizing that the liability of its author can also be engaged.

Cass. com., 13 February 2019, LawLex202100001242JBJ.

Cass. com., 4 October 2018, LawLex202100001240JBJ ; CA Paris, 7 February 2019, LawLex202100005538JBJ.

Cass. com., 13 June 2019, LawLex202100001239JBJ.

CA Versailles, 14 September 2017, LawLex202100002804JBJ ; Cass. com., 13 June 2019, LawLex202100001239JBJ.

CA Versailles, 15 February 2018, LawLex202100005539JBJ.

22. Confidentiality