Bankruptcy Law

A liquidator wishing to hold a manager liable for a shortfall in assets must establish that his or her mismanagement contributed to the shortfall , without having to establish the proportion or limit the amount of the claim . In fact, a manager whose mismanagement is only one of the causes of the shortfall in assets may be declared liable for the shortfall in assets  and ordered to bear all or par …

Causal link

A liquidator wishing to hold a manager liable for a shortfall in assets must establish that his or her mismanagement contributed to the shortfall , without having to establish the proportion or limit the amount of the claim . In fact, a manager whose mismanagement is only one of the causes of the shortfall in assets may be declared liable for the shortfall in assets  and ordered to bear all or part of the debts, even if his or her fault is only responsible for part of them . However, if a court orders a manager to bear all or part of a legal entity's shortfall, it must provide an explanation of how each fault contributed to the shortfall .

In the absence of a causal link between the selected management fault and the company's shortfall in assets, notably when it has not been demonstrated that the fault would have prevented the adoption of a recovery plan  or made it possible to remedy the company's cash shortage and structural difficulties , a manager cannot be held liable . The causal link between the manager's mismanagement and the existence of a shortfall in assets is established when the manager's mismanagement has had the effect of increasing the liabilities, thereby contributing to the shortfall in assets . This is the case when, in the absence of the wrongful deductions, the shortfall in assets would be either non-existent, or greatly reduced . The recruitment of a large number of staff necessarily contributes to the shortfall in assets, since wage claims account for almost half of the total . Furthermore, a court ruling against a manager who reimburses his current account even though the business has been in deficit for two years does not have to consider whether the purpose of this transaction was to avoid the company having to pay substantial social security charges on the salaries he has foregone, since this management error contributed to the shortfall in assets . The manager also commits a mismanagement act contributing to the insufficiency of assets when he deprives the debtor company of cash , in particular by paying dividends to a holding company using old reserves which could have been allocated to the settlement of outstanding debts , or misappropriates sums which deprive the company of funds it needs, and pays undue salaries for considerable amounts . Furthermore, a manager who has disregarded all his accounting, social security and tax obligations, without taking any specific and concrete measures to remedy the company's already delicate situation when he took office, commits a mismanagement that contributes to worsening the shortfall in assets , even if it has not led to the company's collapse . The misconduct most obviously linked to the insufficiency of assets is the failure to keep complete and up-to-date accounts. This deprives the manager of the means to perceive changes in the company's financial situation  and to monitor profitability or detect difficulties before they become insurmountable . The failure to keep proper accounting records is the direct and exclusive cause of the entire insufficiency of assets when the manager pursues a loss-making activity  for the sole purpose of taking a share of the assets to the detriment of the creditors . The production of irregular and inconclusive accounts also contributes to the insufficiency of assets when it leads the tax authorities to reject the accounts and apply a surcharge for deliberate failure to comply . Similarly, managers who have not applied the full VAT rate from the notification received from the tax authorities removing the legal uncertainty as to the applicable rate, are committing a management error which has contributed to the worsening of the shortfall in assets, when they have not collected the difference in VAT from their customers and the company has been subject to a tax receivership . On the other hand, mismanagement in tax or social security matters cannot have contributed to the shortfall in assets if the resulting claims have not been declared  or admitted  as liabilities in the insolvency procedure. A management error generating substantial indemnities payable by the debtor company, but deducted from the shortfall in assets because they were advanced by the CGEA, cannot have contributed to this shortfall in assets .

Furthermore, the failure to declare cessation of payments within the legal time-limit , which is the result of a manifest desire to delay the opening of an insolvency procedure at all costs, and the continuation, for more than a year and a half, of a structurally loss-making operation during which sums were paid in the exclusive interest of the manager, whereas a more rapid declaration of cessation of payments would have enabled the debtor company to be placed in receivership, constitute faults which contributed to the increase in liabilities . The opening of a conciliation procedure does not exonerate the debtor company's managers from liability for mismanagement in failing to declare the cessation of payments, where this contributed to the increase in liabilities .

Lastly, the court looks to see whether the manager's mismanagement has had the effect of increasing the debtor's liabilities or depleting its assets, without consideration , or in his or her personal interest , in which case the causal link is established. However, the aggravation of harm suffered by creditors is not the same as the aggravation of deficient assets .

Cass. com., 23 November 2022, LawLex202300000357JBJ (LJ).

Cass. com., 14 September 2022, LawLex202200008209JBJ (LJ).

CA Rouen, 3 March 2011, LawLex202300008609JBJ (LJ).

Cass. com., 23 May 2000, LawLex202300008702JBJ (LJ).

Cass. com., 17 November 2015, LawLex202100001780JBJ (LJ).

Cass. com., 9 September 2020, LawLex202200007229JBJ (LJ).

Cass. com., 9 September 2020, LawLex202200010829JBJ (LJ).

CA Douai, 24 November 2022, LawLex202300007882JBJ (LJ).

Cass. com., 12 July 2016, LawLex202100001747JBJ (LJ).

Cass. com. 14 January 2004, LawLex202100001757JBJ (LJ), considering that a lack of serious accounting and accounting irregularities have a causal link with the insufficiency of assets insofar as they prevented the director from knowing the financial situation of the company and allowed the continuation of a loss-making activity.

Cass. com, 22 June 2010, LawLex202200010659JBJ (LJ), holding that the irregular bookkeeping prior to the opening of the immediate court-ordered liquidation is linked to the debtor company's lack of assets, since it deprived the company of a management tool which would have enabled its manager to identify its lack of profitability and the need to declare the cessation of payments in order to avoid a continuation of activity prejudicial to creditors; 6 March 2019, LawLex202200000598JBJ (LJ); 17 June 2020, LawLex202300008469JBJ (LJ).

Cass. com., 11 February 2014, LawLex202100001957JBJ (LJ).

Cass. com., 21 June 2005, LawLex202300010701JBJ (LJ).

Cass. com., 30 June 2015, LawLex202100001765JBJ (LJ).

CA Nîmes, 12 April 2023, LawLex202300007885JBJ (LJ).

CA Versailles, 6 July 2021, LawLex202300008790JBJ (LJ); CA Paris, 14 March 2018, LawLex202200010656JBJ (LJ), holding that intentional minorities in VAT declarations and defects in corporate income tax declarations, leading to a tax receivership of over three million euros, necessarily contributed to the insufficiency of assets.

CA Metz, 30 January 2018, LawLex202300008524JBJ (LJ), considering that it is not established that not having paid penalties and charges, which result from a tax receivership, contributed to the insufficiency of assets if the tax authorities did not declare a claim.

CA Metz, 30 January 2018, LawLex202300008524JBJ (LJ), holding that the fact that URSSAF claims had been reduced and that certain contributions had not been paid and others had not been declared during the same period could not be held to have contributed to the insufficiency of assets if the corresponding URSSAF claim had not been admitted as a liability.

Cass. com., 24 March 2021, LawLex202200010833JBJ (LJ).

Cass. com. 17 June 2020, LawLex202200009849JBJ (LJ), holding that a management error in failing to declare the cessation of payments within the legal timeframe cannot have contributed to the creation of liabilities prior to the expiry of the timeframe for making such a declaration.

CA Toulouse, 15 July 2020, LawLex202200000604JBJ (LJ). See also. Cass. com. 30 January 2019, LawLex202100001715JBJ (LJ), considering that the mismanagement of the de jure and de facto managers, who failed to declare the cessation of payments even though this had been established, who pursued a loss-making activity and transferred the business abroad under ruinous conditions, which led to a tax receivership and significant debts linked to customer disputes, necessarily contributed to the debtor company's lack of assets.

CA Versailles, 20 February 2018, LawLex202100001642JBJ (LJ).

Cass. com, 29 September 2015, LawLex202100001730JBJ (LJ), holding that a commodat which deprives a company of the use of a machine essential to its business, without compensation, can only lead to a reduction in its production and results, and contribute to the insufficiency of assets; CA Versailles, 6 July 2021, LawLex202300008790JBJ (LJ), considering that the managers of several companies, which in fact operate a single business by providing each other with personnel without invoicing, by executing contracts for which they are not the owners, by providing each other with services at cost price and by using resources belonging indifferently to one or the other without compensation, have committed a management error which cannot be justified by the interests of the group, and which exacerbates the shortfall in assets, insofar as the liabilities of certain companies have led to an increase in the joint admitted liabilities, whereas, without these abnormal financial flows, it has not been demonstrated that they would have been in a state of suspension of payments in view of their profitable results.

Cass. com., 31 May 2011, LawLex202100001613JBJ (LJ); 28 March 2000, LawLex202200010660JBJ (LJ).

Cass. com, 21 November 2018, LawLex202100001695JBJ (LJ), holding that a de facto manager incurs liability for insufficiency of assets, when he makes payments on behalf of the company for work of which it is not the beneficiary, and personally receives these remunerations, as long as these faults have contributed to the insufficiency of assets ; 19 May 2015, LawLex202300008468JBJ (LJ), considering that a manager who ceases to provide financial assistance to the company at a time when it needs it and, furthermore, causes it to incur expenses in his personal interest, commits a management fault that has a causal link with the insufficiency of assets.

Cass. com., 25 March 2020, LawLex202200000495JBJ (LJ).

Cass. com., 9 June 2022, LawLex202200009312JBJ (LJ).

CA Versailles, 6 July 2021, LawLex202300008790JBJ (LJ).

Cass. com., 16 September 2014, LawLex202100001614JBJ (LJ).

Cass. com, 5 September 2018, LawLex202100001781JBJ (LJ); 5 April 2019, LawLex202300008470JBJ (LJ), holding that the failure to keep regular accounts cannot justify condemning the manager to make good the debtor company's shortfall in assets if the causal link between the management fault and this shortfall in assets is not established; 13 December 2017, LawLex202100001779JBJ (LJ), holding that a manager's failure to pay various company debts does not justify his condemnation to pay the deficiency in assets, when it is not demonstrated in what way it constitutes a management fault that contributes to the deficiency in assets; 18 May 2022, LawLex202300007872JBJ (LJ), holding that a manager cannot be held liable for insufficiency of assets for failing to hold ordinary annual general meetings and for failing to comply with statutory rules on setting managers' remuneration, if no link is established between these two management faults and the insufficiency of assets; 18 May 2022, LawLex202200006460JBJ (LJ), RJDA 2022, n° 500, considering that the preferential nature of the payments made by the manager of the debtor company is not sufficient to engage his liability if a causal link between this management fault and the insufficiency of assets is not established.

Cass. com. 22 January 2020, LawLex202100003704JBJ (LJ), holding that a manager is not liable if his management errors are not the cause of the shortfall in assets, which results exclusively from the taking out of a bank loan, itself not at fault.

CA Chambéry, 15 February 2022, LawLex202200010563JBJ (LJ).

Bankruptcy Law

983. Causal link

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983. Causal link

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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