Bankruptcy Law

A manager who is held liable for insufficient assets is ordered to bear the amount of such assets. If the executive is already subject, in a personal capacity, to a safeguard, receivership or liquidation procedure, the amount of the liabilities to be borne by the executive is determined, after the legal representative or liquidator appointed in the procedure to which the executive is subject has b …

Determining the penalty

A manager who is held liable for insufficient assets is ordered to bear the amount of such assets. If the executive is already subject, in a personal capacity, to a safeguard, receivership or liquidation procedure, the amount of the liabilities to be borne by the executive is determined, after the legal representative or liquidator appointed in the procedure to which the executive is subject has been called to account, in accordance with Article R. 651-6 of the Commercial Code. The court registrar enters the decision on the statement of claims of the procedure to which the interested party is subject, or forwards it to the court registrar competent to do so .

The manager of a legal entity may be declared liable, on the basis of Article L. 651-2 of the Commercial Code, even if his or her mismanagement is only one of the causes of the shortfall in assets, without it being necessary to determine the portion of the shortfall attributable to a fault on his or her part .

The court is required to assess the amount of the shortfall in assets on the day of the ruling, as the manager's sentence cannot exceed this amount . The Court of Cassation does not review the proportionality of the sanction . Determining the amount of the shortfall in assets does not imply that the liabilities have been fully quantified, nor that the assets have been realized, but that the shortfall in assets is certain . An executive guilty of mismanagement cannot be condemned to pay the full amount of the liabilities, but only the difference between the admitted liabilities and the realized assets . The shortfall in assets for which the manager is found to be liable is not reduced to the amount of the increase in liabilities since the cessation of payments . It may be determined on the basis of the amount of liabilities he himself has indicated , without taking into account claims settled by the liquidator or debts arising subsequent to the opening of the judicial liquidation . The amount of the shortfall in assets attributable to a culpable manager is also determined on the basis of the best valuation presented for the assets still forming part of the company's assets, after deduction of any criminal conviction for misuse of corporate assets .

The appropriateness of a sanction cannot be called into question, when the manager, through serious and multiple faults, has contributed to the insufficiency of assets . Similarly, the discharge of liabilities organized by the legal entity's continuation plan does not prevent the insufficiency of assets revealed by the insolvency procedure from being charged in whole or in part to the manager . Neither the possible failings of a judicial liquidator during the realization of the debtor company's assets , nor the absence of a commissioner for the enforcement of the plan, nor the trade-union nature of the restaurant operated by the debtor company, which does not exempt managers from respecting the minimum rules of good management, constitute grounds for exoneration from liability . On the other hand, a manager who has made considerable personal efforts to save his business, notably by contributing his own funds and by taking numerous steps before declaring the company in a state of cessation of payments, justifies exoneration from any pecuniary penalty in respect of the shortfall in assets caused by his mismanagement . The court may consider that it would be inappropriate to condemn a manager for insufficiency of assets if the latter no longer has any assets in his or her patrimony, provided that the manager's condemnation is not assessed solely on the basis of his or her mismanagement, the harm caused by the insufficiency of assets and the causal link. 

Where there is more than one manager, the court may, by reasoned decision, declare them jointly and severally liable , even if only some of them are at fault . Two managers who participate in the wrongful dismissal of almost all the company's staff may be ordered jointly and severally to bear the shortfall in assets, without it being necessary to determine what part of the shortfall is attributable to the fault . Similarly, in the event of an order to contribute to liabilities, a permanent representative is jointly and severally liable with the legal entity . The managers of a legal entity that is a partner in an SNC or an EIG and, as such, is jointly and severally liable for the liabilities of these companies, are required to make good the latter's liabilities, which are added to their own liabilities, up to the fixed asset shortfall, when their liabilities relate to claims prior to the opening judgment . However, joint and several liability cannot be accepted between de jure and de facto managers with different levels of responsibility , since it is only justified when the managers at fault hold the same powers .

Furthermore, in the event of an extension of a judicial liquidation based on the merger of the assets of several legal entities, the insufficient assets of all the companies involved in the procedure, and of which the same person was the de facto or de jure manager, may be charged to the latter . On the other hand, the debts for which a manager is liable for insufficient assets cannot include those of other structures, which he or she did not manage, and to which the insolvency procedure have been extended on the basis of a confusion of assets .

Lastly, the principles of the necessity of offences and penalties and of proportionality guaranteed by Article 8 of the Declaration of the Rights of Man and of the Citizen do not apply to the sanctions provided for by Article L. 651-2 of the Commercial Code, which do not have the nature of a punishment . Accordingly, the first paragraph of Article L. 651-2 of the Commercial Code, which confers on the court the power to assess the consequences of a manager's mismanagement that contributes to the company's shortfall in assets, does not give the court an arbitrary power in the implementation of the liability action, but enables him or her to take into consideration the seriousness and number of mismanagement actions brought against managers and the state of their assets, as well as the economic factors that may lead to the failure of businesses and the risks inherent in their operation, in the general interest objective of encouraging the creation and development of businesses .

Cass. com. 13 February 2007, LawLex202100002817JBJ (LJ), holding that the court seized of an action for payment of insufficient assets against a manager guilty of mismanagement cannot order him to pay the company's liabilities, but must only determine the liabilities to be borne by him and enter them on the statement of claims of his compulsory liquidation.

Cass. com., 20 September 2017, LawLex202100001777JBJ (LJ); 21 June 2005, LawLex202300010701JBJ(LJ).

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

Cass. com., 21 November 2006, LawLex202300010562JBJ (RJ).

Cass. com., 1 July 2020, LawLex202200010776JBJ (LJ).

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

Cass. com., 12 March 2013, LawLex202300008685JBJ (LJ); CA Paris, 16 September 2021, LawLex202200010562JBJ (LJ).

CA Aix-en-Provence, 16 April 2015, LawLex202100005244JBJ (LJ).

C. com., art. L. 651-2, para. 1. - Cass. com. 30 January 2007, LawLex202100001790JBJ (LJ), emphasizing that there is no automatic joint and several liability between managers, but that this can be ordered by the court.

Cass. com., 6 February 2001, LawLex202300010448JBJ (LJ).

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

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

Cass. com., 27 June 2006, LawLex202100001763JBJ (LJ).

Cass. com., 27 June 2006, LawLex202100001647JBJ (RJ).

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

Cass. com., 8 March 2017, LawLex202100002160JBJ (LJ).

Cass. com., 17 July 2001, LawLex202100002158JBJ (LJ); 30 October 2007, LawLex202100001830JBJ (LJ).

Cass. crim., 11 September 2019, LawLex202200000600JBJ (LJ).

Cons. Constit., 26 September 2014, LawLex202100002852JBJ (LJ).

Cass. com., 9 May 2018, LawLex202100001813JBJ (LJ).

Cass. com., 7 June 2005, LawLex202200010777JBJ (LJ).

Cass. com., 17 February 2021, LawLex202200010775JBJ (LJ).

CA Angers, 18 January 2022, LawLex202200010150JBJ (LJ).

Cass. com., 29 September 2015, LawLex202100001730JBJ (LJ).

Cass. com., 28 February 1995, LawLex202200010636JBJ (LJ).

Cass. com., 29 February 2000, LawLex202200000599JBJ (LJ).

Bankruptcy Law

993. Determining the penalty

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993. Determining the penalty

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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