Bankruptcy Law

In particular, a ban on managing a business may be imposed on any person referred to in Article L. 653-1 of the Commercial Code who has knowingly failed to apply for the opening of receivership or liquidation proceedings within forty-five days of the cessation of payments . Since the entry into force of the Law of 26 July 2005 , this fault is no longer a case of personal bankruptcy, but only of pr …

Failure to declare cessation payments within the legal time-limit

In particular, a ban on managing a business may be imposed on any person referred to in Article L. 653-1 of the Commercial Code who has knowingly failed to apply for the opening of receivership or liquidation proceedings within forty-five days of the cessation of payments . Since the entry into force of the Law of 26 July 2005 , this fault is no longer a case of personal bankruptcy, but only of prohibition from managing the business. In addition, since the reform, managers who have requested the opening of a conciliation procedure are not subject to any sanction for these acts .

For the application of Article L. 653-8, the court may not select a date of cessation of payments other than that set in the judgment opening the insolvency procedure, or in a deferral judgment . Consequently, the manager of the debtor company, sanctioned for late declaration of cessation of payments, cannot contest the date of cessation of payments used in the opening judgment , nor demand that the estimate of the debtor's assets be revised upwards . The prohibition on using a date of cessation of payments other than that set in the opening or postponement judgment does not infringe the requirements attached to the right guaranteed by Article 6 ECHR, as long as the manager has a right of appeal or third-party objection against the judgment .

In order to impose a management ban on a manager who has failed to declare his company's cessation of payments within the legal time-limit, the court is not required to examine the reasons which led him to postpone this declaration, or to characterize his intention to evade his obligations . On the other hand, the Law of 6 August 2015  introduced the clarification that the late declaration must be made “knowingly”. This requirement does not apply to proceedings opened before this law came into force . Since then, a management ban can no longer be imposed if the debtor of the obligation did not act with full knowledge of the facts . An executive who has already been sentenced to personal bankruptcy, and who has been advised to declare the cessation of payments, incurs the sanction if he does not fulfil this obligation until several months after the expiry of the legal time-limit , since he cannot have been unaware of the cessation of payments . Similarly, a company manager who has stopped paying institutional creditors for several months, forcing them to take out several registrations, knowingly fails to declare the cessation of payments . A management ban is justified against a manager who only declared the cessation of payments a year and a half after it occurred, even if he was unaware at the time of the company's difficulties, when these clearly became apparent very quickly after that date .

The issue of an enforcement order by a creditor for the purpose of opening receivership or liquidation proceedings does not relieve the director of the obligation to declare the cessation of payments within the forty-five day time-limit . Nor can a company manager justify failure to declare cessation of payments within the legal time limit by the fact that liabilities have decreased since the date of cessation of payments set by the judgment opening the judicial liquidation, or that the company has continued to operate with substantial liabilities .

Finally, when judicial liquidation is opened by rescission of the company's continuation plan for non-fulfillment of financial commitments, the sanction of a management ban cannot be based on failure to make the declaration of cessation of payments within the prescribed timeframe .

C. com., art. L. 653-8, al. 3. See, for applications, Cass. com. 9 May 1995, LawLex202100001628JBJ (LJ); CA Nancy, 21 October 2020, LawLex202100005522JBJ (LJ), considering that a director who knowingly delays declaring the company's cessation of payments is liable to a 10-year management ban.

L. 2005-845 of 26 July 2005 de sauvegarde des entreprises.

Cass. com., 24 May 2018, LawLex202100001942JBJ (LJ); 15 May 2019, LawLex202100001945JBJ (LJ).

CA Besançon, 4 May 2016, LawLex202100002794JBJ (LJ).

Cass. com. 17 June 2020, LawLex202200001598JBJ (LJ); CA Toulouse, 15 July 2020, LawLex202200000604JBJ (LJ), considering that a manager who knowingly fails to declare the cessation of payments within the 45-day time limit is liable to a management ban.

CA Paris, 18 May 2017, LawLex202200010236JBJ (LJ).

Cass. com., 12 January 2022, LawLex202200000640JBJ (LJ).

Cass. com., 9 June 2022, LawLex202200009312JBJ (LJ); 13 May 2003, LawLex202200011197JBJ (LJ); 14 January 2004, LawLex202100001757JBJ (LJ).

Cass. com., 30 September 2008, LawLex202300008738JBJ (LJ).

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

C. com. R. 653-1, al. 2. See, for applications, Cass. com, 4 November 2014, LawLex202100001746JBJ (LJ), holding that a manager's sentence to a management ban, for failing to declare the cessation of payments, is not justified, when it is not provided that the cessation of payments date used is that set by the opening judgment or a deferral judgment; CA Aix-en-Provence, 16 April 2015, LawLex202100005244JBJ (LJ).

CA Paris, 22 March 2016, LawLex202200011101JBJ (LJ).

Cass. com., 29 November 2016, LawLex202300008693JBJ (LJ).

Cass. com., 18 May 2017, LawLex202100001880JBJ (LJ).

L. 2015-990 of 6 August 2015 for growth, activity and equal economic opportunity.

Cass. com., 14 June 2017, LawLex202100001859JBJ (LJ).

Bankruptcy Law

1014. Failure to declare cessation payments within the legal time-limit

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1014. Failure to declare cessation payments within the legal time-limit

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