Bankruptcy Law

In the event of the opening of receivership or court-supervised liquidation proceedings, Article L. 654-2, 1° of the Commercial Code allows the court to declare bankruptcy if it finds that ruinous means have been used to obtain funds, with the intention of avoiding or delaying the opening of the receivership or court-supervised liquidation procedure, irrespective of the date of cessation of payments . The ruinous nature of the means of financing used may result from an excessive level of indebtedness which generates costs that are too high in relation to the debtor's possibilities . The offense of bankruptcy through the use of ruinous means is also characterized by the maintenance of everyday account credits, the interest and costs of which exceed the company's ability to repay , or the discounting of uncaused bills of exchange, generating costs that cannot be covered by commercial profit .

On the other hand, a manager cannot be prosecuted for bankruptcy unless it can be shown that the terms of the loan taken out by the latter, when the company was in a state of suspension of payments, constituted a ruinous means of raising funds .

Cass. crim., 21 September 1994, LawLex202100002004JBJ (RJ).

Cass. crim, 12 March 1998, LawLex202100002001JBJ (RJ) ; 21 September 1994, LawLex202100002004JBJ (RJ) ; 2 June 1999, LawLex202300008742JBJ (LJ), holding that a manager who is fully aware of the loss-making situation of the debtor company, and who, in order to delay the filing for bankruptcy, resorts to bank loans and overdrafts which have generated financial expenses reaching 53% of the added value produced and almost 10% of sales, and signs a factoring contract at a prohibitive cost, is guilty of bankruptcy through the use of ruinous means.

Cass. crim., 22 September 2010, LawLex202100002045JBJ (RJ).

Cass. crim., 8 January 2014, LawLex202200009151JBJ (RJ); 24 May 2000, LawLex202200009150JBJ (LJ); 6 December 1993, LawLex202100001998JBJ (RJ).

Cass. crim., 26 September 1996, LawLex202100002003JBJ (LJ); 12 March 1974, LawLex202200010970JBJ (LJ).

1028. Use of ruinous means