Bankruptcy Law

Initially, only legal entities that were commercial in form or purpose could benefit from the regime of insolvency proceedings as traders. Law No 67-563 of 13 July 1967  extended the benefit of insolvency proceedings to all legal persons under private law. According to the current Article L. 620-2 of the Commercial Code, the safeguard procedure is applicable to “any legal person under private law” …

Concept

Initially, only legal entities that were commercial in form or purpose could benefit from the regime of insolvency proceedings as traders. Law No 67-563 of 13 July 1967  extended the benefit of insolvency proceedings to all legal persons under private law. According to the current Article L. 620-2 of the Commercial Code, the safeguard procedure is applicable to “any legal person under private law”.

The entity must first of all have legal personality in order to be eligible for the provisions of Book VI of the Commercial Code. This excludes entities that do not have legal personality, such as undeclared associations, companies in formation or created de facto , joint ventures, undivided co-ownership  or groups of companies. Nevertheless, a company in formation may be subject to insolvency proceedings if, after its registration, it takes over the commitments made at the origin of the difficulties . Similarly, the partners of a de facto company may be subject to insolvency proceedings if they carry out commercial acts .

Since a company's legal entity subsists as long as its corporate rights and obligations have not been liquidated, it may be subject to insolvency proceedings until the liquidation operations are completed . It also continues to exist in the event of nullity of the company , extension of the company voted by the shareholders before the term set by the articles of association and despite failure to comply with the time-limits set by the latter , and automatic striking off of the company's name by the registrar of the Commercial Court for a reason other than the closure of the liquidation operations . On the other hand, insolvency proceedings may not be instituted against a company whose legal entity has disappeared following its absorption by another company .

The publication in the Company and trade register (Registre du commerce et des sociétés (RCS)) of the acts attesting to the disappearance of the legal entity of a company has an impact on the possibility of opening insolvency proceedings against it . Indeed, the disappearance of legal entity does not prevent the opening of insolvency proceedings when it has not been published in the RCS, even if the acts or events that led to the disappearance were the subject of another legal publication . In addition, it can only be set up against third parties by the publication in the RCS of the acts or events that gave rise to it, even if these third parties had personal knowledge of these acts or events before this formality was carried out .

The entity must also have a legal personality under private law. Nevertheless, certain legal entities under private law are not subject to the provisions relating to insolvency proceedings because special regimes apply to them. This is the case, in particular, for syndicates of co-ownership  , banks  and insurance companies .

The legal entity under private law may take several forms. Commercial companies or civil companies such as non-trading property companies  (sociétés civiles immobilières (SCIs)) may benefit from the insolvency proceedings regime. Also subject to Book VI of the Commercial Code are regularly declared associations that carry on an economic activity, whether or not they are profit-making, even if they are recognized as being of public interest , professional associations, even if they are not required to keep accounts , and professional orders.

Finally, Title II of Book VI of the Commercial Code is applicable to all public-private companies as well as to nationalized companies, whether or not they perform a public service mission. On the other hand, legal entities governed by public law, such as the State, the regions, the departments, the municipalities and public administrative or industrial and commercial establishments, cannot be subject to the provisions in question .

Law No 67-563 of 13 July 1967 on voluntary receivership arrangement, compulsory liquidation, personal bankruptcy and bankruptcies, OJ 14 July 1967.

Cass. com., 30 June 2015, LawLex202100005698JBJ (LJ). See also Cass. com., 23 November 2004, LawLex202100003682JBJ (RJ).

See in particular. Cass. com. 4 January 2000, LawLex202100003688JBJ considering that a single-owner limited liability company cannot be placed in court-supervised liquidation in the year of its removal from the trade register when this removal is not consecutive to the publication of the closure of the liquidation operations.

Cass. com., 20 September 2011, LawLex202100003687JBJ (LJ).

Cass. com., 11 September 2012, LawLex202100003702JBJ (LJ).

Law No 65-557 of 10 July 1965 fixing the status of commonhold of existing buildings, OJ 11 July 1965, Art. 29-15: “The procedures provided for in Book VI of the Commercial Code are not applicable to co-owners associations.”

CA Grenoble, 26 April 2012, LawLex202100005908JBJ holding that an SCI which derives income from the building it owns may be subject to a safeguard procedure as a legal entity under private law, even if the property is exclusively occupied by its partners and managers, as long as a plan for the discharge of bank liabilities would allow it to continue this economic activity. Contra, CA Chambéry, 1 December 2020, LawLex202100005831JBJ considering that an SCI can be the subject of an insolvency procedure except in the absence of stake for the French economy when they constitute only a simple interposition of a legal entity dictated by patrimonial or fiscal considerations.

Cass. com., 18 June 1995, LawLex202100005828JBJ (S).

Cass. com., 16 March 2010, LawLex202100001905JBJ (LJ).

For an application, see Cass. soc. 6 November 1991, LawLex202100005829JBJ.

Cass. com., 21 June 2005, LawLex202100003676JBJ (LJ).

Cass. com., 10 March 1987, LawLex202100003681JBJ (RJ).

Cass. com., 16 December 1975, LawLex202100003679JBJ (LJ).

Cass. com., 26 November 2003, LawLex202100005708JBJ (RJ).

See in particular. Cass. com. 5 April 1994, LawLex202100005827JBJ considering that an EIG can be subject to receivership even if its nullity has been pronounced.

Cass. com., 30 June 2015, LawLex202100003701JBJ (LJ).

CA Paris, 6 January 2009, LawLex202100003633JBJ (LJ).

Cass. com., 28 September 2004, LawLex202100003700JBJ (RJ).

Bankruptcy Law

42. Concept

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42. Concept

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