Bankruptcy Law

Article L. 626-1 of the Commercial Code allows the debtor to adopt a safeguard plan, approved by the court, if there is a serious possibility for the company to be safeguarded. The courts essentially assess this condition in terms of the debtor's financial capacities. In fact, a proposed plan may be rejected if the debtor's financial resources do not enable him to pay the instalments it provides f …

Assessment of the company's chances of survival

Article L. 626-1 of the Commercial Code allows the debtor to adopt a safeguard plan, approved by the court, if there is a serious possibility for the company to be safeguarded. The courts essentially assess this condition in terms of the debtor's financial capacities. In fact, a proposed plan may be rejected if the debtor's financial resources do not enable him to pay the instalments it provides for.

The Court of Cassation thus considers that the safeguard of the debtor cannot be considered when he has neither significant available liquidity, nor a relevant forecast attesting to cash inflows compatible with the timeframe of the implementation of the plan and sufficient to ensure its performance over the duration, without the proposed guarantees making the success of the operation within the timeframe more certain . The trial courts also consider that the rejection of the safeguard plan presented by the debtor is justified when it appears that the debtor will not be able to meet the payment of the instalments provided for by the plan within the allotted time, in the absence of available funds , due in particular to the reduction of his income, the impossibility of committing his personal savings or the impossibility of increasing his indebtedness  or of recovering a significant debt .

Similarly, rejection is justified where the draft plan does not provide any serious evidence as to its ability to ensure the discharge of the liabilities, in the absence of a commitment by the debtor's partners to contribute assets to the plan or of the recovery of its intra-group debts . This is also the case if there are no serious possibilities of paying the debts, if the debtor's only assets do not generate any income and if the plan does not provide sufficient details of the financial capacity of a partner who would have undertaken to make a current account contribution .

Furthermore, a serious possibility of safeguarding a debtor company cannot be envisaged when, at the date of presentation of the plan, the available assets do not allow it to meet its current liabilities, so that it is already in a state of cessation of payments and the opening of a receivership procedure is necessary . Finally, the safeguard plan must provide for the payment of all declared claims, even in the presence of disputes, without being able to rely on a set-off between two claims .

Cass. com., 9 July 2019, LawLex202100005319JBJ (S).

CA Lyon, 30 January 2014, LawLex202100005322JBJ (S); CA Paris, 5 March 2020, LawLex202200004315JBJ (S).

Cass. com., 18 March 2014, LawLex202100005320JBJ (S).

CA Montpellier, 20 February 2019, LawLex202200004349JBJ (RJ).

Cass. com., 20 June 2018, LawLex202200004403JBJ (RJ).

Cass. com., 19 February 2013, LawLex202200004348JBJ (RJ).

CA Paris, 5 March 2020, cited above; CA Lyon, 30 January 2014, cited above.

Bankruptcy Law

244. Assessment of the company's chances of survival

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244. Assessment of the company's chances of survival

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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