Bankruptcy Law

Under the terms of Article L. 621-3 of the Commercial Code, applicable to the receivership procedure by reference to Article L. 631-7, “[t]he judgment opens an observation period of a maximum duration of six months, which may be renewed once, for a maximum duration of six months, by a specially reasoned decision at the request of the receiver, the debtor or the public prosecutor”. The extension of …

Determining the length of the observation period

Under the terms of Article L. 621-3 of the Commercial Code, applicable to the receivership procedure by reference to Article L. 631-7, “[t]he judgment opens an observation period of a maximum duration of six months, which may be renewed once, for a maximum duration of six months, by a specially reasoned decision at the request of the receiver, the debtor or the public prosecutor”. The extension of the observation period in lieu of conversion to compulsory liquidation is justified by the resolution of difficulties in settling wage and insurance claims . Article L. 631-15, I of the Commercial Code stipulates that, no later than two months after the opening judgment, the court may order the observation period to be continued if it is satisfied that the debtor has sufficient financing capacity to do so. The court makes its decision on the basis of a report drawn up by the receiver or, if none has been appointed, by the debtor.

Article L. 631-7(2) adds that the maximum duration of the observation period mentioned in the first paragraph of Article L. 621-3 may exceptionally be extended, at the request of the public prosecutor, by a specially reasoned decision of the court for a maximum period of six months . Article R. 631-7-1-A specifies that for the application of this text, the president of the court must have the court registrar summon the debtor, legal representatives and auditors to the hearing, and notify the public prosecutor of the date of the hearing. The court rules on the request to extend the observation period after hearing the observations of the debtor, the receiver, the legal representative and the auditors.

A court which extends the observation period for a period not exceeding six months, in the absence of a request from the public prosecutor or despite the latter's opposition, does not commit an abuse of power . Indeed, there is no text sanctioning the exceeding of observation period deadlines or their exceptional extension, in the absence of a request from the public prosecutor . The expiry of the observation period in a receivership procedure does not require the court to order the opening of a court-supervised liquidation procedure for the company concerned, unless, during the period of court-supervised liquidation, the company's assets are transferred to the public prosecutor. Expiry of the observation period in a receivership procedure does not require the court to order the company's compulsory liquidation, unless the company's liabilities have worsened during the period of continued operation, its cash flow is insufficient to pay social security contributions, its continued operation poses a risk to employees, and no receivership, continuation or sale plan has been proposed .

Lastly, in accordance with Article L. 631-15, II, “[at] any time during the observation period, the court, at the request of the debtor, the receiver, the legal representative, a controller, the public prosecutor or ex officio, may order the partial cessation of business or pronounce liquidation by order of the court if receivership is manifestly impossible”. The text specifies that the court rules after hearing or duly summoning the debtor, the receiver, the legal representative, the auditors and the person(s) designated by the social and economic committee, and after obtaining the opinion of the public prosecutor. When the court pronounces liquidation, it terminates the observation period and, subject to the provisions of Article L. 641-10, the receiver's mission.

CA Grenoble, 17 March 2022, LawLex202200006744JBJ (RJ).

This brings the maximum duration of a receivership procedure to eighteen months.

Cass. com., 13 December 2017, LawLex202100002187JBJ (RJ).

Cass. com., 10 June 2008, LawLex202100002188JBJ (RJ).

Cass. com., 6 October 1992, LawLex202100005902JBJ (RJ).

Bankruptcy Law

328. Determining the length of the observation period

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328. Determining the length of the observation period

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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