Bankruptcy Law

Article L. 626-1 of the Commercial Code, which applies to the receivership procedure on the basis of Article L. 631-18, allows the debtor to present a receivership plan, approved by the court, if there is a serious possibility that the business can be turned around. Courts essentially assess this condition in terms of the debtor's financial capacity. In fact, a proposed plan may be rejected if the …

Assessing the company's chances of recovery

Article L. 626-1 of the Commercial Code, which applies to the receivership procedure on the basis of Article L. 631-18, allows the debtor to present a receivership plan, approved by the court, if there is a serious possibility that the business can be turned around. Courts essentially assess this condition in terms of the debtor's financial capacity. In fact, a proposed plan may be rejected if the debtor's available resources do not enable it to pay the scheduled instalments. When examining a proposed solution for a debtor company belonging to a group of companies, the court may take into account the consistency of the plan with the solutions envisaged for the other companies in the group .

The Court of Cassation has ruled that a plan cannot be adopted if the debtor has neither significant available cash nor a relevant forecast showing that it will be able to generate sufficient funds to implement the plan over the long term . Rejection of the plan submitted by the debtor is also justified when it appears that the debtor will not be able to pay the dividends within the allotted time, in the absence of available funds , due in particular to the reduction in his income, the impossibility of committing his personal savings or the impossibility of increasing his indebtedness  or recovering a significant debt . The same applies when the draft plan does not provide any serious evidence as to the debtor's ability to pay off its liabilities, in the absence of a commitment by its partners to contribute assets or to recover its intra-group claims , or when its only asset generates no income and does not provide sufficient details as to the financial capacity of a partner who would have undertaken to make a current account contribution . Lastly, the plan must provide for the settlement of all declared claims, even in the event of disputes, without being able to rely on set-off between two claims .

Cass. com., 19 December 2018, LawLex202100004154JBJ (RJ).

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

546. Assessing the company's chances of recovery

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546. Assessing the company's chances of recovery

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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