Bankruptcy Law

The debtor's failure to implement the plan does not automatically result in its termination. Only a judgment of the court that must have adopted the plan, issued after consulting the public prosecutor, may order the plan to be wound up if it is established that the debtor has not fulfilled its commitments within the time periods set in the plan . Resolution must be ordered by a court, even if the  …

Characterization of non-performance of commitments

The debtor's failure to implement the plan does not automatically result in its termination. Only a judgment of the court that must have adopted the plan, issued after consulting the public prosecutor, may order the plan to be wound up if it is established that the debtor has not fulfilled its commitments within the time periods set in the plan . Resolution must be ordered by a court, even if the term of the plan has expired . In order to justify termination, the breach must continue to exist at the date of the court's decision. This is not the case if, between the date of referral to the court and the date of the judgment, the debtor has paid the last instalment of the plan, which has consequently expired . The commissioner for the enforcement of the plan  bears the burden of proving that the debtor is not fulfilling the undertakings in the plan and that the plan should be terminated. The latter has the option of taking action to enforce the recovery of dividends or to terminate the plan for non-payment of dividends, without the admissibility of the termination action being subject to prior formal notice .

What breaches are likely to justify the termination of the plan?

The Court of Cassation considers that the termination of the plan may be justified by the debtor's late payments and its failure to respond to the letters of formal notice from the commissioner for the enforcement of the plan to justify the payment of its dividends . This is the case, in particular, where dividends under the plan are paid late, the fifth dividend is not paid to two creditors subject to the plan and the debtors cannot prove that they will be able to repay the remaining two years of the plan  or where the debtor's failure to meet its financial commitments reveals its inability to pay the scheduled instalments of the plan alone and, consequently, the lack of viability of the business . Failure to pay the first instalment under the plan cannot be justified by the failure to file a final statement of claims, since only the sums to be distributed that correspond to disputed claims need to be paid once they have been recognized as liabilities . By virtue of the principle of a single procedure resulting from the merger of the assets and liabilities of two companies, if one of the companies fails to implement the plan, both companies will have to terminate the plan if the other refuses to pay the unpaid instalments in full . Finally, the commissioner for the enforcement of the plan who finds that the debtor has not carried out the restructuring operations provided for in the continuation plan may, by way of application, request that the plan be rescinded .

On the other hand, the fact that the debtor can no longer dispose of its business and is forced to cease trading does not in itself justify the termination of the plan, where it remains up to date with the payment of the dividends provided for in the plan and the plan is scrupulously complied with . Similarly, a SCEA's failure to honor its undertaking to make mortgage allocations to guarantee the amount of the declared liabilities resulting from its continuation plan does not justify termination of the plan at the request of a creditor who has been paid in full and no longer has an interest in acting .

The failure to implement an increase in the share capital by capitalization of a current account debt, as provided for in the continuation plan, does not justify termination of the plan either, where it turns out a posteriori that such a transaction would represent a risk for the debtor . Nor is an application to wind up the plan admissible where the debtor is complying with the payment schedule set out in the plan, albeit in a manner different from that provided for in the plan .

Finally, the termination of a plan for non-performance of undertakings puts an end to the extension of the procedure resulting from the merger of the assets and liabilities of a company and a natural person. The sale of the real estate assets of one company cannot be used to pay off the liabilities of the other, unless a new merger of assets and liabilities is established . It also precludes their debts from being combined in a court-supervised liquidation subsequently opened against the former .

C. com. L. 626-27, I, para. 2, applicable by reference from art. L. 631-19.

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Bankruptcy Law

580. Characterization of non-performance of commitments

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580. Characterization of non-performance of commitments

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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