Bankruptcy Law

Under Article L. 642-13 of the Commercial Code, in the court ruling adopting the sale plan, the court may authorize the conclusion of a management lease , even where there is a clause to the contrary, notably in the lease for the property, in favor of the person who has made the best possible offer to secure employment and pay creditors over the long term. For the transferee, remedy to the management lease has the advantage of giving him time to familiarize himself with the business before the final sale, and gives him a period of up to two years in which to finance the acquisition. On the other hand, for the company, it presents a risk of misappropriation of assets and know-how, and opens up a two-year period of uncertainty about its future. For this reason, this transitional management method is strictly regulated by law .

The court can only reach a decision after very wide consultation, including with the liquidator, the receiver where one has been appointed, the auditors, the person(s) appointed by the social and economic committee and any other interested parties. He must also obtain the opinion of the public prosecutor. Furthermore, a management lease implies a commitment to acquire the business at the end of the lease term . Under the terms of Article L. 642-15, a provision of public order, in the event of a management lease, the business must be sold within two years of the court ruling which must adopt the plan. The two-year period is a maximum: the transferee cannot propose a seven-year management lease .

Article L. 642-16 provides that the liquidator must be provided by the lessee-manager with all documents and information relevant to his mission. The liquidator is required to report to the court on any damage to the leased assets, as well as on any failure by the lessee-manager to meet its obligations . The court, on its own initiative or at the request of the liquidator or the public prosecutor, may order the termination of the management lease and the cancellation of the plan . Consequently, a transferee who has been granted a two-month lease pending signature of the deeds of sale, but who fails to pay the full amount of royalties due during this period, must be evicted at the end of the contract . The debtor, who is not entitled to refer difficulties concerning the performance of the management lease to the court, is not one of the persons entitled to refer to the court a request for termination of the management lease that could result in the termination of the plan .

Furthermore, in accordance with Article L. 642-17, if the lessee-manager fails to fulfill his obligation to acquire the business within the conditions and timeframe set out in the plan, the court, either ex officio or at the request of the liquidator or the public prosecutor, will order the termination of the lease-management agreement and the cancellation of the plan, without harm to the lessee-manager or the liquidator's liability for damages . However, if the tenant-manager can prove that he is unable to acquire the business under the conditions initially laid down, for a reason not attributable to him, he may ask the court to modify these conditions, with the exception of those relating to the amount of the price and the time-limit laid down in Article L. 642-15 . The court must rule on this request before the expiry of the lease contract and after hearing the opinion of the public prosecutor and hearing or duly appealing to the liquidator, the receiver where one has been appointed, the auditors, the person(s) appointed by the social and economic committee and any interested party . This consultation only applies in the event that the lessee-manager requests a modification of the conditions of the transfer, and not in the event of a referral by the liquidator to the court to establish the lessee-manager's failure to acquire the business within the conditions and timeframe set out in the plan, and to request the termination of the contract and the cancellation of the plan . Termination of the assignment plan is justified when the assignee has not signed the lease-management contract or the deeds of assignment, or is not operating the business due to alleged acts of unfair competition by the debtor, against whom he has taken no action .

Cass. com. 11 April 1995, LawLex200200005461JBJ (RJ), holding that a management lease of the debtor's business may only be entered into, after the observation period, with the court's authorization given in the court ruling adopting the business sale plan.

However, art. L. 642-14 C. com. makes it easier to remedy the situation by stipulating that art. L. 144-7 C. com. concerning the joint and several liability of the lessor and the lessee-manager, does not apply.

CA Poitiers, 9 February 2016, LawLex202300004835JBJ (RJ).

CA Bordeaux, 24 February 1993, LawLex200200005980JBJ (RJ).

CA Versailles, 16 December 1987, LawLex202300004836JBJ (RJ).

CA Aix-en-Provence, 26 November 2009, LawLex202300004833JBJ (RJ).

CA Paris, 2 March 1990, LawLex202300004847JBJ (RJ).

See, however, an isolated decision by the Court of Cassation holding that an assignee who, at the end of the lease-management period, announces that he will be unable to buy back the debtor's assets must be ordered to implement the sale plan he has proposed, by a court ruling equivalent to a sale, Cass. com. 12 February 1991, LawLex202300004736JBJ (RJ).

903. Lease management