Failure to declare cessation of payments may be sanctioned by a ban on managing a business, even if the manager did not realize that they were in a state of cessation of payments.
Cass. Com., January 12, 2022, No. 20-21.427
Pursuant to Article L. 653-8, paragraph 3, of the Commercial Code , the court may issue a management ban against the company director "who knowingly failed to request the opening of a receivership or liquidation procedure within forty-five days of the cessation of payments, without having, moreover, requested the opening of a conciliation procedure".
In this case, following a declaration of insolvency by its manager, Mr. X, insolvency proceedings were initiated against SARL Y… by a judgment dated April 6, 2016, setting the date of insolvency as January 1, 2016. By a judgment dated May 11, 2016, the court terminated the observation period and ordered the company's liquidation. Then, at the request of the liquidator , the court postponed the date of insolvency to October 6, 2014, by a judgment dated February 5, 2018.
The liquidator then summoned the manager before the commercial court seeking a ban on managing a company. On September 30, 2019, the court issued a seven-year ban on managing a company against MX.
The Court of Appeal upheld the judgment rendered by the Commercial Court in its entirety. According to the lower court judges, while it cannot be considered established that Mr. X was aware of the state of insolvency as early as October 6, 2014, it remains nonetheless established that he could not have been unaware, from the first half of 2015, that the company was unable to meet its liabilities with its available assets (non-payment of the employer's share of social security contributions; non-payment of VAT and then of salaries for a period of four months).
The court further emphasizes that the seven-year ban on managing a business – which is not the most severe measure that can be imposed – is appropriate and perfectly proportionate to the seriousness of the offenses committed by Mr. X…
Mr. X… brought the dispute before the Court of Cassation, arguing that the manager who was not aware of the state of cessation of payments within forty-five days from the date thereof, cannot be held responsible for the delay, whatever it may be, with which he made the declaration after this period.
The High Court rejects the appeal considering that the Court of Appeal was able to deduce that, by waiting until March 23, 2016 to request the opening of collective proceedings, Mr. X had knowingly failed to declare the cessation of payments within the forty-five day period provided for in Article L. 653-8, paragraph 3, of the Commercial Code .
Vigilance is therefore essential for leaders facing financial difficulties.
