- Companies in difficulty
1. Extension of proceedings – Characterization of abnormal financial relationships
2. Declaration of claim – calculation of interest
3. Role of the judge in matters of claim dispute
4. Appeal against the admission of a claim
5. Employee action for damages
6. Liquidation and Paulian action – determination of the competent judge
7. Scope of the action for insufficient assets
8. Procedure for the removal of the liquidator
9. Safeguard and surety
- Contracts
1. Significant imbalance
2. Guarantee: handwritten entries
3. Formalities: mention of the duration of the commitment
4. Assessment of the disproportionate nature of the guarantee
5. Validity of the probationary period in the commercial agency contract
6. Sale of the business
- Corporate law
1. Effect of the resignation of the company director
2. Commitment undertaken by the manager
- COMPANIES IN DIFFICULTY
1. Extension of Proceedings – Characterization of Abnormal Financial Relationships
Com. June 16, 2015 (No. 14-10.187) F-PB:
The liquidator of a limited liability company (SARL) had sued a real estate company (SCI) seeking to extend the liquidation of the SARL. The liquidator's request having been granted by the Court of Appeal, the SCI appealed to the Court of Cassation.
The Court of Cassation dismissed the appeal. According to the Court, in order to characterize abnormal financial relationships constituting a commingling of assets, the lower courts are not required to determine whether these relationships have increased, to the detriment of its creditors, the liabilities of the debtor subject to the insolvency proceedings whose extension is sought.
2. Declaration of Claim – Calculation of Interest
Com. May 5, 2015 (No. 14-13.213) FD:
Article R. 622-23 of the French Commercial Code requires the indication of the method for calculating interest whose rate has not been fixed only in cases where its amount cannot be calculated on the date the claim is filed.
Thus, neither the claim, which includes the already calculated amount of accrued interest, nor the order of admission issued by the supervising judge, needs to specify the method for calculating interest.
3. Role of the judge in matters of claim disputes
Com. June 2, 2015 (No. 14-10.391) F-PB:
A bank appealed to the Court of Cassation the rejection of its claim, which was deemed insufficiently substantiated, since the account statement only showed the debit line.
According to the Court of Cassation, when the debtor or the liquidator contests the proof of claim by invoking the absence or insufficiency of the supporting documentation, it is incumbent upon the creditor to submit any additional documents to the proceedings, without the Court of Appeal being required to request them to do so.
4. Appeal against the admission of a claim.
Com. May 19, 2015 (No. 14-14.395) F-PB:
A bank's claim was contested by the court-appointed administrator before being admitted by the supervising judge. The debtor then appealed the decision and sought the annulment of the loan agreement clause concerning interest. This request was declared inadmissible because it had not been submitted to the supervising judge.
According to the Court of Cassation, a debtor in receivership proceedings may appeal the decision of the supervising judge regarding a disputed claim, regardless of the subject of the dispute. The appeal judgment is therefore quashed.
5. Employees' Action for Damages
Com. June 2, 2015 (No. 13-24.714) FS-PBRI:
Employees laid off during a transfer plan voluntarily intervened in the proceedings initiated by the company's plan administrators against a bank, seeking to have its liability recognized for granting ruinous loans.
To declare the voluntary intervention of the laid-off employees inadmissible in their claim for damages resulting from the loss of their jobs, the judgment held that the damages they alleged were inherent to the insolvency proceedings, of which they were a direct consequence, and that they were suffered indiscriminately and collectively by all creditors.
The Court of Cassation quashed the judgment on the grounds that the action for compensation for damages claimed by the dismissed employees is unrelated to the protection and reconstitution of the creditors' common security and does not fall within the exclusive purview of the plan administrator.
6. Liquidation and Paulian action – determination of the competent court
. Com. June 16, 2015 (14-13.970) F-PB:
The exclusive jurisdiction of the insolvency court, as provided for in Article R. 662-3 of the French Commercial Code, applies only to disputes arising from these proceedings or those over which they have a legal influence.
This is not the case for the Paulian action, which is distinct from the action to annul acts performed during the suspect period. Therefore, in this case, the Court of Appeal was correct in dismissing the jurisdiction of the Commercial Court of Antibes, the place where the insolvency proceedings were initiated, in favor of that of the Commercial Court of Paris, within whose jurisdiction the defendant company's registered office is located.
7. Scope of the action for insufficient assets
Com. 30 June 2015 (No. 14-15.984) F-PB:
In this ruling, the Court of Cassation reiterates that the action for liability for insufficient assets provided for in Article L. 651-2 of the French Commercial Code can only be brought by the liquidator against the de jure or de facto directors of a private legal entity.
Consequently, Article L.651-2 of the French Commercial Code is not applicable when the judicial liquidation concerns a self-employed craftsman and not a legal entity.
8. Procedure for removing the liquidator
Com. July 7, 2015 (No. 14-13.195) FS-PB:
The voluntary liquidation of a company and the appointment of a liquidator were decided at a general meeting. The liquidator, having failed to prepare and present the accounts, was sued for removal by the minority shareholders.
Their request was declared inadmissible on the grounds that, according to the combined application of the provisions of Articles L. 237-25, paragraph 4, and L. 238-2 of the aforementioned code, the liquidator cannot be removed for non-compliance with the obligations imposed on him by Article L. 237-25 without first requesting the summary proceedings judge to order him, under penalty of a fine, to fulfill these same obligations.
The judgment was quashed by the Court of Cassation insofar as the admissibility of the application for the removal of the liquidator, filed pursuant to Article L. 237-25 of the Commercial Code, is not contingent upon prior referral, for the purpose of an injunction, to the president of the court ruling in summary proceedings pursuant to Article L. 238-2 of the same code.
9. Safeguard and Suretyship
Com. June 2, 2015 (No. 14-10.673) FS-PB:
The directors of a company had stood as joint and several guarantors for all of the company's obligations to a bank. The company had been placed under safeguard proceedings, and the bank had filed its claim and was subsequently authorized to register provisional judicial mortgages on assets belonging to the guarantors. The bank then sued the guarantors, who were ordered to pay jointly and severally certain sums that would become due as the safeguard plan's deadlines were met.
The Court of Cassation upheld the ruling. According to the Court, the creditor is entitled, pursuant to Articles L. 622-28 and R. 622-26 of the French Commercial Code, to register a provisional judicial mortgage on the assets of the guarantor of the principal debtor subject to safeguard proceedings. To validate this protective measure, the creditor is required to sue the guarantor to obtain an enforceable judgment against them covering the full amount owed. However, enforcement of this judgment cannot be carried out as long as the safeguard plan remains in effect.
- CONTRACTS
1. Significant Imbalance (
Commercial Chamber, May 27, 2015, No. 14-11.387) F-PB:
The Court of Cassation has once again ruled on the issue of the balance of clauses contained in contracts between a purchasing group and its suppliers, structuring its decision around several points.
First, the Court of Cassation characterizes the supplier's subordination based on two elements. On the one hand, the Court notes that the disputed clauses were included in all contracts signed by the suppliers, who did not have the actual power to negotiate them. On the other hand, the Court observes that the suppliers could not risk being delisted by the purchasing group.
The Court then concludes that a significant imbalance exists resulting from the general terms and conditions of purchase and the procedures for their acceptance. In this regard, the Court notes several types of clauses (distortion of payment deadlines, automatic exclusion of discounts for early payment of rebates and services, and the costs inherent in the destruction of products and/or their packaging by consumers) that impose obligations on suppliers without consideration. These clauses, due to their systematic nature and imposition by the purchasing group, constitute an imbalance of obligations to the detriment of the supplier.
Finally, the Court of Cassation rules on the basis for the enforcement of penalty clauses. According to the purchasing group, a penalty clause can only be enforced under Article 1152 of the Civil Code. The Court of Cassation rejects this argument and clarifies that the provisions of Article 1152 of the Civil Code do not preclude the application of Article L. 442-6 I 2° of the Commercial Code to a penalty clause, provided that the conditions are met.
2. Guarantee: handwritten entries
1st Civil Chamber. July 9, 2015 (No. 14-21.051) F-PB:
A bank appealed the appellate court's decision, ruling that the guarantor, an illiterate individual who was not the handwritten author of the guarantee agreement drawn up by the bank, could not act as guarantor for a company under a private agreement.
The Court of Cassation dismissed the appeal against this decision on the grounds that an individual who is unable to precede their signature with the handwritten statements required by Articles L. 341-2 and L. 341-3 of the Consumer Code, intended to ensure their protection and informed consent, can only validly enter into a guarantee agreement with a professional creditor by means of an authentic instrument.
3. Formalities: mention of the duration of the commitment
( 1st Civil Chamber). July 9, 2015 (No. 14-24.287) F-PB:
The Court of Appeal declared the guarantee agreements null and void because the duration of the guarantee should have been clearly specified in the handwritten statement without needing to refer to the printed clauses of the document. According to the Court of Appeal, the imprecision of this statement affected the understanding of the duration of the guarantee agreements and consequently their validity, even though the duration of the guaranteed transaction, in this case eighty-four months, was indicated on the first page of the guarantee agreements.
The Court of Cassation upheld the Court of Appeal's decision on the grounds that, while the provisions of Article L. 341-2 of the Consumer Code do not specify how the duration of the guarantee must be expressed in the handwritten statement, it remains nonetheless essential, as this element allows the guarantor to fully understand the scope of their commitment, that this statement must be included without needing to refer to the printed clauses of the document.
4. Assessment of the disproportionate nature of the guarantee
1st Chamber , June 3, 2015 (Nos. 14-13.126; 14-17.203) FS-PB:
The Court of Appeal had considered that the guarantee was not manifestly disproportionate to the guarantor's income, since their tax assessment did not take into account the expected income from the investment made by the guaranteed company, and therefore was not significant.
The First Civil Chamber of the Court of Cassation adopted the Commercial Chamber's position on this issue and overturned the judgment on the grounds that the proportionality of the guarantor's commitment cannot be assessed in light of the expected income from the guaranteed transaction.
5. Validity of the probationary period in a commercial agency contract
. Com. June 23, 2015 (No. 14-17.894) F-PB:
A company appealed to the Court of Cassation its conviction to pay a termination indemnity to a commercial agent, arguing that it had terminated the contract during the probationary period stipulated therein. The Court of Appeal had held that: " even assuming that the stipulation of a probationary period in such a contract is not in itself unlawful, it cannot have the effect of depriving the commercial agent of their right to indemnity ."
The Court of Cassation quashed the decision on the grounds that the status of commercial agents, which requires for its application that the agreement be definitively concluded, does not prohibit a trial period.
6. Sale of a business,
1st Civil Chamber, July 9, 2015 (No. 14-17.051) F-PB:
The plaintiff sought to have the agency agreement she had signed at her home to find a buyer for her business declared null and void. To this end, she claimed to benefit from the protective provisions relating to door-to-door sales and intended to contest the validity of the agreement on the grounds that it lacked the detachable withdrawal form required by law under penalty of contract nullity, and that in any event, the agent should not have undertaken any action before the expiry of the seven-day period following the signing of the agreement.
According to the Court of Cassation, for a trader, the sale of his business is directly related to his activity, so that the operation is excluded from the scope of Article L. 121-22 of the Consumer Code, in its wording prior to Law No. 2014-344 of March 17, 2014.
- SOCIETIES
1. Effect of the Resignation of a Company Director
(Com. 12 May 2015 (No. 14-12.483) F-PB):
The chairman of a simplified joint-stock company resigned on the day he received a summons to appear before the president of the commercial court. The court subsequently initiated insolvency proceedings against the company. The former chairman, who contested the date set for the cessation of payments, filed a third-party objection to this judgment.
The Court of Appeal declared the third-party objection inadmissible. According to the Court of Appeal, the former chairman was not a third party to the proceedings because his resignation had not been subject to any legally required publication formalities and therefore remained, in the company's dealings with third parties, including the commercial court, its legal representative on the date of the judgment initiating the proceedings.
The Court of Cassation, on the contrary, held that since the functions of a company officer had ended as a result of his resignation, regardless of whether this resignation had been subject to the legally required publicity measures, he could not have appeared as the company's legal representative in the subsequent proceedings brought against the company before the Commercial Court.
2. Undertaking undertaken by the manager
. Com. 12 May 2015 (No. 13-28.504) F-PB:
Even if established, the conflict with the company's interests of a security interest undertaken by a limited liability company to guarantee the debt of a third party is not, in itself, grounds for the nullity of the undertaking.
