Newsletter No. 21 – Business Law
REGULATION
Duty of vigilance of parent companies and contracting companies:
Bill of February 11, 2015
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Hamon Law;
Decrees of March 11 and 17, 2015
CASE LAW
… of March 24, 2015
Enforceability of the declaration of unseizability prior to the commencement of liquidation proceedings
… of March 24, 2015
Statement of claims: additional information from a court decision
… of March 10
Procedures for serving the judgment
… of April 8, 2015
End of the continuation plan
… of March 31, 2015
Extinction of the commercial agent's right to commission
… of April 8, 2015
Nature of the guarantor's annual information obligation
… of March 25, 2015
Transfer of the jurisdiction clause
… of March 3, 2015
Non-existence of a non-compete obligation for the partner of the limited liability company
REGULATION
Duty of vigilance of parent companies and contracting companies
The bill concerning the duty of vigilance of parent companies and contracting entities was adopted on first reading by the National Assembly on March 30, 2015.
This legislation primarily stipulates that companies employing at least 5,000 employees within their organization and their direct or indirect subsidiaries headquartered in France, or at least 10,000 employees within their organization and their direct or indirect subsidiaries headquartered in France or abroad, at the close of two consecutive financial years, must establish and effectively implement a vigilance plan.
The procedures for submitting and implementing the vigilance plan, as well as the conditions for monitoring its implementation, will be defined by decree.
In the event of non-compliance with these provisions, the legislation allows the presiding judge of the court, ruling in summary proceedings, to impose a civil fine not exceeding €10 million. This same penalty would apply if the company were held liable.
The text was submitted to the Senate on March 31, 2015. No date for committee work has been set yet.
Hamon Law: Price reduction announcement
According to the decree of March 11, 2015 , any price reduction announcement is lawful provided it does not constitute an unfair commercial practice. It is specified that, in the case of an announcement made in a commercial establishment, the labeling, marking, or display of prices must include:
- the announced reduced price,
- the reference price which is determined by the advertiser and from which the price reduction.
Similarly, a price reduction of a uniform rate, relating to clearly identified products or services, may be made by cash discount. In this case, this method must be disclosed. Finally, the decree specifies that the advertiser must be able to justify the accuracy of the reference price from which the price reduction is advertised.
HAMON LAW: PRIOR INFORMATION ON PERSONAL SERVICES
Published in the Official Journal of March 25, 2015, the decree of March 17, 2015, establishes, in addition to the display already carried out, a list of information relating to both the service provider and the services they provide.
CASE LAW
Enforceability of the declaration of unseizability prior to the commencement of liquidation proceedings
Com. March 24, 2015 (n°14-10.175) FS-PB:
The Court of Cassation reiterates here that a debtor can invoke against their liquidator the declaration of unseizability they filed before being placed in judicial liquidation.
Consequently, the supervising judge could not consider that the declaration of unseizability is only enforceable against creditors whose rights arose after the publication of this declaration and in connection with the declarant's professional activity, and authorize the liquidator to proceed with the sale of a property whose unseizability was enforceable against them.
Statement of claims: additional information from a court decision
Com. March 24, 2015 (n°14-10.954) F-PB:
A company underwent a tax audit. Following this audit, an enforceable tax assessment was issued for the recovery of corporate income tax due for the years 1993 to 1995. By judgment dated April 16, 2002, the administrative court dismissed the company's application for relief or reduction of this tax. A judgment dated July 11, 2002, initiated insolvency proceedings against the company. On September 16, 2002, the public accountant filed a claim based on the aforementioned enforceable tax assessment. On October 8, 2003, the supervising judge noted that proceedings were pending due to the company's appeal against the administrative court's decision. The administrative court of appeal upheld this decision in a final ruling dated July 7, 2005, which was recorded in the statement of claims, a fact contested by the company.
The Court of Cassation upholds the appeal ruling, which supplemented the statement of claims with a reference to the judgment, insofar as the Court of Appeal did not have to carry out any checks other than that of the finality of the decision of the Administrative Court of Appeal in order to supplement the statement of claims with a reference to that decision.
Procedures for serving a judgment
Com. March 10, 2015 (n°13-22.777) F-PB:
In this case, a company had been placed under receivership and then into liquidation. The supervising judge had granted a creditor's claim for payment of the price of equipment and had authorized the creditor to recover the price from the sub-purchaser. The creditor then sued the sub-purchaser, and the action was declared admissible. The sub-purchaser challenged the judgment declaring the action admissible, arguing that the supervising judge's orders had not been served on him by the court clerk.
The Court of Cassation dismissed the appeal on the grounds that, pursuant to Article 651, paragraph 3 of the Code of Civil Procedure, service of a judgment by way of service at the initiative of a party is authorized, even though the law provides for service by the court clerk in the ordinary manner.
End of the continuation plan
Com. April 8, 2015 (n°13-28.061) F-PBI:
Following the expiration of a restructuring plan and the non-payment made during its term, a creditor who had filed a claim after the plan's adoption brought an action against the debtor before the summary proceedings judge for payment of an advance.
The debtor was ordered to pay an advance and subsequently challenged the decision, arguing that there was a serious dispute regarding the creditor's standing to sue.
The Court of Cassation dismissed the appeal. According to the Court, when a restructuring plan has reached its term without a termination decision, the creditor regains the right to pursue individual legal action against the debtor.
Extinction of the commercial agent's right to commission
Com. March 31, 2015 (n°14-10.346) FS-PB:
The termination of a commercial agency contract having been declared wrongful, the agent sued the principal for damages and payment of outstanding commissions. The principal was ordered to pay a certain amount of commissions and contested this decision, invoking the principle of freedom of proof.
According to the Court of Cassation, the right to commission can only be extinguished if it is established that the contract between the third party and the principal will not be performed and if the non-performance is not due to circumstances attributable to the principal. In this case, the only entries concerning the reasons for the reductions or credits, having been made by the principal, are insufficient, in the absence of other evidence, to demonstrate that they actually correspond to the various agreed-upon situations in which they may be applied, nor, as such, to justify a subsequent reduction in the amount of commissions still owed to the agent. Consequently, the Court considers that the principal has not provided the proof, which is incumbent upon him, of the extinction of his obligation to pay the commissions corresponding to the contracts subscribed to and dismisses the appeal.
Nature of the annual obligation to inform the guarantor
Com. April 8, 2015 (n°13-14.447) FS-PBI:
A credit institution, acting as creditor, appealed the Court of Appeal's decision declaring the guarantee it intended to enforce null and void in order to recover its debt. The lower court had held that, at the time the guarantor invoked the nullity of their commitment, the guarantee agreement had not yet been performed, as evidenced by the mere provision of the legally required annual information. Therefore, the defense of nullity was admissible.
According to the appeal, the annual information provided by the creditor to the guarantor constituted an act of performance of the guarantee, and thus the defense of nullity could not be raised to defeat the demand for performance of this legal act.
The Court of Cassation upheld the Court of Appeal's decision, ruling that the various obligations imposed on the professional creditor are merely legal obligations, sanctioned by the forfeiture of the right to ancillary rights to the debt, and not the consideration for the guarantor's obligation.
Transmission of the jurisdiction clause
1st Civ. March 25, 2015 (n°13-24.796) F-PB:
In a dispute between a sub-purchaser and a UK-based manufacturer/supplier, the latter raised an objection to the jurisdiction of the French courts, relying on the jurisdiction clause in the original contract, which stipulated that the English courts had jurisdiction.
The Court of Appeal declined jurisdiction. According to the court, the manufacturer/supplier had accepted the sub-purchaser's delegation of authority from the original purchaser. Therefore, in the absence of an express agreement to the contrary between the parties, the jurisdiction clause in the original contract should apply to the relationship between the manufacturer/supplier and the sub-purchaser.
The Court of Cassation notes that, according to the case law of the Court of Justice of the European Union (CJEU, 7 February 2013, Refcomp, C-543/10), a jurisdiction clause agreed upon in a contract between the manufacturer/supplier of goods and the purchaser thereof cannot be invoked against a subsequent purchaser who, following a series of contracts transferring ownership concluded between parties established in different Member States, has acquired those goods and seeks to bring an action against the manufacturer/supplier for reimbursement of the sums paid as payment for the goods, unless it is established that this third party gave their effective consent to the clause under the conditions set out in the aforementioned provision. Consequently, the Court quashes the appeal judgment.
No non-competition obligation for a partner in a limited liability company (SARL)
Com. March 3, 2015 (n°13-25.237) FD:
In this case, the co-founder and manager of a limited liability company (SARL) left his position in 2009 to pursue a competing business in another company he had founded. In 2011, after obtaining approval from the shareholders' meeting, he sold his shares and agreed not to solicit certain clients of the company. Believing he had engaged in unfair competition, a shareholder of the first company sued him for damages immediately upon leaving his position. The co-founder was ordered to pay damages by the Court of Appeal, but appealed the judgment to the Court of Cassation.
The Court of Cassation overturned the lower court's decision. According to the Court, unless otherwise stipulated, a partner in a limited liability company is not, in that capacity, required to refrain from engaging in an activity that competes with that of the company and must only refrain from acts of unfair competition.
