You have a sum of money to distribute among several creditors, but no enforcement proceedings are under way. What is the legal procedure? There are specific rules governing the distribution of funds outside any enforcement proceedings.
The legal framework
This procedure is governed by articles 1281-1 to 1281-12 of the Code of Civil Procedure, issued by decree no. 96-740 of 14 August 1996. It completes the reform of civil enforcement procedures introduced by Law no. 91-650 of 9 July 1991 and its implementing decree no. 92-755 of 31 July 1992.
Article 1281-1 of the CPC sets out the principle: "If there is a need to distribute a sum of money between creditors outside of any enforcement proceedings, and excluding the case where this sum comes from the sale of an immovable, the most diligent party may appeal in summary proceedings to the president of the judicial court within whose jurisdiction the debtor resides, who shall designate a person to be responsible for the distribution.
The situations concerned
This procedure applies in three main cases:
Voluntary sale of movable tangible property
This is generally a public sale of items that may have been pledged, with or without dispossession. The procedure does not apply to the out-of-court sale of items seized as part of a seizure and sale.
Sale of securities or assignment of receivables
The dematerialisation of these movables involves the intervention of a third party custodian, which gives them a degree of publicity, particularly when they have been pledged.
Voluntary sale of a business
This is the most common case. Article L.143-21 of the French Commercial Code stipulates that any third party holding the purchase price of a business must distribute it within 105 days of the date of the deed of sale. This period may be extended by 60 days if the tax return has not been filed on time.
The role of the interim relief judge
The procedure begins when the most diligent party (vendor, purchaser or creditor) applies to the interim relief judge. In civil matters, this will be the president of the court. For commercial matters, in particular the distribution of the price of a business, it will be the president of the commercial court.
The court with jurisdiction is that of the debtor's domicile, generally the seller.
The role of the person in charge of distribution
The judge appoints a professional to manage the distribution: bailiff, lawyer, notary or court-appointed agent. This professional becomes the receiver of the funds, unless their deposit at the Caisse des Dépôts is ordered.
The remuneration is deducted from the funds to be distributed and borne by the creditors, in proportion to the amount due to each. In the event of a dispute, the president of the court may set the amount.
Please note: his remit does not include the recovery of funds to be distributed if they are not available, unless he has been granted a special power of attorney.
Stages of the procedure
Information for creditors
The person responsible for distribution shall notify the creditors by registered letter with acknowledgement of receipt that they must, within a period of one month, send him a declaration including:
- A breakdown of the sums claimed (principal, interest, ancillary costs)
- Mention of liens and security interests attached to the claim
- Supporting documents
A creditor who fails to declare his claim within this period forfeits his right to participate in the distribution.
Identifying creditors can be tricky. In the case of a business, pledged creditors are identified by their registration with the commercial court registry. In the case of tangible movables, pledgees with or without dispossession can also be identified.
Proposed breakdown
Within two months of the declarations being made, the person responsible for distribution will draw up a draft distribution plan, which will be notified to the debtor and to each creditor by registered letter.
This notification indicates:
- Recipients have 15 days in which to lodge a reasoned objection
- In the absence of a response, they are deemed to have accepted the project
Handling complaints
In the event of a dispute, the person responsible for distribution will invite the parties to an attempt at conciliation within one month of the first dispute.
If an agreement is reached, minutes are drawn up and communicated to the parties. Payment is made in accordance with this agreement.
If conciliation cannot be reached, a record of the points of disagreement is drawn up. The person in charge of the distribution records the funds and the most diligent party refers the matter to the judicial or commercial court.
Caisse des Dépôts must pay within 15 days of notification of the final judgment.
The impact of collective proceedings
The distribution of funds may be affected by the opening of collective proceedings. Article L.622-21, II of the French Commercial Code provides that the opening of insolvency proceedings halts any distribution procedure that has not had an attributive effect prior to that judgment.
Article R.622-19 of the same code specifies that procedures for distributing the sale price of a movable that do not follow an enforcement procedure that had an attributive effect prior to the opening judgment are null and void. The funds must be remitted to the judicial representative.
This rule applies even if a conventional receiver has been appointed prior to the opening judgment. The Court of Cassation confirmed this in a ruling dated 8 June 2010 (no. 09-68.591).
Do you find yourself in a situation requiring the distribution of funds among creditors? Don't underestimate the complexity of this procedure. Our firm can help you every step of the way, from identifying creditors to managing disputes. Contact us to secure your distribution of funds and avoid procedural pitfalls.
Sources
- Code of civil procedure, articles 1281-1 to 1281-12
- Commercial Code, articles L.143-21, L.622-21 and R.622-19
- Decree no. 96-740 of 14 August 1996 instituting a procedure for the distribution of funds outside any enforcement proceedings
- Court of Cassation, Commercial Division, 8 June 2010, No. 09-68.591
- Cour de cassation, opinion no. 09-30.014 of 29 November 1993
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