When a company enters into collective proceedings (safeguard, receivership or compulsory liquidation)In the case of a creditor, general rules such as the declaration of a claim or the stay of proceedings apply to all previous creditors. However, the law recognises that certain situations are special and deserve specific treatment. This is particularly the case if you are an unpaid seller of goods, the lessor of the company's premises, or if you hold a traditional guarantee such as a mortgage, pledge or collateral.
Understanding these specific rules is fundamental, because they can significantly affect your rights and your chances of recovering what you owe. This article therefore explores these special situations and also clarifies a key point: what happens to the due date of your debts when your debtor is in difficulty?
Have you sold goods that have not been paid for?
The situation of an unpaid seller varies greatly depending on whether or not the goods have been delivered and, above all, whether or not a retention of title clause has been included.
General situation: sale without retention of title
If you have sold goods without a retention of title clause (i.e. without specifying that you retain ownership until full payment has been made), the situation is often unfavourable once the goods have been delivered.
- If the goods have been delivered to the buyer before the opening judgment: Unfortunately, you lose most of your usual protection. Article L. 624-11 of the French Commercial Code states that the seller's lien (which gave you priority over the sale price of the furniture) can no longer be exercised. Similarly, you can no longer ask for the sale to be rescinded (cancelled) for non-payment. Your only option is to declare your claim as an ordinary (unsecured) creditor.
- If the goods are still in transit at the time of the opening judgment: You still have a card to play. As long as the goods have not physically arrived at the buyer's premises (or at the premises of a commission agent acting on the buyer's behalf), you can "claim" them, i.e. exercise a sort of stoppage right to prevent final delivery and recover your goods. This is permitted under article L. 624-13 of the French Commercial Code.
- If the goods have not yet been dispatched You are in a position of strength. Article L. 624-14 of the Commercial Code, in conjunction with the Civil Code, gives you a right of retention. You can refuse to deliver the goods until the price has been paid, even if the buyer is in receivership. The administrator or liquidator will have to pay the price to obtain delivery.
The trump card: the retention of title clause
To alleviate the seller's precarious situation after delivery, the retention of title clause has become an almost indispensable tool. If you have taken the precaution of inserting a clause in your contract of sale (or your general terms and conditions of sale accepted by the buyer) stipulating that you retain ownership of the goods sold until the price has been paid in full, your rights are considerably strengthened.
- The claim action You are no longer simply a creditor, but an owner. You can therefore claim the return of YOUR assets. This action for restitution must be brought within a strict time limit of three months from publication of the opening judgment, as stipulated in article L. 624-9. The main condition is that the assets must still exist "in kind" with the debtor (i.e. they must not have been resold or irreversibly transformed). Article L. 624-16 specifically refers to this claim for assets sold with retention of title.
- Claiming the resale price If the debtor has resold your assets (even though he did not yet own them), article L. 624-18 offers you an interesting possibility: you can, under certain conditions, directly claim the resale price that is still owed by the sub-purchaser to the debtor. This is a complex but potentially very useful mechanism.
Retention of title is a powerful form of protection, but its validity and enforceability depend on strict conditions (clause in writing, accepted by the buyer no later than delivery, etc.).
Are you the lessor of a building (commercial premises, offices, etc.)?
The opening of insolvency proceedings against your tenant also affects your rights as lessor, in particular the special lien that guarantees payment of your rent on the furniture in the rented premises.
Your privilege on furniture is limited
Under normal circumstances, this lien can guarantee a large proportion of the rent due. However, in the event of insolvency proceedings, article L. 622-16 of the Commercial Code provides restrict its scope. Your privilege no longer guarantees that the last two years of unpaid rent prior to the date of the opening judgment. Older rents become simple unsecured claims.
The fate of the lien depends on the future of the lease
Article L. 622-16 then distinguishes according to whether the lease is continued or terminated after the opening judgment:
- If the lease is terminated (by decision of the administrator/liquidator or judge) : In addition to the two previous years, your lien also covers the rent and charges for the "current year" (often calculated from the anniversary date of the lease until termination) as well as any damages that may be awarded against you by the court (for damage, for example).
- If the lease is continued For rent due after The situation is different after the opening judgment. You only benefit from the lien if the other guarantees you were given (security deposit, guarantee, etc.) are not maintained or are deemed insufficient. If the guarantees are sufficient, the lien does not apply to future rents (which will, in principle, be paid normally because they arose after the judgment).
It should be noted that the lessor, even a privileged lessor, has no right of retention over the furniture and cannot ask for it to be allocated.
Do you have a mortgage, pledge or collateral?
If your claim is secured by a "traditional" security interest registered on the debtor's property (mortgage on a building, pledge on a business, pledge on equipment, etc.), the insolvency proceedings will also disrupt your prerogatives.
Prohibition on implementing your guarantee during the observation period
Before going into the details of the prohibition on making your guarantee, it is essential to remember the importance of the verification of claims and the consequences of the declaration, in particular the suspension of interest payments and the prohibition of new registrations. In the safeguard or receivership phase, the priority is often to allow the business to continue and to draw up a recovery plan. To achieve this, the company's assets must be preserved. As a result :
- You cannot initiate seizure proceedings on the encumbered asset (prohibition of individual lawsuits).
- The commissory agreement is paralysed Even if your guarantee contract stipulated that you would automatically become the owner of the property in the event of non-payment, this clause has no effect after the opening judgment, as stated in article L. 622-7, I of the French Commercial Code. Ownership cannot be transferred.
- Judicial attribution is impossible Nor can you ask the court to award you ownership of the pledged asset in payment of your claim.
Your guarantee is therefore "frozen" during this phase, but retains its existence and ranking for the future.
What happens to securities in the event of compulsory liquidation?
If the company goes into compulsory liquidation, the perspective changes: the aim is to sell the assets to pay the creditors. Your rights as a secured creditor are then partially restored:
- Possible realisation by the liquidator The liquidator will sell the asset to which your guarantee relates (often by public auction, but sometimes by mutual agreement with the authorisation of the official receiver). You will then be paid from the sale price, according to your rank in relation to the other registered or preferential creditors.
- Judicial assignment possible (pledge/pledge) Article L. 642-20-1 of the French Commercial Code allows creditors holding a pledge (on tangible assets) or a pledge (on intangible assets, except business assets) to ask the official receiver to allocate the asset to them in payment of their claim (subject to an expert appraisal to determine its value). This is an alternative to sale.
- Commissioners' agreement still prohibited Automatic realisation by transfer of ownership via a commissory agreement remains prohibited, even in liquidation.
Provisional payment: an advance on the sale price?
In addition to the points addressed here, for a complete understanding of creditors' rights, it is also relevant to explore the fate of claims arising after the opening judgment and possible recourse against third-party guarantors. In any event, whether you are in safeguard/recovery or liquidation, if the property to which your security relates is sold by the bodies involved in the proceedings, the law offers you an interesting possibility: you can ask the official receiver for a provisional paymentIn other words, an advance on the sale price, without waiting for the final distribution among all the creditors (articles L. 622-8 and L. 643-3 of the French Commercial Code).
The conditions are strict: your claim must be declared, your lien ranking must give you a reasonable expectation of being paid the price, and sometimes (especially in the case of safeguard/recovery) you must provide a bank guarantee to ensure repayment if, in the end, you have received too much. This option should be examined on a case-by-case basis.
What happens when your receivables fall due?
The opening of insolvency proceedings has a direct impact on the due date for your debts, but this impact differs radically depending on the type of proceedings.
Safeguarding and receivership: Term maintained
The rule, set out in Article L. 622-29 of the French Commercial Code, is designed to encourage reorganisation: the opening judgment does not render due and payable claims that have not yet fallen due. If you had granted a loan repayable in 3 years, or if your invoice was only payable within 60 days, and this period has not expired on the date of the judgment, your debt retains its initial term. It does not become immediately due and payable simply because the proceedings have been opened.
This rule is a matter of public policy, and any clause to the contrary in your contracts (providing for early payment in the event of insolvency proceedings) is deemed unwritten. The debt will be paid either on its normal due date (if it is subsequent to the judgment and privileged), or in accordance with the terms of the safeguard or recovery plan.
In compulsory liquidation: Forfeiture of term
Conversely, when the company enters into compulsory liquidation (unless a temporary continuation of activity is authorised with a view to a sale), the objective is no longer reorganisation but the rapid realisation of assets to pay creditors. Article L. 643-1 of the Commercial Code therefore restores the traditional rule: judicial liquidation leads to forfeiture of the term of office.
This means that all the debtor's debts, even those that have not yet fallen due, become immediately payable. The liquidator must take them into account in their entirety (possibly after deduction of non-accrued interest for certain loans) to establish the liabilities to be paid as far as possible with the proceeds from the sale of the assets.
The situation of creditors faced with a company in difficulty is therefore far from uniform. Depending on whether you are a vendor, lessor or security holder, and on the nature of the proceedings initiated, your rights and the limitations that apply to them vary considerably. A detailed legal analysis of your contractual situation and the guarantees you hold is essential if you are to devise the strategy best suited to defending your specific interests. Do not hesitate to consult our firm to assess your precise position and the action to be taken.
Sources
- Commercial Code, in particular articles L. 141-6, L. 622-7, L. 622-8, L. 622-16, L. 622-29, L. 624-11 to L. 624-18, L. 641-3, L. 642-20-1, L. 643-1, L. 643-3.
- Civil Code, article 2332 (preferential right of lessor and seller of furniture).
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