The opening of collective proceedings (sauvegarde, redressement or liquidation judiciaire) results in the suspension of individual legal action against the debtor. As a result, any legal action by a creditor is in principle prohibited or interrupted if it aims to order the debtor to pay a sum of money, or to rescind a contract for non-payment of a sum of money. Creditors do, however, have the option of recovering their claim, but this option is subject to certain reporting requirements and deadlines.
What are the steps and obligations to be followed by the creditor to obtain payment of his claim?
The declaration of debt in the collective procedure
In the event of the opening of collective proceedings, claims against the debtor must be declared in order to be collected. All creditors holding a claim that arose prior to the judgment opening the collective proceedings, with the exception of wage claims and maintenance claims, must declare their claim, regardless of the type of proceedings (art. L.622-24, L.631-14, and L.641-3 of the French Commercial Code). Creditors must also declare claims regularly arising after the opening judgment (except those mentioned in art. L.622-17 of the French Commercial Code, which are considered “useful” to the proceedings). Effect: The claim declaration interrupts the statute of limitations until the closure of the proceedings; it dispenses with any formal notice and is equivalent to a writ of execution.
By whom is the declaration made?
The declaration is made by the creditor or by a servant (in the event of delegation of power) or any representative of his choice, the creditor being able to ratify the declaration made in his name until the judge rules on the admission of the debt. If the creditor is a legal person, it is the legal representative who makes the declaration.
To whom should the declaration be sent?
The declaration of claim is made to the body in charge of the procedure:
- In the event of safeguard or receivership, it is addressed to the legal representative.
- In the event of judicial liquidation, it is addressed to the liquidator.
No form is required for sending the declaration. It is sent in principle by post. It is best to do this by LRAR. Proof of its sending can be done by any means by the creditor.
The contents of the statement:
The statement of claims must include certain mandatory information (art. R.622-21 et seq.):
- The amount of the debt due at the time of the opening judgment, the indication of the amounts due and their due date
- The guarantee with which the debt is possibly accompanied
- The current interest calculation method
- Elements making it possible to prove the existence and the amount of the debt if it does not result from a title; otherwise, if the amount of the claim has not yet been determined, the claim is declared on the basis of an assessment.
- The indication of the court seized if the declared debt is the subject of a dispute
This declaration must be attached, under a slip, the supporting documents. These can be produced in copy (examples: copy of invoice, purchase order or delivery). It is necessary to add the elements allowing the identification of the declaring creditor (and of the servant or the agent if he declares in his name) as well as of the debtor (name or company name, address or registered office, registration number in the RCS, etc.).
The reporting deadline
The declaration deadline is2 months frompublication of the opening judgment in the Bulletin officiel des annonces civiles et commerciales (BODACC): art. R.622-24 of the French Commercial Code.
- The creditor may rectify his initial declaration as long as this declaration period has not expired.
The absence of declaration of claims within this period has the effect of rendering the claim unenforceable against the debtor until the closure of the collective proceedings. The creditor will therefore not be able to receive any payment in the context of the collective proceedings, he will be considered foreclosed.
If the creditor has not declared his claim within the time limit : the action to lift the foreclosure
In the event of non-compliance with the declaration deadline of 2 months, the creditor may exercise an action for a statement of foreclosure under conditions. It must demonstrate one or more of the following conditions:
- The delay is not due to his doing
- This is the case of the creditor who exceeded the deadline due to a publication error by Bodacc which had indicated that it was 4 months whereas the law sets it at 2 months.
- When the debtor has concealed from the creditor that he is subject to collective proceedings, within the framework of an instance which opposed him to this creditor.
- The delay is due to an omission on the part of the debtor when drawing up the list of claims: the debtor forgets to mention the debtor in his list of creditors.
The action must be brought within6 months ofpublication of the opening judgment. The creditor must refer the matter to the juge-commissaire, who may be seized by petition. Starting point for different time limits :
- 6 months from receipt of notice for creditors holding published security or bound to debtor by published contract
- 6 months from the date on which it is established that the creditor could not have been unaware of the existence of his claim
Exception: privileged posterior claims
Safeguard and reorganization: Claims duly arising after the opening judgment for the purposes of the procedure or the observation period, or in return for a service provided to the debtor during this period, are paid when due (art. L.622-17 of the French Commercial Code). In liquidation: Claims duly arising after the judgment opening or pronouncing the judicial liquidation are paid when due (art. L.641-13 of the French Commercial Code): – If they have arisen for the purposes of the proceedings or the provisional maintenance of the business authorized under article L. 641-10. – If they have arisen in consideration of a service provided to the debtor while the business is being maintained, or in performance of an ongoing contract duly decided after the judgment opening the safeguard or reorganization proceedings, if applicable, and after the judgment opening the compulsory liquidation proceedings. – Or if they arise from the day-to-day needs of the debtor, a natural person. These claims are not subject to the obligation to declare, since they must be paid on the due date. However, if they are not paid when due, they must be brought to the attention of the body in charge of the proceedings (administrator, mandataire judiciaire, commissaire à l’exécution du plan or liquidator).
And after the declaration of the claim?
The procedure for verifying and admitting claims
Once declared, the claim is subject to verification (existence, amount). They are verified by the trustee, the debtor or even the administrator, or by the liquidator in the event of liquidation. The official receiver then decides whether or not the claim should be included in the debtor’s liabilities, i.e. whether it should be taken into account in the distribution of dividends decided by the court. The debtor, the trustee or the liquidator may then contest the declared claims. In this case, the dispute will be forwarded to the creditor, who will have a 30 days to respond. In the absence of a response, the creditor will no longer be able to contest the subsequent decision on whether or not to reject the claim. If the claim is not contested by the debtor or the mandataire judiciaire, it will be recognized as a liability. It is only once the claim has been accepted as a liability that the creditor can claim payment of the claim, which will be made according to the type of collective procedure and the terms and conditions, if any, decided by the Court (safeguard/reorganization plan or sale plan).
Backup and recovery plan
The normal outcome of a safeguard or receivership procedure is the adoption of a continuation plan, the purpose of which is to enable the company to continue trading, maintain employment and pay its debts. Stages:
- A draft plan is first drawn up by the debtor with the administrator in the event of safeguarding / by the administrator in the event of recovery. This is drawn up in consultation with the creditors who are consulted either collectively or individually on discounts and payment deadlines.
- The court adopts the safeguard or recovery plan if there is a serious possibility for the company to be safeguarded.
- The safeguard or recovery plan provides for the settlement of all claims declared, even if they are disputed.
As part of the execution of the plan, the administrator distributes the dividends. This is where the payment of creditors comes in: they are paid in accordance with what has been adopted in the plan, depending on any discounts and payment deadlines.
- What if the creditor is not paid in full at the end of the continuation plan?
- Once the plan has come to an end, creditors whose admitted claims have not been paid in full regain their right to take individual legal action against the debtor: only sums due under the plan or the agreements to which it refers can be claimed.
- In the event of the plan’s resolution (failure) and the opening of new collective proceedings by the same judgment, creditors subject to the plan or admitted to the liabilities of the1st proceedings are exempt from declaring their claims.
The disposal plan in the event of liquidation
In compulsory liquidation, there are 2 possibilities: either a plan organizes the total or partial transfer of the company, or there is an isolated sale of the company’s assets. The purpose of carrying out the liquidation is to pay the creditors thanks to the price withdrawn from the sale. Creditors find themselves in competition with other creditors, in particular those who hold securities registered on the debtor’s property (mortgage, pledge, etc.) or privileges (in particular employees and the Public Treasury) and who benefit from priority of payment.
- The classification of creditors:
In the event of an assignment in liquidation, the proceeds of the assets will be distributed among the creditors, who will be paid according to the ranking order set out in article L.641-13 of the French Commercial Code:
- Super privileged wage claims
- Legal costs arising after the opening judgment
- Creditors having granted a new cash contribution to the debtor
- Previous creditors holding immovable security
Then comes the payment of subsequent creditors:
- Salary claims for which the amount has not been advanced
- Loans granted as well as receivables resulting from the continued performance of contracts in progress
- Sums the amount of which has been advanced pursuant to 5° of Article L. 3253-8 of the Labor Code
- Other subsequent claims, according to their rank.
Creditors prior to the opening of the procedure will be paid after later creditors.
Recent case law
Exclusion of preferential payment of a subsequent claim (Cass. com. March 10, 2021 No. 19-22.791). Pursuant to article L.622-17 of the French Commercial Code, claims regularly arising after the opening judgment for the purposes of the proceedings or the observation period, or in return for a service provided to the debtor during this period, are entitled to payment on maturity or by preferential claim. However, jurisprudence considers that claims for damages arising from the improper performance of a contract during the observation period do not benefit from this preferential treatment. Relevé de forclusion pour une créance postérieure (Cass. com. December 9, 2020 n° 19-17.579). A claim arising after the opening of the collective proceedings, under article 700 of the CPC, which is not considered useful to the proceedings, must be declared. If the creditor is late in declaring the claim, the foreclosure may be lifted. Suing the debtor after resolution of the plan for non-performance (Cass. com. September 9, 2020 n°19-10.206). A creditor may not sue a debtor undergoing reorganization for a claim that has not been declared during and after the execution of the plan, but may do so in the event of the plan’s resolution, without incurring the statute of limitations.