France - Cass. com., 22 June 2010

Declaration of foreign creditor’s claims: 
when in France, do as the French does
Author: Catherine OTTAWAY
Hoche Société d'Avocats, Paris, France

A Dutch company and a French company concluded a contract of services. On March 11, 2004, the French company filed for bankruptcy.

The manager of supply project of the Dutch company sent a declaration of claim with the liquidator of the French company. He was authorized to do so by the Chief Executive Officer of the Dutch company who gave him a general power to represent the company towards every person and any operations concerning the activities of the company and to sign, establish and keep a record of any document and do everything considered necessary in connection with such activities.

The lodging of claim of the Dutch company has been rejected by a French Court of Appeal based on a lack of power of the agent who lodged the claim.   

Before the Supreme Court, the Dutch company alleged that the issue relating to the power of a person to represent a company should be governed by the law of the country where the company has its headquarters. The Dutch company added that under Dutch law, a power to represent a company, drafted in general terms, is sufficient to lodge a claim on behalf of this company.

Relying on the Council Regulation (CE) n° 1346/2000 of 29 May 2000 on insolvency, the French Cour de Cassation ruled against this argumentation in a decision dated June 22, 2010 in which the Court confirmed the adage “When in Rome, …” (C. Cass. 06/22/2010 n° 09–65.481 and prev. C.Cass. 12/15/2009, Bull. civ. IV, n°164).

Pursuant to article 4 paragraph 2 h, the law of the State where the insolvency proceeding was opened shall determine the conditions for the opening, the conduct and the closure of such proceeding, and therefore is governing the lodging, verification and admission of claims.

When the insolvency proceeding is opened in France, French law governs the validity of the power given to an agent to lodge a claim. Under French law, when the claim is lodged by a person who is not a legal representative of the creditor, the claim may be lodged by an agent holding a power giving him the relevant authorization to achieve such an act. Such authorization must be given by a legal representative of the creditor or by an agent who was authorized by a legal representative of the creditor to lodge a claim on behalf of the creditor and to delegate this power.    

Besides, in France, the lodging of a claim qualifies as writ of summons initiating a judicial action. As a result, to be valid, the authorisation given by a company to its agent must be precise and must expressly mention the power to declare such claim or to take legal proceedings.

The creditor’s claim must be lodged with the creditors’ representative (in safeguard procedure or reorganisation) or the liquidator (in liquidation) within two months after the publication of the opening judgement. The publication is generally made two to three weeks after the judgement is rendered. This time limit is extended to four months (2+2 months) for overseas based creditors.

Creditors should be careful when preparing their lodging of claim (L 622–24, L 631–14 of the commercial code). The claim must be justified and the listed proof of debts should preferably be drafted in French. When applicable, the claim should mention that the debt is preferential. Interests stop accruing at the date of the opening judgement. All sums must be converted in Euros with the exchange rate applicable at the date of the opening judgment. And of course, the lodging of claim must be signed by a relevant officer representing creditor.

Creditors may request to become controllers if they are third parties vis–a–vis the debtor. Once appointed by the judge in charge of the insolvency proceeding (“juge commissaire”), controllers have access to more information than other creditors and assist the insolvency administrator in his mission. They are bound by secrecy during their mission and cannot charge any cost for this function. Once appointed, creditors cannot offer to buy any assets from the insolvent company.

French rules relating to the lodging of claims may be tricky for foreign and even French companies. Asking a French lawyer to lodge the claim on behalf of the creditor is a good way to avoid the pitfalls of this field. Besides French Lawyers have a general and legal power to act for their clients in order to declare their claim.
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