Associated files

Obligation to file annual accounts

Filing annual accounts and their associated documents with the registry office of the Commercial court is compulsory for several categories of companies.

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Judicial administration

The main reason for the legislation behind judicial administration proceedings is to allow a business in difficulty to continue its activity in the framework of legal processing, while at the same time allowing it to repay its debts and maintain its jobs.

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Practical file on the recovery of credits before the Commercial Court

Where a client fails to pay an invoice at the due date, following verification of the well-founded nature of the credit, the situation of the debtor and several friendly reminders remaining without remedy, it is often time for the creditor to being credit recovery proceedings. This then leads to the entitlement to one of the three major techniques for recovery of credits, namely: an order for payment, a referral provision and summons in substance.

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The minutes of general meetings for approval of the annual accounts of commercial companies

Once a year, the annual accounts for the last financial year, i.e., the balance sheet, the profit and loss statement and the notes, must be approved of the Annual General Meeting. More specifically, in most commercial companies (SA, SAS, SNC, SCS, SA, SARL etc. ), the members of the executive bodies are liable to heavy criminal and civil sanctions for management error, if they breach the obligation to submit annual accounts for approval by the partners or shareholders. For this reason, the members of these executive bodies must demonstrate that they have indeed submitted the company's annual accounts for the preceding financial year for approval by the partners or shareholders, who generally meet in Annual General Meeting, by drawing up minutes of the general meeting. The approval of the annual accounts is therefore strictly regulated. By approving these annual accounts, these partners or shareholders implicitly demonstrate that the documents concerned contain data that has been prepared on a true and sincere basis. They also presume that, as of the closing date of each financial year, these annual accounts reflect a faithful picture of the assets, the financial position and the book profit (or loss) for the companies' business. More generally, the approval of the annual accounts represent the indispensable tool to provide a minimum of information on the main accounting parameters, financial management and operations of commercial companies. They are therefore an essential decision making tool aiding the diverse interests of any interested person (directors; shareholders; investors; government authorities; creditors, such as bankers, suppliers; customers; competitors; commercial courts and potentially other judicial authorities, responsible for preventing and dealing with companies in difficulty) near or far, through access to the company's business data as well as by their financial, accounting and management position. For all these reasons, it is vital that the annual accounts must be approved in strict compliance with the statutory requirements.

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File : Notice to pay, a credit recovery procedure

Part 1

Prerequisites for an order for payment

Prerequisites for an order for payment

When the creditor, the applicant, launches the order for payment procedure, it presupposes that the credit is not contestable, at least in appearance.

Alongside the European order for payment procedure for recovery of cross-border recovery in the European area, there is a French order for payment procedure reserved solely for national disputes.
The order for payment procedure, through a legal formality and at less cost, allows a creditor of a sum of money to order the debtor to make payment, in a unilateral and rapid manner (on average, in under two months).
The order for payment fundamentally differs from legal proceedings for the recovery of credits known as "common law" (notably the summary provision and summons "in substance") where discussions between parties remains the rule throughout the dispute. The order for payment procedure is not subject to the adversarial principle until the creditor receives the order for payment. In other words, from the start of proceedings until service of this order, the debtor cannot defend itself: it is unaware of the proceedings initiated against it and the basis (facts, arguments and rights and proof) of the submissions of its opposing party.
It is service of the order for payment by the bailiff of the creditor which allows the debtor to discover the debt recovery proceedings have been initiated. Rights of defence of the debtor are however guaranteed by the option it has to object to this order. This reaction by the debtor in objecting leads to invalidating the order for payment and initiating another phase of proceedings, which this time must be subject to the adversarial principle.

A legally founded and justified credit.

The order for payment procedure may be used to obtain payment of a credit if the debtor refuses to make payment and whilst it may be proved that the credit is certain (the current existence cannot be contested in substance), liquid (the amount is indicated) and payable(the payment date has passed). Inversely, any credit likely to be the object of a serious objection is excluded from this procedure, namely any credit for which it can be seriously established that at least one of these three criteria is not present, as well as any disputed credit (in other words currently subject to pending proceedings).

Good to know: the creditor should previously prove the payment of amounts and the non repayment in the event of the credit resulting from the undue payment of funds which have not been reimbursed by the debtor.

 

A credit admissible for the order for payment procedure

The order for payment procedure may be used for any civil or commercial credit, whatever the total amount, and leading to one of the following primary sources:

  • a civil or commercial contract (for instance, a sales agreement, credit agreement, lease); a statutory obligation (for instance contributions due to a retirement fund; a joint ownership credit); debt acknowledgement;
    Good to know : where the credit is contractual, determination of its amount is undertaken by application of the contractual stipulations, including where applicable, a criminal clause.
  • commitments resulting from acceptance or drawing of a letter of exchange; the subscription of a payment order or endorsement or consent of one of these;
  • acceptance of a DAILLY form for the transfer of professional credits, namely a document facilitating the credit for companies by allowing them to transfer credits and securities to a credit establishment allowing for immediate payment.

Inversely, the order for payment procedure is excluded primarily in the following instances:

  • payment of all credits disputed, namely with an external origin from a contract, such as for instance, compensation due to a victim by a third party, for prejudices which it occasioned. This payment should be requested in the framework of a summons (summons before the court) for criminal liability, launched by a legal summons;
  • payment of compensation for default in performance of a contract since this should be the object of a specific request in the framework of a summons for contractual liability;
  • return of the deposit paid for termination of a contract since this should additionally be the object of a specific request in the framework of a summons for contractual liability.

Good to know: payment of a cheque without sufficient funds may not be recovered using the order for payment procedure since a specific procedure is in place for this instance.

 

A debtor against whom proceedings can be taken

The debtor should be a private person, whether a physical person or legal entity, in other words a sole tradership or, for instance, a company, EIG, cooperative, association. Public legal entities, debtors (local authorities, State), cannot be concerned by this procedure since they fall within the remit of the administrative courts.
Moreover, the debtor should have one of its offices in France. For a debtor residing abroad, it is sufficient to have, for instance, a flat or office in France. In the contrary case, there is a European order for payment procedure.
Finally, in order to avoid needlessly launching any order for payment procedure and therefore prior to any application in this direction:

  • Although not compulsory, it is recommended that the creditor send (by recorded delivery letter with acknowledgement of receipt or by a bailiff's deed) to the debtornotice to perform its obligation within a given deadline. Indeed, the wording of the response or the lack of response to this notice in general allows the creditor to clearly ensure the intentions of the debtor and, consequently, to prove that the creditor has duly performed all of the necessary formalities to reclaim funds. Moreover, where it is unsuccessful, the notice leads to late payment interests.
  • If the debtor is entered on the Trade and Companies Register (RCS), it is recommended that the creditor check with the registry office of the Commercial court concerned whether the debtor has already been the object of Insolvency proceedings, primarily Judicial Liquidation or Judicial administration. It should be reiterated that these proceedings lead to blocking individual proceedings by creditors against the debtor and submitting them to making a declaration of credits arising prior to the ruling initiating proceedings.

 

Consult our subject-specific files on Insolvency proceedings