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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Last published

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 3

The ruling: an ordinance

The ruling: an ordinance

Depending on whether the creditor application is deemed well founded or not, the judge, by way of an order which does not need to be motivated, orders the debtor to pay or, on the contrary, dismisses the disputed credit in whole or in part.

An order for payment... or dismissal of the application

If the judge believes that the application is regular and well founded (in other words sufficiently completed and justified), it shall hand down a ruling which shall constitute an "order for payment", namely ordering the debtor to pay, in principal and interest, potentially increased by fees, ancillary payments and expenses. These shall include procedural fees such as registry office fees in the event of referral before the Commercial court; service by bailiff of the order on the debtor; compulsory stamp duty.

Inversely, the judge may hand down a total or partial dismissal of the application, which is the case when the application does not include, for instance, the required indications set forth by law and/or the supporting documentation not allowing the proof of credit to be proved.

Finally, it may happen that the judge hands down an adjournment, which may happen when the matter appears incomplete or supporting documents are not comprehensible. The creditor is then invited to complete the file within the agreed timescale as conferred by the judge, subject to the application being dismissed.

Good to know: if the application is entirely dismissed, the documents provided by the creditor are immediately returned thereunto. In other instances, these are temporarily stored with the registry office, and then returned to the creditor, at its request, immediately following objection to the application by the debtor, or, as soon as the enforceable declaration has been made on the order, in the event of no objection by the debtor.

In practice, the judge frequently completes the end of the application form initially issued by the creditor entitled "ORDER".

This deed, for which justification is not required, should be signed by the judge and clerk of the court subject to being deemed invalid. The order may be drafted on paper or electronically. In the latter instance, it should be signed by a secure electronic signature.

 

Communication of an order for payment

The credit receives from the registry office a true and certified copy of the application for an order.

It is then incumbent upon the creditor to serve the order (namely notice), on the debtor, or each debtor, of the copy of the application and the order. Service of documents must be undertaken by a bailiff, within six months following the date of the order. Failing this, the ordinance shall be null and void.

Service of the order shall lead to suspension of the deadline for statutes of limitations allocated to the creditor to take legal action: in other words, it shall release the creditor from the time limits imposed by law on debtor(s).

The service of notice should include the following subject to being invalid:

  • a notice for payment to the creditor of the liability, late payment interest and recovery fees (stamp duty, registry office fees, bailiff fees);
  • notice to the debtor of the option to oppose the order, insofar as it believes it holds means for defence as to jurisdictional competence or the substance of the dispute. This information must be completed by the following indications:
    - the deadline in which objection should be formed (one month following the date of service of the order) and that, once this time has expired, the time which the debtor shall no longer have any right of redress and may be forced, by all legal channels, to pay the amounts claimed.
    - the court holding jurisdictional competence before which the matter should be referred;
    - the format in which it should be presented;
    - the notice which the debtor may indicate to the registry office on documents presented by the creditor.

If service is undertaken directly in the presence of the debtor, the bailiff should, moreover, orally indicate all information and notices appearing in the deed and indicate fulfilment of this diligence.

 

Ordinance dismissing an application for an order for payment Other legal channels

No redress (notably appeal) shall be open to the creditor against an order for total or partial refusal of the liability.

If the application is dismissed in total, the creditor shall only have ordinary means of redress against the debtor to acknowledge the validity of the credit and receive payment.

This is the same if dismissal of the application is partial and if the creditor chooses not to serve the order on the debtor. This abstention shall also lead to abandoning the order for payment proceedings.

In the event of partial dismissal of the application followed by service of the order constituting partial dismissal to the debtor, service shall then constitute continuation of the order for payment: in other words, the creditor relinquishes requesting from the other party payment of its liability by all other ordinary legal channels.

Ordinary legal channels shall roll out to all means offered by law to the creditor so as to order the debtor to make paymentand which may be used against it insofar as it is not the object of any restrictive measure for the rights of taking action against creditors such as, for instance, in the event of the debtor going into Judicial liquidation or administration.
Amongst these methods, certain actions allow the creditor, when justified, to obtain the following before the court, thanks to an enforceable document, namely thanks to a decision allowing for assistance by public forces to ensure application of the order:
- an order sentencing the debtor to pay the amount due, recovery fees, compensation of prejudice (previously demonstrated) caused by its default, and potentially a fine (amount to be paid per day of delay).
- where applicable, forced enforcement at term of the payment requested, notably by allocation of amounts seized or by the forced sale of assets seized.

The legal action open to the creditor is primarily as follows:
Referral provision: several principles characterise this procedure.

  • It is adversarial, which means, for the most part, by the fundamental right of each party to understand all means of defence (facts, arguments of law and proof) of the other party.
  • It is oral, namely it is verbally outlined, in other words, the pleadings of each party shall prevail over all written documents, notwithstanding any desire to the contrary and expressly formulated verbally before the judge and/or the other party, to exclusively refer to the written document by the judge to the party making a request (validly justified) to be presented to hearings.
  • It does not impose representation of the parties by legal counsel.
  • It requires summons by the creditor (served by bailiff) on the debtor, to appear before the summary judge (post especially conferred to the presiding judge of the court: magistrate, district, commercial court).

In brief, this procedure allows the creditor, in a short timescale (fifteen days to a month on average) compared to a full procedure "in substance" from obtaining from the judge a decision ordering the debtor to make payment of a provision equal to the claimed credit in whole or in part, and this whilst the existence of the credit has never been legally recognised in substance, within the framework of legal action "in substance". However, it is necessary for the credit for which payment is claimed not to be, at least in appearance, seriously contestable, namely, likely to be easily called into question (which may be the case when the basis of the credit appears ambiguous, incomplete or subject to interpretation).

The summons for payment "in substance": this procedure is, in principle, always adversarial.

  • The procedure is oral and without compulsory representation by a lawyer, before the local judge, district or commercial courts. However, it must be written with compulsory representation by the lawyer before the district court.
  • It additionally requires summons sent by the creditor (served by bailiff) on the debtor, to appear before the competent judge (district court, presiding judge of the district court, presiding judge of the commercial court) with a view to receiving, for instance, payment of the price of a sale or service.

In brief, the procedure is much less rapid (from several months to, sometimes, several years) than the summary proceedings. It should be used by the creditor insofar as the legal basis for rights are likely to lead to sufficiently credible objection by the debtor. In practice, the judge is led to examine whether the main criteria of validity of the credit are fulfilled: certainty (incontestable existence), liquidity (given or determinable amount) and due (date of payment has passed). This is the reason why this type of legal action is frequently described as legal action "in substance" and is different from summary legal action in the framework of which the court intervenes without ever undertaking in depth control of rights of the creditor, and only as a judge of the incontestable nature or clear nature of the credit.