FRANCE Law and Practice Contributed by: Anne-Sophie Noury, Saam Golshani and Alicia Bali, White & Case
5.4 The Position of Shareholders and Creditors in Liquidation Pursuant to French law, pre-insolvency attachments by the debtor may be frustrated if they result from pre - ventive attachments that have not been converted to definitive attachments prior to the opening judgment. Regarding attachment of title, creditors who benefit from a valid retention of title clause may be able to exercise their repossession right if the good subject to the clause remains unpaid and is part of the debtor’s estate on the date of the opening judgment. How - ever, subtleties do exist when it comes to enforcing such right to repossess; for instance, if the contract containing the retention of title clause has not been published on a public registry, the creditor will have to file a proof of property ownership within three months of the publication of the opening judgment, in addi - tion to his or her proof of claim. Failing this, his or her right of property will become unenforceable against the liquidation estate. With regard to set-offs, French law provides that the opening of insolvency proceedings entails an auto - matic suspension, which prohibits any payment of claims predating the opening of proceedings, includ - ing by way of set-off; exceptionally, set-offs may be made between related claims ( compensation de cré- ances connexes ). Under French law, claims are con - sidered to be related if they are of the same nature (contractual or tortious) and arise from the same con - tract or set of contracts, or from the same event. Even if the creditor holds claims that can be qualified as related, he or she is still obliged to file a proof of claim, failing which his or her claims will be unenforceable such that it will be impossible to set off such claims. Creditors, secured and unsecured, are not entitled to disrupt the liquidation proceedings – they could ask the bankruptcy judge to be appointed as a proceeding supervisor ( contrôleur ), but such appointment does not vest the appointed creditor with significant rights regarding the implementation of the liquidation pro - ceeding. In addition, creditors, secured and unsecured, will remain subject to an automatic stay. By way of excep - tion, creditors benefitting from pledges are entitled to
ask for the judicial assignment of their pledges, which would result in an exclusive right in the proceeds of the sale of the pledge asset. Regarding rights, remedies and liens against third par - ties, they are not subject to any automatic stay, but the automatic acceleration resulting from the opening judgment will not be binding on guarantors who are natural persons. 6. Cross-Border Issues in Insolvency 6.1 Sources of International Insolvency Law The principal legislation that applies to cross-border restructuring and insolvency cases involving France and other EU member states is European Regula - tion 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast), as amended, in particular by Regulation (EU) 2018/946 of the European Parliament and of the Council of 4 July 2018 (the EU Insolvency Regulation). When the other country is an EU member state (excluding Denmark), the European texts applicable in this matter – particularly the European Regulation – are based on the principle of the immediate and auto - matic recognition of decisions relating to the opening, running and closing of insolvency proceedings in all other EU member states, without any special proce - dure or declaration of enforceability being required. There are few defences available that could prevent enforcement (eg, public policy incompatibility). 6.2 Jurisdiction The main rules under French insolvency law determin - ing which jurisdiction’s decisions, rulings or laws are paramount are those provided by the EU Insolvency Regulation, with the main test being the centre of main interests (COMI). The COMI is the place where the debtor conducts the administration of its interests on a regular basis, and which is ascertainable by third parties. The presump - tion that the COMI is placed at the registered office will not apply if the registered office has changed in the preceding months.
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