FRANCE Law and Practice Contributed by: Anne-Sophie Noury, Saam Golshani and Alicia Bali, White & Case
7. Duties and Liability of Directors and Officers 7.1 Duties of Directors There is no list of directors’ management duties. Courts apply a standard of reasonable and due care (formerly known as gestion en bon père de famille ). The directors need to act as ordinarily prudent direc - tors with typical professional care, diligence and effec - tiveness, placed in the same situation and in similar circumstances, and should take into account material facts that are specific to a case in order to make their decisions. Directors should always act in the best interest of the company and do not owe any other duties towards the shareholders and third parties, such as creditors (no “shift” in directors’ duties occurs under French law when a company is on the verge of insolvency). Despite there being no shift of directors’ duties under French law, company directors are still required by law to file for appropriate in- or out-of-court proceedings within 45 days of the date of cash flow insolvency. 7.2 Personal Liability of Directors Directors, managers and officers of French commer - cial companies (whether listed or unlisted) should always act in the company’s corporate interest to avoid the risk of civil or potentially criminal liability. When a company becomes financially distressed, and especially when it approaches the state of cash flow insolvency ( cessation des paiements ), the need to carefully consider any source of liability (and related possible cash contributions) may become particularly acute. Accordingly, directors, managers and officers of these companies should follow certain relevant guidelines and practical steps in order to mitigate the risk of liability. In the context of judicial liquidation proceedings ( liqui- dation judiciaire ), courts may decide that all or part of the liabilities of the company shall be borne by all or part of the directors, provided that the following three conditions are met.
6.3 Applicable Law The EU Insolvency Regulation applies within the EU (except in Denmark) to public insolvency proceedings, as defined therein and listed in its Annex A (including safeguard, accelerated safeguard, judicial reorganisa - tion and judicial liquidation proceedings). It provides that the courts of the member state in which a debtor’s COMI is situated have jurisdiction to commence the main insolvency proceedings relating to such debtor. The determination of a debtor’s COMI is a question of fact on which the courts of the different member states may have differing, and even conflicting, views. 6.4 Recognition and Enforceability In countries where the EU Insolvency Regulation does not apply and insolvency judgments are made in a jurisdiction that does not have a treaty with France, recognition will no longer be automatic and will instead be subject to a court declaration of enforce - ability ( exequatur ). 6.5 Co-Ordination in Cross-Border Cases France has not adopted the UNCITRAL Model Law on Cross-Border Insolvency (1997) (Model Law) (in con - trast to the UK). However, the EU Insolvency Regu - lation has introduced some provisions to facilitate the co-ordination of insolvency proceedings opened against companies that are part of the same group. 6.6 Foreign Creditors Foreign creditors benefit from the following specific provisions: • an additional delay of two months to file their claims from the date of publication of the open - ing judgment in BODACC (four months for French creditors); and • in accordance with the EU Insolvency Regula - tion, the opening of insolvency proceedings in France will not affect the rights in rem of creditors or third parties in respect of tangible or intangible – or movable or immovable – assets, nor specific assets and collections of indefinite assets as a whole that change from time to time, belong to the debtor and are situated within the territory of another member state at the time of the opening of proceedings.
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