FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
of the works council. However, a case-by-case analysis should be done in order to assess the content and extent of the proposed guarantee or security in order to determine whether or not a prior consultation should be undertaken. Pur - suant to Article L2312-8 of the French Labour Code, the works council must be informed and consulted on matters relating to the organisa - tion, management and general business of the company. This Article is usually interpreted broadly by French courts. In addition, the courts tend to consider that any decision that may have a significant impact on the company and on its employees requires a prior consultation of the works council. In the context of any guarantee or security, the implementation of which would have an impact on the general business of the company and potentially affect its employees, the prior consultation of the works council should be considered. Any security granted by shareholders over the shares of the company, the implementation of which may result in a change of control of or by the company over the shares of its subsidiaries would require a prior consultation of the works council pursuant to Article L2312-8 of the French Labour Code. If a prior consultation is required, the works council should provide its opinion before the guarantee or the security is granted. It should be noted that a negative opinion will not prevent the company from taking the decision to grant the relevant guarantee or security. Failure to comply with the above information and consultation obligations can give rise to criminal sanctions against the legal representative of the company. In addition, a judge could decide to suspend the decision taken by the company until the completion of the consultation process. Hardening periods apply to the granting of security and guarantees in France. The insol - vency date, defined as the date when the
debtor becomes unable to pay its debts out of its available assets as they fall due, is gener - ally deemed to be the date of the court deci - sion commencing the judicial reorganisation or judicial liquidation proceedings. However, in the decision commencing judicial reorganisation or liquidation proceedings or in a subsequent deci - sion, a court may determine that the insolvency date is an earlier date, up to 18 months prior to the court decision commencing the proceed - ings. The insolvency date is important because it marks the beginning of the “hardening period”. Certain transactions entered into by the debtor during the hardening period are, by law, void or voidable. Void transactions include transactions or pay - ments entered into during the hardening period that may constitute voluntary preferences for the benefit of some creditors to the detriment of other creditors. These include transfers of assets for no consideration, contracts under which the reciprocal obligations of the debtor significantly exceed those of the other party, payments of debts not due at the time of payment, pay - ments made other than in the ordinary course of business, security granted for debts previ - ously incurred and provisional measures (unless the right of attachment or seizure predates the insolvency date), the transfer of any assets or rights to a French law trust arrangement (fiduci - ary) (unless such transfer is made as a security for a debt incurred at the same time) and any amendment to a French fiduciary that dedicates assets or rights to a guarantee of prior debts. Voidable transactions include transactions entered into, payments made when due or cer - tain provisional and final attachment measures, in each case, if such actions are taken after the debtor was declared bankrupt and the party
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