La Revue Squire

Rédigé par Antoine Adeline le Vendredi 20 Janvier 2006 à 15:39

Inspired by the American bankruptcy law known as “Chapter 11”, the “law to safeguard businesses” is aimed at helping businesses to avoid financial difficulties and to allow companies in bankruptcy to avoid liquidation.

The law of 1985

According to statistics, the law of 1985 did not have the desired results – more than 50,000 businesses disappear every year.

The fact that the legislation of 25 January 1985, updated in 1994, lacked efficiency and was revealed to be incongruous with the actual economic context (globalisation, deindustrialisation, RTT) can also be attributed to the shortcomings of company directors.


The objective of the new text is to encourage research into the handling of the difficulties of companies. A declaration of suspension of payments is not an automatic indication that a company will be subject to the opening of a collective procedure.

The law of 1985 set out a wide variety of procedures which at times made the situation unnecessarily complex.

In the search for a solution that would allow the company to continue operating, the law considers that “the debtor is better placed to appreciate which procedure is better adapted to the situation”. During a set period, the director has the following choices: the ad hoc mandate, reconciliation, or the legal route.


Rédigé par guillaume taillandier le Vendredi 20 Janvier 2006 à 15:36


Rédigé par Antoine Adeline le Vendredi 20 Janvier 2006 à 15:35

In May 2005, we reported that the appointment of administrators by the English High Court in respect of SAS Rover France was held by the French Commercial Court to be a valid appointment pursuant to the EC Regulation Insolvency Proceedings (1346/2000) ("Regulation").

Notwithstanding the very robust and commercially grounded decision of the Commercial Court of Nanterre, the appointment of the English administrators in respect of SAS Rover France has been the subject of an appeal by the French Attorney General who pleaded several articles under the Regulation. The decision of the French court of appeal has been handed down on 15 december; it is another success for Hammonds Hausmann and a further endorsement of the application of the Regulation by the court of appeal in France.

The Appeal

The Attorney General brought his appeal against the application of the English administration order on three main grounds:

The English administration order that determined that the centre of main interests of SAS Rover France to be in England was invalid.

The application of English insolvency procedure, in particular with regard to the rights of the French employees, was contrary to French public policy.

There should be a secondary insolvency procedure opened in France in respect of SAS Rover France.


Rédigé par Agnès Bérenger le Vendredi 20 Janvier 2006 à 15:32

Jacques Chirac’s desire to implement a system of court class action to enable consumers to combat the abusive practices of certain industries should have been finalised by the beginning of this year by a draft law, but it was delayed.

The parties involved in the draft - consumer associations and lawyers - point out that the procedure will give small complainants the ability to be heard in the context of a unified complaint.

While a class action procedure already exists in France, the “joined action” it is not widely used because of its complexity. It involves collecting all the claims of the complainants which is a difficult task to manage.

Up until now companies engaging in abusive practices did not have much to fear from the French legal system but the situation could change with the draft law.

Critics of the law, namely the Medef, say that class action is an American menace and that more often than not the proceedings benefit the lawyers and not the complainants.

It could be that the ethical code for lawyers in France, which states that lawyers may not be remunerated exclusively on the result of a case, would prevent lawyers from unfairly profiting from class action lawsuits.

A working group of the national bar council wrote a report to the minister of justice which was favourable to the introduction of a new form of class action lawsuit. The report pointed out that for the new kind of lawsuit to be successful the lawyers’ ethical code must be flexible on two points: the prohibition on soliciting business and remuneration of lawyers.

However, a working group consisting of Medef representatives, consumer associations and lawyers was not in favour of introducing the procedure. In a report given to government ministers and published on 19 December, the group proposed three alternatives:

- a simple adjustment to the joined action;
- a collective action similar to an American class action suit where the collective action would be lodged by a group of consumers constituted of people who expressly wish to be included in the action or a collective action including all consumers except those who expressly wish to be excluded;
- an action led by an association following which the consumers could act individually to obtain compensation.

A new consultation is being launched and will continue until 1 March. After this date the government must deposit the draft law.

Contentieux - Procedure

Rédigé par Elisa Bernad le Vendredi 20 Janvier 2006 à 15:29

Order n° 2005-893 of 2 August 2005

The media has greeted the arrival of this “new product” with scepticism – commenting that the work market place is already saturated with a number of different types of contracts of whose names, more than the content, change according to the government’s wishes.

However, it must be admitted that the “nouvelle embauche” contract is different from other contracts. Although it is only intended for businesses with 20 or less employees, it nevertheless concerns all contracts of indeterminate length in so far as the contract contains a trial period of 2 years which can be broken by the employer at any time (subject to respecting a notice period of 15 or 30 days) and without having to give any reason.

The employer does not have complete freedom to dismiss employees at will. The fact that the contract can be broken at any time does not exonerate the employer from respecting the rights of his employees. Similarly, a protected employee’s contract cannot be terminated without prior authorisation of the labor inspection.

The “nouvelle embauche” contract does not eliminate the risk of litigation where the employer terminates the contract without cause. It is anticipated that employees and even judges will pay more attention to whether or not the termination is founded or motivated by reasons related to an employee’s private life, political opinions or is discriminating (for example on grounds of religious beliefs or sexual orientation ).

This order is not a blank cheque for companies. Any termination of an employment contract that is not founded on professional inadequacy, disciplinary or economic grounds could incite employees to seek justice from the employment tribunals.

The fact that there does not have to be a reason for terminating the employment contract does not mean that there is no risk of litigation from employees. It is the employer’s responsibility to ensure that they effectively manage the employment contract. An employee whose contract has been terminated after nearly two years of service will benefit from the required 30 days notice period but it is advisable in any case to ensure that there is some provision in the contract relating to the end of the long trial period. Particular attention should be paid to employees on the “nouvelle embauche” contract and employers should ensure that periodic evaluations are in place between the employer and employee so that both parties are fully aware of the implications of the contract.

It may be that the “nouvelle embauche” contract is part of the response to unemployment but it will not allow companies to dispense with regularly training and evaluation of their employees. Employers who are not mindful of the implications of the new legislation could be caught out and indeed the first claim began one month after the introduction of the contract.


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