The new possibility for company directors to submit an offer to acquire the assets of the company they manage

In the context of the acquisition of a solvent (in bonis) business, the offeror purchases it together with its liabilities (tax and social security debts, claims, loans, etc.) and its assets.

In matters of judicial reorganisation and judicial liquidation, the rule is different, since the purchaser may submit an offer to acquire the assets alone, that is to say only the means of production, the business goodwill, the equipment, the premises and the inventory.

The purchaser will not take over the liabilities of the failing business (save for rare exceptions — for example the repayment of a loan granted to the business to enable the financing of an asset transferred to the assignee).

Thus, the implementation of a transfer plan for a business in cessation of payments aims (i) to ensure the continuation of activities capable of autonomous operation, (ii) the preservation of all or part of the jobs attached to them, and (iii) the discharge of liabilities.

As regards the identity of the purchaser, there is a prohibition in principle laid down in Article L 642-3 of the Commercial Code which prevents, for a period of 5 years, the de jure or de facto director of the business under insolvency proceedings from submitting an acquisition offer.

There was nevertheless an exception to this rule, very rarely applied in practice, allowing the director to make an acquisition offer, upon application by the public prosecutor and by a “specially reasoned” judgment of the Court.

Henceforth, in order to preserve employment and cope with the unprecedented health crisis currently underway, the Government decided temporarily to relax the prohibition laid down by Article L 642-3 of the Commercial Code by authorising, subject to conditions, the transfer of all or part of the assets of a business in difficulty to the director, following an application made by the latter or by the court-appointed administrator.

This option is expressly provided for in Article 7 of Order no. 2020-596 of 20 May 2020 on the adaptation of the rules relating to business difficulties to the consequences of the covid-19 epidemic, and the temporal scope of this derogation currently extends from 20 May 2020 to 31 December 2020.

This new departure from the Commercial Code is justified, according to the President of the Republic’s report relating to the aforementioned order, by “the current economic difficulties faced by businesses, which justify facilitating the transfer of businesses in difficulty, provided they are viable and where the debtor is not in a position to ensure the continuation of the business itself within the framework of a safeguard or reorganisation plan”.

Indeed, owing to a strong intuitu personae, the director of the failing business is very often the person best placed to ensure the survival of the business and to preserve the jobs attached to it, and the order of 20 May 2020 thus grants him a second chance.

However, the Court will naturally require the director to provide guarantees as to the continuation of the business and the preservation of jobs, and the President of the Republic’s report does not fail to specify that “the court and the public prosecutor will ensure that the transfer plan is not merely an opportunity for the debtor to wipe out his debts and reduce his workforce by submitting, himself or through an intermediary, an acquisition offer”.

Finally, the examination of the application of the director or of the court-appointed administrator by the public prosecutor is naturally maintained during the hearing for the examination of the acquisition offers.

Recently, a judgment of the Montpellier Commercial Court handed down on 19 June 2020 applied this new rule in the context of the judicial reorganisation of the company ORCHESTRA (children’s clothing), accepting the offer of the former director and founder.

In that case, there were two competing offers: the offer put forward by a foreign investor and minority shareholder, which was favoured by the staff representatives as it was deemed more solvent, and that of another company composed of various investors and controlled by the former director of ORCHESTRA.

In the context of the judicial reorganisation of the company CAMAÏEU, the acquisition offer of the former director did not, by contrast, meet with the same success, since the Lille Commercial Court, by judgment dated 17 August 2020, preferred the acquisition offer submitted by the ready-to-wear retailer to Financière Immobilière Bordelaise, which made it possible to safeguard three quarters of the jobs.