Download Memorandum Date 10 March 2016 From Reinhard Dammann Direct

Memorandum
FROM
Reinhard Dammann
DATE
10 March 2016
DIRECT DIAL
+33 1 4405 5151
MACRON LAW MODIFIES THE JURISDICTION OF INSOLVENCY COURTS
The present note aims at giving a brief overview of the much anticipated reform introduced by
the law No. 2015-990 of 6 August 2015 (the "Macron law") concerning the jurisdiction of
insolvency courts.
This reform created specialized insolvency courts in order to provide for a more efficient
treatment of (i) large insolvency cases, especially in the context of cross border
proceedings and (ii) insolvency cases involving corporate groups, which will make forum
shopping possible to some extent for the first time in France.
The provisions of the Macron Law governing specialized insolvency courts will come into
force as from 1 March 2016.
I.
Jurisdiction of specialized insolvency courts for large cases
On 26 February 2016, a decree was issued, which published a list of 18 specialized insolvency
courts: Bobigny, Bordeaux, Dijon, Evry, Grenoble, Lyon, Marseille, Montpellier, Nanterre,
Nantes, Nice, Orléans, Paris, Poitiers, Rennes, Rouen, Toulouse and Tourcoing.
A. Scope
The specialized insolvency courts will have jurisdiction over companies which meet the
following thresholds:

Companies or holding companies of a corporate group which have 250 or more
employees and a net turnover of at least € 20 million; or

Companies or holding companies of a corporate group which have a net turnover of at
least € 40 million, regardless of the number of employees.
With respect to corporate groups, the Macron law provides for the jurisdiction of specialized
insolvency courts only for holding companies or intermediate holding companies taking into
consideration the companies that are directly or indirectly controlled or owned within the
meaning of article L. 233-1 and L. 233-3 of the French Commercial Code1. However, with
respect to subsidiaries, the turnover or the number or employees of a holding company are not
taken into account.
Thus, when insolvency proceedings have been opened against a subsidiary that does not
individually meet the thresholds, and subsequent insolvency proceedings are opened at the
level of a parent company that directly or indirectly controls or owns such a subsidiary, the
proceedings of the subsidiary will be automatically transferred to the specialized commercial
court which has jurisdiction over the parent company.
B. Proceedings

The specialized courts will have jurisdiction over the abovementioned companies with
respect to insolvency proceedings, i.e. safeguard (including the accelerated safeguard
proceedings and the accelerated financial safeguard proceedings), reorganization
(redressement judiciaire) and liquidation proceedings.

With respect to conciliation proceedings, the above subject-matter jurisdiction rules
will apply provided that the jurisdiction of the specialized court has been requested by
the Public Prosecutor or has been agreed upon by the president of such court.
Specialized insolvency courts will also have jurisdiction with respect to insolvency
proceedings falling within the scope of the European Insolvency Regulation
1346/2000 when the debtor's COMI is located in France. The Macron law does not
provide for the jurisdiction of specialized insolvency courts for secondary proceedings
where the debtor only has an establishment in France within the meaning of article
3§2 of the European Insolvency Regulation 1346/2000. This lack of provision seems
to be involuntary.
1
Article L. 233-1 states that when a company owns more than 50% of another company's capital, the second
company shall be regarded as a subsidiary of the first company.
Article L. 233-3 states that:
I) a company is deemed to control another company:
 when it directly or indirectly holds a fraction of the capital which gives it a majority of the voting
rights at that company's general meetings;
 when it alones holds a majority of the voting rights in that company by virtue of an agreement
entered into with other shareholders and this is not contrary to the company's interests;
 when it determines in fact, through the voting rights it holds, the decisions at that company's
general meetings;
 when it is a shareholder of that company and has the power to appoint or dismiss the majority of
that company's governing bodies.
II) a company is presumed to exercise such control when it directly or indirectly holds a fraction of the
voting rights which is higher than 40% and no other person holds a fraction larger than its own.

Finally, specialized insolvency courts will be competent with respect to proceedings
where the debtor is located outside the territorial scope of the European insolvency
regulation but has an establishment in France.
If a specialized insolvency court is declared competent with respect to a debtor which has its
registered office or an establishment in the jurisdiction of another insolvency court in France,
the Macron law provides that the president (or a delegated judge) of such court will
automatically become a member of the specialized insolvency court hearing the case.
C. Extension of the jurisdiction of specialized insolvency courts with respect
to companies which do not meet the legal thresholds
The Macron law now provides that the French Supreme Court or the Court of Appeal as the
case may be, can, if the interests at stake justify it (this is a very broad concept subject to the
appreciation of the judge) decide to refer the safeguard, reorganization or liquidation
proceedings to a specialized insolvency court, even though the debtor does not meet the
required thresholds in terms of turnover or number of employees.
II.
Jurisdiction of specialized insolvency courts for insolvency proceedings of
corporate groups
Insolvency proceedings of corporate groups within the meaning of article L. 233-1 and
L. 233-3 of the French Commercial Code2, can be opened by the court in the jurisdiction of
the registered office of any company of the group and this court will remain competent for the
opening of all other insolvency proceedings of the group.
Thus, the Macron law has introduced for the first time a forum shopping device since the
debtor or the creditor has the possibility to some extent to choose the competent specialized
insolvency court if the companies of a group have different registered offices.
As stated above, there is one exception to this rule. Insolvency proceedings of a subsidiary
which is not subject to an specialized insolvency court will be transferred to the court of the
controlling parent company if such a parent company is a subject to the jurisdiction of a
specialized court.
This exception does not apply to insolvency proceedings of subsidiaries which are subject to
the jurisdiction of specialized insolvency courts.
For instance if the holding company is located in Paris with a subsidiary located in Marseille,
then the debtor will be able to choose between the Marseille insolvency court or the Paris
insolvency court to open centralized insolvency proceedings for all the companies of the
group.,
2
see footnote 1
The specialized insolvency court can appoint a single judicial administrator and an official
receiver for all the insolvency proceedings of the group.
This reform is of the utmost importance in the international context since it permits to
concentrate all French insolvency proceedings in a cross-border context at one of the 19
insolvency specialized court for the whole French (sub)group.