LAW PRIOR TO JANUARY 1, 2006
Personal bankruptcy is a prohibition measure that can be pronounced, in accordance with article L. 625-1. In the context of a judicial reorganization or liquidation procedure is opened, with regard to:
1o persons individuals exercising the profession of trader, farmer or registered in the directory of trades;
2o natural persons, de jure or de facto managers of legal persons having an economic activity;
3o individuals, permanent representatives of legal entities, managers of legal entities defined in 2o above.
Personal bankruptcy entails a ban on directing, managing, administering or controlling, directly or indirectly, any commercial or craft enterprise, any agricultural operation and any legal person having an economic activity (Art. L. 625-2.)
It also entails the prohibitions. and forfeitures applicable to persons who were declared bankrupt within the meaning given to this term prior to January 1, 1968.
At any stage of the procedure, the court may (Art. L. 625-3) pronounce the personal bankruptcy of any natural person trader, of any farmer or of any person registered in the register of trades against whom one of the following facts:
1o To have pursued abusively a loss-making operation which could only lead to the cessation of payments;
2o have failed to keep accounts in accordance with legal provisions or have removed all or part of the accounting documents;
3o Having embezzled or concealed all or part of the assets or fraudulently increased his liabilities.
It can declare the personal bankruptcy of any manager, de jure or de facto, remunerated or not, of a legal person who has committed one of the acts mentioned in article L. 624-5. to know
1o Have exercised a commercial, craft or agricultural activity or a management or administrative function of a legal person contrary to a prohibition provided by law;
2o To have, with the intention of avoiding or delaying the opening of the receivership or liquidation proceedings, made purchases with a view to resale below the price or employed ruinous means to obtain funds;
3o Have subscribed, on behalf of others, without consideration, to commitments deemed too important at the time of their conclusion, having regard to the situation of the company or the legal person;
4o Have paid or have been paid, after cessation of payments and with full knowledge thereof,
5o Failure to report the state of suspension of payments within fifteen days.
The court can pronounce the personal bankruptcy of the leader of the legal person who has not paid the debts of this one charged to him.
In the cases provided for in Articles L. 625-3 to L. 625-6, the court automatically seizes or is seized by the administrator, the representative of creditors, the liquidator or the public prosecutor.
In the cases provided for in Articles L. 625-3 to L. 625-6, the court may pronounce, in place of personal bankruptcy, the prohibition to direct, manage, administer or control, directly or indirectly, either any company commercial or artisanal, any agricultural operation and any legal person, or one or more of these.
The prohibition mentioned in the first paragraph may also be pronounced against any person mentioned in Article L. 625-1 who, in bad faith, has not provided the creditors’ representative with the complete and certified list of his creditors and the amount of its debts within eight days of the opening judgment.
The voting rights of executives affected by personal bankruptcy or by the prohibition provided for in Article L. 625-8 are exercised in meetings of legal persons subject to a judicial reorganization or liquidation procedure by an agent appointed by the court for this purpose, at the request of the administrator, liquidator or commissioner for the execution of the plan.
The court can order these managers or some of them to transfer their shares or shares in the legal person or order their forced transfer through the care of a legal representative, if necessary after expertise. The proceeds of the sale are allocated to the payment of the share of social debts in the event that these debts have been charged to the directors.
When the court declares personal bankruptcy or the prohibition provided for in article L. 625-8, it fixes the duration of the measure, which may not be less than five years. He can order the provisional execution of his decision. Disqualifications and prohibitions cease automatically at the fixed term, without any need for the pronouncement of a judgment.
The closing judgment for the extinction of liabilities restores the business manager or the directors of the legal person in all their rights. He exempts them or falls under all disqualifications and prohibitions.
In all cases, the interested party can ask the court to relieve him, in whole or in part, of the forfeitures and prohibitions if he has made a sufficient contribution to the payment of the liabilities.
When there is a total increase in disqualifications and prohibitions, the court’s decision entails rehabilitation.