Insolvency Law at Mayotte (France)
Insolvency Law in Mayotte (France)
Mayotte is an overseas department of France, and as such, insolvency law in Mayotte is largely governed by French national law, specifically the French Commercial Code (Code de commerce), along with provisions relevant to overseas territories. In the case of insolvency, Mayotte follows the same general principles and rules applicable in mainland France, though with some regional adaptations.
Here's an overview of the insolvency law framework in Mayotte:
1. Governing Legislation
French Commercial Code (Code de commerce): The primary legislation governing insolvency in Mayotte, just as it does in mainland France, is the French Commercial Code, specifically Book VI, which covers insolvency procedures.
Mayotte, as an overseas department, is subject to French national law but may have certain administrative procedures specific to its jurisdiction.
2. Types of Insolvency Procedures
French insolvency law provides for several types of procedures, depending on the situation of the debtor (whether a company or an individual). The procedures aim to either restructure the business (if feasible) or liquidate it if it is no longer viable.
a) Redressement Judiciaire (Judicial Reorganization)
This procedure is available when a company is facing financial difficulties but still has the potential to continue its activities.
Judicial reorganization is designed to help the business recover by restructuring its debts and operations under court supervision.
A court-appointed administrator assists in developing a reorganization plan that must be approved by the court and creditors. The goal is to enable the company to return to solvency while paying off its debts over time.
b) Liquidation Judiciaire (Judicial Liquidation)
Liquidation is initiated when a company is insolvent and cannot be reorganized. The company's assets are sold, and proceeds are distributed to creditors in a predefined order of priority.
The procedure is supervised by a liquidator, appointed by the court, who takes control of the company’s assets and ensures that creditors are paid in the legal order of priority.
This procedure leads to the dissolution of the company.
c) Sauvegarde (Safeguard Procedure)
A safeguard procedure is a preventive measure that is available to companies that are not yet insolvent but are in financial difficulty and at risk of becoming insolvent.
This procedure allows the company to restructure its debt before becoming insolvent, under court supervision. It allows businesses to negotiate with creditors without the immediate threat of liquidation or judicial reorganization.
The safeguard procedure helps businesses survive by restructuring debt, renegotiating contracts, and stabilizing operations.
d) Liquidation des Biens (Liquidation of Assets for Individuals)
For individuals, a simplified liquidation procedure can be initiated if they are unable to pay their debts. This process allows for the liquidation of the individual’s assets to satisfy creditors.
This procedure is overseen by a court-appointed trustee, and the individual may be able to discharge remaining debts after a specified period, depending on their circumstances.
3. Initiation of Insolvency Procedures
Insolvency proceedings can be initiated by the debtor (voluntary filing) or by creditors (involuntary filing) if the debtor is unable to meet their financial obligations.
A debtor company or individual must be in a state of cessation des paiements (cessation of payments), meaning that they are unable to pay their due debts with available assets.
In France, the law requires companies to file for insolvency proceedings within 45 days of the cessation of payments. Failure to do so may result in a court-imposed penalty.
4. Role of the Court
The commercial court (tribunal de commerce) in Mayotte handles insolvency proceedings for businesses. The court is responsible for reviewing the insolvency petition, deciding on the appropriate procedure (reorganization or liquidation), and overseeing the process.
In the case of individual insolvency, the judicial court (tribunal judiciaire) has jurisdiction.
The court appoints an administrator or liquidator and supervises the implementation of the reorganization plan or liquidation process.
5. Insolvency Practitioners
Insolvency practitioners in Mayotte, known as administrators or liquidators, play a key role in managing insolvency proceedings. They are appointed by the court to take control of the debtor’s assets and oversee the restructuring or liquidation process.
These professionals are typically qualified experts, often accountants or lawyers, with experience in managing insolvency cases.
6. Creditor Claims and Priority
Creditors are paid in a specified order of priority, as outlined by the French Commercial Code:
Secured creditors (those holding collateral or guarantees for their debts) are paid first.
Preferred creditors include employees’ wages and social security obligations (e.g., taxes and employee benefits).
Unsecured creditors are paid after secured and preferred creditors.
Equity holders/shareholders (if any assets remain after creditors are paid) are the last to receive any distribution.
7. Cross-Border Insolvency
Mayotte, as part of France, follows the European Union’s cross-border insolvency regulations under the EU Insolvency Regulation. This means that insolvency proceedings in Mayotte can be recognized and enforced across other EU jurisdictions, subject to the rules of international recognition and cooperation in insolvency.
However, Mayotte does not yet have a specific legal framework for non-EU cross-border insolvency cases.
8. Director Liability
Directors and officers of companies in insolvency can be held personally liable if they engage in fraudulent or wrongful trading. This includes situations where directors continue trading knowing the company is insolvent and fail to file for insolvency proceedings on time.
Directors may also be held liable for actions that disadvantage creditors, such as preferential payments to certain creditors or asset stripping.
9. Challenges in Insolvency in Mayotte
One of the challenges for businesses facing insolvency in Mayotte is the administrative burden. Although the insolvency framework is consistent with mainland France, the island’s legal system can face delays, particularly due to limited local resources.
There is also a lack of insolvency professionals compared to mainland France, which can slow the resolution of cases.
Cross-border insolvency issues may arise, particularly in cases involving creditors or companies based outside the EU, where Mayotte’s integration into EU laws may not always be sufficient to resolve international disputes efficiently.
10. Recent Reforms and Future Outlook
Mayotte, as part of France, follows reforms implemented at the national level. Recent changes to French insolvency law have aimed to simplify the reorganization process, make it more accessible to struggling businesses, and improve outcomes for creditors and debtors.
Mayotte's insolvency law system is expected to evolve in parallel with France’s broader legal reforms aimed at improving the efficiency of insolvency proceedings, facilitating business recovery, and enhancing creditor protection.
Summary
In Mayotte, insolvency law is largely governed by the French Commercial Code, with the same principles and procedures applied as in mainland France. Companies facing financial difficulties can choose from procedures like reorganization (judicial redressement) or liquidation (judicial liquidation), depending on their viability. Mayotte follows French law on creditor priority, the appointment of administrators, and cross-border insolvency, making it a part of France’s broader insolvency system. However, challenges in local administrative capacity and the enforcement of cross-border insolvency can create difficulties.
RELATED Blog
0 comments