The opening of safeguard or reorganisation proceedings does not automatically terminate a current agreement notwithstanding any contractual clause providing for termination.

Termination by a lessor

A commercial lessor may apply for termination or have a lease terminated for non-payment of rent three months after the opening judgment. However, if the sums due are paid before the expiry of this period, there is no reason to terminate the lease. The judge must check therefore whether the tenant has paid the sums due before the expiry of the three months period, or arguably before the day on which the judge's decision is made.

Two recent court decisions have considered the practical application of these rules.

Decisions

On 4 April 2024, a landlord of commercial premises obtained a ruling in the Paris Court of Appeal, that the lease should be terminated for payment default after the court ordered liquidation. The judge had previously authorised the sale of the debtor company's assets including the commercial lease. The lease was no longer transferable and the liquidator's request for authorisation to sell the business by mutual agreement was rejected and the order of the judge authorising the sale reversed.

On 12 June 2024, the Court of Cassation ruled that the landlord’s claim for rent after the opening of the insolvency proceedings had, after a payment by the tenant the day before the lessor’s application, been extinguished and the claim was rejected by the court. The question remains whether, if the payment had been made after the application, the judge would have ordered the termination of the lease.

Cour d’Appel de Paris, Pôle 5, chambre 9, 4 avril 2024 n° 23/13690

Chambre Commerciale financière et économique, 12 juin 2024 n°22-24.177

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.