Distribution Priorities for Pre-Commencement Creditors under Judicial Liquidation in France

Abstract

One of the most problematic issues of the bankruptcy procedure is a fair distribution of the cost of the debtor’s assets among the creditors under the liquidation of debtor. The issue becomes particularly challenging for foreign creditors who often lack sufficient knowledge about the legal regulation of bankruptcy abroad. In this regard, it seems urgent to tackle the question of distribution priorities in foreign legal systems. In this article, the author examines the legislation and jurisprudence of France regarding the order of pre-commencement creditors’ claims settlement. Currently, this branch of law has seen a number of reforms which require exploration. The most part of Russian studies devoted to bankruptcy proceedings in France do not cover this field. In this study, the author describes the differences between the pre-commencement and post-commencement creditors, as well as considers the conditions for recognizing several claims as privileged for the purposes of distributing property of the debtor. Further, the author examines in detail the sequence established by the legislator concerning the distribution priorities as to pre-commencement creditors, depending on the nature of the property (movable or immovable) to be distributed. Finally, the paper presents the methods, which allow creditors to get their claims satisfied beyond the statutory priority, that is, in a preferential order. Based on the study the author concludes that there exists an economic component of the legal regulation of bankruptcy in France. By introducing certain institutions, the legislator can regulate (stimulate or repress) the activity of several businesses. At the same time, since under liquidation the purpose of the bankruptcy procedure is primarily an equitable distribution of the value of the debtor’s assets among creditors, the priority of their claims appears to be representative one for this branch of the law of a particular state. The results of this research and the conclusions may be used both by practicing lawyers to determine the status of a particular claim against the debtor and by researchers in the study of various approaches to the concept and the legal regime of pre-commencement claims.