The Court of Cassation has handed down a ruling that clarifies the issue of whether or not a current account is closed in the event of winding-up proceeding or liquidation. It now rules that the opening or pronouncement of a winding-up proceeding does not result in the closure of the debtor’s current account. (Court of Cassation, Civil Division, Commercial Division, 11 September 2024, 23-12.695, Published in the Bulletin)

A company was placed in receivership and then in liquidation. The bank, (the company’s creditor) then turned to the guarantor to request payment of the debit balance of the current account.

The central issue in this dispute was whether or not the current account had been closed solely as a result of the winding-up proceeding.

A previous ruling had held that a company’s current account was closed as a result of its being placed in liquidation. The ruling concluded that the debit balance on this account was immediately due and payable to the guarantor and that a bank could therefore immediately demand payment from the guarantor. (Com., 13 December 2016, appeal no. 14-16.037, Bull.2016, IV, no. 156).

In its decision of 11 September 2024, the Cour de cassation reversed this previous solution.
Firstly, the Court of Cassation points out that ‘ according to Article L. 641-11-1, I, paragraph 1, introduced into the French Commercial Code by Order no. 2008-1345 of 18 December 2008, notwithstanding any legal provision or contractual clause, no indivisibility, termination or resolution of a current contract may result solely from the opening or pronouncement of a winding-up proceeding ’ .

The Cour de cassation deduced from this text that a current account that had not been closed prior to the opening of the liquidation proceedings constituted an ongoing contract, so that in the absence of a legal provision to the contrary, the aforementioned texts were applicable to it.

The Court of Cassation therefore abandoned its previous case law, ruling that the opening or pronouncement of a judicial liquidation does not result in the closure of the debtor’s current account.

This solution has an impact on personal guarantees. If the current account is not closed before the judicial liquidation, the debit balance of this account is still not due. It cannot therefore be claimed from the guarantor.

By reverting in clear and explicit terms to its much-criticised 2016 decision, the Cour de cassation has adopted a position that is more favourable to guarantors.

Banks will therefore have to be careful to close the current account if they wish to take legal action against the guarantor.

By Olivier Vibert, Lawyer, KBESTAN.