Vol 22 (2025) - Issue 3

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The ‘Confusion de Patrimoines’, a French Particularity Which Enables the Extension of Ongoing Insolvency Proceedings to Other Companies, Including Abroad, Subject However to Conditions Set by the European Court of Justice for Extensions in the EU

Synopsis
The concept of 'confusion de patrimoines' has existed in French insolvency law for decades. Initially shaped in courtrooms, it was codified in 2005. In a nutshell, in case of 'confusion des patrimoines' (literally meaning intermingling of assets) court appointed administrators and/or liquidators can request an extension of ongoing insolvency proceedings to other corporate entities. The courts permit this in limited situations where (i) the
corporate entities in question are fictitious – this is a fairly rare occurrence or (ii) when the accounts of the companies (in insolvency and against which extension is sought) are so intertwined that it becomes impossible to determine to which company the assets and debts truly belong ('indéterminabilité de la consistance patrimoniale'), or when they have 'abnormal' financial relationships ('des relations financières anormales'). Abnormal financial relationships are generally characterized by a transfer of assets or payments between companies with no or inadequate consideration.
In a recent ruling (the 'Ruling'), the French Supreme Court provided a useful reminder of the rules established by EU regulations governing the determining criteria of a company's centre of main interests ('COMI') in case of extension of insolvency proceedings commenced in France to a company situated in another EU country.