FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
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(b) an assignment plan (plan de cession), under which the business and assets (including the Secured<br />
Property(ies) or the shares) of the Obligor would be assigned to a third party in consideration for a<br />
price, which given the nature of the companies, should not be significantly less than the value of the<br />
Secured Property(ies) or the shares (as relevant) since there would be no employees which would<br />
need to be taken over by an assignee and thereby justify a price lower than the value of the Secured<br />
Property(ies) or the shares (as relevant). The proceeds of sale would (after satisfaction of preferred<br />
claims) be applied toward the discharge of the obligations to the Issuer together with legal costs.<br />
Extension of Insolvency of an Obligor<br />
Directors and officers (dirigeants de fait ou de droit) of an insolvent company may be held personally<br />
liable for the debts of the company in case of mismanagement of the company’s business (faute de gestion)<br />
if they have used the company’s credit and assets in their own interest or have been found guilty of other<br />
serious acts of fraud or mismanagement. Depending on the level of mismanagement and the procedure<br />
chosen, the directors may be obliged to pay all or part of the company’s debt, as a result of separate<br />
proceedings against them (action en comblement de passif), or by way of an extension of the insolvency<br />
proceedings to their personal assets in the proceedings against the debtor.<br />
A court can also extend the insolvency of one entity in a group of companies to others in the same group<br />
or to the whole group if the court finds that the assets and liabilities of the group have been managed as<br />
a single unit. The French supreme court (Court de cassation) has established case-law for two types of<br />
situations which would entitle a court to extend bankruptcy proceedings of one company to another, even<br />
when the second company is not insolvent: (i) the comingling of assets and liabilities between the<br />
companies (confusion des patrimonies) and (ii) the fictitious nature of the companies (fictivité). The<br />
comingling of assets and liabilities between companies may result from a mixing (imbrication) of assets<br />
and liabilities resulting from a general disorder in their respective accounts, which renders the<br />
determination of the companies’ respective assets and liabilities impossible or form financial or business<br />
relationships between the relevant companies not at arms’ length conditions, such as transfers of assets by<br />
one company to another without proper or any consideration. In practice, there are no precise criteria by<br />
which a court may characterise the merging of assets and liabilities of two companies.<br />
Certain decisions have emphasised that bankruptcy proceedings of a company may only be extended to<br />
another company when the degree of inter-relationship of the aggregate assets and liabilities of the<br />
relevant companies means they are so inextricably linked that only a professional adviser could ascertain<br />
the actual respective asset/liability situation of the relevant companies. In this respect, it should be noted<br />
that French courts usually take into account both the accounting and the legal aspects of the<br />
inter-relationship between the companies.<br />
The bankruptcy proceedings of a company may also be extended where there are unusual transfers of<br />
assets from one company in favour of another if it could be argued that the two companies in reality form<br />
a single entity. This would be the case, for example, where a company is set up using the assets of another<br />
company in order for the company to shield, for example, its real estate assets from its creditors or where<br />
a company pays, without receiving an apparent corporate benefit, the debts of another company.<br />
There is no precise legal definition of the concept of what amounts to the fictitious nature of a company.<br />
It has been held to apply where a separate legal entity exists in form only. The company does not have<br />
autonomy and does not in practice exist as an independent legal entity despite the existence of an<br />
independent legal structure and its creation results from a fraudulent intent. Thus, a French court would<br />
be entitled to extend the bankruptcy of a company to another company on the basis of the fictitious nature<br />
of the company if, for example, the business executives were the same, the companies’ names were nearly<br />
identical, the companies’ registered offices were located in the same place, the companies had the same<br />
activities and/or interests or the letter-head of the companies was identical. As far as real estate<br />
transactions are concerned, the merging of assets and liabilities between companies (confusion des<br />
patrimonies) and the fictitious nature of a company (fictivité) may be merged issues. However, the<br />
existence of one or more of these elements is not sufficient to systematically establish the fictitious nature<br />
of a company, the establishment of which depends mainly on the facts, and is considered on a case by case<br />
basis.<br />
Enforcement of the Obligor Security<br />
Enforcement of Obligor Security<br />
Enforcement in respect of the assets of the Obligors can be by two routes: (a) an enforcement of the<br />
Mortgages and other security granted by the Borrowers and (b) enforcement of the Shares Pledges<br />
granted by the Parent Obligors.<br />
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