An idea on its own cannot be the subject of protection under trade-mark or patent law. However, actions can be taken in French law to prevent competitors from usurping or slavishly following an idea.

In French law, there is a specific concept of a fonds de commerce. Frequently, when English-speaking lawyers refer to an asset deal, in French law, this will mean the sale of a fonds de commerce. The key defining component of a going concern or fonds de commerce is the customer-base or clientele.

Although there is a view that the interests of the company are simply those of its shareholders, there is a general recognition that the French company has its own distinct corporate interest. Thus when a company engages in a particular transaction it is important to verify that those commitments and duties are in the corporate interest of the company itself. The French courts are attentive to the corporate interest in particular when security is given by a company over its assets ostensibly for the benefit of a third party or notably a group to which the company belongs.

In principle the shareholders are only liable to the extent of their contribution to the share capital given the limited liability of most commercial companies. However a shareholder in a limited liability company could nevertheless become liable if the shareholder has de facto become involved in the management company and that has led to the insolvency

The fact that a company becomes insolvent does not mean that a director would automatically become liable. Such liability would only arise if the director has taken unusual steps or actions or entered unusual transactions which have worsened the financial position of the company. There would normally have to be some form of management negligence.

The commercial court considers that during the period running up to the filing for insolvency the management may have undertaken certain actions either in their own personal interests or for example to delay insolvency. Such actions may create preferential situations between creditors who should be treated on an equal footing. Transactions which occurred during this period are thus susceptible to be overturned by the court if they are not in the corporate interest of the debtor company.

The Commercial Court can summon the director or CEO to a meeting in order to discuss the financial position and possible remedial measures.

The company can request the appointment of an agent appointed by the court to assist with negotiations with certain creditors. The advantage is that the process would be confidential and flexible.

Another mechanism would be a conciliation procedure which is more formal but which would enable the company to try to reach a settlement with its creditors.

There are three broad types of insolvency procedure in France:

• The sauvegarde or “safeguard” procedure: the debtor must be faced with financial difficulties but not be insolvent. The purpose is to pre-empt a worsening of the situation.
• The receivership (redressement) procedure, in which the company is insolvent but there may chances of recovery
• The liquidation procedure, in which the company cannot be turned around.

The delegation of powers is frequent given that the CEO may not wish to bear liability for all aspects of the company’s business. It is recommended that the delegation should be in writing and clearly setting out the scope of the powers transferred. The delegated powers should fall within the skills-set of the person receiving the power.

In French, the abus de biens sociaux is a criminal offence involving the misappropriation of corporate assets or monies for personal use by a director.