THE ROLE OF THE SYNDIC IN THE LIQUIDATION PROCEEDINGS
SARAH SEFFORI – DOCTORANT
Legislative framework unquestionably reflects the degree of welfare of every Society and constitute the barometer of civilization of every State insofar as the adoption of modern and developed laws makes it possible to respond to the aspirations of the people and to achieve the economic, social, environmental and societal objectives.
For this reason, the Moroccan legislator has initiated the process of modernizing its legal arsenal, in particular trade law, which has spread over a long period, from 12 August 1913 until the promulgation of Law 95-15 on the Commercial Code.
In this wake, it should be emphasized that this overhaul has made it possible to harmonize Moroccan legal artillery with many laws in comparative law in the context of the globalization of the economy and the international standardization of laws and regulations international commercial.
In fact, the Moroccan Commercial Code dealt with major problems, in this case insolvency procedures, which act as an alternative to bankruptcy law, which is considered vulnerable and more restrictive, in relation to the new contributions of Book V, which preserves the interests of all stakeholders in this case (i) the interests of the enterprise in the economic tissue, since the latter makes it possible to provide livelihoods for its economic and social partners, as well as the rights of creditors which may be linked to other enterprises.
For example, Law 17-73, which came into force following the revision of Book V of the Commercial Code (May 1998), introduced a variety of insolvency procedures, namely:
- an alert procedure, in this case the internal and external prevention of difficulties likely to compromise the continuity of the company’s operations;
- a safeguard procedure through the preparation of a safeguard plan submitted to the court for approval;
- a judicial rehabilitation procedure through the implementation of a continuity plan or a disposal plan;
- These difficulties may also lead to the end of the continuation of the operation by the winding up of the company if The Company is irremediably compromised. In the opening judgment, the court designates the Insolvency Judge and the Syndic. He shall also appoint a substitute for the Insolvency Judge entrusted with the same tasks if the latter is prevented from attending. No relative up to and including the fourth degree or ally of the head or officers of the enterprise may be designated as an Insolvency Judge or Syndic.
- THE ROLE OF THE SYNDIC IN THE LIQUIDATION PROCEEDINGS:
The Syndic is the cornerstone of the legal liquidation procedure of the company in liquidation declared to be in an irremediably compromised situation. Judicial liquidation shall be ordered either by the court of its own motion or following the conversion of (i) the safeguard procedure or (ii) judicial rehabilitation or (iii) the resolution of the continuation plan or of (iv) the surrender plan into judicial liquidation.
In order to safeguard the interests of creditors and to implement the provision to initiate proceedings, the Syndic performs a series of tasks, which are listed as follows:
- Conservatory measures in judicial liquidation procedure:
Since judgments given in respect of Insolvency of undertakings are enforceable by provision and are a matter of public policy, the Syndic ensures, as soon as he takes up his duties, the transfer of property in the possession of the Company and draw up an inventory either directly or in the presence of the head of the company.
Similarly, the Syndic shall himself do all the acts necessary to preserve the rights of The Company against its debtors and to preserve its production capacity, provided that the Registrar undertakes the necessary measures such as (i) the statement of the judgment opening the proceedings by the registrar in the local and central business registers, (ii) the publication of the latter in a legal journal and in the “Gazette”, (iii) the posting of that notice in court, (iv)the mention of this notice on the books of the land conservation (etc.), as well as (v)the notification of the judgment to the head of the enterprise and the syndic.
As soon as the legal winding-up procedure is initiated, the Syndic shall make an inventory of his assets directly or with the assistance of an expert appointed for that purpose and shall also work on the appointment of the company’s guardians or the conclusion of a guarding contract. Nevertheless, the Syndic may face liquidity problems, in particular in the absence of the head of the company or in the case of its insolvency, which leads him to notify the creditors.
- Warning of creditors and receipt of declarations of claims:
Upon taking up his duties, the Syndic shall consult the list of creditors submitted to the head of the enterprise, and proceed to the notification of creditors by all means of communication, including by judicial officer, by post, by registered letter, and, if applicable, by fax, telephone and e-mail.
Similarly, the Syndic shall notify known creditors, who are registered in the Commercial Register, namely employees, partners and third parties, as well as creditors holding a security interest which has been the subject of a published publication or a published leasing agreement, if applicable, at his domicile, until he receives the declaration of the other creditors who are aware of the delivery of the judgment to open the legal liquidation proceedings, while ensuring compliance with the deadlines for the declaration of debts prescribed in Article 720 of the Moroccan Commercial Code. It should also be noted that for each proceeding, a special register marked and initialed by the Insolvency Judge is kept by the Syndic, who enters the declarations of claims in chronological order of receipt.
- Verification of receivables and realization of assets:
The Syndic proceeds, after expiry of the procedure of declaration of claims, the realization of the asset or requests its exemption from verification of chirographary claims, if it appears that the proceeds of the realization of the asset will be entirely absorbed by court costs and preferred claims, which are the subject of an order issued by the Insolvency Judge.
In the light of the proposals of the Syndic, the Insolvency Judge shall decide on the admission or rejection of the claims or declare that a proceeding is in progress, or that the dispute does not fall within its jurisdiction in accordance with the provisions of Article 729 of the Moroccan Commercial Code, taking into account the legal effects resulting from the notification and the time limits of the remedies to be filed, otherwise it is deemed to have waived the challenge.
The Syndic may also use an expert appraisal to determine the amount of claims, if any, especially in the event that the latter raises the veracity of the claims, based on the documents in its possession or on the product elements justifying the adjustment of the claims declared. Thus, the clerk immediately publishes in the «Gazette», the statement of claims filed at the registry in accordance with the provisions of article 732 of the Commercial Code.
- The Syndic’s role on the valuation of the company’s assets and their auction:
The Syndic launches a call for tenders to assess the assets of the Company, after their inventory, whether they are movable property, immovable or shares, while working to identify them, control, protect, and appoint guards as well as undertake legal procedures necessary for the recovery of furniture if they are in the possession of third parties.
The Insolvency Judge shall order the sale by public auction or by mutual agreement of the other property of The Company, the head of The Company heard or duly called and after having obtained the observations of the controllers.
The Syndic shall, as soon as possible, submit applications for valuation of the company’s assets to the Insolvency Judge. The valuation of these assets is done through an expertise and is carried out in the presence of the Head of the company or duly convened. The conclusions of the said expert opinion shall be presented and discussed before the Insolvency Judge. The Syndic and the head of The Company or his representative shall in turn be called upon to express their views on the said expertise. A copy of the report of the appraisal is given to the Head of the company, who deals in particular with an appraisal of movable property, immovable property or goodwill.
Thus, the Insolvency Judge orders the assignment, the date of the finding of the public assignment and auction in the context of a public hearing, assisted by the Syndic.
This procedure shall end with the submission of bids for the acquisition of the company’s goods or the failure of the disposal process, in the absence of bids or for their inadequacies, to the extent that these assets are re-offered for sale several times and where appropriate, the Syndic may request an appraisal of these assets by an expert under the same conditions.
- LEGAL ARRANGEMENTS FOR THE DISPOSAL OF THE ASSETS OF THE COMPANY IN THE COURSE OF ITS LIQUIDATION:
The judicial liquidation is based on the realization of the assets of the entrepreneurial enterprise with a view to the discharge of its liabilities and its distribution to the creditors. To do this, the Syndic chooses two mechanisms to realize the company’s assets individually or as a whole.
- Disposal of the enterprise as a production unit:
Production units composed of all or part of the movable or real estate assets may be the subject of a global sale in accordance with the provisions of Article 655 of the Moroccan Commercial Code. By unit of production we mean a set of material and human means enabling the exercise of an autonomous economic activity.
- Global Divestiture:
The legislator has identified three methods for disposing of the company’s assets in liquidation, which the Insolvency Judge could use. This is the sale by tender, by friendly tender or mutual amicable arrangement.
- Sale by auction:
This method is generally preferred to the extent that, in theory, it makes it possible to give transparency to the disposal processes and to obtain better prices in the event that competition was intensified at public auctions. As such, the legislator submitted it to the rules of seizure of immovable property contained in the Code of Civil Procedure which remains applicable unless it comes into conflict with the law of companies in difficulty.
- Amicable Auction:
Paragraph 3 of Article 654 of the Moroccan Commercial Code provides that “the Insolvency Judge may, (…) authorize the sale to be made by amicable auction on the price he fixes…”
The Insolvency Judge must justify the choice of this method by specifying that the consistency of the buildings, their location or the bids received are likely to allow an amicable transfer under the best conditions.
- Mutual agreement:
The Moroccan legislator provides in the third paragraph of Article 654 of the Moroccan Commercial Code that “the Insolvency Judge may authorize the sale either by amicable auction on the price he fixes, or by mutual agreement at the prices and conditions he determines“, except that this type of sale is subject to two main conditions, namely, the approval of the Insolvency Judge duly justified and a better financial return.
- THE ROLE OF THE SYNDIC IN THE CONTEXT OF ONGOING LEGAL PROCEEDINGS AND THE PROTECTION OF THE INTERESTS OF THE COMPANY IN LIQUIDATION:
The Syndic intervenes in ongoing legal cases after it has knowledge of them, or its notification by the court of the opening of the judicial liquidation proceedings. The latter produces the necessary documents, expresses his opinion and appoints a lawyer to defend the interests of the company before the court.
If necessary and to contest the nullity of contracts concluded outside the legislation in force, when they have produced an unreal debt, or when they are fictitious contracts or concluded during the suspicious period provided for in Article 712 of the Moroccan Commercial Code, which covers 24 months before the opening of the procedure, as well as in the case of acts for free made in accordance with Article 714 of the Moroccan Commercial Code.
It should also be noted that the Syndic will act as a principal in civil, criminal and commercial litigation proceedings in order to protect the interests of the creditors and the debtor.
- THE ROLE OF THE SYNDIC IN RELATION WITH THE CLAIMS OF THE PROCEEDING:
The Syndic plays an important role in the enforcement of social judgments for the benefit of employees, who suffer a rather substantial prejudice following the liquidation of the company employing them, especially since they benefit from the first lien established by the said article on the generality of the furniture of the employer in accordance with article 382 of the Moroccan Labour Code, as provided for in chapter 1248 of the Dahir des Obligations et des Contrats (DOC).
The Syndic, with the assistance of the head of the enterprise and after consulting the employees’ delegates, draws up the list of employees’ claims within a period of 06 months in accordance with Article 727 of the Moroccan Commercial Code. This list, after having been referred to by the Insolvency Judge, is published in the Gazette, which preserves the right of any employee whose claim has not been mentioned, under penalty of foreclosure, to exercise his action before the competent court.
After being notified by the company judgments, the Syndic submits the claim for payment on a provisional basis, a share of the claim definitively admitted in accordance with article 662 of the Moroccan Commercial Code.
- RANKING OF CREDITORS AND DISTRIBUTION OF PROCEEDS OF LIQUIDATION:
The Syndic shall prepare and present the draft distribution of the proceeds of the liquidation, the Head of the company duly called, in accordance with the orders of realization of the asset, the procedural formalities of auction, and the value of the company’s assets in relation to its liabilities.
Following the classification of creditors and the nature of the assets transferred by the Syndic, the proceeds of the liquidation shall be distributed after deduction of the costs and expenses of the legal liquidation proceedings, which shall relate mainly to the fees of experts, Syndics, custody and other expenses.
After the determination of the value of the proceeds of the judicial liquidation and the fixing of the distributable balance, the Syndic shall distribute it in accordance with the general rules of privileges in accordance with the provisions of (i) Code de Recouvrement des Créances Publiques, (ii)the Law governing the National Social Security Fund “CNSS” or (iii)the Dahir des Obligations et des Contrats “DOC” or (iv) the Moroccan Commercial Code, taking into account the priority given to mortgage creditors. He should also take into account the provisions of article 382 of the Moroccan Labor Code and others.
Following the approval of the Insolvency Judge of the order between the creditors and the distribution of the proceeds of the liquidation in accordance with the legislation in force , in accordance with article 668 of the Commercial Code, the distribution order shall be published in the ” Gazette “, against which the parts are entitled to appeal call within 15 days from the date of publication . After this deadline, it East settled debts respecting the rules of priorities and privileges .
- THE ROLE OF THE SYNDIC IN THE EXTENSION OF THE JUDICIAL WINDING-UP:
The extension of the judicial liquidation procedure is done with regard to the manager , the company or more companies , based on the facts listed in article 740 of the Commercial Code, being given that this article has provided the completeness of these reasons to avoid any excess or abuse in the formulation of requests opening of this procedure .
It is possible to lift extension of the procedure according two terms , ( i ) through _ of an accounting expertise before the Insolvency Judge , whose purpose is to audit the accounts of the company and to determine the reasons which have led to judicial liquidation or through (ii) the disclosure by the Syndic of contraventions committed by the Head of the company , duly called to be auditioned in council chamber . _
The Council Chamber hears the Head of the company and compares him to the violations invoked by the public prosecutor, the trustee, the creditors or the appointed expert.
Finally, he should be noted that in many case , the extension of the procedure is done with regard to the manager or leaders _ or with regard to of one other company , as a result of confusion of their patrimony with that of the company subject to the procedure and declaration of forfeiture commercial as a sanction correlative to the extension of the procedure .