La subordination financière

Financial subordination establishes a hierarchy between creditors. This degree is implemented through the legal or intentional suppression of creditors’ right to equal distributions in the bankruptcy proceedings. When it is a priority claim, this loss is imposed on creditors by law. When it is a subordinated claim, creditors accept to waive their right to equal distributions. In both cases, some creditors will be paid only after the full payment of others. Those are called residual creditors.Corporation financing is based upon a division between owner and lender. Traditionally, the former puts money into the business through legal capital while the latter grants loans. As this view no longer depicts the reality of corporation financing, the French jurisprudence tried to replace it with the concept of equity, which is broader than the legal capital. In this work, equity is redefined in setting in its core financial subordination, which clearly shows why a shareholder is a residual claimant. This new definition of equity, which is shared by other disciplines outside law gives a different approach to the financing of companies under French law