Lawyer - Insolvency proceedings

Anticipating and managing economic difficulties are major challenges for the long-term survival of any business. When a company is going through a critical period, initiating collective proceedings can be a complex but sometimes essential step. These procedures, whether in the form of safeguards, receivership or compulsory liquidation, are governed by precise formalities and raise sensitive issues for directors, managers, creditors and employees.

Our firm assists companies and their directors at every stage of these processes, providing a clear understanding of the options available and defending their interests.

Insolvency proceedings require not only an in-depth knowledge of the law, but also the ability to devise strategies tailored to the specific features of each case, whether the aim is to preserve what can be preserved or to manage a suspension of payments as effectively as possible.

Anticipating and preventing : Alternatives to collective and safeguard proceedings

Proactive management of the company's difficulties can help avoid the need to initiate collective proceedings, which often have far-reaching repercussions.

It is therefore vital for managers, whether they are sole traders or company chairmen, to be able to identify the first signs of fragility and to be aware of the preventive tools available to them, such as the ad hoc mandate.

Detecting the signs: the importance of suspension of payments

One of the key concepts when it comes to companies in difficulty is the cessation of payments. This situation is characterised by the company's inability to meet its current liabilities with its available assets, as stipulated in the French Commercial Code.

Many company directors wonder about the exact definition of this state of affairs, and about the right time to draw the necessary conclusions, in particular by filing for bankruptcy with the clerk of the relevant commercial court. The main financial difficulty often lies in the objective assessment of this situation.

Delaying the determination or declaration of cessation of payments can entail significant risks, in particular a worsening of the situation, making any recovery more difficult, and even penalties for late declaration, constituting management misconduct.

Our firm can help you make a precise diagnosis of your cash flow situation and your liabilities. We will advise you on whether you have actually ceased payments, on the resulting reporting obligations, and on the immediate legal implications for your company and for you as its director. This follow-up is essential.

Safeguard procedure: a way to reorganise and avoid the worst

When a company encounters difficulties that it is unable to overcome on its own, but is not yet in a state of suspension of payments, the preventive safeguard procedure may offer a solution.

The aim is to enable the business to be reorganised under court protection in order to ensure its survival, maintain its business activity and employment, and pay off its debts. This applies whether the business is a commercial or craft activity or a liberal profession.

The stakes are high: without preventive action, the company risks sliding into receivership or liquidation if no measures are taken, considerably limiting its room for manoeuvre.

The safeguard procedure opens an observation period during which a continuation plan (or safeguard plan) will be drawn up. We can help you prepare the safeguard application, which must demonstrate the serious nature of the difficulties and the company's ability to reorganise.

During the observation period, we support you in discussions with the various stakeholders and in drawing up a credible and sustainable safeguard plan, presenting a solid report.

Accelerated safeguard procedures: targeted solutions

For certain situations, in particular where rapid financial restructuring is required and a consensus can be reached with the main creditors, often banking institutions, the law provides for specific tools: accelerated financial safeguard (SFA) or accelerated safeguard (SA).

These procedures are generally initiated at the end of a conciliation procedure during which a draft plan has been drawn up with the help of an ad hoc representative or conciliator. Their advantage lies in their brevity and their ability to overcome the opposition of minority creditors.

However, their implementation is subject to strict conditions, particularly in terms of debt thresholds or company size for some of them, and the company must not have been in suspension of payments for too long when the preliminary conciliation is opened. Time is of course a critical factor.

Our firm can help you decide whether to use these fast-track procedures, guide you through the links between them and any conciliation procedure, and assist you in implementing and finalising the plan.

Court-ordered receivership: aiming for the company's survival

If the company has ceased to make payments but still has prospects of recovery, it may be considered for legal redress.

The main objective is to continue the business, maintain employment and pay off liabilities.

Conditions and commencement of receivership

A company that is in a state of suspension of payments must, in principle, apply for a court-ordered reorganisation (or liquidation if reorganisation is manifestly impossible) within forty-five days.

The company director, often an entrepreneur who is passionate about his business, may feel helpless in the face of this obligation and the consequences it entails. The Commercial Court, now the Economic Activities Court, has jurisdiction in these matters.

The risk, in the event of inaction or if the court deems recovery impossible, is a rapid conversion to compulsory liquidation, with often irremediable consequences for the company and its assets. In this case, the matter should be referred to the court without delay.

Our firm will help you prepare the declaration of cessation of payments (often referred to as a bankruptcy petition) and the application to open a court-ordered reorganisation, by filling in the appropriate form for the registry.

We ensure that your interests are defended from the earliest stages, and liaise with the bodies appointed by the court, such as the court-appointed administrator and trustee, as well as the official receiver.

Managing the observation period: a decisive phase

The opening of the receivership procedure marks the start of an observation period, generally for an initial period of six months, renewable under certain conditions. This period is crucial: it should enable a full diagnosis of the company's situation to be made and its ability to recover to be studied.

For the manager, this phase raises many questions: what powers do I have? What happens to existing contracts (commercial leases, contracts with suppliers, employment contracts governed by labour law)? How can the business continue? Poor management during this period, or an erroneous assessment of the company's capabilities, can compromise its chances of success. The effects of the procedure are immediate.

We provide strategic advice on day-to-day management during the observation period. This includes analysing the fate of current contracts - the law offers options for continuing or terminating them - and assisting with the preparation of the economic, social and environmental report (ESER), an essential document for looking to the future. Each decision by the juge-commissaire or the juges commissaires will be closely monitored.

From diagnosis to recovery plan

The successful outcome of a receivership is the adoption of a recovery plan, sometimes called a continuation plan. This plan, approved by the court, sets out how the business is to continue, any reorganisation measures (social, structural) and, above all, how the liabilities are to be settled over a period of up to ten years.

Drawing up this plan is a complex exercise, involving convincing the court and creditors of the viability of the project. It often involves negotiations with the creditors, who may or may not meet in committees.

A poorly prepared or unrealistic plan will be rejected, generally leading to compulsory liquidation. The presentation at the hearing must be beyond reproach.

Our firm puts its experience at your service to help you formulate proposals for settling your debts (applications for deferred payment, or even debt write-offs), negotiate with creditors and their representatives, and present a sound, well-argued recovery plan to the court. We assist our clients at every stage.

Judicial liquidation: when business cannot be maintained

The company is wound up by the court when it is clearly impossible to turn the business around or when the safeguard or recovery plan cannot be adopted or implemented.

The aim is to put an end to the company's activities, realise its assets and pay off its creditors as far as possible, under the supervision of the liquidator.

Situations leading to compulsory liquidation

The decision to place a company into compulsory liquidation is taken by the court either immediately, if the situation so requires, or at the end of an unsuccessful observation period. For the manager, this outcome is often synonymous with failure and worries about the consequences.

Liquidation means that the business ceases trading immediately (unless there is an exceptional and limited authorisation to continue), and that the director is relieved of the administration of his assets. It also has a significant social impact, with the termination of employment contracts. The repercussions can be diverse and far-reaching for all those involved.

Our firm will explain the criteria that lead to compulsory liquidation and assist you through these difficult times, providing you with clear information on the direct consequences of these proceedings for the company and for yourself.

Liquidation operations: realisation of assets and discharge of liabilities

Once a liquidation order has been issued, a liquidator is appointed. The liquidator's main task is to verify the company's liabilities, sell its assets (movable and immovable property, inventories, business goodwill, etc.) and distribute the proceeds among the creditors in accordance with an order of priority defined by law and the French Commercial Code. The sale of assets is a key stage.

Managers often wonder how the assets will be sold and in what order the various creditors will be paid (employees, tax authorities, social security bodies, preferential creditors, unsecured creditors). Poor valuations or disputes may arise.

We monitor the operations carried out by the liquidator, informing the debtor of his residual rights and the progress of the fund distribution process. Although the executive is divested, he retains a right to be informed. A potential buyer may also come forward for certain assets.

Closure of the liquidation: consequences and possible consequences

Court-ordered liquidation proceedings end with a decision to close the business, usually on the grounds of insufficient assets, i.e. when the funds available are insufficient to pay off all the creditors. The question then arises as to the consequences of this closure, particularly for outstanding debts and for the future of the director.

In principle, closure on grounds of insufficient assets puts an end to individual proceedings by creditors against the individual debtor. There are exceptions, however, and the Cour de cassation has established case law on these points.

Our firm can advise you on the effects of the procedure and the precise consequences of closing the liquidation. For sole traders, we can also examine the conditions for eligibility for a professional recovery procedure, which allows debts to be written off, subject to strict conditions of good faith and the absence of significant assets.

Directors: anticipating and managing the liability risks associated with insolvency proceedings

The opening of collective proceedings against a company exposes the director (whether a partner or not, de jure or de facto) to the risk of civil or criminal liability.

It is essential to be aware of this and, if necessary, to prepare your defence with a lawyer.

Understanding liability claims and penalties

As a company director, you may legitimately fear that you could be held personally liable for all or part of your company's debts, in particular through an action for insufficient assets.

Other personal sanctions may be imposed, such as personal bankruptcy or a ban on managing, administering or controlling a business. In the most serious cases, criminal proceedings for bankruptcy may be brought.

These sanctions are not automatic. They require proof of mismanagement that has contributed to the shortfall in assets, or of specific misconduct. The stakes are high: financial penalties, a ban on managing a professional activity, or even imprisonment. The Code of Civil Procedure provides a framework for these actions.

Our firm carries out a preventive assessment of the risks of your liability being called into question. If an action is brought, we devise a strategy to defend you and assist you at every stage of the proceedings, including appeals if necessary. Each of the firm's lawyers puts his or her experience at your service.

The suspect period: a major issue in insolvency proceedings

The suspect period is the period between the date of cessation of payments (set by the court, which can be up to 18 months before the opening judgment) and the judgment opening the collective proceedings.

Certain acts carried out by the company during this period may be considered suspicious and subject to annulment. These may include payments of debts not yet due, payments by abnormal means, gifts, the provision of guarantees for previous debts, or unbalanced commercial contracts.

The purpose of cancelling these acts is to reconstitute the company's assets for the benefit of all creditors. For example, a sale of assets at a low price could be challenged.

We work with you to analyse the deeds that could be challenged during the suspect period. If you are faced with an action for annulment, or if you are the co-contracting party to an act that has been annulled, we will advise you and defend your interests.

Our commitment to you in insolvency proceedings

Going through insolvency proceedings is a complex ordeal, both technically and in human terms. Our firm is committed to providing you with high-quality legal support, based on our in-depth experience of insolvency law.

Our in-depth knowledge of legislation, such as the French Commercial Code, case law (including that of the Tribunal de Grande Instance - now the Tribunal Judiciaire - and the Cour de Cassation) and the practices of commercial courts, such as the Paris Commercial Court for major cases, enables us to offer you relevant analysis and strategic advice.

As each situation is unique, we favour a tailor-made approach, whether you are a company director, debtor, creditor or business partner.

Responsiveness and availability are at the heart of our commitment, because these cases are often urgent. We are committed to establishing a relationship of trust and to providing you with clear and transparent information at every stage of the procedure.

Our role is to guide you towards the best possible solution. We are committed to preventing and dealing with difficulties.

For a confidential analysis of your situation and to explore the options open to you, our team of lawyers specialising in insolvency proceedings is at your disposal.