Taking action before the suspension of payments
Your sales are falling, your suppliers are getting impatient, your cash flow is tight. You're not yet out of business, but you can see the wall closing in. The time to act is now - not later.
The judicial safeguard procedure is the only collective procedure that the head of the company can request on his or her own initiative, before the situation becomes irreversible. It was designed by the legislator to enable viable businesses to reorganise under judicial protection, without waiting for the situation to collapse.
Our firm assists company directors in difficulty from the very first warning signs. We assess whether your situation meets the conditions for initiating proceedings, and work with you to devise the most appropriate strategy - whether this involves a safeguard, an ad hoc mandate or a conciliation procedure.
Article L. 620-1 of the French Commercial Code
«A safeguard procedure is instituted at the request of a debtor who, although not in suspension of payments, can demonstrate difficulties that it is unable to overcome. The purpose of this procedure is to facilitate the reorganisation of the company in order to enable it to continue its economic activity, maintain employment and pay off its debts.»
Situations in which we intervene
- Lasting decline in sales jeopardising payment of future instalments
- Loss of a major customer or contract that throws the business off balance
- Tensions with bank creditors, suppliers or social security bodies
- Litigation likely to place a heavy burden on the company's cash flow
- Need to restructure debt to preserve business and jobs
Stages of the safeguard procedure
Debtor's request
Opening judgment
Observation period (6-18 months)
Economic and social report
Drawing up the plan
Execution of the plan (up to 10 years)
What back-up can do for you
Safeguarding is not an admission of weakness. It is a strategic tool. The opening ruling has immediate effects that change the balance of power with your creditors and give you time to rebuild.
The stay of proceedings. No previous creditor can summon you for payment, seize your accounts or pursue an ongoing enforcement procedure. Interest payments are suspended. This protection gives you real breathing space to restore your cash flow.
The CEO remains at the helm. Unlike receivership, safeguard is designed to ensure that the head of the company retains control of his business. When appointed, the court-appointed administrator's role is one of supervision or assistance - not representation.
Personal guarantees are protected. If you are a guarantor of your company, creditors cannot sue you personally for the duration of the plan, as long as it is complied with. However, precautionary measures are still possible.
Safeguard, receivership or compulsory liquidation
| Backup | Turnaround | Liquidation | |
|---|---|---|---|
| Cessation of payments | No | Yes | Yes, the situation is irremediably compromised |
| Initiative | Single debtor | Debtor, creditor or public prosecutor | Debtor, creditor or public prosecutor |
| Management | The manager remains at the helm | Possible divestment | Full divestment |
| Duration of the plan | Up to 10 years | Up to 10 years | No plan |
| Bonds | Protected during the plan | Protected during the plan | Unprotected |
From the opening judgment to the safeguard plan
The safeguard procedure is structured. Each stage determines the next. Our firm intervenes at each stage to defend your interests and prepare the plan that will enable your business to continue operating.
Preparing the request
The application to open the procedure is filed by the debtor alone with the Commercial Court. The application must describe the company's difficulties and show that it is not in suspension of payments. The quality of the application determines the court's decision. Our firm will draft the application, assemble the supporting documents and assist you at the hearing.
The observation period
The opening judgment opens a six-month observation period, renewable up to a maximum of eighteen months. During this period, an economic and social report is drawn up. Business continues, current contracts are maintained and creditors must declare their claims within two months.
The judicial representative represents the collective interests of the creditors. The court-appointed administrator supervises or assists the director in his management. The official receiver supervises the proceedings. We represent you in dealings with these parties and ensure that your rights are protected.
The backup plan
This is the culmination of the procedure. The plan organises the settlement of liabilities over a period of up to ten years, while maintaining the company's activity. It is drawn up by the debtor with the assistance of the insolvency administrator, submitted to the creditors - or the classes of parties affected - and then approved by the court.
Our firm negotiates with creditors, prepares the draft plan and ensures that it is financially coherent. A realistic, well-structured plan is the key to a company's lasting recovery.
Accelerated backup
Has your company already initiated a conciliation procedure and is a draft plan under negotiation? Under the accelerated safeguard procedure, this plan can be imposed on recalcitrant creditors within a tight timeframe. This procedure is available even if the company has been in suspension of payments for less than forty-five days (art. L. 628-1 of the French Commercial Code).
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