Acting before insolvency strikes
Revenue is declining, suppliers are growing impatient, and cash flow is tightening. You are not yet insolvent, but the wall is approaching. Now is the time to act – not after.
The safeguard procedure (sauvegarde judiciaire) is the only formal insolvency proceeding that a director may initiate voluntarily, before the situation becomes irreversible. The French legislature designed it to allow viable businesses to restructure under court protection without waiting for collapse. In concept, it shares common ground with a UK Company Voluntary Arrangement (CVA) or a scheme of arrangement, though the procedure is court-driven and follows a rigid statutory timetable.
Our firm advises directors of distressed companies from the first warning signs. We assess whether your situation meets the conditions for safeguard and prepare the most suitable strategy – whether that is safeguard, a mandat ad hoc, or conciliation.
Article L. 620-1, French Commercial Code
Safeguard proceedings are available, on the debtor’s application, to any debtor that is not yet insolvent but faces difficulties it cannot overcome. The proceedings are intended to facilitate the reorganisation of the business so as to enable the continuation of economic activity, the preservation of employment, and the settlement of liabilities.
Situations in which we intervene
- Sustained decline in revenue jeopardising the ability to meet future payments
- Loss of a major client or contract that destabilises the business
- Tension with bank creditors, suppliers, or social security bodies
- Pending litigation that may heavily drain cash reserves
- Need to restructure debt in order to preserve operations and employment
Stages of the safeguard procedure
Debtor’s application
Opening judgment
Observation period (6-18 months)
Economic and social assessment
Plan preparation
Plan execution (up to 10 years)
What the safeguard procedure gives you
Safeguard is not a sign of weakness. It is a strategic tool. The opening judgment produces immediate effects that shift the balance of power with your creditors and buy you the time needed to rebuild.
A moratorium on creditor actions. No pre-existing creditor may sue for payment, seize your accounts, or continue enforcement proceedings. Interest stops accruing. This moratorium is automatic and gives you genuine breathing room to restore cash flow – comparable in effect to the UK administration moratorium.
The director remains in control. Unlike judicial reorganisation, safeguard is designed so that the company’s management retains control of day-to-day operations. The court-appointed administrator, when designated, exercises a supervisory or advisory role – not a management role.
Personal guarantees are protected. If you have given a personal guarantee for your company’s debts, creditors cannot pursue you personally for the duration of the plan, provided the plan is being complied with. Protective measures remain possible, however.
Safeguard, reorganisation, and liquidation compared
| Safeguard | Reorganisation | Liquidation | |
|---|---|---|---|
| Insolvency required? | No | Yes | Yes, and recovery manifestly impossible |
| Who may apply | Debtor only | Debtor, creditor, or public prosecutor | Debtor, creditor, or public prosecutor |
| Director’s role | Remains in full control | May be partially or fully divested | Fully divested |
| Plan duration | Up to 10 years | Up to 10 years | No plan |
| Personal guarantees | Protected during the plan | Protected during the plan | Not protected |
From the opening judgment to the safeguard plan
The safeguard procedure is structured. Each stage conditions the next. Our firm intervenes at every phase to defend your interests and prepare the plan that will allow your business to continue trading.
Preparing the application
The application is filed by the debtor alone with the Commercial Court. The file must demonstrate the difficulties faced by the business and establish that it is not yet insolvent. The quality of the application conditions the court’s decision. Our firm drafts the application, assembles the supporting documents, and represents you at the hearing.
The observation period
The opening judgment commences a six-month observation period, renewable up to a maximum of eighteen months. During this period, an economic and social assessment is prepared. The business continues to trade, ongoing contracts are maintained, and creditors must file their proofs of debt within two months.
The creditors’ representative acts in the collective interest of creditors. The administrator supervises or assists the director. The supervisory judge oversees the proceedings. We represent you before each of these court officers and ensure your rights are preserved.
The safeguard plan
This is the culmination of the procedure. The plan organises the repayment of liabilities over a period of up to ten years while maintaining the business as a going concern. It is prepared by the debtor with the assistance of the administrator, submitted to creditors – or to classes of affected parties – and then approved by the court.
Our firm negotiates with creditors, prepares the draft plan, and ensures its financial coherence. A realistic, well-structured plan is the key to lasting recovery.
Accelerated safeguard
Has your company already commenced conciliation and is a plan under negotiation? The accelerated safeguard procedure allows that plan to be imposed on dissenting creditors within a compressed timeframe. This procedure is available even if the company has been insolvent for fewer than forty-five days (Article L. 628-1, French Commercial Code). It is conceptually close to the UK restructuring plan under Part 26A of the Companies Act 2006, which also allows cross-class cram-down.
Frequently asked questions
How long does the safeguard procedure take?
The observation period lasts six months, renewable up to eighteen months. The safeguard plan is then executed over a maximum of ten years. In total, expect between eighteen months and twelve years depending on the complexity of the situation and the volume of liabilities to be settled.
What is the difference between safeguard and judicial reorganisation?
Safeguard is available before insolvency and can only be requested by the director. Judicial reorganisation is opened once the company is insolvent. Both aim to enable the continuation of the business, but safeguard gives the director greater control over the proceedings and management of the company.
Are my personal guarantees protected during safeguard?
Individual guarantors benefit from a stay of proceedings during the observation period and the execution of the plan, provided the plan is being complied with. Creditors may, however, take protective measures to preserve their rights.
Who can apply for safeguard proceedings?
Only the debtor. This is one of the key advantages of safeguard over judicial reorganisation, which may be initiated by a creditor or the public prosecutor. The director retains the initiative.
Do you handle urgent cases?
Yes. When the situation deteriorates rapidly, we can prepare and file a safeguard application within very short timeframes. The critical point is not to wait until insolvency occurs, as that would close off access to this procedure. An initial discussion allows us to assess the urgency and define the next steps.