The suspect period: definition, determination and legal action

By Yasmine EDDAM28 April 2025

When a company's difficulties reach a critical point, French law provides for specific mechanisms to try to turn it around or, if that is no longer possible, to organise its liquidation in an orderly fashion. At the heart of these so-called collective procedures (judicial recovery and liquidation) lies a fundamental concept: the suspect period. It is of considerable practical importance, as it determines the validity of many acts carried out by the company before the proceedings are formally opened. Understanding how this period is defined, how its start date is set, and what legal action may result from it, is essential for any manager, creditor or partner of a company in difficulty. This article sets out to detail these essential aspects of the legal framework surrounding the suspect period. For an overview of the issues involved, please consult our general guide to the suspect period and its consequences.

Define the suspect period: when does it begin and when does it end?

The suspect period, as its name suggests, is a period of time during which the debtor's actions are examined with particular attention. Legally, it runs from the date of cessation of payments to the date of the judgment opening the receivership or liquidation proceedings.. This is a grey area where the company, although continuing in business, is no longer able to meet its current liabilities with its available assets.

The keystone is therefore suspension of payments. It is defined by the French Commercial Code as the debtor's inability to meet its current liabilities with its available assets.. For an in-depth understanding of this definition and its assessmentFor more information, see our article on this subject. This is not just a temporary cash flow problem, but a structural situation in which the company can no longer meet its debts as they fall due. It is this situation that justifies the opening of a receivership or compulsory liquidation.

It is important to note that the safeguard procedure, designed to anticipate difficulties before the cessation of payments, does not in principle lead to the opening of a suspect period.. It is reserved for companies which, although in difficulty, have not yet suspended payments.. However, there are exceptions. If, after the opening of a safeguard procedure, it appears that the company was already in suspension of payments, the court will convert the procedure into a receivership and will set a date for the suspension of payments, thus retroactively opening a suspect period.. Similarly, if payments cease during the safeguard observation period or even during the execution of a safeguard or reorganisation plan, a conversion to reorganisation or liquidation, or a resolution of the plan followed by new proceedings, may lead to the determination of a suspect period..

The precise date on which payments cease is decisive, as the suspect period begins from the first hour of that day.. Any act performed on that day is potentially affected by the annulment rules.

Determining the date of cessation of payments: a decisive step

The date of cessation of payments is at the heart of the system. Its determination determines the starting point of the suspect period and, consequently, the fate of many legal acts.

This date is set by the court initiating the receivership or compulsory liquidation proceedings.. The court must rule on this point in its opening judgment. However, it is often the case that, at the time of opening, the court lacks the precise information needed to date the cessation of payments with certainty. In such cases, the law provides for a default solution: the cessation of payments is deemed to have occurred on the date of the opening judgment.. Theoretically, therefore, there could be no suspect period if the court does not rule explicitly or sets the date at the day of judgment..

But this initial fixation is often only temporary. The law allows the court to change this date at a later date, by one or more successive rulings.. More often than not, this will involve moving the date back, i.e. setting an earlier date for the cessation of payments than the one initially set. Why is this? Because it is often after the procedure has been opened, thanks to the investigations of the legal representatives (administrator, judicial representative), that elements are discovered revealing that the company was in difficulty much earlier than previously thought, sometimes using ruinous or fraudulent means to conceal its situation..

However, this action to postpone the date of cessation of payments is subject to restrictions. Only the court-appointed administrator, the court-appointed agent (or the liquidator in the event of liquidation) and the public prosecutor may request it.. Neither the debtor himself, nor a creditor, nor even the commissioner responsible for implementing the plan (unless he takes over an action initiated earlier) may refer the matter to the court for this purpose.. The procedure requires a summons from the debtor, who must be able to defend himself..

There is an important time limit: except in cases of proven fraud or if a conciliation agreement has been approved prior to the proceedings, the court may not postpone the date of cessation of payments for more than two years. eighteen months before the date of the judgment opening the proceedings. This rule is intended to provide a degree of legal certainty for older documents.

The nullity action: who can take action and how?

Once the suspect period has been defined, certain acts performed during that period may be annulled. However, such annulment is never automatic, even for acts deemed to be legally null and void. It must be requested in court.

Jurisdiction to hear these nullity actions lies with exclusively to the court that initiated the proceedings receivership or compulsory liquidation. This jurisdiction is a matter of public policy and takes precedence over the usual rules of jurisdiction, even for acts concerning immovable property or normally falling within the jurisdiction of other courts (such as the industrial tribunal for a settlement relating to dismissal, or sometimes even the administrative court for certain contracts)..

Who can apply for annulment? As in the case of the action for postponement of the date, the law sets out an exhaustive list of the persons entitled to take action: the court-appointed administrator, the court-appointed agent (or liquidator) and the public prosecutor.. The plan execution commissioner may also act, in particular to continue an action initiated before he took office or in the collective interest of the creditors.. If the judicial representative remains inactive despite a formal notice, a supervising creditor may act in his place..

However, some people are excluded:

The debtor himself cannot request the nullity of an act that he has performed. The purpose of the law is to protect creditors, not to allow debtors to disclaim easily.
Nor can creditors, acting individually, seek the annulment of a deed on the basis of the nullities of the suspect period. They may, however, in certain cases, use the action paulienne de droit commun if the conditions are met (fraud by the debtor causing them prejudice).
Nor can sureties or other guarantors invoke these nullities to avoid their own commitments.

The action for nullity is directed against the person who benefited from the disputed act: the co-contractor, the donee, the paid or guaranteed creditor, etc.. The procedure generally involves a writ of summons. If the voidable deed concerns a right in rem in immovable property (sale, mortgage, etc.), the request for nullity must be published in the land registry in order to be admissible..

There are two main categories of deeds that may be annulled: those that are annulled almost automatically (nullités de droit), because their very nature is suspect in this context, and those that can only be annulled if certain conditions are proved (nullités facultatives), in particular knowledge on the part of the co-contractor of the state of cessation of payments. You will find details of these acts in our dedicated articles: Acts automatically annulled during the suspect period (legal nullities) and When can a deed be annulled during a suspect period?.

Once pronounced, the judgment annulling an act has absolute authority: it is binding on everyone, including other bodies involved in the proceedings who may not have acted.. The traditional means of appeal are available to the parties concerned (the beneficiary of the document, unsuccessful legal representatives) within a short period of time (ten days from service)..

The effects of cancellation: back to square one?

When a deed is annulled by the court on the basis of the rules governing the suspect period, the consequences are far-reaching and are mainly aimed at restoring things to the state they were in before the disputed deed.

The main effect of nullity is theretroactive annulment of the act. This means that the act is considered never to have existed, not only for the future but also for the past. This approach is more radical than the old "unenforceability against the estate" that existed before 1985.. The annulled act disappears completely from the legal system.

The logical consequence of this annihilation is the obligation to return. The parties must return what they have received under the annulled deed.

If the deed concerned property (sale, gift), the beneficiary must return it in kind if possible. If they cannot (for example, if the property has been destroyed or resold to a third party in good faith protected by other rules), they must return the corresponding value. The donee must also return any fruits received.
If the act was a payment, the creditor (the accipiens) must return the sums received.
If the deed was a guarantee (mortgage, pledge), this simply disappears. The creditor once again becomes unsecured (a simple creditor with no specific security).

The situation is often difficult for the other party whose contract has been annulled. If the annulment concerns a payment that he had received, his initial claim is "reborn" because the payment is erased.. However, as this claim arose before the opening judgment, it must be declared in the collective proceedings within the legal deadlines. However, the annulment judgment is often handed down long after these time limits have expired.. The creditor then runs the risk of being foreclosed: not only must he return what he has received, but he could also lose his claim definitively for failure to declare it in time.. The law provides for the possibility of the foreclosure being lifted if the creditor proves that it was impossible for him to know of his obligation before the expiry of the time limit, which could apply here, but is not automatic..

In addition, a contractual partner who must return a sum of money cannot invoke set-off against his own claim (which is reborn).. The restitution debt is considered unavailable, as it must revert in full to the collective proceedings..

The ultimate aim of these cancellations is to reconstitution of the debtor's assets. The assets or sums recovered are returned to the assets of the company in difficulty. They may be used either to finance a recovery plan or to pay off all creditors in the event of liquidation, according to an order of priority defined by law. The aim is to restore, as far as possible, the equality between creditors that has been undermined by suspicious acts..

Lastly, it should be noted that nullity has the following effects erga omnesin other words, with regard to everyone, including third parties who may have acquired rights subsequent to the annulled act. For example, if a sale is cancelled, the buyer must return the goods, even if they have already resold them to a sub-purchaser (who may himself have to return the goods, unless there is specific protection).. The protection of good faith or appearance is often set aside in this specific context..

The suspect period and the nullity actions that can arise from it are a complex but essential mechanism in the law governing companies in difficulty. It aims to strike a balance between the need to continue trading and the protection of creditors' rights. Navigating this legal framework requires specialised expertise.

For a personalised analysis of your situation and to determine whether any actions you have taken or benefited from could be called into question, our team will be happy to help you. for expert, personalised legal assistance.