Running out of cash is not automatically the same as being legally unable to pay debts in France. The decisive question is whether the company can meet its due and certain debts with assets that are immediately available. For a foreign founder, that test is harder to document because cash may sit in a foreign bank, a parent company may promise emergency funding, and the director may be managing the French business from another country. A promise, a future invoice, an uncalled investment or an illiquid asset does not necessarily solve today’s cash shortfall.

The French term “cessation des paiements” describes the legal threshold that can require a French company to seek court protection. A “Kbis” is the official extract showing a company’s registration and key corporate information. The “greffe” is the registry of the competent court. “URSSAF” is the body that collects French social-security contributions, and “BODACC” is the Bulletin officiel des annonces civiles et commerciales, the official bulletin that publishes many business-law notices. These terms matter when a founder is abroad and must act quickly.

This guide explains how to test the threshold, when a preventive procedure remains available, how to prepare a filing from abroad and how to reduce personal exposure. It applies to common French structures such as a SAS (simplified joint-stock company) and a SARL (limited-liability company), while the court will examine the company’s actual activity, debts, assets and governance.

I. When Is a French Company Legally Unable to Pay Its Debts?

A. How to distinguish cash pressure from cessation des paiements

The starting point is Article L. 631-1 of the French Commercial Code. Its statutory test refers to “l’impossibilité de faire face au passif exigible avec son actif disponible”. In practical English, the company is in cessation des paiements when its immediately available assets cannot cover its due debts. The test is not a general opinion about whether the business is healthy, profitable or worth saving. It is a comparison made at a legally relevant date.

“Passif exigible” means debts that are certain, quantified and due, and that the creditor can demand immediately. It may include an unpaid invoice that is not being genuinely disputed, an overdue bank instalment, a tax debt that has reached its payment date, an URSSAF contribution, rent, an employee’s due salary or a debt confirmed by a judgment. A debt that is merely forecast, disputed in principle or covered by a valid moratorium is treated differently. The company should prepare a dated schedule showing creditor, legal basis, amount, due date, dispute status, payment demand and any agreed extension.

“Actif disponible” means cash and other resources that the company can actually mobilise to make the payment when it falls due. It usually includes bank balances, cash and an undrawn and usable credit facility. A foreign founder should obtain bank statements from every account used by the French company, not only the French operating account. Statements should show the account holder, currency, balance, overdraft limit, restrictions, blocked funds and the date on which the funds can be transferred. If the account is held by the parent company rather than the French subsidiary, it should not automatically be presented as the subsidiary’s cash.

The French statute expressly allows credit reserves and creditor moratoria to affect the analysis. The final sentence of Article L. 631-1 provides that a debtor who proves that “les réserves de crédit ou les moratoires dont il bénéficie” enable it to meet the due liabilities with available assets is not in cessation des paiements. The burden is practical: obtain a signed bank confirmation, an operative facility agreement, evidence that the facility is not suspended and a written creditor agreement identifying the extended dates. A parent company’s informal email saying that it will fund the French subsidiary next month is weaker than an immediately available, documented and unconditional facility.

The balance sheet can therefore mislead. A French company may own valuable intellectual property, stock, equipment, a receivable from a customer or a building and still be unable to pay an employee or URSSAF today. Conversely, a company with a temporary loss may not be in cessation des paiements if it has a usable credit line or a binding moratorium. The court looks at liquidity and maturity, not only at net assets or annual revenue.

The comparison must also be made with care where transactions are cross-border. Convert foreign-currency balances at a supportable rate and state whether the funds can be transferred without a regulatory, contractual or banking restriction. Separate cash belonging to the parent, a shareholder loan that has not been funded, a capital increase that has not been completed and a receivable that is not yet collectible. If the foreign parent is willing to inject money, record the amount, date, currency, legal instrument, conditions, authorisation and evidence of transfer. A future financing round is not the same as available cash.

The Supreme Court has repeatedly required a precise factual analysis. In Cass. com., 1 July 2020, no. 19-12.068, the Court dealt with the need to identify the due liabilities and available assets at the date relevant to the decision. The point for a foreign director is simple: do not rely on an old cash forecast prepared before a parent-company transfer failed, a bank account was frozen or a tax debt became due. Update the schedule immediately before the filing and preserve the earlier versions.

An older but useful decision, Cass. com., 11 June 2014, no. 13-16.481, illustrates why a genuine credit reserve or a valid URSSAF moratorium can change the result. The company’s financial difficulties and declining profitability were not enough, because the evidence showed a credit reserve and a payment arrangement that covered the relevant due debts. The decision does not give directors a licence to delay. It shows that the legal threshold must be calculated from real, usable funding rather than from pessimism or optimism.

For a foreign-owned company, the first emergency document should therefore be a 13-week cash-flow model supported by bank evidence. It should be reconciled to the accounting ledger and divided into:

• cash immediately usable by the French company;
• committed but not yet received funding;
• customer receivables, with realistic collection dates;
• assets that cannot be sold or transferred quickly;
• due debts, including tax, social-security, payroll, rent, finance and trade creditors; and
• disputed or rescheduled debts, with the documents proving the dispute or moratorium.

That file allows the director, accountant and French counsel to identify the exact date on which the company may have crossed the legal threshold. It also prevents a common error: treating an unpaid debt, an accounting loss or a missed forecast as conclusive proof without comparing the figures that the law actually requires.

B. Which preventive route still exists before and around the 45-day clock?

A founder should not wait for the 45th day if the company is already showing serious signs of distress. French law offers preventive tools, but each has a different entry condition and degree of confidentiality. The route must be chosen from the company’s actual position, not from the label that appears most reassuring to a foreign parent.

If the company is in difficulty but is not yet in cessation des paiements, a safeguard procedure may be possible. Article L. 620-1 of the French Commercial Code describes a procedure opened at the debtor’s request when it is not in cessation des paiements and faces difficulties it cannot overcome. Safeguarde (safeguard) is not a substitute for a late filing after the company has already been unable to pay due debts. A director who chooses it should be able to show why the company still has the liquidity required by Article L. 631-1.

The mandat ad hoc is a flexible, confidential prevention mechanism. Under Article L. 611-3, the president of the competent court may appoint an ad hoc representative at the debtor’s request and define the representative’s mission. The founder can propose a candidate. The tool can help negotiate with a bank, a foreign parent, a major supplier or a landlord before the situation reaches the insolvency threshold. It does not suspend every payment deadline and it does not remove the director’s duty to monitor the company’s cash position.

Conciliation is available when the company has an established or foreseeable legal, economic or financial difficulty. Article L. 611-4 refers to “une difficulté juridique, économique ou financière, avérée ou prévisible” and allows the procedure where the debtor has not been in cessation des paiements for more than 45 days. That wording creates a narrow but important window. A company that has only just crossed the threshold may still discuss a conciliation, but the director must not use a conciliation request as a reason to ignore the filing deadline or conceal a worsening cash position.

The request for conciliation must explain the company’s economic, financial, social and asset position, its financing needs and the means available to meet them. Article L. 611-6 provides for a request by the debtor and a conciliator appointed by the court. The mission is normally limited to four months, with a possible reasoned extension at the conciliator’s request, subject to the statutory maximum. Article L. 611-7 gives the conciliator a role in seeking an amicable agreement with principal creditors and regular contracting partners.

The key distinction is timing:

• before cessation des paiements, mandat ad hoc, conciliation or safeguard may be considered depending on the facts;
• after cessation des paiements, redressement judiciaire (judicial reorganisation) or liquidation judiciaire (judicial liquidation) becomes the central court route;
• if the company has been in cessation des paiements for no more than 45 days, conciliation may remain legally possible, but it must be assessed immediately and cannot be used to manufacture delay; and
• after the relevant deadline, a creditor or the public prosecutor may take the initiative.

Foreign founders should also disregard obsolete guides that still recommend a “crisis exit treatment” as a current filing route. Service Public Entreprendre explains that this procedure can no longer be requested since 22 November 2025 and that companies in cessation des paiements must seek judicial reorganisation or liquidation instead: Service Public, treatment of crisis exit. That change is particularly important for international groups using online information prepared before 2026.

The first 48 hours should be organised as a decision file rather than a sequence of informal calls. The director should ask the accountant to freeze the accounting data, produce the due-liability schedule and reconcile every bank account. The parent should state whether it is offering an immediately usable facility or merely considering a future investment. Counsel should check the company’s articles, the identity of the legal representative, the registered office, existing guarantees, employee position and the competent court. The result should be a written recommendation: no cessation yet and prevention; cessation less than 45 days and an urgent conciliation assessment; or cessation requiring preparation of a judicial filing.

The decision must be recorded even if the founder is outside France. A board or shareholder resolution may be useful for funding, but it does not transfer the director’s statutory duties to the parent. If a foreign corporate director acts through a permanent representative, the group should make sure that the representative has the information, authority and records needed to act. A French company cannot be left without an operational decision-maker simply because its investors are abroad.

II. What Must a Foreign Director Do Within 45 Days?

A. How to file for redressement or liquidation from abroad

The 45-day rule is found in Article L. 631-4 of the French Commercial Code. It states that the debtor must request the opening of redressement judiciaire no later than 45 days after cessation des paiements if it has not requested conciliation within that period. For a company whose recovery is manifestly impossible, the practical filing may seek liquidation judiciaire. The director should not wait for a creditor’s summons to force the issue.

The French system does not treat foreign nationality as a reason to keep the company outside French insolvency law. Article L. 631-2 makes redressement judiciaire applicable to “toute personne morale de droit privé”, meaning any private-law legal person. A French SAS or SARL remains a French legal person even when its shareholder, president, manager, bank account or ultimate owner is outside France. The court will focus on the company’s registered office, activity, assets, liabilities and actual management.

For a company carrying on a commercial or artisanal activity, the competent court is generally connected with the registered office. The French court system has also operated a tribunal des activités économiques (TAE), an economic-activities court, in selected locations since 1 January 2025 for certain prevention and collective procedures. The foreign director should verify the current court using the official jurisdiction tool rather than copying the name of a court from an old article. The registered office must be genuine: a virtual address, a move that was never filed or an address that no longer receives mail can create immediate procedural problems.

Service Public Entreprendre’s guide on declaring cessation des paiements confirms the 45-day deadline and lists the supporting information expected for the filing. The same official checklist should be used to identify the Cerfa form and the financial documents commonly required. “Cerfa” is the French standard administrative form system; the relevant declaration is usually Form 10530, with the exact version and filing channel to be checked at the time of submission.

The preparation file should normally contain:

• the signed declaration of cessation des paiements and the company’s request for redressement or liquidation;
• the company’s registration details, including its SIREN (the nine-digit French company identification number), legal form, registered office and current Kbis;
• a copy of the legal representative’s passport or identity document and evidence of authority to act;
• the latest annual accounts, trial balance, general ledger extracts and current management accounts;
• a cash position dated less than one month before filing, together with bank statements for French and foreign accounts used by the company;
• a complete statement of debts, including tax, VAT, URSSAF, employees, landlords, lenders, suppliers, group companies and litigation;
• a statement of security interests, liens and privileges;
• a list of receivables, with realistic collection dates and evidence of material disputes;
• a list of employees, payroll arrears, employment contracts and any immediate employment issue; and
• a six-month cash-flow and operating forecast where redressement is sought, showing why continued activity and a plan may be credible.

The foreign-founder version of this file needs more than a French accounting export. Attach translations or explanations for foreign bank statements, parent-company facilities, shareholder-loan agreements, foreign guarantees, currency restrictions and group invoices. Identify whether a foreign creditor has a security interest or whether a parent has promised to subordinate its claim. If a document is in English, preserve the original and prepare a faithful French translation where the court or its registry requires one. Do not translate figures in a way that obscures the currency or the date.

The legal representative may need to instruct a French lawyer, an accountant or a local representative to prepare the filing and attend the hearing. A mandate or power of attorney can organise that assistance, but it does not necessarily remove the representative’s obligation to provide accurate information. The lawyer cannot safely file on the basis of a parent’s summary that omits a foreign bank account, an intercompany debt or unpaid payroll. The mandate should identify access to the accounting system, bank evidence, tax portals and corporate records.

The director should make the strategic choice between redressement and liquidation carefully. Redressement is designed to allow the business to continue, preserve employment and pay the liabilities under a court-approved plan. Liquidation is appropriate where recovery is manifestly impossible and the assets must be realised. The director proposes the route; the court decides the procedure after examining the evidence. An optimistic business plan with no financing, no customers and no credible working capital does not become a recovery plan merely because the foreign parent wants to preserve the brand.

A creditor or the public prosecutor can also initiate a redressement procedure. Article L. 631-5 of the French Commercial Code allows the court to be seized by the public prosecutor or on a creditor’s summons when the statutory conditions are met. The provision matters in practice: a supplier, landlord, URSSAF or other creditor may act when the director remains silent. The company should maintain a monitored French postal address and designate someone to receive court documents, even if the founder is in the United States, the United Kingdom, the United Arab Emirates or another jurisdiction.

The filing does not end the company’s need to communicate. The director should prepare a short notice for the parent, employees, bank, accountant and major creditors explaining the procedure sought, the court, the date of filing and the contact details of counsel. Communications must not promise individual payment, transfer assets to a related company or favour a connected creditor. They should preserve evidence and avoid statements that contradict the accounting file.

B. How to avoid personal liability and protect the group

Limited liability protects the shareholder from ordinary company debts, but it is not a guarantee against every personal claim. The company’s insolvency is separate from the director’s personal position. Personal exposure may arise from a personal guarantee, a deliberate misuse of company assets, a de facto management role, an unlawful transfer, a tax or social-security rule that applies personally, or a management fault that contributed to an insufficiency of assets.

The principal civil rule is Article L. 651-2 of the French Commercial Code. It allows the court, when liquidation of a legal person shows insufficient assets, to make directors bear all or part of that insufficiency where a management fault contributed to it. The same provision states that “la responsabilité … ne peut être engagée” for a simple management negligence. That is not a safe harbour for passive conduct. A director who knowingly lets payroll, VAT, URSSAF or supplier debts accumulate after the company has crossed the legal threshold may face a very different analysis from a director who acted promptly on reliable but incomplete information and sought prevention or court protection.

Case law adds an important causal requirement. In Cass. com., 17 June 2020, no. 18-11.737, published in the Bulletin, the Court held that “la faute tenant à la déclaration tardive de cessation des paiements ne pouvant exister avant l’expiration du délai de quarante-cinq jours”. The consequence is not that every late filing automatically creates a debt against the director. The alleged delay must have existed after the 45-day period and must have contributed to the insufficiency of assets. The same decision prevents a court from attributing to the late-filing fault liabilities that arose before the legal period had expired.

In Cass. com., 20 April 2017, no. 14-50.048, the Court required the analysis of late filing to be connected to “la date de la cessation des paiements fixée dans le jugement d’ouverture ou dans un jugement de report”. For a foreign founder, this is why dated evidence matters. The director should preserve the first cash-flow warning, the bank’s refusal or limit reduction, the tax or URSSAF demands, the funding proposal, the accounting advice, the board minutes and the final decision to file. A court must be able to reconstruct the timeline rather than infer it from a year-end balance sheet.

The risk of an interdiction de gérer, an order preventing a person from directing, managing, administering or controlling a business, is addressed by Article L. 653-8. It permits an interdiction where a person knowingly failed to request redressement or liquidation within 45 days without having requested conciliation. The word “sciemment” is important: the court examines knowledge and conduct. A foreign director cannot assume that distance, language or reliance on a foreign parent automatically proves lack of knowledge. Those facts should be addressed with evidence of professional advice, reporting lines, language support and the decisions taken.

The Supreme Court’s decision in no. 18-11.737 also shows the value of separating pre-deadline and post-deadline liabilities. If the business continues after the filing deadline, identify which new liabilities were unavoidable, which were authorised as part of a recovery plan and which resulted from an unjustified continuation. Do not treat the 45-day period as a free period to pay selected insiders. The company should pay ordinary operating expenses only within a documented strategy and with advice on the effects of the insolvency date.

The “période suspecte”, or suspect period, creates another risk. The judgment may fix the cessation date before the filing date. Certain payments and transactions in that interval can be challenged or set aside. Article L. 632-1 of the Commercial Code identifies acts that are null when they occur from the date of cessation des paiements, subject to the statutory conditions. Until the filing is assessed, the company should suspend dividends, non-essential payments to shareholders, asset transfers to a parent or sister company, repayment of a shareholder loan, unusual bonuses and payments that favour one creditor without a documented legal reason.

The parent company should not empty the French subsidiary to protect an overseas balance sheet. Any transfer of stock, intellectual property, cash, customer contracts or employees must be assessed at arm’s length, supported by a business reason and documented with valuation and payment evidence. If the French company is paying a parent-company invoice, identify the service, contractual basis, due date, economic benefit and treatment of other creditors. If the parent is funding the company, record whether the money is a capital contribution, a shareholder loan, a subordinated loan or a payment made for the subsidiary. Related-party documents are likely to receive close attention once a procedure opens.

Employees and public creditors require special care. A company that continues to submit VAT, corporate-tax and payroll declarations while not paying the corresponding amounts creates a clearer evidence trail than a company that stops filing altogether. An unpaid return may remain a debt, but missing records makes the court’s work and the director’s defence harder. Coordinate the accounting position with the French tax administration and URSSAF, preserve employee payroll data and make no promise that a foreign parent has not approved in writing.

Personal guarantees must be mapped separately. A director who guaranteed a lease, bank facility or supplier debt may be pursued under the guarantee’s terms even though the company is in a collective procedure. The guarantor should check the cap, duration, formal validity, notice and any statutory protection. A foreign parent’s guarantee, keepwell letter or comfort letter must be analysed under its governing law and is not interchangeable with the director’s liability under French insolvency law.

A foreign shareholder is not automatically liable for the French company’s debts. The shareholder’s exposure may nevertheless increase if it acted as a de facto director, mixed assets, organised a fraudulent transfer, gave an enforceable guarantee or used the subsidiary as a shell. The corporate group should keep separate bank accounts, contracts, approvals, accounting records and decision logs. The fact that a French company is wholly owned by a foreign company does not remove the need for French corporate governance.

The following action plan is designed for the first 45 days:

1. Day 1: appoint a French lawyer and accountant, identify the legal representative, secure the registered-office mail and freeze the accounting and bank evidence.
2. Days 1 to 3: build the due-liability schedule, reconcile French and foreign bank accounts, test credit lines and document every moratorium or parent-funding commitment.
3. Days 3 to 7: determine the likely cessation date, review safeguard, mandat ad hoc and conciliation, and identify the competent court.
4. Before day 15: prepare the Cerfa 10530 package, the latest accounts, the recent cash position, employee and creditor schedules, translations and powers of attorney.
5. Before day 30: decide whether redressement remains credible, whether liquidation is unavoidable or whether a lawful conciliation is still possible.
6. No later than day 45, absent a valid conciliation route: file for the appropriate judicial procedure and retain proof of filing.
7. After filing: respond to the court, mandataire judiciaire (court-appointed creditors’ representative), administrateur judiciaire if appointed, tax authorities, URSSAF, employees and creditors through one controlled information channel.

This timetable is not a substitute for a case-specific calculation. The date may be disputed, the company may have an available credit reserve, or a creditor’s moratorium may change the result. The foreign founder should obtain a written legal and accounting position before choosing a date, but should not use the need for perfect information as an excuse to let the statutory period expire.

Conclusion

A French company does not become legally insolvent merely because it has no revenue, makes a loss or misses one payment. The decisive test is the company’s ability to pay certain and due liabilities with assets that are genuinely available. For a foreign-owned company, the evidence must cover every relevant bank account, parent-company funding commitment, currency restriction, moratorium, tax debt, URSSAF debt, employee claim and related-party transaction.

Once cessation des paiements is established, the director must work against a real 45-day deadline. Safeguard belongs before the threshold; mandat ad hoc and conciliation may provide prevention or a narrow route around the threshold, but they do not justify concealment or indefinite delay. Redressement or liquidation must be prepared with the competent French court, an accurate Cerfa package and a coherent explanation of the company’s future.

Prompt, documented action protects more than the company. It gives the foreign director evidence of a responsible timeline, protects employees and creditors from avoidable deterioration, and limits the risk that a parent-company transaction will later be challenged. The correct objective is not to keep the French entity alive at any cost. It is to choose, prove and implement the legally available route before the company’s cash position and the director’s options become worse.

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