Your French subsidiary has stopped paying its suppliers, the bank has frozen the overdraft, and the local manager is asking you what to do. You are sitting in London, New York, Dubai or Singapore, you do not read French court letters easily, and every week of hesitation makes the position worse. French insolvency law does not wait for foreign shareholders to get organized: once a company can no longer pay its debts as they fall due, a strict forty-five-day clock starts running, and the people who run the company from near or far can end up personally liable if that clock is ignored. The good news is that France offers several different court procedures, including confidential preventive routes and procedures that keep the business trading, but each door closes at a different moment. This guide explains, in plain English and with the exact French legal texts, how a foreign parent company detects the danger point, files on time from abroad, chooses between the available procedures, protects its directors against personal liability, and recovers what can still be recovered, including shareholder loans. Every French acronym is explained along the way.
This article is written for foreign founders, groups and investors who own a French company, typically a SAS (société par actions simplifiée, the flexible French corporation most foreigners choose) or a SARL (société à responsabilité limitée, the French limited liability company). If you are still at the creation stage, start with our step-by-step guide to setting up a company in France as a foreign founder, which covers the bank account, the Kbis (the official company identity extract issued by the greffe, the court registry) and VAT registration. If the company is simply loss-making but still paying its bills, read instead our guide on how a foreign parent dissolves and liquidates a solvent French subsidiary. The present guide starts where those stop: the French company cannot pay, and you must act under insolvency law.
I. File in Time and Choose the Right French Insolvency Procedure
A. How a Foreign Owner Detects Cessation des Paiements and Meets the Forty-Five-Day Filing Duty From Abroad
Everything in French insolvency law turns on one concept: the cessation des paiements, usually translated as cash-flow insolvency or the inability to meet liabilities as they fall due. Article L. 631-1 of the Commercial Code (Code de commerce) defines the trigger as the situation of a debtor who is “dans l’impossibilité de faire face au passif exigible avec son actif disponible”, unable to meet its due liabilities with its available assets. The same article adds an important safety valve: a debtor who shows that credit reserves or payment moratoria granted by its creditors allow it to meet due liabilities with available assets is not in cessation des paiements. In practice, this means the test is not simply whether the bank balance is negative. A confirmed and still available credit line, a documented payment schedule accepted by the tax authorities or URSSAF (the French social-security collection agency), or a written standstill from the main supplier can keep the company outside cessation des paiements, provided the documents are real, current and sufficient to cover what is due. Promises, expired facilities and hoped-for fundraisings do not count.
For a foreign parent, the practical difficulty is seeing the moment when the line is crossed, because information arrives late and in French. Treat the following as red flags that require an immediate solvency check with the French accountant (expert-comptable): unpaid supplier invoices older than sixty days, a bank that withdraws or freezes the overdraft facility, a formal notice (mise en demeure) from URSSAF or the tax office, attachment proceedings by a creditor (saisie on the bank account), wages paid late, and directors advancing personal funds or the parent wiring emergency cash just to meet payroll. None of these alone proves cessation des paiements, but together they almost always mean the test in Article L. 631-1 is met or imminent. Ask the expert-comptable for a dated treasury statement comparing available assets (cash plus genuinely drawable facilities) with due liabilities (everything already payable, not future instalments), and keep that document: it fixes the date from which the filing clock runs and shows later that you acted diligently.
Once cessation des paiements is established, the legal representative of the company must ask the court to open a redressement judiciaire (court-supervised reorganization, explained below) within a maximum of forty-five days. Article L. 631-4 of the Commercial Code states: “L’ouverture d’une procédure de redressement judiciaire doit être demandée par le débiteur au plus tard dans les quarante-cinq jours qui suivent la cessation des paiements s’il n’a pas, dans ce délai, demandé l’ouverture d’une procédure de conciliation.” In other words, the debtor has forty-five days from the cessation of payments to request the opening of reorganization proceedings, unless it has requested the opening of a conciliation (a confidential preventive negotiation supervised by the court) within that same period. Missing this deadline is one of the most heavily sanctioned faults in French business law: as will be seen in Part II, knowingly failing to file within forty-five days can lead to a court ban on managing any company (interdiction de gérer).
A recent ruling of the Cour de cassation (the French supreme court for civil and commercial matters) clarifies how the forty-five-day rule interacts with conciliation, and foreign owners should know it precisely. In its judgment of 20 November 2024, appeal no. 23-12.297, published in the official Bulletin, the Commercial Chamber holds: “Il résulte de la combinaison de ces textes que, lorsque le délai de quarante-cinq jours prévu par le second expire au cours de la procédure conciliation, le débiteur est dispensé d’exécuter son obligation de demander l’ouverture d’une procédure de redressement judiciaire. A l’expiration de la procédure de conciliation, le débiteur est en revanche tenu d’exécuter cette obligation sans délai” (Cass. com., 20 Nov. 2024, no. 23-12.297). In plain terms, if you enter conciliation in time and the forty-five days expire while the conciliation is running, you are excused from filing for reorganization during the conciliation, but the duty revives immediately and without delay when the conciliation ends if the company is still insolvent. The lesson for a foreign parent is operational: conciliation buys time to negotiate, it does not cancel the filing duty, so the end date of the conciliation must be diarised and a filing pack kept ready in case negotiations fail.
Filing from abroad is entirely possible but must be organized. The declaration of cessation des paiements (déclaration de cessation des paiements) is lodged by the company’s legal representative, meaning the president of the SAS, the gérant (manager) of the SARL, or a person holding a proper power of attorney, at the greffe (registry) of the court where the company has its registered office (siège social). If the siège is in Paris or the inner suburbs, that is the commercial court of the siège, and Paris filings follow their own practical timetables and document checklists, so allow extra days for translation and legalization of any foreign power of attorney. In practice, foreign groups instruct a French insolvency lawyer (avocat) who prepares the filing statement, the list of creditors, the employee headcount, the recent accounts and the cash position, and who represents the company at the opening hearing. Directors who live abroad can generally be heard by the court through counsel or by videoconference arrangements agreed in advance, but they cannot simply ignore the summons: the court examines the directors’ conduct, and absence without representation looks like abandonment. Keep every transfer of funds from the parent documented as a loan or a capital injection with written terms, because undocumented wires will be questioned later, as Part II explains.
Two immediate formalities follow the opening judgment and matter to foreigners. First, the judgment is published in the BODACC (Bulletin officiel des annonces civiles et commerciales, the official gazette where French corporate events are published), which is how suppliers, banks and landlords learn about the procedure. Second, the company’s Kbis extract is annotated to show the procedure, so any counterparty checking the company will see it. Neither step requires action from the parent, but both confirm that from the opening judgment onwards, the company speaks through the court-appointed officers: the administrateur judiciaire (the court-appointed administrator who supervises or assists management during the observation period) and the mandataire judiciaire (the creditors’ representative who collects and verifies claims). From that point, the parent negotiates with the procedure, not around it.
B. Sauvegarde, Redressement or Liquidation: Which Door Is Still Open for Your French Company
French law offers three main court procedures, and the right one depends entirely on timing, which is why Part A matters so much. The sauvegarde (safeguard procedure) is the earliest and most protective route: Article L. 620-1 of the Commercial Code opens it to a debtor which, without being in cessation des paiements, shows difficulties it cannot overcome, and the procedure is designed to reorganize the business so that activity continues, jobs are preserved and liabilities are cleared through a court-approved plan. For a foreign parent, sauvegarde is the prize for acting early: management stays in place, the procedure is less stigmatizing, and the parent keeps real influence over the restructuring. But sauvegarde is legally closed once cessation des paiements has occurred, so a parent that waits until the cash is gone has lost this option permanently.
The redressement judiciaire (judicial reorganization) is the standard procedure once cessation des paiements is established but the business can still be saved. Under Article L. 631-1, it aims to allow the continuation of the company’s activity, the maintenance of employment and the clearing of liabilities, through a plan ordered by the court after an observation period (période d’observation) during which the administrator assesses whether rescue is possible. During this period the company usually keeps trading under supervision, and creditors vote on or are consulted about the proposed plan, sometimes through classes of affected parties for larger cases. For the foreign parent, redressement means a supervised breathing space: pre-filing individual lawsuits and enforcement actions by most creditors are frozen by the opening judgment, because Article L. 622-21 of the Commercial Code provides that the opening judgment “interrompt ou interdit toute action en justice” by creditors seeking payment of a sum of money and stops enforcement proceedings against the company’s assets. Landlords, suppliers and banks already suing must therefore pause, which gives the group time to fund a continuation plan, find a buyer for the business, or negotiate debt reductions in an orderly frame instead of under seizure threats.
The liquidation judiciaire (court-ordered liquidation) is the terminal procedure: Article L. 640-1 of the Commercial Code opens it to any debtor in cessation des paiements whose recovery is manifestly impossible, and its purpose is to end the activity and sell the assets to pay creditors. A liquidateur judiciaire (court-appointed liquidator) replaces management, employees are dismissed under a supervised process with the French wage-guarantee scheme advancing unpaid wage claims, and the assets are sold either piecemeal or as going-concern blocks. Foreign parents often assume that liquidation ends their worries because the subsidiary was a limited-liability company; Part II explains why that assumption is dangerous. The choice between redressement and liquidation is made by the court on the basis of the administrator’s report and the available rescue offers, but the parent’s attitude weighs heavily in practice: a parent that files early, funds the observation period transparently and presents a credible plan usually obtains redressement, while a parent that files late with empty accounts and no plan pushes the court towards liquidation and invites scrutiny of its own conduct.
Before any of these doors, there is the confidential preventive route mentioned in Part A: the conciliation, a private negotiation with the main creditors conducted under a court-appointed conciliator, without publication in the BODACC and without the stigma of a public procedure. Conciliation only works if the company approaches the court before cessation des paiements is too deep, which is another reason to run the solvency test at the first red flag rather than after the bailiff’s visit. A foreign parent that discovers the problem early should therefore ask its French counsel immediately whether a confidential conciliation is still available, because it preserves the commercial reputation of the French business, keeps banking relationships workable, and, as the Cour de cassation confirmed in the 20 November 2024 ruling quoted above, suspends the forty-five-day filing duty while it runs. Once cessation des paiements is undeniable and conciliation has failed or was never opened, the only compliant path is the timely filing for redressement or liquidation, and every week of delay converts a manageable procedure into personal exposure.
II. Shield the Foreign Parent and Its Directors, and Recover What Can Still Be Recovered
A. Where the Foreign Parent and the Directors Are Personally Exposed
Limited liability protects shareholders against the company’s debts, but French insolvency law pierces that shield in several precisely defined situations, and foreign directors are the first targets because courts assume distance means negligence. The central weapon is the action en responsabilité pour insuffisance d’actif, the liability action for shortfall of assets: Article L. 651-2 of the Commercial Code provides that where the court-ordered liquidation of a legal entity reveals a shortfall of assets, the court may, where a management fault (faute de gestion) contributed to that shortfall, order that all or part of the shortfall be borne by some or all of the de jure or de facto directors who contributed to the fault, with joint and several liability possible for multiple directors. Two points in this text are vital for foreigners. First, it catches dirigeants de fait, de facto directors, so a foreign parent company or a group executive who actually directs the French subsidiary from abroad, approves every payment, hires and fires, or negotiates with the bank over the local manager’s head can be condemned even without any formal corporate office. Second, the same article draws a line the courts must respect: “Toutefois, en cas de simple négligence du dirigeant de droit ou de fait dans la gestion de la personne morale, sa responsabilité au titre de l’insuffisance d’actif ne peut être engagée”, meaning mere simple negligence cannot trigger this liability. The liquidator must therefore prove a real management fault that contributed to the shortfall, such as continuing a structurally loss-making activity with no rescue plan, keeping manifestly irregular accounts, or stripping the company of substance, and not just imperfect management from a distance.
Who brings this action, and against whom, was clarified only days ago by the Cour de cassation, which makes this guide fully current. In its judgment of 9 September 2026, appeal no. 24-22.135, published in the Bulletin, the Commercial Chamber holds: “Selon le second, en matière de responsabilité pour insuffisance d’actif, le tribunal est saisi par le liquidateur ou le ministère public. Il peut également l’être, dans l’intérêt collectif des créanciers, par la majorité des créanciers nommés contrôleurs lorsque le liquidateur n’a pas engagé l’action, après une mise en demeure restée sans suite. Il en résulte que l’action ouverte aux créanciers contrôleurs est subsidiaire” (Cass. com., 9 Sept. 2026, no. 24-22.135). For a foreign director, the practical message is double. On the defensive side, the circle of potential claimants is wide: the liquidator, the public prosecutor and, if the liquidator stays inactive after formal notice, the majority of the creditors appointed as controllers. On the procedural side, creditor controllers cannot pile onto an action the liquidator has already launched, which prevents a director from facing several parallel lawsuits over the same shortfall. Article L. 651-3 of the Commercial Code, the provision interpreted in that ruling, sets exactly this scheme for seizing the court. The action is time-barred three years after the judgment opening the liquidation, so exposure does not vanish when the company disappears from the RCS (Registre du commerce et des sociétés, the French companies register).
The second exposure is the personal sanction: faillite personnelle (personal bankruptcy) or, more commonly for foreign directors, the interdiction de gérer, the court ban on directing, managing or controlling any business. Article L. 653-8 of the Commercial Code allows the court to pronounce this ban in the cases defined by the preceding articles, and it expressly adds that the ban may also be pronounced against any person who knowingly failed to cooperate with the court officers and, crucially, against any person who knowingly omitted to request the opening of reorganization or liquidation proceedings within forty-five days of the cessation des paiements without having requested conciliation. This is the sanction behind the filing duty of Part A, and it applies to foreign directors exactly like French ones: living abroad, not speaking French and delegating everything to the local manager are not defences, and a ban pronounced in France is increasingly visible to banks and partners across Europe through company registers and compliance checks. Our companion analysis of when a foreign director can be banned from managing after late filing details the defences that actually work, starting with proof that the forty-five days were respected or that conciliation was opened in time.
The third exposure strikes the foreign parent itself: the extension of the procedure to the parent for confusion of assets (confusion des patrimoines) or fictitiousness of the subsidiary. Article L. 621-2 of the Commercial Code provides that at the request of the administrator, the creditors’ representative, the debtor or the public prosecutor, an opened procedure “peut être étendue à une ou plusieurs autres personnes en cas de confusion de leur patrimoine avec celui du débiteur ou de fictivité de la personne morale”, meaning the subsidiary’s insolvency proceedings can be extended to the parent where their assets are confused or the subsidiary is fictitious. Extension is catastrophic for a group because the parent’s own assets become available to the subsidiary’s creditors. Courts find confusion typically where cash is pooled without proper agreements or accounting, where the parent pays the subsidiary’s suppliers directly and the subsidiary pays the parent’s invoices without documentation, where the same bank account is used, or where intra-group services are invoiced at manifestly artificial prices with no written contract. Fictitiousness targets shell subsidiaries with no real activity, no employees and no autonomy. A foreign group protects itself by keeping the exact opposite paper trail: separate bank accounts, written intra-group service agreements at arm’s-length prices, documented current-account advances with interest terms, separate accounting, and real local decision-making evidenced in minutes. Centralized group management is lawful; undocumented financial promiscuity is what gets the procedure extended.
Finally, foreign parents sometimes make things worse by trying to rescue the subsidiary informally: emergency loans wired overnight, instructions to keep trading at all costs, or personal guarantees given to the French bank in panic. Support itself is protected by statute: Article L. 650-1 of the Commercial Code states that once safeguard, reorganization or liquidation proceedings are opened, “les créanciers ne peuvent être tenus pour responsables des préjudices subis du fait des concours consentis, sauf les cas de fraude, d’immixtion caractérisée dans la gestion du débiteur ou si les garanties prises en contrepartie de ces concours sont disproportionnées à ceux-ci”, which means a creditor, including a parent that lent money, cannot be held liable for losses caused by the support it provided, except in cases of fraud, characterized interference in the debtor’s management, or guarantees taken in return that are disproportionate to the support. Documented loans on normal terms are therefore safe; taking over management while pretending to be a mere lender, or securing emergency advances with excessive collateral stripped from the subsidiary, is exactly the characterized interference and disproportionate guarantee the statute punishes. The line between lawful group support and punishable meddling is paperwork and proportionality, and it must be drawn before the filing, not after.
B. Shareholder Loans and the Practical Recovery Checklist for a Parent Acting From Abroad
The question every foreign parent asks once the procedure is opened is whether the money it put into France can come back, starting with the compte courant d’associé, the shareholder current account through which groups routinely advance cash to their French subsidiary. French law treats the parent like any other creditor for these advances: the claim must be declared to the mandataire judiciaire within the statutory deadline running from the BODACC publication, with the loan agreements, transfer proofs and account statements attached, and it will rank as an unsecured claim unless a valid security was taken in healthier times. Late or undocumented declarations are the main reason foreign parents recover nothing, so the declaration should be prepared by French counsel immediately after the opening judgment, not months later when the liquidator asks. Interest agreed in the advance terms can be claimed too, but only within the limits the verified documents support. Advances made after the opening judgment to keep an authorized continuation running follow a more favourable payment regime, which is another reason to fund the company transparently through the procedure rather than through informal pre-filing wires.
Recovery also depends on what the parent does not do in the months before filing. Payments that prefer one creditor over the others once the company is already insolvent, new security granted for old debts, and asset transfers at undervalue are all liable to be challenged by the court officers once the procedure is opened, with the result that the money or the asset must be returned to the pool for all creditors. A foreign group should therefore freeze selective payments as soon as cessation des paiements is suspected: no more paying the home-country supplier in full while French creditors wait, no more sweeping the French account to the parent, no more transferring equipment or trademarks out of the subsidiary. If intra-group balances must move for genuine operational reasons, each movement needs a written justification, market terms and same-day accounting entries. Courts judge the pre-filing period document by document, and a clean, boring paper trail is the parent’s best defence against both extension claims under Article L. 621-2 and fault claims under Article L. 651-2.
Employees deserve a dedicated paragraph because foreign owners regularly underestimate this front. French employment law survives contact with insolvency: employment contracts continue during the observation period, dismissals follow a supervised procedure with employee representatives informed and consulted, and unpaid wages are advanced by the French wage-guarantee scheme, which then claims reimbursement from the procedure. A parent that stops paying wages without procedure, dismisses staff by email from headquarters, or empties the company of the funds meant for severance exposes its directors to additional claims and destroys any chance of selling the business as a going concern. The correct reflex is to give the French counsel and the court officers an exact headcount, contract types, seniority dates and pay arrears from day one, and to let the procedure handle the workforce steps. Buyers of distressed businesses in France buy the workforce with the assets, so a properly managed employee file directly increases the sale price and therefore the parent’s own recovery as a creditor.
Put together, the foreign parent’s action plan from abroad runs as follows. First, commission the dated solvency test from the expert-comptable and stop all selective payments the day cessation des paiements is confirmed or seriously suspected. Second, instruct a French insolvency lawyer immediately and sign a power of attorney allowing counsel and the local representative to file, declare claims and appear in court. Third, decide within days, not weeks, between confidential conciliation if the cash position still allows it and a court filing within the forty-five days of Article L. 631-4, keeping the 20 November 2024 ruling (no. 23-12.297) in mind if conciliation is chosen. Fourth, assemble the filing pack: recent accounts, treasury statement, creditor list with the parent’s own advances fully documented, employee file, lease and key contracts, and all intra-group agreements. Fifth, after the opening judgment, declare every group claim to the mandataire judiciaire on time and monitor BODACC publications and the Kbis. Sixth, keep the parent’s hands visibly clean throughout: separate accounts, written terms for every intra-group flow, no direct management of the subsidiary’s daily payments from headquarters. Seventh, evaluate honestly whether the business can be continued, sold or must be liquidated, and if liquidation is unavoidable, manage it as an orderly court process rather than an abandonment, since abandonment is precisely what triggers director bans and parent extensions. Groups with a siège in Paris or Île-de-France should note that the commercial court of the siège handles the case locally, so Paris-based subsidiaries follow Paris timetables and hearing practices, and every procedural letter arrives in French at the registered office: appointing counsel who actually collects and reads that mail is not administrative detail, it is the difference between controlled proceedings and default sanctions.
Conclusion
An insolvent French subsidiary is not the end of a foreign group’s French story, but it is a legal procedure with compulsory steps, hard deadlines and personal sanctions for those who improvise. The forty-five-day filing duty in Article L. 631-4, the choice between sauvegarde, redressement and liquidation, the freeze of creditor lawsuits under Article L. 622-21, the director’s exposure to the shortfall action of Article L. 651-2 and the management ban of Article L. 653-8, the parent’s exposure to extension for confusion of assets under Article L. 621-2, and the protection for properly documented support in Article L. 650-1 form one coherent system: file early, file transparently, keep every intra-group flow documented, and use the court’s framework instead of fighting it. The two latest Cour de cassation rulings confirm the trend: the 20 November 2024 decision (no. 23-12.297) organizes the articulation between conciliation and the filing duty, and the 9 September 2026 decision (no. 24-22.135) disciplines who may sue directors for the shortfall. A foreign parent that acts within these lines usually saves the business or at least its directors; one that wires money in panic, pays friends first and files late generally loses both the money and the managers’ right to run companies. If the alarm signals described in Part I look familiar, the next step is a solvency diagnosis this week, not next quarter.
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