Your suppliers in France have stopped delivering, the URSSAF payment notice has arrived with penalties, the VAT return shows an amount you cannot pay, and the bank has frozen the overdraft. You live in London, New York, Dubai or Singapore, and your French company — the SAS or SARL you set up with such care — is running out of cash. The first question is not whether the business is going through a rough patch. Under French law, the question is binary and dated: is the company in cessation des paiements, the state of being unable to meet its due liabilities with its available assets, and if so, since when? Everything flows from that date. It determines which court-supervised procedure you can still choose, how fast you must act, which payments the court can later cancel, and whether you as a foreign director can be ordered to pay the company’s shortfall out of your own pocket. French insolvency law does not punish a director for failing; it punishes a director for filing late, for paying the wrong creditor at the wrong time, and for management faults that deepened the hole. The good news for a founder living abroad is that none of the rescue tools requires you to live in France. Conciliation, safeguard (sauvegarde), judicial recovery (redressement judiciaire) and even liquidation can be opened and followed through a French lawyer holding a written authority, with the court-appointed officers — the administrateur judiciaire and the mandataire judiciaire — doing the on-the-ground work. This guide explains, in plain English with the exact legal tests, how to run the cash test yourself, which door to knock on and within what deadline, what personal exposure you face as a non-resident director, and the concrete steps to take this week without boarding a plane.

I. How to tell whether your French company is in cessation des paiements and which rescue procedure to file for from abroad

A. Can your French company still pay its due debts with its available cash, credit lines and agreed delays?

French law defines the trigger of most insolvency procedures with a single sentence. Article L. 631-1 of the Commercial Code provides that “Il est institué une procédure de redressement judiciaire ouverte à tout débiteur mentionné aux articles L. 631-2 ou L. 631-3 qui, dans l’impossibilité de faire face au passif exigible avec son actif disponible, est en cessation des paiements.” In English: the company is in cessation des paiements when it cannot meet its due liabilities (passif exigible) with its available assets (actif disponible). Note what the test is not. It is not balance-sheet insolvency — a company whose liabilities exceed its assets on paper is not necessarily in cessation des paiements if it can still pay each bill as it falls due. And it is not a feeling of difficulty. It is a cash comparison, measured day by day, between what must be paid now and what is immediately available to pay it.

On the liabilities side, the passif exigible means every debt that is actually due: supplier invoices past their payment date, wages and the monthly social declarations to URSSAF (the body that collects employers’ social contributions — Union de recouvrement des cotisations de sécurité sociale et d’allocations familiales), the VAT shown on the CA3 return, the corporate tax instalments, loan repayments that have fallen due, and rent. A debt that is not yet due — a loan maturing next year, a supplier invoice payable in sixty days — does not count. On the assets side, the actif disponible means cash in hand and in the bank plus anything immediately realisable: an authorised and still-undrawn overdraft, receivables that can be collected at once, stock that can be sold immediately. Fixed assets, the value of the brand, future fundraising and hoped-for sales do not count. If the first column exceeds the second, the company is presumptively in cessation des paiements, and the clock starts running.

There is, however, one statutory escape route, and it matters enormously for foreign-owned companies whose parent or shareholders can inject support. The same article continues: “Le débiteur qui établit que les réserves de crédit ou les moratoires dont il bénéficie de la part de ses créanciers lui permettent de faire face au passif exigible avec son actif disponible n’est pas en cessation des paiements.” In other words, a company that proves that confirmed credit reserves or payment delays granted by its creditors allow it to cover its due debts is not in cessation des paiements. A documented shareholder cash commitment, a bank line that is genuinely still open, a written moratorium from URSSAF or the tax office (service des impôts des entreprises), or suppliers’ agreed payment schedules can keep the company on the right side of the line — but only if they are real, documented and sufficient. A vague promise from the parent company to provide support if needed has repeatedly been held insufficient by the courts; what counts is a binding commitment covering the actual shortfall. This is the first document your lawyer will ask for when you call from abroad: the aged creditor list, the bank position, and every written credit line or moratorium you hold.

Why does the exact date matter so much? Because the court will fix the date of cessation des paiements in the opening judgment, and that date opens the suspect period (période suspecte) running back from it, during which certain payments and transactions can be annulled. Article L. 632-1 of the Commercial Code provides that “Sont nuls, lorsqu’ils sont intervenus depuis la date de cessation des paiements, les actes suivants” — payments of debts that were not yet due, payments of due debts made by abnormal means, transfers for no consideration, and new security interests granted for old debts, among others. Concretely, if you repay your own shareholder current-account advance (compte courant d’associé) or grant the bank a mortgage while the company is already unable to pay its due debts, the liquidator can have that payment or security cancelled and the money brought back into the pot for all creditors. From the moment cash gets tight, the rule is simple: pay nothing abnormal, grant no new security, and reimburse no shareholder advances without advice. Normal payments of due debts in the ordinary course — salaries, a supplier paid by standard transfer when due — remain valid, but anything preferential or unusual becomes vulnerable.

Two practical consequences follow for the foreign founder. First, draw up the cash comparison in writing now, with your accountant, dated and signed: due debts on one side, available assets plus documented credit reserves and moratoria on the other. That paper will be the basis of every filing and every defence later. Second, stop the reflex of wiring emergency money from your personal account into the company informally or, worse, pulling money out to shield it. Both moves, done after cessation des paiements, can be recharacterised or clawed back. If the parent or the shareholders want to support the French company, do it as a documented, arm’s-length measure — ideally discussed with counsel before the filing — so that it counts as a genuine credit reserve rather than looking like confusion after the event.

B. Conciliation, safeguard or redressement judiciaire: which door is still open and how fast must you file from abroad?

Once you know where the company stands on the cash test, French law offers three doors, and which ones remain open depends entirely on whether cessation des paiements has occurred and for how long. The friendliest door is conciliation, a confidential negotiated procedure before the president of the commercial court (tribunal de commerce, the court that hears business cases; its clerk’s office is the greffe). Article L. 611-4 of the Commercial Code provides that “Il est institué, devant le tribunal de commerce, une procédure de conciliation dont peuvent bénéficier les débiteurs exerçant une activité commerciale ou artisanale qui éprouvent une difficulté juridique, économique ou financière, avérée ou prévisible, et ne se trouvent pas en cessation des paiements depuis plus de quarante-cinq jours.” Conciliation is private — unlike safeguard or redressement, it is not published in the official bulletin of civil and commercial announcements (BODACC, the Bulletin officiel des annonces civiles et commerciales, where insolvency openings are advertised) and no mention is entered on the company’s Kbis extract (the Kbis is the official registration certificate issued by the greffe, the identity card of a French company). A court-appointed conciliator helps you negotiate standstills, rescheduling or partial write-offs with the main creditors, and any agreement can be given court approval (homologation), which protects the new money and the agreed payments against later suspect-period challenges. For a foreign shareholder, conciliation is often the best value: a few months of protected negotiation, full confidentiality vis-à-vis the market, and no public stain on the Kbis. But it requires acting early — either before cessation des paiements or within forty-five days after it.

The second door, safeguard (sauvegarde), is the full court-supervised procedure for a company that is in difficulty but not yet in cessation des paiements. Article L. 620-1 of the Commercial Code states that “Il est institué une procédure de sauvegarde ouverte sur demande d’un débiteur mentionné à l’article L. 620-2 qui, sans être en cessation des paiements, justifie de difficultés qu’il n’est pas en mesure de surmonter.” Safeguard halts individual enforcement actions, imposes an observation period during which an administrateur judiciaire assists or supervises management, and ends with a court-approved repayment plan spread over up to ten years. It is public — published and mentioned on the Kbis — but management stays in place and no automatic dismissal of the director follows. For a foreign founder whose French subsidiary is structurally sound but hit by a lost contract, a tax reassessment or a temporary cash gap, safeguard buys time under court protection while the business keeps running. The catch is the same: you must file before cessation des paiements is characterised. Directors who wait until the account is empty and wages unpaid have usually lost access to both conciliation and safeguard.

The third door opens precisely when the first two close. Once the company is in cessation des paiements, the procedure is judicial recovery (redressement judiciaire), whose purpose, like safeguard, is to allow the business to continue, jobs to be preserved and liabilities to be cleared through a court plan. If recovery is manifestly impossible, the court opens judicial liquidation (liquidation judiciaire) instead: Article L. 640-1 provides that “Il est institué une procédure de liquidation judiciaire ouverte à tout débiteur mentionné à l’article L. 640-2 en cessation des paiements et dont le redressement est manifestement impossible.” And here the forty-five-day rule becomes a personal duty of the director. Article L. 631-4 states that “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.” Within forty-five days of cessation des paiements, you must either file for redressement (or liquidation, if hopeless) or at least request conciliation. Missing that deadline is itself one of the classic management faults held against directors later, and it closes the confidential route: a late conciliation request is inadmissible, leaving only the public procedures.

Filing from abroad is a matter of organisation, not presence. The declaration of cessation des paiements is filed at the greffe of the tribunal de commerce of the company’s registered office — for a Paris-registered SAS or SARL, that is the Paris commercial court — together with the accounts, the creditor and debtor lists, and the cash-flow statement your accountant prepares. A French avocat acts for you under a written power of attorney; your personal appearance is not required at the filing stage, and the court deals thereafter with the appointed officers and your counsel. What the court and the officers will want from you, quickly, is information: the full creditor list with amounts and due dates, the employment situation (even one employee triggers specific wage-guarantee steps through the AGS, the wage guarantee scheme), the status of the bank accounts, and the group’s intentions — will the foreign parent support a continuation plan, fund a sale of the business as a going concern (cession), or let liquidation run its course? Decide this before the hearing, because the opening judgment already sets the course: observation period with a view to a plan, or immediate liquidation if the court considers recovery manifestly impossible. If you already went through the formation journey described in our hub guide to setting up a company in France as a foreign founder, think of this as the mirror sequence: the same greffe, the same Kbis, now recording the procedure instead of the incorporation.

A final warning on timing that foreign directors consistently underestimate: the forty-five days run from the economic reality, not from the day you admit the problem. The court fixes the date of cessation des paiements retrospectively, often months before the filing, based on the accounts, the unpaid due debts and the bank statements. Calling your lawyer the day wages bounce is already late if suppliers have been unpaid for three months. The practical rule is to seek advice at the first missed payment of a due debt — URSSAF, VAT, wages, a major supplier — and no later. Early advice preserves conciliation and safeguard; late advice leaves only redressement and liquidation, with a public Kbis entry, BODACC publication, and a liquidator (mandataire judiciaire turned liquidateur) combing through your management for faults. The French system rewards the director who files early and punishes the one who waits, and distance is no excuse the courts accept.

II. What a foreign director personally risks when the French company enters redressement or liquidation

A. Will you have to pay the company’s shortfall yourself: faute de gestion, insuffisance d’actif and the simple-negligence shield?

The question every foreign director asks — whether a French court can come after personal assets held in London, New York or Dubai — has a precise legal answer, and it is narrower, and more technical, than most founders fear or most creditors claim. A French SAS or SARL shields its shareholders: as a shareholder you lose your investment, nothing more, absent a personal guarantee (cautionnement) you signed. But directors — the président of a SAS, the gérant of a SARL, and any de facto manager (dirigeant de fait, the person who actually runs the company without the title) — face a dedicated liability regime when liquidation reveals that the assets do not cover the liabilities. Article L. 651-2 of the Commercial Code provides that “Lorsque la liquidation judiciaire d’une personne morale fait apparaître une insuffisance d’actif, le tribunal peut, en cas de faute de gestion ayant contribué à cette insuffisance d’actif, décider que le montant de cette insuffisance d’actif sera supporté, en tout ou en partie, par tous les dirigeants de droit ou de fait, ou par certains d’entre eux, ayant contribué à la faute de gestion.” Three conditions must all be met: a shortfall (insuffisance d’actif), a management fault (faute de gestion), and a causal contribution of that fault to the shortfall. The court can then order the director to pay all or part of the shortfall, and where several directors are involved it may hold them jointly and severally liable.

The same article immediately adds the shield that has decided a large share of recent cases: “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.” Simple negligence — carelessness, lack of vigilance, an imprudent but honest business choice — cannot trigger liability for the shortfall. Only a genuine management fault, something beyond mere negligence, qualifies. The Court of Cassation (Cour de cassation, France’s supreme court for civil and commercial matters) enforces this boundary strictly. In a judgment of 13 April 2022 (case no. 20-20.137), it held that simple negligence by a director rules out liability for the shortfall (Court of Cassation, commercial chamber, 13 April 2022, case no. 20-20.137), quashing a ruling that had condemned a director to pay 300,000 euros essentially for a lack of vigilance in depending on a single client whose brutal termination of the relationship sank the company. Depending on one big client, trusting a partner, reacting too slowly — these are negligence, not management faults, and the supreme court overturned the condemnation on that exact ground.

Two further supreme-court rulings complete the picture, and both are directly useful to a foreign director preparing a defence. First, on timing: the 9 December 2016 reform that introduced the simple-negligence shield applies immediately, including to proceedings already under way. The commercial chamber held on 2 October 2024 (case no. 23-15.995) that the 9 December 2016 reform introducing the simple-negligence shield applies immediately, including to collective proceedings and liability suits already under way. A liquidator cannot dodge the shield by arguing that the alleged faults predate the reform. Second, on proof: the court must connect each fault to the shortfall, fault by fault. On 17 June 2020 (case no. 18-11.737), the Court of Cassation ruled that a judgment ordering a director to bear all or part of the shortfall must spell out, fault by fault, how each retained fault contributed to it (commercial chamber, 17 June 2020, case no. 18-11.737). A blanket condemnation that infers liability from poor management in general, without linking each fault to the shortfall, is quashed. In that case, the appeal court had counted an increase in liabilities that predated the date by which cessation des paiements should have been declared, and the supreme court censured the reasoning: what matters is whether the shortfall worsened because of the fault, in the relevant window, not the company’s overall decline.

What, then, does count as a faute de gestion in practice? The case law clusters around a familiar catalogue: continuing a manifestly loss-making activity with no restructuring plan in the sole interest of keeping control, keeping fictitious or grossly incomplete accounts that blind the company to its own position, using company funds for personal purposes, deliberately ignoring the forty-five-day filing duty while the shortfall deepens month after month, or stripping assets ahead of the filing. Late filing alone is the most common reproach against absent foreign directors: living abroad does not suspend the forty-five-day duty, and a director who learns of the cash crisis from 5,000 kilometres away is judged on what he did once informed — convene, document, file — not on where he lives. Conversely, a director who can show ordered accounts, timely advice sought, an early conciliation request or a filing within the deadline, and no diversion of funds, will find the simple-negligence shield a strong defence even if the company ultimately fails. Keep every email with the accountant, every board minute, every filing receipt: when the liquidator sues — usually two to four years after the opening — those papers are your case.

Note the boundary of this regime. Liability for the shortfall is not the only personal exposure. Directors can separately face a ban on managing (interdiction de gérer), personal bankruptcy measures (faillite personnelle) for the gravest conduct such as asset-stripping or fraud, and ordinary civil or criminal liability for distinct wrongs — undeclared work, tax fraud, misuse of company assets (abus de biens sociaux). Those are separate actions with their own conditions, but they share the same practical lesson: the foreign director who files early, cooperates with the court-appointed officers and keeps clean, complete records almost never meets them, while the director who hides, delays and moves money around meets all of them at once.

B. Suspect-period traps, late-filing faults and the exact steps to take this week without flying to France

Beyond the shortfall action, two traps catch foreign directors after the opening judgment: the suspect-period nullities and the late-filing fault. The suspect period runs from the court-fixed date of cessation des paiements to the opening judgment, and during it the payments listed in Article L. 632-1 — debts paid before they were due, due debts paid by abnormal means, shareholder advances reimbursed, new security granted for old debts — are void as of right once the liquidator invokes them. The reflexes that feel natural to a founder in crisis are precisely the ones the law strikes down: repaying yourself the money you lent the company, paying your home-country supplier in full while leaving French creditors unpaid, granting the bank a charge over the company’s assets to keep the line open, or selling an asset at a friendly undervalue to a related company. Every one of these can be unwound, with interest and costs, and each one feeds the liquidator’s fault file against you. The discipline from the first cash scare is therefore negative as much as positive: make no preferential payment, grant no security, sign no set-off, reimburse no current account, and sell nothing outside the ordinary course without written advice. Ordinary-course payments of due debts by standard means remain safe; everything extraordinary is suspect.

The late-filing fault deserves its own paragraph because it is the fault most foreign directors commit without realising it. French courts treat the forty-five-day filing duty as a hard professional standard: once cessation des paiements is established, the director must file or seek conciliation within forty-five days, and each month of unjustified delay that lets the shortfall grow is booked as a management fault contributing to it. Pleading distance and delegation — not having seen the accounts, having relied on reassurances from the local manager — is not a defence; at best it amounts to negligence, and where the delay demonstrably deepened the hole, courts requalify it as fault. The 17 June 2020 ruling cited above is your best protection and your clearest instruction at once: because the court must show how each fault contributed to the shortfall, a director who files promptly deprives the liquidator of the easiest causal story — the months of drift between the date the company should have been declared and the date it was. Early filing is not an admission of failure; it is the single most effective liability shield a director owns.

Here, concretely, is the week-one programme from abroad. First, commission the dated cash comparison described in Part I from your French accountant: due debts, available assets, documented credit lines and moratoria. Second, halt all abnormal outflows — no shareholder reimbursements, no new security, no preferential payments — and confirm that instruction in writing to whoever holds the company’s bank powers in France. Third, instruct a French insolvency lawyer with a clear written authority covering the filing, the hearing and all dealings with the administrateur and mandataire judiciaire; send the full creditor list, the last approved and filed accounts (approval and filing at the greffe remain mandatory even in difficulty — our guide to the French company’s annual legal calendar explains the timetable), the employment contracts, the leases, the bank documents and any parent-support letters. Fourth, decide with counsel which door to take — conciliation if you are early, safeguard if the difficulties are serious but the cash test is still passed, redressement within the forty-five days if cessation des paiements is characterised — and file. For a Paris-registered company the competent court is the Paris commercial court, and your lawyer handles the greffe filing and the hearing; your presence is arranged only if the court expressly wants to hear you, which counsel will prepare with you by video. Fifth, if the parent company is willing to fund a solution — a conciliation contribution, new money protected by homologation, or a takeover bid for the business — put it in a binding written commitment now, so it counts as a genuine credit reserve or a credible plan backing rather than a vague comfort letter the court will discount.

One last practical point on money flows during the observation period: once a safeguard or redressement is opened, the rules on paying old debts change completely — pre-opening debts are frozen and paid only through the plan, while properly authorised post-opening debts are paid as they fall due. Paying a frozen pre-opening creditor after the opening judgment for the sake of the business relationship is a fault that helps nobody, least of all you. Route every payment decision through counsel and the appointed officers until the plan is adopted or liquidation pronounced. Directors who respect that discipline come out of French insolvency proceedings with their personal assets intact and, often, with a restructured company; directors who improvise payments on their own come out facing the shortfall action. Distance changes none of this — it only means your instructions must be written, dated and channelled through your lawyer, which, as it happens, is exactly the paper trail a good defence is made of.

Conclusion

A French company that cannot pay its bills is not a lost cause; it is a company that has entered a highly codified sequence where dates and documents decide everything. Run the cash test honestly — due debts against available assets, counting only real, documented credit reserves and moratoria. File early: conciliation while you are still within forty-five days of cessation des paiements, safeguard while the test is still passed, redressement within the forty-five-day duty once it is not. Stop abnormal payments from the first scare, because the suspect period will unwind them and turn them into exhibits. And as a foreign director, understand your true exposure: you answer for the shortfall only if a genuine management fault contributed to it, simple negligence is a statutory shield the Court of Cassation enforces case after case, and the court must prove the link fault by fault — but none of that protects the director who files months late, keeps no accounts and moves money in the dark. None of these steps requires living in France; all of them require a dated paper trail and a French lawyer holding your written authority, from the first cash comparison to the hearing before the commercial court. Do this week what the law rewards — document, stop the abnormal, file on time — and the French system will do what it was designed to do: give the viable business a plan, close the hopeless one cleanly, and leave the diligent director’s personal assets alone.

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