Your French company has stopped paying its suppliers, the landlord is threatening court action, URSSAF — the French social-security collection agency — has sent a formal demand for unpaid contributions, and your bank in Paris has frozen the overdraft. You live in London, New York, Dubai or Singapore, you manage the business from a distance, and you are wondering whether you can simply wait for things to improve, inject a little cash from your foreign parent company, or quietly close the French entity and walk away. French insolvency law gives you none of these easy exits. Once a French company can no longer pay its due debts with its available cash, it is in what French law calls cessation des paiements, and the registered director has a maximum of forty-five days to ask the court to open insolvency proceedings. Missing that deadline, paying one creditor ahead of the others, or emptying the accounts back to the foreign parent can expose you personally to court-ordered payments, a ban on managing companies, and even criminal prosecution. This guide explains, for a foreign founder or group running a French subsidiary from abroad, how to tell whether the company is legally insolvent, what you must file and when, what the court will do to the company, and what the court can do to you.

I. Is Your French Company Insolvent? The Cessation des Paiements Test and the 45-Day Filing Duty

A. What Counts as Cessation des Paiements: Due Debts Measured Against Available Cash

French law defines insolvency with a single test. A company is in cessation des paiements when it is, in the words of article L. 631-1 of the Commercial Code, “dans l’impossibilité de faire face au passif exigible avec son actif disponible”, that is, unable to meet its currently due liabilities with its available assets. The comparison is deliberately narrow and it works in your favour as often as it works against you. On one side of the scale sits only the passif exigible: debts that are already due and payable, such as an unpaid supplier invoice past its term, wages now owed, VAT already declared and payable, or a loan instalment whose date has passed. Future debts do not count, even if they are certain: next quarter’s rent, a loan that matures in six months, or a tax bill not yet issued cannot by themselves place the company in cessation des paiements. On the other side sits only the actif disponible: cash in hand, bank balances actually drawable, and receivables that can be mobilised immediately. Real estate, equipment, inventory and uncalled capital are not available assets, however valuable they look on the balance sheet. A company can therefore be balance-sheet solvent and still be legally insolvent, which is the trap most foreign managers fall into: they look at the equity on the annual accounts, see a positive number, and conclude that nothing urgent is required, while the cash test has already been failed for weeks.

The statute adds one important correction that often decides borderline cases. The same article L. 631-1 provides that “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 plain terms, a documented and still usable bank credit line counts as available cash, and a payment delay formally granted by a creditor removes that debt from the due-liabilities side for as long as the moratorium runs. But both elements must be real and provable: an overdraft facility the bank has just cancelled is not a reserve of credit, a vague oral promise from a supplier to “wait a little” is not a moratorium, and a shareholder current-account advance that the foreign parent can recall at any moment will be examined with suspicion. From abroad, your first practical step is therefore a dated cash photograph: list every debt already due with its exact maturity, list every euro actually drawable plus confirmed credit lines, and keep the written proof of each agreed delay. If the second list does not cover the first, the company is presumptively in cessation des paiements, and the forty-five-day clock described below has already started, whether or not any creditor has gone to court.

Two administrative words you will meet constantly deserve a clear explanation. The greffe is the clerk’s office of the commercial court, which keeps the Registre du commerce et des sociétés, the French company register in which your SAS or SARL is recorded. The Kbis extract is the official identity card the greffe issues for a company: name, registered office, share capital, directors, and current status. When a court opens insolvency proceedings, the judgment is registered and published, notably in the BODACC, the official gazette of commercial announcements, so that every creditor, bank and future business partner can see it. There is no discreet insolvency in France: the opening judgment appears on the company’s public record within days, which is why suppliers and banks often learn of the situation before the foreign director has finished organising a response. Accepting this publicity from the start avoids the most common mistake, which is to keep trading and paying selectively while hoping nobody notices, because selective payments made after the cessation date can later be cancelled by the court, as explained in section II.

B. The 45-Day Rule: File for Redressement or Open a Conciliation Before the Clock Runs Out

Once cessation des paiements is established, the registered director has a personal legal duty to act fast. Article L. 631-4 of the Commercial Code 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.” The filing is commonly called the dépôt de bilan, the declaration of cessation of payments, and it is lodged with the commercial court of the company’s registered office, together with a full financial dossier whose contents the official Service-Public Entreprendre page on the declaration of cessation of payments lists in detail. The forty-five days run from the actual cash-failure date, not from the day you admit the problem, and the court later fixes that date itself in the opening judgment, so backdating your awareness changes nothing. For a director living abroad, the practical consequence is blunt: the day the cash photograph described above turns negative, you must instruct a French lawyer or representative that same week, because preparing the dossier, translating foreign-parent documents, and arranging a signature from abroad already consumes most of the deadline.

The statute offers exactly one alternative to filing within the forty-five days: a conciliation, which is a confidential court-supervised negotiation with creditors. Article L. 611-4 of the Commercial Code grants this procedure to debtors “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”, which means the door to conciliation closes once the company has been insolvent for more than forty-five days. Conciliation is often the best option for a foreign-owned company that has a viable business but a temporary cash hole, because it stays confidential, it does not appear in the BODACC, and it allows a negotiated rescheduling while the director keeps full management powers. Its interaction with the filing duty was clarified in a recent Cour de cassation decision that every cross-border director should know: in its judgment of 20 November 2024, no. 23-12.297, the Commercial Chamber held that “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.” In other words, a conciliation opened in time freezes the filing duty, but the duty revives immediately and in full when the conciliation ends without an agreement, and the director who then waits commits a management fault. Requesting a conciliation therefore buys time only if you use that time to reach a deal or prepare the filing.

You should not assume that silence from creditors means safety. Even if the director files nothing, the court can be seised by others: article L. 631-5 of the Commercial Code provides that “la procédure peut aussi être ouverte sur l’assignation d’un créancier, quelle que soit la nature de sa créance”, so a single unpaid French supplier, landlord or the URSSAF collector can petition the court to open a redressement against your company, and the public prosecutor can do the same. From abroad you will typically learn of this through a summons served at the French registered office, which is why a reliable domiciliation address with real mail forwarding is not an administrative luxury but an early-warning system; companies whose registered-office mail goes unread discover the opening judgment only when the bank accounts are already frozen. If the declaration is lodged late, the consequences fall on the director personally: the official guidance warns that where the declaration is lodged after the 45-day statutory deadline, the official guidance warns that the court can sentence the director to a ban on managing companies, an interdiction de gérer covering directorships in any business, and the delay itself is routinely treated as a management fault supporting a claim for the company’s asset shortfall, developed in section II. For companies registered in Paris and the inner suburbs, the competent court is the Paris commercial court, and hearings on opening are fast, often within days of the petition, so a foreign director should plan from the outset to be represented by counsel and to attend by arrangement rather than hoping for an adjournment.

II. What the French Court Will Do to the Company and What It Can Do to You Personally

A. Redressement or Liquidation: Observation Period, Suspect Period and Employees Covered by the AGS

French law offers three court procedures, and which one fits depends entirely on whether the company is already insolvent and whether it can still be saved. If the difficulties are serious but cessation des paiements has not yet occurred, the company can request a sauvegarde, a protection procedure open to a debtor who, in the words of article L. 620-1 of the Commercial Code, “sans être en cessation des paiements, justifie de difficultés qu’il n’est pas en mesure de surmonter”. If cessation des paiements has occurred but the business may survive, the court opens a redressement judiciaire, which article L. 631-1 describes as intended “à permettre la poursuite de l’activité de l’entreprise, le maintien de l’emploi et l’apurement du passif”, through a court-approved repayment plan adopted after an observation period. If recovery is hopeless, the court opens a liquidation judiciaire, available under article L. 640-1 against a debtor “en cessation des paiements et dont le redressement est manifestement impossible”, a procedure “destinée à mettre fin à l’activité de l’entreprise ou à réaliser le patrimoine du débiteur par une cession globale ou séparée de ses droits et de ses biens”. The court can move directly from a redressement petition to liquidation where the file shows the situation is manifestly beyond rescue, a power confirmed by article L. 631-7, so a director who files for redressement hoping to gain time must be ready to argue, with figures, that a plan is credible. Where the company is still solvent, none of this applies: the proper route is a voluntary winding-up, which follows completely different rules and is described in our guide on closing, dissolving and striking off a French company while living abroad.

The opening judgment fixes the date of cessation des paiements, and that date draws a line that reaches backwards in time: the so-called suspect period between that date and the judgment. Acts performed during that period can be cancelled by the court, and the list in article L. 632-1 of the Commercial Code reads like a catalogue of what panicking directors usually do: “Sont nuls, lorsqu’ils sont intervenus depuis la date de cessation des paiements, les actes suivants”, including “Tous les actes à titre gratuit translatifs de propriété mobilière ou immobilière”, “Tout paiement, quel qu’en ait été le mode, pour dettes non échues au jour du paiement”, payments of due debts made by unusual means, and security granted for previously contracted debts. Concretely, once the cash test has failed, you must stop paying debts before they fall due, stop granting the bank new security for old loans, stop transferring assets for free even within the group, and above all stop repaying the foreign parent’s shareholder current account ahead of independent creditors, because the liquidator will typically attack exactly those payments first. This is also why our analysis of blocked shareholder current accounts in French companies matters here: money the parent injected as a loan ranks as a claim in the proceedings and cannot simply be wired home when trouble appears.

Employees are treated separately from ordinary creditors and this surprises many foreign employers. When insolvency proceedings open, employment contracts do not end automatically; the administrator or liquidator may dismiss staff where the business cannot continue, but unpaid wages are covered by a dedicated guarantee scheme, the AGS, funded by employer contributions. Article L. 3253-2 of the Labour Code provides that “les rémunérations de toute nature dues aux salariés pour les soixante derniers jours de travail sont, déduction faite des acomptes déjà perçus, payées, nonobstant l’existence de toute autre créance privilégiée”, up to a regulatory ceiling, and further dismissal-related sums are covered under conditions the official Service-Public Entreprendre page on judicial liquidation details. For a foreign director this has two practical consequences: first, keeping exact payroll records and filing the mandatory declarations stays essential even in a crisis, because the AGS advances money on the basis of those records; second, attempting to dismiss the French team informally from abroad, without the liquidator and without the specific insolvency dismissal procedure, creates claims that will simply reappear as liabilities of the proceedings. Suppliers and landlords, meanwhile, do not wait: an unpaid French creditor can seek conservatory seizures or an injunction to pay, as described in our guide on recovering unpaid invoices in France from abroad, which is why the forty-five-day filing duty is also a shield, since the opening judgment freezes individual enforcement actions and forces all creditors into the collective proceedings.

B. Your Personal Exposure as a Foreign Director or Parent Company: Insuffisance d’Actif, Faillite Personnelle and Extension for Confusion of Assets

Limited liability protects shareholders, not directors. Where a French company’s judicial liquidation reveals that the assets do not cover the liabilities, the court can order the directors to pay the shortfall from their own funds. 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 elements of this sentence matter enormously for foreign groups. First, dirigeants de fait, de facto directors, are covered alongside registered directors: a foreign parent company or its executives who actually directed the French subsidiary, approved every payment, or hired and fired its staff can be pursued even though their names never appeared on the Kbis extract, and trying to hide behind a local nominee director does not remove that risk. Second, the fault must have contributed to the shortfall and must predate the opening judgment; late filing, continued loss-making trading, absence of proper accounts, and payments favouring one creditor are the classic faults retained by the courts. Third, the statute expressly shields mere negligence: “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”, so an honest mistake is not enough, but anything beyond that, documented in board minutes and bank statements, is usable evidence. A useful illustration is the judgment of the Commercial Chamber of 26 February 2020, no. 18-22.745, where a liquidator pursued alleged de facto directors for insuffisance d’actif and failed: the court of appeal found the shortfall unproven and the claim rejected, a rejection the Cour de cassation left intact, recalling through the reproduced reasoning that only a shortfall established during or at the end of the collective proceedings can be charged, and that “l’insuffisance d’actif doit être certaine au jour où le juge statue”. The lesson cuts both ways: liquidators cannot bill directors for hypothetical shortfalls, but where the shortfall is certain and a real management fault fed it, the order to pay follows.

Beyond money, the court can impose personal sanctions that end a business career in France. Article L. 653-4 of the Commercial Code allows the court to order faillite personnelle, personal bankruptcy, against a director who, among other listed acts, pursued abusively and in his personal interest a loss-making operation that could only lead to cessation des paiements. The Cour de cassation gave this text a scope foreign directors often underestimate: in its judgment of 13 April 2022, no. 21-12.994, it held that “L’article L. 653-4, 4°, du code de commerce sanctionne par la faillite personnelle le fait pour un dirigeant de poursuivre abusivement, dans un intérêt personnel, une exploitation déficitaire qui ne peut conduire qu’à la cessation des paiements de la personne morale. Un tel comportement peut être caractérisé même lorsque la cessation des paiements est déjà survenue.” Continuing to trade at a heavy loss while skipping social-security and tax payments, in that case to benefit another company owned by the same director, justified an eight-year personal bankruptcy even though the cessation date had already passed. Faillite personnelle carries ineligibility and management bans, and the same facts can ground an interdiction de gérer, while the criminal side is covered by banqueroute: article L. 654-2 punishes directors who, to delay the proceedings, used ruinous means to raise funds, who “détourné ou dissimulé tout ou partie de l’actif du débiteur”, fraudulently increased liabilities, or “tenu une comptabilité fictive ou fait disparaître des documents comptables”. Keeping real accounts from day one is therefore not bookkeeping advice but criminal-risk management, and backdating documents or hiding assets once insolvency looms is the fastest route from a commercial failure to a criminal file.

The final exposure is the one foreign groups discover last: the proceedings opened against the French subsidiary can be extended to the foreign parent itself. Article L. 621-2 of the Commercial Code allows the proceedings to be extended to other persons “en cas de confusion de leur patrimoine avec celui du débiteur ou de fictivité de la personne morale”, and the courts apply this to parent companies that mixed funds, settled the subsidiary’s debts as their own without documentation, or ran the subsidiary as a mere branch without its own decision-making. The Cour de cassation tightened the test in its judgment of 30 April 2025, no. 24-14.053, recalling first that “une procédure de liquidation judiciaire ouverte à l’égard d’un débiteur peut être étendue à une ou plusieurs autres personnes en cas de confusion de leurs patrimoines avec celui du débiteur”, then quashing an extension ordered on loose grounds, because “la confusion des patrimoines ne peut résulter que de relations financières anormales entre les sociétés en cause”. For a foreign parent, the message is operational: every cash movement between parent and subsidiary must be documented as a priced loan, a capital increase, or a genuine service invoiced at arm’s length, with written agreements and accounting entries on both sides, because undocumented sweeps, free services, and shared accounts with no settlement are exactly what liquidators collect as evidence of abnormal financial relations. If your group already mixed funds, disclose the full picture to French counsel before the liquidator reconstructs it, since the extension brings the parent’s own assets into the French proceedings.

Conclusion

A French subsidiary that cannot pay is not a problem you can outwait from abroad. Apply the cash test honestly, count only due debts against only drawable money and confirmed credit lines, and treat a negative result as the start of a forty-five-day countdown to file for redressement or open a confidential conciliation. Once proceedings open, stop all selective payments, keep the accounts and payroll records exact so employees are covered by the AGS, and assume every transfer of the suspect period will be examined. Above all, protect yourself as a director and as a parent company: file on time, do not trade on at a heavy loss to favour another entity, never strip assets or hide documents, and keep every intra-group flow priced and written so no confusion of assets can be alleged. Insolvency handled early is a procedure; handled late, it becomes personal liability.