Your French company has stopped paying on time and you live abroad. The payroll for your Paris employee is due next week and the account is short, URSSAF (the social-security collection agency, Union de recouvrement des cotisations de sécurité sociale et d’allocations familiales) has sent a formal demand for unpaid contributions, a supplier is threatening to serve a writ before the commercial court, and your accountant in France writes that the cash position no longer covers the debts already due. Your first reflex may be to wait for a better month, inject a little cash from abroad, and negotiate privately with each creditor. French law allows that reflex for a short time only. Once the company is unable to meet its due liabilities with its available assets, it is in cessation des paiements, the legal state of stopped payments, and the clock starts running: the debtor must ask the court to open insolvency proceedings within forty-five days, failing which the director faces personal liability for the shortfall and, in the worst cases, a ban on managing companies. This article explains, for a foreign founder or director running a French SAS (société par actions simplifiée, the flexible joint-stock company most foreign investors choose) or SARL (société à responsabilité limitée, the limited-liability company with a more rigid framework) from outside France, how to recognise the state of cessation of payments, what to file and where within the forty-five days, which court proceeding fits your situation, and how to protect your personal assets and your right to manage. A few reference points used below: the greffe is the registry office of the court; the Kbis is the official company identity certificate it issues; the RCS (Registre du commerce et des sociétés) is the companies register; BODACC (Bulletin officiel des annonces civiles et commerciales) is the gazette where insolvency judgments are published; and since 1 January 2025 the commercial court of Paris has become the Paris tribunal for economic activities, the TAE (tribunal des activités économiques), which now handles prevention and insolvency cases in the capital.

I. How Do You Know Your French Company Is in Cessation des Paiements, and What Must You File Within 45 Days?

Everything starts with a date, because the forty-five-day period runs from the day the company entered the state of cessation of payments, and the court will later fix that date itself if you do not identify it correctly. Foreign directors often discover this too late, after months of selective payments made from abroad in the belief that paying wages while leaving the tax bill aside keeps the company alive. French courts apply a strict cash test, and understanding it before you file determines whether you still have access to confidential rescue proceedings or whether you must declare the cessation. If you are hesitating between legal vehicles at an earlier stage, the comparison of the SAS, the SARL, the branch and the subsidiary in our guide to choosing the right vehicle for doing business in France from abroad explains why the choice of structure also shapes who signs the declaration and who answers for it.

A. When Does French Law Say a Company Has Stopped Paying: the Cash Test and What It Excludes?

The definition sits in Article L.631-1 of the Commercial Code, in force, which opens rehabilitation proceedings to any debtor « dans l’impossibilité de faire face au passif exigible avec son actif disponible, est en cessation des paiements ». In plain English, the test compares two columns at a given date: on one side the passif exigible, the liabilities already due and payable — wages, social-security contributions, VAT owed, supplier invoices past their term, loan instalments fallen due; on the other side the actif disponible, the assets immediately available — cash in hand, bank balances, and only those reserves of credit that are actually drawable. Real estate, equipment, unpaid share capital and future orders do not count, because they cannot pay a debt due tomorrow. A company can therefore be balance-sheet solvent and still be in cessation of payments if nothing liquid is left to meet this month’s obligations.

The same Article L.631-1 immediately adds the two lifelines that take a company out of the state of cessation: « 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. » A confirmed and still-undrawn bank overdraft facility counts as available assets, and a payment deferral genuinely granted by a creditor pushes the corresponding debt out of the due column. But both must be real and provable: an oral promise from a banker, a hoped-for shareholder advance from abroad that has not been wired, or a unilateral decision to pay suppliers late do not qualify. For a founder managing from another country, the practical consequence is sharp. Before deciding anything, ask your French accountant for a dated treasury statement listing, line by line, the debts due and the cash and drawable facilities available on that exact day. That single page is the document on which the court, the administrator and later possibly the liquidator will judge whether you filed on time or traded while insolvent.

The courts apply this comparison ruthlessly and at precise dates, as the Court of Cassation confirmed in a recent ruling. In a judgment of 30 April 2025 (Commercial Chamber, pourvoi no 24-14.159, courdecassation.fr/decision/6811bb1512a37cea68763c88), the judges reviewed a case in which a court of appeal had fixed the date of cessation of a debtor company after comparing the figures at a specific day, deducing from them that the company was in cessation on that date: « l’actif disponible était de 64 300, 81 euros au 20 avril 2021, tandis que le passif exigible se chiffrait à cette même date à la somme de 86 833,94 euros » The Court of Cassation quashed that ruling, but on a ground every foreign director should memorise: « En statuant ainsi, sans donner aucun motif à sa décision d’exclure la date du 31 décembre 2020 invoquée par le liquidateur dans ses conclusions, la cour d’appel n’a pas satisfait aux exigences du texte susvisé », namely Article 455 of the Code of Civil Procedure, under which every judgment must state its reasons. Two lessons follow. First, the liquidator is entitled to argue for an earlier date of cessation than the one the director admits, and the court must examine that argument with reasons. Second, the date of cessation is a judicial finding built on dated figures, not on the director’s feeling that things would improve. Keeping monthly treasury statements, bank correspondence granting or refusing facilities, and written deferrals from creditors is therefore not administrative tidiness; it is the evidence that will fix the starting point of your forty-five days.

Three common misunderstandings need clearing at this stage. Paying wages but not taxes still leaves the company in cessation if the tax debt is due and no moratorium covers it; French courts treat public creditors like any other creditor in the cash test. Receiving a court summons for an unpaid invoice does not by itself prove cessation, but the judgment debt it produces, once due, enters the due column — and the procedure for answering such a writ from abroad is described in our companion guide on closing and liquidating a French company from abroad only for solvent closures, which is a different route that disappears once cessation is characterised. And injecting money from your foreign account after the event does not erase the state of cessation retroactively; it improves the cash position from the day the funds actually arrive, which is why a documented shareholder advance wired immediately is worth more than a promised one. The question is never whether the business idea is good. It is whether, today, the available assets cover the debts due.

B. Filing the Declaration From Abroad: Where, With What Papers, and the Conciliation Alternative?

Once cessation is established, Article L.631-4 of the Commercial Code, in force, states the obligation in one sentence: « 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 debtor — in practice the legal representative, the president of the SAS or the manager (gérant) of the SARL — therefore has forty-five days from the date of cessation to file either a request to open rehabilitation proceedings or a request to open conciliation, the confidential negotiated procedure. Missing both deadlines does not make the company disappear; it exposes the director to the personal-liability actions examined in Part II, and it allows any creditor or the public prosecutor to petition the court instead, at a moment the director no longer controls.

The filing itself is a paper procedure at the court registry, which a director living abroad can prepare without travelling if the file is complete. Article R.631-1 of the Commercial Code, in force, lists what the declaration must contain: « La demande d’ouverture de la procédure de redressement judiciaire est déposée par le représentant légal de la personne morale ou par le débiteur personne physique au greffe du tribunal compétent », and attached to the request must be, besides the annual accounts for the last financial year, « L’état du passif exigible et de l’actif disponible ainsi qu’une déclaration de cessation des paiements », plus the company identification number, a treasury position, the number of employees, and supporting documents that the decree details. In practice the greffe provides a standard declaration form (déclaration de cessation des paiements, formerly called dépôt de bilan), and the official service-public guide walks through the filing step by step at entreprendre.service-public.gouv.fr/vosdroits/F22352. Since 1 January 2025, companies registered in Paris file before the Paris tribunal for economic activities (TAE), which replaced the Paris commercial court for prevention and insolvency matters, together with eleven other cities including Lyon, Marseille, Nanterre and Versailles. A director abroad typically signs the form, has it filed by a French lawyer with a power of attorney, and appears later only if the court summons the director to the opening hearing. What matters is the date the complete file reaches the registry, not the date of any hearing, so an incomplete file sent on day forty-four that is completed on day fifty is a late file.

The alternative within the same forty-five days is conciliation, and it deserves attention because it is confidential while rehabilitation is public. Article L.611-4 of the Commercial Code, in force, opens conciliation 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 ». A conciliation is negotiated under a court-appointed conciliator, usually within four to five months, with the main creditors, and any agreement can be recorded or approved by the court; crucially, nothing is published in BODACC while negotiations run, which preserves the company’s credit and the director’s reputation. But the window is narrow by design: beyond forty-five days of cessation, conciliation is closed and only rehabilitation or liquidation remain. For a foreign director, the decision tree is therefore simple. If the difficulty is foreseeable or recent and the forty-five days have not expired, ask for conciliation first and negotiate quietly. If cessation is older, or if negotiations have no realistic chance because the cash hole is structural, file for rehabilitation within the deadline and keep the proof of filing. In both cases, stop paying some creditors selectively to favour others once cessation is known: payments made after the date of cessation can later be cancelled at the liquidator’s request, and the director who organised them answers for it.

One final technical point that directors abroad consistently underestimate: the court fixes the date of cessation itself. Article L.631-8 of the Commercial Code, in force, provides: « Le tribunal fixe la date de cessation des paiements après avoir sollicité les observations du débiteur. » If the judgment says nothing, cessation is deemed to have occurred on the opening date, but the court may backdate it, since « Elle peut être reportée une ou plusieurs fois, sans pouvoir être antérieure de plus de dix-huit mois à la date du jugement d’ouverture de la procédure. » The backdated period, called the suspect period (période suspecte), is the zone in which past payments, securities and transfers can be annulled. Every week of delay in filing therefore lengthens the period the liquidator can claw back — including repayments of shareholder advances you wired to yourself, guarantees granted to your foreign bank, and offsets arranged between group companies. Filing early shortens the suspect period; filing late extends it. That arithmetic alone should decide a hesitant director.

II. What Happens to a Foreign Director When the French Company Enters Insolvency Proceedings?

Filing the declaration does not end the story; it opens a court-supervised phase in which the director keeps or loses control depending on the proceeding, and in which the director’s own conduct before and after the filing comes under review. Foreign directors sometimes assume that living outside France puts them beyond the reach of the French insolvency court. It does not. The obligations attach to the office — president, general manager, gérant, de jure or de facto director — not to the director’s address, and judgments for shortfall liability or management bans are enforceable and published. The developments that follow are of general scope: they describe the checks and steps useful in any comparable situation and do not describe the situation of any particular company, about which this article makes no finding. The good news is that French law offers a ladder of proceedings matched to the seriousness of the situation, and that personal liability requires a proven management fault, not mere failure. This second part maps the ladder and then the exposure, with the concrete steps a director can take from abroad at each stage. Readers facing a tax audit in parallel should also consult our guide on answering a French tax audit notice from abroad, because unpaid tax debts frequently trigger the very cash crisis described here.

A. Which Proceeding Fits Your Situation: Safeguard, Rehabilitation or Liquidation, and Who Is Allowed to Sue You?

Three court proceedings exist, and only one of them is available before cessation occurs. Safeguard (sauvegarde) is the early, protective proceeding: Article L.620-1 of the Commercial Code, in force, opens it to a debtor who « sans être en cessation des paiements, justifie de difficultés qu’il n’est pas en mesure de surmonter », with the purpose of reorganising the business while activity continues under a court-approved plan. Only the debtor can request it, creditors cannot force it, and the director stays in charge with the assistance of an administrator. If your French company faces serious but not yet cash-critical difficulties — a lost major client, a disputed tax reassessment under challenge, a financing round delayed — safeguard is the proceeding to request, and it must be requested before the cash test turns negative.

Once cessation is established, the main road is rehabilitation (redressement judiciaire), whose purpose Article L.631-1 of the Commercial Code defines as allowing « la poursuite de l’activité de l’entreprise, le maintien de l’emploi et l’apurement du passif » through a plan adopted after an observation period. The court appoints an administrator and a creditors’ representative (mandataire judiciaire), inventories the debts, and observes the business, typically for six months renewable. The director may continue to run day-to-day operations but needs authorisation for important acts, and the plan can reschedule debts over up to ten years, impose partial write-offs with creditor consent, or organise the sale of the business as a going concern. If recovery is plainly hopeless, the court opens liquidation (liquidation judiciaire): Article L.640-1 of the Commercial Code, in force, reserves it for a debtor « en cessation des paiements et dont le redressement est manifestement impossible », and its purpose is to end the activity or sell the assets, globally or piecemeal, to pay creditors in their legal order of priority. Employees’ wage claims, secured creditors, the tax authorities and unsecured suppliers are not paid in the same rank, which is why directors should never promise one creditor full payment out of turn once proceedings loom.

Inside these proceedings, a foreign director needs to know who can bring claims against the management, because threats do not always come from those entitled to sue. The liquidator and the public prosecutor are the natural claimants for shortfall liability, but creditors appointed as controllers (contrôleurs) have only a backup role. The Court of Cassation restated this hierarchy in a judgment of 9 September 2026 (Commercial Chamber, pourvoi no 24-22.135, courdecassation.fr/decision/6aa1386d195da062e0d12bcf), holding that « Il en résulte que l’action ouverte aux créanciers contrôleurs est subsidiaire », and that where « l’action en responsabilité pour insuffisance d’actif avait déjà été engagée par le liquidateur, de sorte que les contrôleurs n’avaient qualité ni pour agir ni pour intervenir, fût-ce à titre accessoire ». In practice, if a major supplier appointed as controller writes to you from France demanding payment for the shortfall or threatening a personal action, that letter has no procedural standing while the liquidator is already acting; answer through your lawyer, do not negotiate personal payments under pressure, and verify every claimed standing before paying anything. Conversely, cooperate fully with the liquidator and the court-appointed bodies: obstructing the inventory, hiding accounting records kept abroad, or moving assets out of France after the opening judgment are among the fastest routes to the sanctions described below.

Distance imposes practical arrangements in each proceeding. Give your French lawyer a written power of attorney covering filings, hearings and correspondence with the court-appointed officers; keep a complete set of company records — articles, shareholder decisions, bank statements, employment contracts, tax returns — accessible in France, because the administrator will ask for them within days; and centralise all creditor contact through the lawyer so that no informal promise made by phone from abroad contradicts the court file. If the company employed staff in France, the wage-guarantee institution (AGS, Association pour la gestion du régime de garantie des créances des salariés) advances unpaid wages within set ceilings once the court opens proceedings, which defuses the most urgent human pressure but does not extinguish the company’s debt. And if the business can still be saved by selling it, the court can authorise a sale plan (plan de cession) during rehabilitation: foreign buyers, including the director’s own foreign group, may bid, but the debtor-director’s own offer is subject to strict court control to prevent sales at an undervalue.

B. Your Money and Your Future: Shortfall Liability, Personal Bankruptcy and the Practical Steps From Abroad?

The sanction foreign directors fear most is the action for shortfall liability (action en responsabilité pour insuffisance d’actif), which can order the director to pay the company’s debts out of personal funds. Article L.651-2 of the Commercial Code, in force, sets three cumulative conditions: a court-ordered liquidation showing an asset shortfall, « en cas de faute de gestion ayant contribué à cette insuffisance d’actif », and a causal contribution of that fault to the shortfall; the court may then order all or some of the de jure or de facto directors who contributed to the fault to bear the shortfall in whole or in part, jointly if there are several. The same article contains the shield that honest but unsuccessful directors rely on: « 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 — a late filing without aggravating conduct, an error of business judgment that hindsight makes look naive — is not enough; the claimant must prove a genuine management fault that helped dig the hole.

What counts as a management fault is illustrated by the catalogue of personal-bankruptcy grounds in Article L.653-4 of the Commercial Code, in force, which the courts also use as a reference for shortfall actions. Among the listed facts, one targets exactly the conduct of a director who keeps trading a doomed company: « Avoir poursuivi abusivement, dans un intérêt personnel, une exploitation déficitaire qui ne pouvait conduire qu’à la cessation des paiements de la personne morale ». Continuing to trade for months after the cash test has turned negative, paying yourself management fees or repaying your shareholder advance while wages and taxes go unpaid, hiding the situation from the shareholders and the auditor, or drawing up accounts that conceal the losses are the textbook faults. Personal bankruptcy (faillite personnelle) and the management ban (interdiction de gérer) that can accompany these findings prohibit the person from directing any company in France for up to fifteen years, and the judgment is published in BODACC and on the criminal record extract used for company registrations. A director living in London, New York or Dubai who plans to keep investing in France cannot treat that sanction as a distant French formality: it blocks every future directorship and every regulated filing that requires a clean record.

The defence of a foreign director is therefore built long before any courtroom, and it rests on four files. First, the dating file: monthly treasury statements, bank letters granting or refusing credit, written creditor deferrals, and the accountant’s alerts, proving when cessation actually occurred and that you filed within forty-five days of that date. Second, the governance file: board or shareholder decisions showing that you informed the shareholders, sought advice, requested conciliation or filed on time, and did not pursue a loss-making activity for personal benefit. Third, the payments file: proof that once difficulties appeared, no creditor was favoured — no selective repayment of your own advance, no security granted to your foreign lender, no asset transferred to a related company at an undervalue during the suspect period. Fourth, the cooperation file: timely transmission of accounts and records to the court-appointed officers, attendance at hearings in person or through counsel, and no movement of funds out of France after the opening judgment. Directors who can produce these four files rarely face shortfall orders; directors who managed by phone and kept records in a laptop abroad almost always do.

Five immediate actions follow from this if the cash test has just turned negative. Have the accountant date and sign the treasury statement showing available assets against due liabilities, so the forty-five days run from a documented point. Stop all selective payments, including to yourself and to group companies, until a lawyer has reviewed which payments remain lawful. Instruct a French lawyer this week, not next month, to prepare either the conciliation request or the cessation declaration for the competent registry — in Paris, the TAE — with the full set of documents required by the decree. Inform the shareholders in writing and record the decision to file, because a director who files against a silent shareholder later proves diligence, while a director who files nothing proves nothing. And if employees are owed wages, let the proceedings trigger the AGS wage guarantee rather than funding payroll personally in a disorderly way that later looks like favouritism. None of these steps requires living in France; all of them require acting within days, through counsel, with dated paper. Companies that recover from unpaid-invoice crises do so by enforcing their claims early, as explained in our guide to recovering unpaid French invoices from abroad; companies that survive their own inability to pay do so by filing early, because the court rewards the director who comes forward and punishes the one who is brought in.

Conclusion

A company registered in France that cannot pay its due debts with its available assets is in cessation of payments from that day, whether its director lives in Paris or on another continent, and the Commercial Code gives that director forty-five days to ask the court for rehabilitation or conciliation. The cash test is mechanical — due liabilities against available assets, with only proven credit reserves and granted deferrals excluded — and the court will fix the date itself, with reasons, if the director does not. Before the deadline, conciliation offers a confidential negotiation; after it, rehabilitation imposes a public observation period that can still save the business through a plan, while liquidation ends it and sells the assets. The foreign director who files on time, stops selective payments, keeps dated treasury and governance records in France, and cooperates with the court-appointed officers faces a manageable proceeding and, in most cases, no personal liability, since simple negligence cannot support a shortfall order. The director who waits, pays favourites, and files nothing faces the reverse: a backdated cessation, an extended suspect period in which past payments are clawed back, a shortfall order funded from personal assets, and a management ban published for all to see. Distance from France changes none of the deadlines and none of the sanctions; it only raises the price of delay, because every step that a local director takes in a morning at the registry takes a foreign director a week of correspondence. Date the cash position today, instruct counsel this week, and file within the forty-five days: that is the entire strategy, and it works.