Judicial reorganisation lawyer in Paris: observation, plan and sale.

Yes, in principle the director remains in office after the opening judgment, but the director's powers depend on the mission entrusted to the administrator. Article L. 631-12 of the French Commercial Code (Code de commerce) allows the court to instruct the administrator to assist the debtor in all or some management acts, or to run the business alone. Reading the opening judgment is therefore the first step: it shows who signs, who commits expenditure and who operates the accounts. Some acts fall outside day-to-day management in every case. Article L. 622-7 of the Commercial Code, made applicable to judicial reorganisation by Article L. 631-14 of the Commercial Code, reserves to the supervising judge (juge-commissaire) the authorisation of acts of disposal outside day-to-day management, contractual security interests securing a post-opening claim, settlements and compromises. The court may also modify the administrator's mission at any time, at the request of the bodies of the proceedings or the public prosecutor's office, or of its own motion. The firm checks with the director where the line lies between the acts the director may carry out alone, those that require the administrator's signature and those that call for an order, in order to avoid a void act or later liability.

The opening judgment prohibits, by operation of law, payment of any claim arising before it, except by set-off of connected claims, under Article L. 622-7 of the Commercial Code. It also prohibits payment of post-opening claims that do not fall within paragraph I of Article L. 622-17, that is, those that did not arise regularly after the opening for the needs of the proceedings or of the business during the observation period, or in consideration for a service received in that phase. The director must therefore separate pre-opening invoices, which will be declared as liabilities, from the running costs the business continues to generate. Set-off remains closely scrutinised. The Court of Cassation quashed a judgment that had allowed set-off between two reciprocal claims, noting that "these claims, which did not arise from a single contractual whole, were not connected" (Cass. com., 6 May 2026, No. 23-23.937, our translation). A supplier who claims an earlier payment as a condition of further deliveries therefore cannot obtain it by this route without scrutiny. The firm helps the director to classify each debt, to identify the contracts worth continuing and to prepare, where a pledged or retained asset is indispensable to the business, the application for authorisation to pay provided for in paragraph II of the same article.

Article L. 621-3 of the Commercial Code caps the initial duration of the observation period at six months, which the court may extend once by the same length, by a decision giving its reasons. In judicial reorganisation, Article L. 631-7 of the Commercial Code also allows, on application by the prosecution service and exceptionally, a final extension of six months. The first milestone, however, comes much earlier. Article L. 631-15 of the Commercial Code requires the court to rule within two months of the opening: it authorises continuation where the business appears able to finance it, on the basis of a report prepared by the administrator or, failing that, by the debtor. At any point during the observation period it may also order partial cessation of the activity or order liquidation where reorganisation is manifestly impossible. This is a fact-specific assessment, largely within the trial courts' discretion. In a group, the Court of Cassation accepts that the court may take the overall coherence into account, holding that "nothing prevents the court, when examining the solution proposed for each of them, from taking into account, by a global approach, the coherence of the project in light of the solutions envisaged for the other companies of the group" (Cass. com., 19 December 2018, No. 17-27.950, our translation). The director must come to this hearing with a reliable, quantified cash-flow forecast.

No, not freely. Article L. 631-10 of the Commercial Code provides that from the opening judgment, shares, equity securities or transferable securities giving access to the capital held by de jure or de facto directors, even through an intermediate structure, change hands validly only on the conditions set by the court; any transfer made otherwise is void. Equity securities and transferable securities giving access to the capital are transferred to a special blocked account, on which no movement may be made without the authorisation of the supervising judge, while the non-transferability of the shares is noted in the company's registers. This rule covers the remunerated director and the unpaid director alike, and it extends to indirect holdings, for example through a holding company. A plan for an investor to come in or for a family transfer therefore cannot be signed as an ordinary transaction. Where a change to the capital or the transfer of corporate rights is provided for in the draft plan or in the plan, Article L. 631-19 of the Commercial Code further deems approval clauses in the articles of association to be unwritten. The firm checks the chain of ownership, prepares the application to the court and fits the transaction into the plan, so that an injection of equity genuinely serves the reorganisation instead of being exposed to annulment.

Yes, within a strict framework. Article L. 631-19-1 of the French Commercial Code (Code de commerce) allows the court, where the recovery of the business so requires and at the request of the public prosecutor's office, to make adoption of the plan conditional on the replacement of one or more directors. It may also declare their shares non-transferable, give the voting right to a court-appointed officer, or order the sale of the shares at a price fixed by an expert. The directors must be heard or duly summoned, and the provision does not apply to regulated liberal professions or, under Article L. 631-19 of the Commercial Code, to a plan adopted or approved within classes of affected parties. According to the Court of Cassation, the measure does not entail automatic dispossession, since "a company director may avoid the forced sale of the director's corporate rights by giving up management duties" (Cass. com., 11 October 2016, No. 14-29.360, our translation). In the same case, it quashed the judgment that had granted an application by the public prosecutor's office made on the occasion of a request to modify the plan, and declared that application inadmissible, since a forced sale cannot by itself constitute such a modification. A director targeted by such a request must therefore check who made it, its form, its timing and the justification drawn from the needs of the reorganisation, before disputing the price set by the expert.

The administrator prepares the draft plan with the assistance of the debtor, as provided by Article L. 631-19 of the Commercial Code. Where no administrator has been appointed, Article L. 631-21 of the Commercial Code refers to the simplified rules under which the debtor prepares the draft itself, with the possible assistance of an expert (Article L. 627-3). The director is therefore not a bystander: the director supplies the activity forecasts, the reorganisation measures, the financing and the commitments of the shareholders. Article L. 626-10 of the Commercial Code requires naming those who undertake to perform the plan, detailing what they promise and explaining the expected change in employment. These commitments cover the future of the business, its financing, the settlement of the declared liabilities and, where applicable, the guarantees given. The duration of the plan is set by the court and may not exceed ten years, or fifteen years for an agricultural holding, under Article L. 626-12 of the Commercial Code. Where classes of affected parties are formed, the proposals are put to them for a vote, and the draft then escapes this ceiling, since Article L. 626-30-2 of the Commercial Code disapplies Article L. 626-12. A credible plan rests on instalments compatible with actual cash flow, not on an optimistic recovery assumption. The firm reviews the forecasts with the director, distinguishes firm commitments from intentions, and prepares the documents that will allow the court to gauge the reliability of the plan.

Yes, but only the court may order a substantial modification. Article L. 626-26 of the Commercial Code, applicable to the recovery plan by reference from Article L. 631-19 of the Commercial Code, reserves this decision to the court, at the request of the debtor and on the report of the plan supervisor. Where the request concerns the arrangements for clearing the liabilities, the creditors concerned are consulted. Their silence amounts to acceptance, except for debt write-offs or conversions into securities giving access to the capital. Before ruling, the court obtains the opinion of the prosecution service and summons in particular the debtor, the plan supervisor, the controllers and the staff representatives. A director who anticipates a fall in activity is better advised to submit a documented request before the first payment default than to wait for an application for termination of the plan. Modification is also not a way of introducing a measure of a different nature: the Court of Cassation has held that a request for the forced sale of shares cannot by itself constitute a request to modify the plan (Cass. com., 11 October 2016, No. 14-29.360). The firm prepares the application, the interim accounts and the proposed new schedule.

Not necessarily. Article L. 626-27 of the Commercial Code allows the court to bring the plan to an end where the debtor does not comply with the schedule it accepted. In judicial reorganisation, Article L. 631-20 of the Commercial Code adds that a new cessation of payments arising during performance leads the court to terminate the plan and order liquidation. Two distinct questions therefore arise: payment of the instalments and the existence of a new cessation of payments. In a Paris case, the court of appeal reversed a judgment terminating the plan because the instalments had been paid, even if late, and held that "As the recovery plan has been performed, the judgment will be reversed insofar as it ordered termination of the plan." (CA Paris, pôle 5 ch. 8, 21 March 2023, No. 22/08129, our translation). It then ruled out cessation of payments, for lack of proof that the social security debts relied on were due. For its part, the Court of Cassation has quashed a termination, holding that "since immediate repayment of the loan was not required, the funds handed to the debtor constituted available assets" (Cass. com., 14 December 2022, No. 21-17.706, our translation). Funds from a family loan, actually paid over and not repayable immediately, may therefore count towards available assets. The director should regularise the instalment as quickly as possible and quantify available assets and debts due precisely.

In principle, no. Article L. 631-22 of the Commercial Code makes the rules of section 1 of chapter II of title IV applicable to a sale ordered in judicial reorganisation, including Article L. 642-3 of the Commercial Code. That provision prohibits the debtor, de jure or de facto directors, their relatives and in-laws up to the second degree and the controllers from submitting an offer, directly or through an intermediary. It also prohibits them from acquiring, within five years of the sale, the assets sold or the shares of a company that holds them. The court may derogate from these prohibitions, on application by the public prosecutor's office, by a specially reasoned judgment, except for the debtor and the controllers. Case law applies this rule broadly. The Court of Cassation held, in liquidation, that "the de facto director of the legal entity placed in judicial liquidation may not acquire its assets" (Cass. com., 8 January 2020, No. 18-20.270, our translation). The Paris Court of Appeal upheld the rejection of the offer of a company created by a former director, holding that "it follows from the spirit of this provision that the conflict of interest from which the prohibition derives may also exist with the former director" (CA Paris, pôle 5 ch. 9, 12 December 2024, No. 24/10762, our translation). These two decisions, given on particular facts, went against the excluded bidders: before any offer, it must be checked whether the bidder falls within the categories covered by Article L. 642-3 and, if so, the derogation provided by law should be considered.

During the observation period, Article L. 622-13 of the Commercial Code gives the administrator alone the power to require continuation of current contracts, provided the necessary funds are available. The counterparty may not terminate the contract merely because the proceedings have been opened. The contract is terminated by operation of law where a formal notice to elect remains unanswered by the administrator for more than one month, a period the supervising judge may shorten or extend by up to two months, or where a post-opening performance is not paid and the counterparty does not agree to continue the relationship. The Court of Cassation nevertheless requires that this termination be recorded by the supervising judge: where the matter had not been referred to the judge, the leasing contract was still in force when the sale plan was adopted. In the same judgment, it held that "the purchaser is bound to perform the commitments made in its offer and repeated before the court" (Cass. com., 20 September 2017, No. 16-14.065, our translation), including payment of the earlier rent it had undertaken to settle. For the director, the list of contracts needed for the business must therefore be drawn up early, with the rent due and the commitments the bidders agree to take over. The firm reviews this list, the formal notices received and the orders of the supervising judge before the hearing on the offers.

Yes, but only where redundancies for economic reasons are urgent, inevitable and indispensable. Article L. 631-17 of the Commercial Code makes such redundancies subject to the authorisation of the supervising judge, to whom the matter is referred by the administrator. Before that referral, the administrator carries out the consultation procedure provided for in Article L. 1233-58 of the Labour Code. The administrator attaches to the application the opinion obtained, evidence of the steps taken on compensation and redeployment, and the decision of the administrative authority where one is required. The notification timetable follows rules specific to insolvency proceedings. The Social Chamber held that "the time limits provided for in Article L. 1233-39 of the Labour Code for sending dismissal letters for an economic reason do not apply in the event of judicial reorganisation or liquidation" (Cass. soc., 17 May 2023, No. 21-21.041, our translation), and ruled without remitting the case, dismissing the employee's claim of irregularity. A director who is considering a reduction in headcount must tie it to precise economic data and to the timetable of the proceedings. Redundancies provided for by the plan are governed by paragraph III of Article L. 631-19 of the Commercial Code, within the month following the judgment adopting the plan.

The debtor is among the few persons entitled to appeal against the judgment adopting or rejecting the sale plan, along with the public prosecutor's office, the purchaser and the counterparty whose contract is being assigned, under paragraph III of Article L. 661-6 of the Commercial Code. The time limit is short: Article R. 661-3 of the Commercial Code sets it at ten days from delivery of the judgment for the debtor. That standing is not enough, however. The Court of Cassation held that "although the debtor has standing to appeal against the judgment adopting the sale plan, it must also show a personal interest in exercising that avenue of appeal" (Cass. com., 23 October 2019, No. 18-21.125, our translation). In that case, the company's appeal was declared inadmissible, because it had proposed no plan, had not opposed the sale, and was in reality defending the interests of its director as guarantor and of an unsuccessful bidder. The appeal to the Court of Cassation was declared inadmissible. This decision goes against a director who wants to challenge the sale in order to protect himself or herself as guarantor. A useful challenge is therefore prepared before the hearing, through a clear position by the business on the offers and, where appropriate, an alternative draft plan.

The answer depends on the date on which the proceedings were opened. During the observation period, proceedings against a guarantor who is an individual are suspended until the decision adopting the plan or opening liquidation, under Article L. 622-28 of the Commercial Code as applied to judicial reorganisation. This suspension ends with the judgment adopting the plan, subject, for recent proceedings, to the benefit of the plan that a guarantor who is an individual may invoke. For proceedings opened before 1 October 2021, the former Article L. 631-20 deprived guarantors of the benefit of the recovery plan. The Paris Court of Appeal still applied it in 2026 to proceedings opened in 2019, holding that "The creditor therefore regains its right to pursue the guarantor once the recovery plan has been adopted." (CA Paris, pôle 5 ch. 6, 23 September 2026, No. 25/10411, our translation). It ordered the guarantor to pay, less the payments made under the plan: the decision goes against the director as guarantor. For proceedings opened since 1 October 2021, Article L. 631-20 of the Commercial Code no longer contains this exclusion, and Article L. 626-11 of the Commercial Code, made applicable by Article L. 631-19 of the Commercial Code, allows co-obligors or guarantors who are individuals to rely on the provisions of the plan. The director must therefore check the date of the opening judgment, the terms of the guarantee and the schedule adopted before disputing a demand from the bank.

Article L. 631-4 of the Commercial Code requires the debtor to apply to the court within forty-five days of the date of cessation of payments, unless the debtor has requested conciliation during that period. Article L. 653-8 of the Commercial Code allows a management ban to be imposed on a director who knowingly failed to request the opening of proceedings within that period. The adverb matters: it must be established that the director was aware of the state of cessation of payments. The Court of Cassation nevertheless approved a sanction even though the director was unaware of the cessation of payments on the date to which it had been put back. It accepted that later unpaid contributions, VAT and salaries established that the director "had knowingly failed to declare the cessation of payments within the forty-five-day period" (Cass. com., 12 January 2022, No. 20-21.427, our translation). This decision goes against the director: putting back the date of cessation of payments is not enough to protect the director if later signals show knowledge. In judicial reorganisation, the best defence remains the chronology: dates of the first unpaid debts, financing steps, exchanges with public creditors and the date the court was seized. The firm reconstructs this chronology from the accounting and banking documents.