Insolvency proceedings lawyer in Paris: safeguard, reorganisation, liquidation and claim filing.

The dividing line rests on cessation of payments and viability. Safeguard (Article L. 620-1 of the French Commercial Code) is open to a debtor who shows difficulties it cannot overcome, without being in cessation of payments. Judicial reorganisation (Article L. 631-1) applies as soon as payments have ceased, where the business remains viable. Judicial liquidation (Article L. 640-1) is opened when reorganisation is manifestly impossible. All three proceedings suspend individual proceedings and freeze pre-opening liabilities, but their purpose differs: continuation, reorganisation or winding up.

Cessation of payments is defined in Article L. 631-1 of the French Commercial Code as the inability to meet liabilities that are due and payable with the available assets. Available assets comprise cash and sums that can be mobilised immediately (credit reserves, moratoria granted by creditors). Liabilities due and payable comprise debts that have fallen due and are certain, liquid and uncontested. Rescheduling obtained suspends the due date. The diagnosis is made at a given moment and checked against the most recent accounts.

Article L. 631-4 of the French Commercial Code requires the director to apply for the opening of reorganisation proceedings within forty-five days of cessation of payments, unless an application for conciliation has been made within that period. Exceeding the time limit is a management fault that can ground an action for liability for shortfall in assets (L. 651-2) and an application for personal bankruptcy or a ban on managing a business (L. 653-8). The time limit runs from the day the director had objective knowledge of the cessation.

The opening judgment suspends individual proceedings, freezes pre-opening liabilities and appoints the supervising judge, the creditors' representative and, where applicable, the administrator. Ongoing contracts are not terminated automatically; the administrator or the liquidator chooses whether to continue or to renounce them (Article L. 622-13 of the French Commercial Code). Clauses providing for automatic termination on the opening of proceedings are deemed unwritten. Publication in the BODACC starts the time limit for filing claims.

The observation period lasts six months and may be renewed for a further six months by decision of the court. During this period, the director stays in place in safeguard proceedings, and stays in place under the supervision or with the assistance of the administrator in reorganisation. The powers are set by the opening judgment. The director can no longer pay a pre-opening claim without the authorisation of the supervising judge. The director continues to run the business, but under supervision, and takes part in drawing up the draft plan.

Article L. 622-24 of the French Commercial Code requires every creditor whose claim arose before the opening judgment to send a filing to the creditors' representative. The ordinary time limit is two months from publication of the opening judgment in the BODACC. It is extended to four months for creditors who do not reside in metropolitan France (or, where the proceedings are opened overseas, in the relevant department or territorial collectivity). Creditors holding a registered security interest or a registered contract are notified personally, and the time limit runs from that notice. The filing counts as a claim in court and preserves security interests.

The creditors' representative checks each claim filed. If it proposes a partial or total rejection, it informs the creditor, who has a period in which to reply. If there is no reply or if the parties disagree, the matter is brought before the supervising judge, who rules by order. That order may be appealed to the court of appeal. The defence requires solid documents: invoices, purchase orders, delivery notes, emails confirming the service, signed payment schedules. A challenge may result in partial admission rather than total rejection.

The continuation plan is adopted by judgment at the end of the observation period. It sets out how the business will continue, the rescheduling of liabilities and the debtor's commitments. Its maximum duration is ten years (fifteen years for farmers). The court assesses the viability of the project, the consistency of the forecasts and the commitment of the directors. For companies subject to classes of affected parties (companies above the thresholds), a favourable vote of the classes is required. The plan makes it possible to avoid liquidation and preserve the business.

The continuation plan keeps the debtor at the head of the business after restructuring. The sale plan transfers all or part of the business to a buyer selected by the court. The sale may be total or partial (a branch of activity). The sale price is applied to pay creditors according to their ranking. Contracts necessary to continue the business (lease, employment contracts, commercial contracts) may be transferred to the buyer by decision of the court. A sale in reorganisation is governed by Articles L. 631-13 et seq.

Liquidation is opened when the debtor is in cessation of payments and its reorganisation is manifestly impossible (Article L. 640-1 of the French Commercial Code). The court appoints a liquidator, who takes full powers, the debtor being divested of its assets (Article L. 641-9). The liquidator verifies the claims, sells the assets (as a whole or separately) and pays creditors according to their ranking. The proceedings may be closed for insufficiency of assets or for extinction of liabilities. Closure for insufficiency opens, where appropriate, an examination of the director's liability.

The liquidator realises the assets in several ways: sale of the business as a whole, separate sale of a branch of activity, or sale of individual assets (equipment, stock, real estate, receivables). Sale as a whole is preferred if it preserves jobs and pays creditors better. Real estate is sold at public auction or by private agreement with the authorisation of the supervising judge. Intellectual assets (trademarks, patents) may be sold separately. The proceeds are applied to pay claims according to the ranking of privileges and security interests.

Yes. Safeguard may be converted into reorganisation if cessation of payments occurs during the observation period. Reorganisation may be converted into liquidation if the situation deteriorates and reorganisation becomes manifestly impossible. Conversion does not require waiting for the end of the observation period: the court rules as soon as the conditions are met, on application by the debtor, the public prosecutor, the creditors' representative or of its own motion. This possibility of conversion makes it possible to adapt the proceedings to how the situation actually develops.

Article L. 651-2 of the French Commercial Code allows the court, where the judicial liquidation of a legal entity reveals a shortfall in assets, to place all or part of that shortfall on the director or directors who committed a contributory management fault. Mere negligence has been excluded since the law of 9 December 2016. The action may be brought by the liquidator or the public prosecutor or, where the liquidator fails to act after a formal notice, by the majority of the creditors appointed as supervisors. It is time-barred after three years from the liquidation judgment. The amount is assessed at the court's sole discretion (Cass. com., 9 May 2018, No. 16-26.684).

Personal bankruptcy, known as faillite personnelle (Articles L. 653-1 et seq. of the French Commercial Code), penalises serious breaches: abusively continuing a loss-making business, diverting or concealing all or part of the assets, keeping fictitious or fraudulent accounts, failing to keep accounts, or disposing of company assets as if they were personal property. It entails a ban on directing, managing, administering or controlling any commercial or craft business and any legal entity, for a maximum of fifteen years. Entry in the criminal record is mandatory. The penalty may be limited to a simple ban on managing a business.

Fraudulent bankruptcy (banqueroute, Article L. 654-1 of the French Commercial Code) is a standalone offence, which requires the opening of reorganisation or liquidation proceedings and the commission of listed acts: purchases for resale below market price, preferential payments, diversion or concealment of assets, fraudulent increase of liabilities, fictitious or missing accounts. The penalties are five years' imprisonment and a fine of €75,000, raised to seven years and €100,000 where the offender is a director of an investment services provider (Article L. 654-4). Additional penalties of a ban on managing a business and ineligibility may be imposed.

The commercial lease is an ongoing contract subject to Article L. 622-13 of the French Commercial Code. The administrator (in safeguard and reorganisation) or the liquidator (in liquidation) has an option: to require the lease to continue or to renounce it. Rent that fell due before the opening judgment is declared as a liability. Later rent consists of post-judgment claims (Article L. 622-17), to be paid when due in order to preserve the lease. The landlord cannot take any eviction measure based on a payment default prior to the judgment during the observation period. The lease may be assigned to the buyer under a sale plan.

Employees benefit from threefold protection. Unpaid wages and indemnities are guaranteed by the AGS, the employees' wage-claims guarantee scheme (Association pour la gestion du régime de Garantie des créances des Salariés), within the statutory ceilings. Employees are represented by an employee representative appointed from the opening, who attends hearings and checks the drawing up of the statement of wage claims. Preservation of employment is given priority in sale plans, the court having to choose the offer that best safeguards jobs. Economic dismissal during the proceedings follows specific authorisation rules.

No. The opening of insolvency proceedings does not release the guarantor. However, a guarantor who is an individual benefits from the provisional stay of proceedings during the observation period and the performance of the safeguard or reorganisation plan. The guarantor may raise all defences inherent in the debt: extinction, limitation, challenge. Where a claim is to be filed, the guarantor is released if the creditor fails to file within the time limit. A director who has stood as guarantor must anticipate this risk from the opening by organising a personal defence.

The opening judgment prohibits or suspends any legal action seeking payment of a sum of money or termination of a contract for non-payment, as well as any enforcement procedure against the debtor's assets (Article L. 622-21 of the French Commercial Code). Proceedings based on other grounds (liability action, action to reclaim goods, action for nullity) remain possible. Creditors holding a post-judgment claim may act individually when it falls due. Actions by unsecured creditors are postponed until closure, unless the claim is admitted.

Yes, unless the court has imposed a ban on managing a business or personal bankruptcy. A director who has not been subject to such a penalty may create or run a new company. Closure for insufficiency of assets does not automatically entail a ban on managing a business. However, the history of insolvency proceedings can affect access to credit, relations with suppliers and the confidence of future partners. The firm systematically advises the director on the conditions for resuming business, the separation of personal and business assets and the documentation of management decisions.