Backup procedure
Verified 01 January 2023 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice
The backup procedure is for a company that is not termination of payments It justifies financial difficulties that it is not able to overcome. Safeguarding facilitates the reorganisation of the company to allow the continuation of business activity, the maintenance of jobs and the settlement of debts. The company which obtained the opening of a conciliation without the agreement of all creditors can benefit from an accelerated backup procedure.
Ordinary backup procedure
The safeguard procedure shall cover any company which justifies difficulties which it is unable to overcome.
These difficulties may be of a legal, economic or financial nature.
These companies may include:
- Individual entrepreneurs (EI) having a commercial, artisanal, liberal or agricultural activity
- Micro-entrepreneurs
- Businesses
The company must not be in termination of payments.
The opening of a safeguard procedure is only at the request of the company or business manager.
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Commercial or craft activity
Individual Entrepreneur
The contractor must complete an opening application form. This must be lodged at the Registry of the Commercial Court where the company's head office is located.
This request indicates the difficulties the company is experiencing and the reasons why it is not able to overcome them.
It also specifies whether the contractor is committed to establishing a heritage inventory.
Request to initiate a backup procedure
Opening request is with the following documents:
- Annual accounts for the last financial year
- Unique identification number
- Cash position
- Forecast income statement
- Number of employees
- Encrypted Statement of Receivables and Debts
- Assets and liabilities and off-balance sheet liabilities
- Summary inventory of company assets, rights and obligations (distinguishing between those of the estate professional and personal heritage). The renunciation the protection of personal property shall also be indicated by specifying the name of the creditor concerned and the amount of the undertaking.
- Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
- Certificate on honour certifying absence of ad hoc mandate or conciliation within 18 months of the date of application
Business
An officer must complete an opening application form. This must be lodged at the Registry of the Commercial Court where the company's head office is located.
This request indicates the difficulties the company is experiencing and the reasons why it is not able to overcome them.
It also specifies whether the contractor is committed to establishing a heritage inventory.
Request to initiate a backup procedure
Opening request is with the following documents:
- Annual accounts for the last financial year
- Unique identification number
- Cash position
- Forecast income statement
- Number of employees
- Encrypted Statement of Receivables and Debts
- Assets and liabilities and off-balance sheet liabilities
- Summary Inventory of business Assets
- Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
- Certificate on honour certifying absence of ad hoc mandate or conciliation within 18 months of the date of application
Liberal activity
Individual Entrepreneur
The contractor must complete an opening application form. This must be lodged at the registry of the judicial court where the company's seat is located.
This request sets out the nature of the difficulties that the company faces and the reasons why it is not able to overcome them.
It also specifies whether the contractor is committed to establishing a heritage inventory.
Request to initiate a backup procedure
Who shall I contact
Opening request is with the following documents:
- Annual accounts for the last financial year
- Unique identification number
- Cash position
- Forecast income statement
- Number of employees
- Encrypted Statement of Receivables and Debts
- Assets and liabilities and off-balance sheet liabilities
- Summary inventory of company assets, rights and obligations (distinguishing between those of professional and personal heritage). The renunciation the protection of personal property shall also be indicated by specifying the name of the creditor concerned and the amount of the undertaking.
- Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
- Certificate on honour certifying absence of ad hoc mandate or conciliation within 18 months of the date of application
- Designation of the professional order or authority on which the company depends
Business
An officer must complete an opening application form. This must be lodged at the registry of the judicial court where the company's seat is located.
This request indicates the difficulties the company is experiencing and the reasons why it is not able to overcome them.
It also specifies whether the principal undertakes to draw up a heritage inventory.
Request to initiate a backup procedure
Who shall I contact
The request for opening shall be accompanied by the following documents:
- Annual accounts for the last financial year
- Unique company identification number
- Cash position
- Forecast income statement
- Number of employees employed on the date of application
- Encrypted Statement of Receivables and Debts
- Assets and liabilities and off-balance sheet liabilities
- Summary Inventory of Debtor Assets
- Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
- Certificate on honour certifying absence of ad hoc mandate or conciliation within 18 months of the date of application
- Designation of the professional order or authority on which the company depends
The court shall decide on the initiation of the proceedings after hearing the individual contractor or the business manager and the representatives of the CSE: titleContent.
The court may appoint a judge to collect all information on the company's financial, economic and social situation. If the court finds that the application is well founded, it shall initiate the proceedings.
The decision to initiate the backup is mentioned in RCS: titleContent if it is a merchant or a commercial business. It is mentioned inRNE: titleContent in other cases.
The Registrar of the Court shall publish a notice of the opening judgement in the Bodacc: titleContent and in legal ad support of the place where the company has its registered office.
The opening judgement shall appoint the bodies responsible for the proceedings and shall open a period of observation during which the company shall continue its activity.
The objective of the compliance period is to arrive at a safeguard plan under the supervision of the court and most often with the assistance of a judicial administrator.
FYI
Where the company falls within the regulated liberal sector (e.g. architect, doctor or commissioner of justice - former judicial officer and judicial auctioneer), the court must hear the professional order or body to which it falls.
Procedural bodies
The court shall designate judicial officer which defends the collective interest of creditors, a judicial administrator responsible for supervising the contractor or the officer in his management, and judge.
The court shall invite social and economic committee (CSE) where available, to appoint a representative from among the company's employees.
Mission of the judicial administrator
The appointment of a judicial administrator is mandatory when the company has at least 20 employees and a turnover that exceeds €3 millionHT: titleContent.
The court shall assign one of the following tasks to him:
- Supervision of the company in difficulty in its management
- Assistance for all or some of the management acts
Mission of the Judge-Commissioner
The Judge-Commissioner may authorise the company in difficulty to:
- Disposal (such as a sale or loan) foreigners to the day-to-day management of the company
- Establishment of a security actual (such as a mortgage) as security for a claim after the initiation of the proceedings.
Role of the leader during the backup process
Individual Entrepreneur
The individual contractor carries out the day-to-day management acts (e.g., a supply order) that are not included in the administrator's mission.
Once the backup procedure has been initiated, the user cannot change the composition of his professional heritage if this results in a decrease in the professional asset.
Business
The officer carries out the acts of day-to-day management (e.g. ordering supplies) that are not included in the director's mission.
He continues to perceive his remuneration unless otherwise decided by the members or shareholders.
Backup observation period
Backup begins with a period of observation.
This period is used to carry out an economic and social assessment of the company.
It also allows for the study of recovery options.
An inventory of the company's assets shall be drawn up by the principal.
During this period, the company continues its activity.
The court may, at any time, order the partial cessation of the activity.
During this period, the draft backup plan is drawn up and the procedure for checking claims begins.
Duration of observation period
She is Maximum 12 months (6 months renewable once for a maximum period of 6 months at the request of the administrator, the company in difficulty or the prosecution).
Prohibition of payment of prior claims and prosecution of creditors
The judgement initiating the proceedings shall the prohibition for the company in difficulty to pay any debt arising before the opening judgement.
In practice, this means that the company no longer pays its debts once the safeguard judgement has been opened. Creditors must therefore declaration of claims to the judicial representative.
The opening judgement shall also entail the suspension of individual proceedings : creditors who had not yet initiated proceedings on the day of the opening judgement can no longer do so afterwards.
The opening judgement determines the rate of interest (statutory, conventional and late) and increases except loans over 1 year.
The surety (natural persons) of the company in difficulty may take advantage of the interruption of the interest rate.
FYI
creditors have an obligation to report their claims to the judicial officer, within 2 months of the publication of the opening judgement in the official gazette of the civil and commercial announcements (Bodacc). For procedures opened since 1to October 2021, the debt declaration must specify the nature of the security and its plate.
Situation of claims following the opening judgement of the safeguard
In principle, the company in difficulty does not pay the debts after the judgement opening the safeguard procedure. Salaries are an exception to this rule and are always paid on a priority basis.
Others claims shall also be paid on maturity:
- Claims required to conduct the compliance procedure or period (e.g. payment of a delivery of goods necessary for the business' activity)
- Consideration for a benefit provided to the company in difficulty during this period (for example, payment for plumbing work)
- Maintenance claims
To deal with the health crisis, a backup privilege encouraging cash flows during the observation period. In practice, the funds provided must be repaid before all other claims. However, salary claims remain a priority.
In order to facilitate the continuation of its activity, the Judge-Commissioner may also authorise the company in difficulty to pay the invoices of the carriers.
Continuation of current contracts
Commercial contracts shall continue unless the court administrator decides otherwise.
At the end of the observation period, several solutions are available to the company in difficulty.
Where there is a serious possibility for the company to be safeguarded, the court shall, for this purpose, draw up a plan that terminates the period of observation.
Setting up a backup plan
The backup plan allows the manager to take a set of steps to restructure his company and allow it to be saved.
This plan shall be subject to the vote of the creditors and assigned party classes if they exist.
Companies shall be required to establish classes of affected parties in any of the following cases:
- Where the company has more than 250 employees and a net annual turnover exceeding €20 million
- When the net annual turnover exceeds €40 million
The backup plan shall not last more than 10 years and shall include, where appropriate, the termination, addition or disposal of one or more activities.
The implementation of the plan imposes payment deadlines or debt forgiveness on creditors.
In the judgement setting out the plan or amending it, the court may decide that the property which it considers essential for the continuation of the company cannot be sold for a certain period of time.
Transformation of the safeguard procedure into a judicial remedy
When it appears that the company was already in termination of payments before the safeguard procedure is initiated, the court must convert the safeguard into a judicial remedy.
Disappearance of conditions justifying opening
If during the safeguard procedure the company's situation improves, the court may terminate the safeguard procedure.
Accelerated backup procedure
Accelerated backup is a procedure subject to the rules of backup with a period of observation and a plan put in place very quickly. It concerns companies that have obtained the opening of conciliation proceedings but are unable to reach an agreement with their creditors.
The accelerated backup procedure is initiated when all of the following conditions are met:
- The company is engaged in a conciliation
- It has developed a draft business continuity plan that can be agreed upon by creditors
- Its accounts shall be certified by an auditor or drawn up by an auditor
FYI
the accelerated backup procedure can be initiated against a company that is in a state of termination of payments for less than 45 days from the date of the request to initiate the procedure.
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Commercial or craft activity
Once the conditions have been met, the company must complete an application form.
This must be deposited at the registry of the commercial court where the company's head office is located.
Request for an accelerated or accelerated financial backup procedure
The documents to be attached to the opening application are as follows:
- Annual accounts for the last financial year
- Unique company identification number
- Cash position
- Forecast income statement
- Number of employees employed on the date of the request to open
- Encrypted Statement of Receivables and Debts
- Assets and liabilities and off-balance sheet liabilities
- Summary Inventory of company Assets
- Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
- Copy of the opening decision conciliation
- Financing table and, where the debtor prepares consolidated accounts, cash flow table
- Cash budget for the next three months
- Projected Funding Plan
- Backup Plan Project
Liberal activity
Once the conditions have been met, the company must complete a form.
The application for an accelerated safeguard procedure shall be lodged at the registry of the judicial court where the company's head office is located.
Request for an accelerated or accelerated financial backup procedure
Who shall I contact
The documents to be attached to the opening application are as follows:
- Annual accounts for the last financial year
- Unique company identification number
- Cash position
- Forecast income statement
- Number of employees employed on the date of application
- Encrypted Statement of Receivables and Debts
- Assets and liabilities and off-balance sheet liabilities
- Summary Inventory of company Assets
- Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
- Designation of the professional order or authority of the company practising a regulated profession
- Copy of the opening decision conciliation
- Financing table and, where the debtor prepares consolidated accounts, cash flow table
- Cash budget for the next three months
- Projected Funding Plan
- Backup Plan Project
Appointment of procedural bodies and duration of proceedings
The Court shall decide on the opening of the proceedings after a report by the conciliator on the conduct of the conciliation and the prospects for the adoption of the draft plan.
The court shall appoint one or more judicial administrators.
The opening judgement shall also constitute assigned party classes. The company in difficulty shall draw up a list of the claims of each affected party which participated in the conciliation. This list shall be certified by the auditor or attested by the auditor.
Accelerated backup time
The court shall decide on the plan within 2 months of the opening judgement.
At the request of the company in difficulty and the judicial administrator, the court may extend this period without the total duration of the proceedings exceeding 4 months.
Accelerated Backup Plan Agreement
The officer and the court administrator shall present the draft safeguard plan to the classes of parties affected.
Each assigned party class must vote the plan.
The decision is made by each class by a majority of 2/3 of the voters.
The court may refuse to stop the plan if it does not prevent the cessation of payments.
The fast-track safeguard has an effect on all creditors prior to the opening judgement. Employees and creditors are not concerned.
Its effects are more limited than those of other collective proceedings. This means that fast backup cannot be converted to recovery or court settlement.
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