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Judicial rehabilitation

Verified 15 May 2022 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice

The judicial review procedure is collective procedure applicable to a company which is in termination. The proceedings are initiated by the court. It must enable the company to continue to operate, to maintain jobs and todischarge of liabilities.

A company shall be brought to court if it is in good condition termination.

This procedure may apply to the following persons:

  • Individual companies with a commercial, craft, liberal activity
  • Micro entrepreneurs
  • Businesses
  • Farmers (only if the conciliation procedure applied to farmers)

Warning  

small companies who are in default may benefit from a lighter crisis resolution until 2 June 2023.

Individual entrepreneur or business executive in difficulty shall request the initiation of the judicial review procedure no later than within 45 days the termination.

Failure to comply with this deadline may result in a prohibition on the management or closing of the company's liabilities for misconduct.

The procedure may also be requested by creditor or at the request of public prosecution.

Warning  

the judicial review procedure may not be requested when conciliation is in progress.

An application for judicial remedy shall be made to the commercial or judicial courts depending on the nature of the activity.

What documents should be provided?

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Commercial or craft activity

Individual entrepreneur

The Commercial Court shall assess whether the conditions for the initiation of the judicial remedy have been met.

For the individual contractor, the court checks the conditions ofeligibility for legal redress and a procedure overhang. It opens judicial review that deals with both the business and personal debts of the individual entrepreneur.

Where the debts only arise from personal heritage the individual contractor, the commercial court, with the consent of the contractor, shall not initiate legal proceedings. He refers him to the debt overhang board.

Application for the initiation of legal proceedings (with or without professional reinstatement)

The application for judicial review is made by the Head of company.

He must complete the form n°10530 and file it with the court of commerce of the place of company.

Application for the initiation of legal proceedings (with or without professional reinstatement)

Who shall I contact

The application for judicial review must be accompanied by the following documents:

  • Unique company identification number
  • Number of employees employed on the date of application (name, address, etc.) and the amount of turnover on the closing date of the last accounting year
  • Active and Liabilities Statement security and off-balance sheet commitment
  • Summary Inventory of company Assets
  • Annual accounts for the last financial year
  • Cash position (list of claims and debts) less than 1 month old
  • Certificate of honour certifying the absence of appointment of an ad hoc agent or the opening of a conciliation within 18 months prior to the request
Business

The application for judicial review is made by the head of the business.

He must fill out the form n°10530 and file it with the court of commerce office of the company.

Application for the initiation of legal proceedings (with or without professional reinstatement)

Who shall I contact

The application for judicial review must be accompanied by the following documents:

  • Unique company identification number
  • Number of employees employed on the date of application (name, address, etc.) and the amount of turnover on the closing date of the last accounting year
  • Active and Liabilities Statement security and off-balance sheet commitment
  • Summary Inventory of company Assets
  • Annual accounts for the last financial year
  • Cash position (list of claims and debts) less than 1 month old
  • Certificate of honour certifying the absence of appointment of an ad hoc agent or the opening of a conciliation within 18 months prior to the request

Liberal activity

Individual entrepreneur

The court shall assess whether the conditions for the initiation of the judicial remedy have been met.

For the individual contractor, the court checks the conditions ofeligibility for legal redress and a procedure overhang. It opens judicial review that deals with both the business and personal debts of the individual entrepreneur.

Where the debts only arise from personal heritage the individual contractor, the court, with the consent of the contractor, shall not initiate legal proceedings. He refers him to the debt overhang board.

The opening request must be completed and filed to Registry of the Court the location of the company's headquarters.

Application for the initiation of legal proceedings (with or without professional reinstatement)

Who shall I contact

The application for judicial review must be accompanied by the following documents:

  • Unique company identification number
  • Number of employees employed on the date of application (name, address, etc.) and the amount of turnover on the closing date of the last accounting year
  • Active and Liabilities Statement security and off-balance sheet commitment
  • Summary Inventory of company Assets
  • Annual accounts for the last financial year
  • Cash position (list of claims and debts) less than 1 month old
  • In the case of a business involving members who are jointly and severally liable for social debts, list them with their name and domicile
  • Certificate of honour certifying the absence of appointment of an ad hoc agent or the opening of a conciliation within 18 months prior to the request
  • Where the debtor a profession subject to legislative or regulatory status or whose title is protected, the designation of the professional body or authority to which it belongs.
Business

The opening request must be completed and filed to Registry of the Court the location of the company's registered office.

Application for the initiation of legal proceedings (with or without professional reinstatement)

Who shall I contact

The application for judicial review must be accompanied by the following documents:

  • Unique company identification number
  • Number of employees employed on the date of application (name, address, etc.) and the amount of turnover on the closing date of the last accounting year
  • Active and Liabilities Statement security and off-balance sheet commitment
  • Summary Inventory of company Assets
  • Annual accounts for the last financial year
  • Cash position (list of claims and debts) less than 1 month old
  • In the case of a business involving members who are jointly and severally liable for social debts, list them with their name and domicile
  • Certificate of honour certifying the absence of appointment of an ad hoc agent or the opening of a conciliation within 18 months prior to the request
  • Where the debtor a profession subject to legislative or regulatory status or whose title is protected, the designation of the professional body or authority to which it belongs.

Where a plan to relieve the company of its difficulties appears possible, the court shall pronounce the judgement of initiation of judicial remedy.

The judgement:

  • Initiates a period of observation that will lead to a diagnosis of the company and the preparation of a recovery plan;
  • shall designate the bodies of the proceedings (i.e. the judge-commissioner, the judicial officer and the judicial administrator).
Date of termination of payments

The date of termination of payments shall determine the beginning of the so-called suspect period.

The suspect period is the period between the date of termination of payments and the date of the court's decision to initiate proceedings.

Certain acts committed during this period may be set aside by the court which considers that the officer has made a decision that can be set aside. This is the case, for example, when a manager enters into a loan agreement when he knows that his business is highly indebted.

Formalities of the judgement of initiation of the judicial remedy

The clerk of the court shall carry out the following formalities:

  • Mention in the Commercial and business Register (CSR) for a commercial activity or in the Trades Register (RM) for a craft company or for a liberal activity in the Special Register maintained by the Registry of the Judicial Court
  • Notice to the Official Commercial and Commercial Advertising Bulletin (Bodacc)

The clerk of the court shall inform the officer or contractor of the initiation of the judicial remedy within 8 days of its delivery.

Establishment of an observation period

Duration of observation period

The judgement opens a period of observation of up to 6 months.

It may be renewed once, for a maximum period of 6 months, at the request of the administrator, the company in difficulty or the public prosecution.

The Public Prosecutor's Office may request a second renewal: the observation period can therefore last up to 18 months.

Appointment of procedural bodies

In the opening judgement, the court designates different parties:

  • Commissioner
  • Judicial officer
  • Judicial administrator for companies of a certain size

The court is not required to appoint a judicial administrator where the business or company meets the following 2 conditions:

  • She has less than 20 employees
  • Its duty-free turnover is less than €3 000 000
Constituting classes of assigned parties

Companies which fulfil the following conditions shall be obliged to establish assigned party classes :

  • More than 250 employees and a net turnover exceeding 20 € million
  • A net turnover of more than 40 € million

Creditors are then grouped according to their claim: for example, tax creditors, creditors with security real.

Companies that are not subject to this obligation may apply to the Judge-Commissioner for authorisation to establish creditors in assigned party classes.

Duties of the judicial officer and the judicial administrator

As soon as the procedure is opened, judicial officer draw up an inventory of the company's assets and the guarantees that affect them.

An officer or contractor shall provide the administrator (if any) and the judicial agent with the following:

  • List creditors company in difficulty
  • Amount of outstanding debts and major contracts

The officer shall also inform the judicial agent and the administrator (if any) of any pending judicial proceedings.

The judicial administrator shall be responsible for assisting the officer or ensuring, wholly or in part, the administration of the company on the basis of what the court decided upon his appointment.

During this period of observation, the judicial administrator shall draw up an economic and social balance sheet.

At any time during the observation period, at the request of the company, the judicial agent, the prosecution, the court may order the partial cessation of the activity.

Effects of the initiation of the judicial review procedure

To the Leader

The chief executive officer or company remains in office.

Upon initiation of the legal redress procedure, the individual contractor may no longer modify his professional assets if this results in a reduction in the professional assets.

His or her remuneration is maintained, but the court administrator can ask the judge-commissioner to change it.

The individual manager or contractor who has posted security for the company in difficulty may benefit of the cessation of the interest rate and any late interest and markup.

This provision also applies to natural persons coobligated and those who have granted personal security.

An executive cannot sell the shares of the company he owns. In contrast, the partners may sell their shares or shares.

In respect of creditors and sureties and other guarantors

The judgement initiating the proceedings shall prohibit payment all debtappeared before the opening judgement.

Creditors who demanded payment of their claims forward the opening of the judicial process can no longer initiate legal proceedings or make seizures to enforce decisions already obtained.

Increases and interest are also suspended.

The guarantees who are natural persons and who have provided guarantees to the company in difficulty may benefit of the cessation of the interest rate and any late interest and markup. This provision also applies to natural persons coobligated and those who have granted security personal.

Receivables after the opening judgement for the purposes of the proceeding or the compliance period, or in consideration of a benefit provided to the company during that period, shall be paid.

Creditors who consent new cash flow company during the observation period priority of payment over other creditors.

In practice, these creditors will be repaid before all other claims, with the exception of wage claims. Indeed, this contribution is made to help the company to ensure the continuation of its activity and its sustainability. This is called relief privilege.

FYI  

from the date of the judgement initiating the court proceedings, creditors shall have 2 months to complete their declaration of claims. The security company consents to these claims must also be reported. This statement of claim shall specify the nature of the security and its plate.

With regard to the company and employees

The company's activity continues during the observation period with the assistance of the judicial administrator who may be responsible for overseeing the management of the company or co-managing the company with the officer.

The Head of company continues to exercise over the heritage of the company of disposition and Administrative and rights and actions not reserved for the judicial administrator.

Initiation of judicial review proceedings does not result in the termination of contracts that are pending.

The court administrator determines which contracts are to be continued and which are to be terminated.

The commercial lease continues in principle. It may, however, be cancelled at the request of the local landlord if the tenant does not pay his rent. The court administrator may also choose not to continue the lease. In this case, the decision is made by the owner of the premises.

For procedures opened since 1to October 2021, the deputy judge may authorise the company in difficulty during the compliance period to pay the invoices of the carriers.

During the observation period, employees continue their employment contract. When a Social and Economic Committee in the company, the employee shall appoint a representative of the employees.

If during this period, economic redundancies are urgent, unavoidable and indispensable, the judge may authorise them.

Where there is a substantial opportunity for company relief, the Tribunal will put in place a recovery plan that terminates the compliance period.

Where relief appears impossible, the court shall court.

At any time, the court may order the partial cessation of the activity or order the judicial liquidation.

The observation period ends in one of the following ways:

  • Through the implementation of a judicial redress plan
  • By the end of the judicial remedy
  • By partial or total disposal of the company
  • By court
Adoption of the Judicial Remedy Plan

After hearing the company management, the administrator, the judicial officer and the staff representatives, the court shall draw up a plan for judicial redress.

This plan shall be drawn up for a period not exceeding 10 years. In addition, for the duration of the plan, the court appoints a director or an agent to ensure that the plan is properly executed.

The recovery plan is intended to allow the company to continue its operations, to maintain its employment and to pay its liabilities.

This plan shall specify the following:

  • Settlement of debts
  • Economic layoffs (possible)
  • Statutory changes of the company in difficulty (e.g. change in the company's social object, i.e. its activity)
  • Eventually, the court may prohibit the sale of goods deemed essential for the continuation of the company for a period not exceeding 10 years

The court can thus extend the repayment of debts over 10 years.

These payment periods may benefit the deposit, natural person, coobligated and persons who have consented security personal.

For the adoption of the recovery plan, the court, at the request of the public prosecutor, may decide to replace one or more company officers.

The recovery plan may provide for redundancies necessary for the survival of the company.

The plan may also provide for the termination or transfer of one or more activities.

When job backup plan must be developed, the administrator shall implement the procedure laid down in the Labour Code within one month of the judgement.

Please note

where the company in receivership is no longer able to pay the wages owed to its employees, that payment shall be made by wage guarantee insurance (AGS).

Termination of judicial review

If the company has sufficient funds to deter creditors and pay the costs of the proceedings, the court may terminate the proceedings.

Partial or total transfer of company

The plan may also provide for the termination or transfer of one or more activities.

In the case of a transfer plan, the employees who are not dismissed become the employees of the manager who takes over the company.

Judicial liquidation

If the remedy appears to be impossible, the court shall court.

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