Judicial Redress
Verified 01 January 2023 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice
The judicial redress procedure is a collective proceedings applicable to a company that is in cessation of payments. The proceedings shall be initiated by the court. It must allow the company to continue to operate, to maintain jobs and todischarge of liabilities.
A company is put into receivership if he is in a state of cessation of payments.
This procedure may apply to the following:
- Individual contractors (EI) having a commercial, artisanal, liberal activity
- Micro-entrepreneurs
- Businesses
- Farmers (only if the conciliation procedure applied to farmers)
Warning
small companies who have ceased to make payments may benefit from a simplified procedure of post-crisis treatment until June 2, 2023.
The individual entrepreneur or the head of the business in difficulty shall request the initiation of judicial redress proceedings at the latest within 45 days of the cessation of payments.
Failure to do so may result in a ban on managing or encumbering the liability of the company for mismanagement.
The procedure may also be requested by a creditor or at the request of the public prosecutor's office.
Warning
the judicial redress procedure may not be requested where reconciliation is in progress.
The request for judicial redress is made to the commercial court or the judicial court depending on the nature of the activity.
What documents are to be provided?
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Commercial or craft activity
Sole trader
The commercial court shall assess whether the conditions for judicial redress have been met.
For the sole trader, the court shall verify the conditions ofeligibility for judicial redress and to a procedure for over-indebtedness. It then opens a judicial redress procedure which deals with both the business debts and the personal debts of the individual entrepreneur.
Where debts arise solely from the personal assets the sole trader, the commercial court, with the agreement of the contractor, shall not initiate judicial redress. He sends him back to the over-indebtedness commission.
The request for judicial redress shall be made by the Head of company.
He must fill in the form n°10530 and file it with the registry of the commercial court of the company.
The application for judicial redress must be accompanied by the following documents:
- Unique identification number of the company
- State of current liabilities and the available assets (supplemented by the list of debts for which payment is continued on the assets in question) and declaration of cessation of payments
- Number of employees employed at the date of the request (name, address, etc.) and the amount of turnover at the closing date of the last accounting year
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of the property, rights and obligations of the company (distinguishing between those of professional and personal heritage). The acts of waiver the protection of personal property shall also be mentioned, specifying the name of the creditor concerned and the amount of the commitment.
- Annual accounts for the last financial year
- Cash position (list of receivables and debts) less than 1 month old
- Honor certificate certifying that no ad hoc representative has been appointed or that conciliation has been opened within 18 months of the request
Business
The request for judicial redress shall be made by the head of the business.
He must fill in form No. 10530 and file it with the commercial court registry of the company's registered office.
The application for judicial redress must be accompanied by the following documents:
- Unique identification number of the company
- State of current liabilities and available assets, and declaration of cessation of payments
- Number of employees employed at the date of the request (name, address, etc.) and the amount of turnover at the closing date of the last accounting year
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of company assets
- Annual accounts for the last financial year
- Cash position (list of receivables and debts) less than 1 month old
- Honor certificate certifying that no ad hoc representative has been appointed or that conciliation has been opened within 18 months of the request
Liberal activity
Sole trader
The judicial court shall assess whether the conditions for judicial redress are met.
For the sole trader, the court shall verify the conditions ofeligibility for judicial redress and to a procedure for over-indebtedness. It then opens a judicial redress procedure which deals with both the business debts and the personal debts of the individual entrepreneur.
Where the debts arise only from the personal assets the individual contractor, the court, with the agreement of the contractor, shall not initiate judicial redress. It is sending it back to the Debt Relief Commission.
The request for opening must be completed and deposed beside of the Registry of the Court of Justice the location of the seat of the company.
Who shall I contact
The application for judicial redress must be accompanied by the following documents:
- Unique identification number of the company
- State of current liabilities and the available assets (supplemented by the list of debts for which payment is continued on the assets in question) and declaration of cessation of payments
- Number of employees employed at the date of the request (name, address, etc.) and the amount of turnover at the closing date of the last accounting year
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of company assets (distinguishing between those belonging to the professional heritage and those belonging to the personal assets). The acts of waiver the protection of personal property shall also be mentioned, specifying the name of the creditor concerned and the amount of the commitment.
- Annual accounts for the last financial year
- Cash position (list of receivables and debts) less than 1 month old
- In the case of a business with members jointly and severally liable for social debts, a list of them together with their name and domicile
- Honor certificate certifying that no ad hoc representative has been appointed or that conciliation has been opened within 18 months of the request
- Where the debtor exercises a liberal profession subject to a legislative or regulatory statute or whose title is protected, the designation of the professional body or authority to which it is subject.
Business
The request for opening must be completed and deposed beside of the Registry of the Court of Justice the place where the company has its registered office.
Who shall I contact
The application for judicial redress must be accompanied by the following documents:
- Unique identification number of the company
- State of current liabilities and available assets, and declaration of cessation of payments
- Number of employees employed at the date of the request (name, address, etc.) and the amount of turnover at the closing date of the last accounting year
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of company assets
- Annual accounts for the last financial year
- Cash position (list of receivables and debts) less than 1 month old
- In the case of a business with members jointly and severally liable for social debts, a list of them together with their name and domicile
- Honor certificate certifying that no ad hoc representative has been appointed or that conciliation has been opened within 18 months of the request
- Where the debtor exercises a liberal profession subject to a legislative or regulatory statute or whose title is protected, the designation of the professional body or authority to which it is subject.
When a plan to get the company out of its difficulties appears possible, the court pronounces the judgment opening judicial redress.
The judgment:
- sets a provisional date of cessation of payments,
- initiates an observation period which will make it possible to carry out a diagnosis of the company and to prepare a recovery plan,
- designates the organs of procedure (i.e. the Judge-Commissioner, the judicial representative and the court administrator).
Date of cessation of payments
The date of cessation of payments shall fix the beginning of the period referred to as the suspect period.
The period of suspicion is the period between the date of cessation of payments and the date of the court's decision to initiate proceedings.
Certain acts taken during that period may be annulled by the court which considers that the director has taken a decision which may be annulled. An example of this is when an executive enters into a loan contract knowing that his or her business is highly indebted.
Formalities of the judgment initiating judicial redress
The Registrar of the Court shall carry out the following formalities:
- Mention to SCR: titleContent for a commercial activity and/or RNE: titleContent for artisanal or liberal company
- Notice to the Official Bulletin of Civil and Commercial Advertisements (Bodacc)
- Inserting into a legal listing support
The court clerk shall inform the officer or contractor of the commencement of the judicial redress within 8 days of its delivery.
Establishment of an observation period
Duration of observation period
The judgment opens an observation period of up to 6 months.
It may be renewed once, for a maximum period of six months, at the request of the administrator, the company in difficulty or the public prosecutor's office.
The Public Prosecutor's Office may request a second renewal: the period of observation may therefore last up to 18 months.
Appointment of procedural bodies
In the opening judgment, the court designates various interveners:
- Judge-Commissioner
- Judicial agent
- Court administrator for companies of a certain size
The court is not no obligation to appoint a court administrator when the business or company meets the following 2 conditions:
- It has fewer than 20 employees
- Its turnover excluding taxes is less than €3 000 000
Building affected party classes
Companies that meet the following conditions are required to affected party classes :
- More than 250 employees and a net turnover exceeding 20 € million
- A net turnover exceeding 40 € million
Creditors are then grouped according to their claim: for example, tax creditors, collateral real.
Companies that are not subject to this obligation may apply to the Judge Commissioner for authorization to set up creditors affected party classes.
Duties of the judicial representative and the judicial administrator
As soon as the procedure is initiated, the judicial representative draw up an inventory of the company's assets and the guarantees attaching to them.
The officer or contractor shall provide the director (if any) and the judicial representative with various elements:
- List of creditors of the company in difficulty
- Amount of outstanding debts and major contracts
The director shall also inform the judicial representative and the administrator (if any) of any ongoing judicial proceedings.
The judicial administrator shall be responsible for assisting the officer or for the administration of the company, wholly or in part, on the basis of what the court has decided upon his appointment.
During this observation period, the 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 representative, the public prosecutor, the court may order the partial cessation of the activity.
Effects of the initiation of judicial redress proceedings
In respect of the director
The company leader or head remains in office.
As soon as the judicial redress procedure has been initiated, the sole trader may no longer alter his business assets if this results in a reduction in the business assets.
His remuneration is maintained, but the judicial administrator may ask the judge commissioner to amend it.
The manager or individual entrepreneur who has taken the company in difficulty as his guarantor may benefit of the interruption of the rate of interest and any interest for delay and increase.
This provision also applies to natural persons coobligated and those who have consented to a personal security.
The director may not dispose of the shares in the company which he owns. On the other hand, members may sell their shares.
In respect of creditors and sureties and other guarantors
The judgment initiating the proceedings shall result in a prohibition on payment all claim apparent before the opening judgment.
Creditors who demanded payment of their claims front the initiation of judicial redress can no longer bring legal proceedings or make seizures to enforce decisions already obtained.
Surcharges and interest are also suspended.
The bonds who are natural persons and who have acted as guarantors in respect of the company in difficulty may benefit of the interruption of the rate of interest and any interest for delay and increase. This provision also applies to natural persons coobligated and those who have consented to a safety personal.
Debts which appeared after the opening judgment for the purposes of the procedure or the period of observation, or in return for a service provided to the company during that period, are paid on maturity.
Creditors who consent new cash flow to the company during the observation period shall priority of payment over other creditors.
In practice, these creditors will be reimbursed before all other claims, except wage claims. Indeed, this contribution is made to help the company ensure the continuation of its activity and its sustainability. This is called the right of redress.
FYI
from the judgment initiating the judicial redress procedure, creditors have 2 months to make their declaration of claims. The collateral these claims must also be declared by the company. That statement of claim shall specify the nature of the collateral and its plate.
With regard to the company and employees
The activity of the company 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 manager.
The Head of company continues to exercise over the company's heritage acts of disposition and administrative and rights and actions not reserved to the receiver.
The opening of judicial redress proceedings shall not entail the termination of contracts which are in progress.
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 terminated at the request of the owner of the premises 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 binding on the owner of the premises.
For procedures opened since 1er October 2021, the judge-commissioner may authorize the company in difficulty during the compliance period to pay the carriers' bills.
During the observation period, the employees continue their employment contract. When there is a Social and Economic Committee (ESC) in the company, the latter must appoint a representative of the employees.
If during this period, economic redundancies are urgent, inevitable and indispensable, the judge may authorize them.
Where there are substantial possibilities of remedying the company, the court will put in place a remedying plan ending the observation period.
Where the remedy appears to be impossible, the court shall order the judicial liquidation.
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:
- By putting in place a plan for judicial redress
- By the end of judicial redress
- By the partial or total transfer of the company
- By the judicial liquidation
Adoption of the Judicial Redress Plan
After hearing the officers of the company, the administrator, the judicial representative and the staff representatives, the court shall adopt 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 shall appoint a director or agent to oversee the proper execution of the plan.
The recovery plan is intended to enable the company to continue operating, to maintain jobs and to pay its liabilities.
The plan shall specify the following:
- Settlement of debts
- Economic redundancies (possibly)
- Statutory changes of the company in difficulty (e.g. change in the object of the company, i.e. its activity)
- Possibly a prohibition on the sale of goods deemed essential for the continuation of the company by the court for a period not exceeding 10 years
This allows the court to stagger the debt repayment over 10 years.
These payment periods may benefit the surety, natural person, as natural persons coobligated and persons who have consented to a safety personal.
For the adoption of the recovery plan, the court, at the request of the public prosecutor's office, may decide to replace one or more heads of company.
The recovery plan may provide for redundancies which are necessary for the survival of the company.
The plan may also provide for the cessation or disposal of one or more activities.
When a job protection plan must be drawn up, the administrator shall implement the procedure laid down in the Labor Code within one month of the judgment.
Please note
where the company in receivership can no longer pay the wages due to its employees, the latter shall be paid by wage guarantee insurance (AGS).
End of judicial redress
If the company has sufficient funds to pay the creditors' interest and the costs of the proceedings, the court may terminate the reorganization proceedings.
Partial or total transfer of the company
The plan may also provide for the cessation or disposal of one or more activities.
In the case of a divestiture plan, the employees who are not laid off become the employees of the manager who takes over the company.
Judicial winding-up
If the remedy appears impossible, the court shall order the judicial liquidation.
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