Involuntary closure of a company: judicial liquidation

Verified 01 January 2023 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice

Judicial winding-up concerns a company whose payments have ceased and whose reinstatement is manifestly impossible. The procedure terminates the company's activity. Its assets are then sold to allow payment to the various creditors. Small companies may, under certain conditions, use a simplified procedure: judicial winding-up.

Judicial winding-up

The bankruptcy procedure concerns companies who are in cessation of payments and whose recovery is impossible.

The companies concerned are:

FYI  

Even after his delisting of the SCR: titleContent , a trader may be put into receivership if at least part of his indebted is of professional origin.

Judicial winding-up proceedings must be requested by the sole trader or business manager within 45 days of cessation of payments.

No request for the opening of proceedings reconciliation shall not have taken place during that period.

The manager or sole trader applies to the court competent according to his activity, to make a request for liquidation.

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Business activity

Sole trader

The commercial court shall assess whether the conditions for the opening of the judicial winding-up are met.

For the sole trader, the court shall verify the eligibility conditions a judicial winding-up and to a procedure for over-indebtedness. It then opens judicial winding-up proceedings 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 sole trader, the commercial court, with the agreement of the contractor, shall not open a bankruptcy procedure. It is sending it back to the Debt Relief Commission.

The request for judicial winding-up 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.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall 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, rights and obligations (distinguishing between those falling under the occupational heritage and personal property). 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 application for judicial winding-up shall be lodged by the director.

He must fill in form No. 10530 and file it with the commercial court registry of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall be accompanied by the following documents:

  • Unique identification number of the company
  • 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

Handicraft activity

Sole trader

The commercial court shall assess whether the conditions for the opening of the judicial winding-up are met.

For the sole trader, the court shall verify the conditions ofeligibility for compulsory winding-up and to a procedure for over-indebtedness. It then opens judicial winding-up proceedings 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 sole trader, the commercial court, with the agreement of the contractor, shall not open a bankruptcy procedure. It is sending it back to the Debt Relief Commission.

The application for judicial winding-up shall be lodged 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.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall 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, rights and obligations (distinguishing between those falling under the occupational heritage and personal property). 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 application for judicial winding-up shall be lodged by the director.

He must fill in form No. 10530 and file it with the commercial court registry of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall be accompanied by the following documents:

  • Unique identification number of the company
  • 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 the opening of the judicial winding-up are met.

For the sole trader, the court shall verify the eligibility conditions a judicial winding-up and to a procedure for over-indebtedness. It then opens judicial winding-up proceedings 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 sole trader, the commercial court, with the agreement of the contractor, shall not open a bankruptcy procedure. It is sending it back to the Debt Relief Commission.

The application for judicial winding-up shall be lodged by the sole trader.

He must fill in the form n°10530 and file it with the registry of the court of the company.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall 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, rights and obligations (distinguishing between those belonging to the heritage professional and personal property). 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 application for judicial winding-up shall be lodged by the director.

He must fill in the form n°10530 and file it with the registry of the court of justice of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall be accompanied by the following documents:

  • Unique identification number of the company
  • 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

Agricultural activity

Sole trader

The judicial court shall assess whether the conditions for the opening of the judicial winding-up are met.

Forthe sole traderl, the court shall verify the conditions ofeligibility for compulsory winding-up and to a procedure for over-indebtedness. It then opens judicial winding-up proceedings 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 sole trader, the commercial court, with the agreement of the contractor, shall not open a bankruptcy procedure. It is sending it back to the Debt Relief Commission.

The application for judicial winding-up shall be lodged by the sole trader.

He must fill in the form n°10530 and file it with the registry of the court of the company.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall 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 application for judicial winding-up shall be lodged by the director.

He must fill in the form n°10530 and file it with the registry of the court of justice of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall be accompanied by the following documents:

  • Unique identification number of the company
  • 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

Where there is no procedure for reconciliation in the course of the liquidation may be requested by one of the following persons:

  • Public Prosecutor
  • One of creditors of the company in difficulty (supplier, owner of the commercial premises, Urssaf)
  • Any heir to an individual entrepreneur

In the event of the death of a sole trader (IS) who was in default of payments for the professional part of his assets, the court may be seised within 1 year from the date of death.

FYI  

Judicial winding-up may be ordered during the period of observation of proceedings in backup or judicial redress.

If the application for winding-up is accepted by the court, the court shall order the opening of the winding-up and appoint the interveners in that procedure.

The court orders the opening of proceedings (it is the opening judgment) and appoint a Judge Commissioner and a liquidator.

If it exists in the company, the Social and Economic Committee (ESC) must appoint a representative from among the employees of the company. This representative checks claims arising from employment contracts and checks the payment of sums to employees.

The opening judgment has immediate consequences for the company, its manager and its employees.

Publication of the judgment initiating the judicial winding-up

The opening judgment shall be published by the Registrar of the Court of First Instance:

  • At SCR: titleContent for a commercial activity or RNE: titleContentfor an artisanal activity or the register kept by the court registry for other activities
  • To the Official Civil and Commercial Advertising Newsletter (Bodacc)
  • In a legal listing support
Activity of the company and termination of the duties of the director

In principle, liquidation by the court entails the cessation of the activity of the company.

The director is relieved of his duties and the management of the company is entrusted to the liquidator.

The individual entrepreneur can no longer administer and dispose of the assets that make up his professional estate. From the date of the opening of the judicial liquidation, he shall be prohibited from altering his professional assets if this entails a reduction in assets. This prohibition shall apply until the winding-up has been completed.

However, the continuation of the activity may be authorized by the court for a maximum period of 6 months in one of the following cases:

  • Total or partial divestiture of the company is possible
  • The public interest or the creditors' interest requires it

In these 2 cases, the court appoints a court administrator to manage the company. He will exercise the powers of the liquidator.

Warning  

Where winding-up proceedings are opened against an individual contractor, the latter may exercise one news professional activity. This is not possible if it has been the subject of a winding-up for lack of assets or a closure of a occupational recovery in the last five years.

A new professional heritage is then formed. This new professional estate is not affected by the ongoing liquidation procedure.

Appointment and assignment of the liquidator

As soon as the proceedings are opened, the liquidator shall administer the company and shall:

  • Company Management
  • Verification of claims
  • Sale of the goods (goods, materials, immovable property, right to lease, etc.) either as part of an overall sale of the company (disposal plan) or through separate sales (the funds are then divided among the different creditors according to the rank of each)
  • Dismissal of employees and payment of wages
  • Recovery of sums due to the company, if necessary in legal proceedings

Warning  

in principle, the liquidator cannot sell the personal property of the sole trader to pay the liability. However, at the request of the contractor and with the approval of the Judge Commissioner, the liquidator may do so if this would facilitate the realization of the assets of the professional estate.

Appointment and assignment of the Judge Commissioner

In the judgment which initiates the judicial winding up, the court shall appoint a Judge-Commissioner.

The latter is responsible for ensuring that the procedure proceeds expeditiously and that the interests at stake are protected.

Following the judgment pronouncing the judicial liquidation, the company must cease its activity immediately unless the continuation of the activity is permitted.

Termination of employment contracts

The liquidator must implement the procedure for economic redundancy and must consult the Social and Economic Committee (ESC) if it exists.

The employment contracts between the employees and the company in difficulty shall be terminated within 15 days of the judgment pronouncing the winding-up by the courts or of the expiry of the authorization to continue the activity.

This period shall be extended to 21 days where employment protection plan (ESP) is established.

If the liquidator is obliged to set up a PSE, he must submit it to the Dreets: titleContent for validation or approval.

The Dreets shall take a decision within 4 days of the date of the last meeting of the ESC.

Claims arising from the termination of the employment contract (wages, bonuses, allowances, contributions and social contributions, etc.) shall be covered by the contribution to the wage guarantee scheme (AGS).

Discontinuation of individual proceedings

The opening judgment prevents any legal action against the company to obtain payment of a sum of money: it may be an action for payment of rent or a sale price.

Any legal action to terminate a contract for default is also suspended or prohibited.

Interests price interruption

The opening judgment sets the price of interest (contractual, legal, etc.) and surcharges, with the exception of interest on loans of more than 1 year.

Settlement of creditors

Within 2 months of the publication of the opening judgment in the Bodacc: titleContent, creditors must to declare their claims to the liquidator.

All the debts of the company for the continuation of the activity after the opening of the procedure must be paid immediately.

The court shall declare the liquidation closed in one of the following situations:

  • When all creditors are uninterested (exceptional situation), that is, the company has been able to repay all creditors and still has money that it will distribute to the partners
  • When the company faces a shortage of assets, that is, the company no longer has enough money to repay all the debts

After the winding-up has been completed, individual creditors' actions against the company in liquidation are no longer possible.

However, in the event of tax evasion, concealment of assets or personal or criminal sanctions against the individual manager or contractor, creditors regain their right to sue the company in liquidation.

Simplified judicial winding up

Simplified bankruptcy is when the company does not own any real estate (i.e. if there is no land, such as real estate). However, the sole trader owner of his principal residencee may also benefit from the simplified judicial winding-up.

For businesses, other conditions must be met.

The court has the possibility to revert to the common rules of judicial liquidation at any time if the liquidator discovers the existence of a real estate asset (other than the principal residence).

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Micro-entrepreneur

He shall be entitled to the opening of the simplified winding-up procedure if his assets do not include immovable property.

Individual business

The sole trader shall be entitled to simplified compulsory winding-up provided that its assets do not include real estate. The sole trader who owns his principal residence may benefit from the simplified bankruptcy procedure.

Business

A business benefits from simplified bankruptcy if the following three conditions are met:

  • The asset does not include real estate.
  • The number of employees during the 6 months preceding the opening of the simplified winding-up procedure shall be no more than 5.
  • Revenue excluding tax is less than or equal to €750,000.

The application for the simplified winding-up procedure shall be lodged by the manager or the individual contractor with the court registry for the company's registered office, depending on the nature of the activity.

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Commercial or craft activity

Individual business

The court shall assess whether the conditions for the opening of the judicial winding-up are met.

If the sole proprietor meets the conditions for eligibility for compulsory winding-up and to a procedure for over-indebtedness, the court shall open a judicial winding up which deals with the individual entrepreneur's professional and personal debts.

Where the debts arise only from the personal assets of the contractor, the commercial court, with the agreement of the contractor, does not open a bankruptcy procedure and refers the entrepreneur to the over-indebtedness commission.

The application for judicial winding-up shall be lodged by the sole trader.

He must fill in form No. 10530 and file it with the commercial court registry of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall 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). Acts waiving 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 application for judicial winding-up shall be lodged by the director.

He must fill in form No. 10530 and file it with the commercial court registry of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings must be accompanied by the following documents:

  • Unique identification number of the company
  • 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 or agricultural activity

Sole trader

The court shall assess whether the conditions for the opening of the judicial winding-up are met.

If the sole proprietor meets the conditions for eligibility for compulsory winding-up and to a procedure for over-indebtedness, the court shall open a judicial winding up which deals with the individual entrepreneur's professional and personal debts.

Where the debts arise only from the personal assets the contractor, the court, with the agreement of the contractor, does not open a bankruptcy procedure and refers the entrepreneur to the over-indebtedness commission.

The application for judicial winding-up shall be lodged by the sole trader.

He must fill in the form n°10530 and file it with the registry of the court of justice of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall 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 application for judicial winding-up shall be lodged by the director.

He must fill in the form n°10530 and file it with the registry of the court of justice of the company's registered office.

Application for the opening of proceedings for reorganization or winding-up by the courts (with or without occupational reinstatement)

Who shall I contact

The application for winding-up proceedings shall be accompanied by the following documents:

  • Unique identification number of the company
  • 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

Verification of claims

In practice, debts shall not be verified as a whole.

Only wage claims and those which can be settled with the available assets (according to their rank).

Sale of goods

The liquidator shall sell the movable property within 4 months of the decision ordering the simplified winding-up procedure.

This is done in one of the following ways:

  • Over-the-counter (over-the-counter with the agreement of the seller and buyer)
  • At public auction

Settlement of creditors

After the verification of claims and the sale of assets, the liquidator shall include his proposals for apportionment in the statement of claims.

It shall assess the amount of foreseeable legal costs.

The statement of claims is thus completed and lodged at the Court Registry.

The statement of claims shall be published only if the sums to be apportioned allow payment of all creditors.

If the sums to be allocated allow only the payment of preferred creditors (i.e. those with a safety or the Treasury, for example), the statement of claims is not published.

Any interested party may take cognizance of this statement of claims and lodge a complaint before the Judge-Commissioner.

The liquidator then allocates the sums according to the proposals of the liquidator or the decision of the judge-commissioner.

The simplified winding-up proceedings shall be closed at the latest within six months of the opening of the simplified winding-up proceedings.

However, the procedure shall be closed within 1 year if the 2 conditions are met:

  • The company employs more than 1 employee
  • Duty-free turnover is greater than €300,000

In any case, the court can extend the procedure by 3 months.

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