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Declaration of cessation of payments (balance sheet)

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

A company is in default when the cash available to it is no longer sufficient to pay its debts. Once this statement is found, the company must, within 45 days, file a statement (called bankruptcy) before the commercial or judicial courts. Termination of payments shall trigger the initiation of conciliation, reorganisation or liquidation proceedings.

The declaration of termination of payments may concern the following persons:

  • Business
  • Individual entrepreneur (for the professional part of its assets)
  • Micro-entrepreneur

The declaration of cessation of payments shall be made by the following persons:

  • For a business: the manager or a co-manager (i.e. one of the 2 managers if the LLC is involved in the co-management)
  • For a individual business: the head of company

The procedure for declaring the cessation of payments shall not apply to individuals in the course of the debt overhang procedure, credit institutions and persons covered by extension of collective proceedings already open to a business.

FYI  

when a company is in default, it can no longer benefit from the procedures of the ad hoc mandate or backup.

Termination of payments is defined as the inability to meet liabilities due with asset available.

The available assets and liabilities are reviewed by the court, which will determine a date on which the payments will cease.

The Commercial Court is competent for a commercial or craft activity and the Judicial Court for a liberal or agricultural activity.

Active Available

The available asset is cash and anything that can be converted into cash immediately (e.g., sale of property) or in the very short term (just a few days) by allowing the company to continue.

Liability

Liabilities due shall consist of all debts due and of which creditors can claim payment immediately.

These debts must be certain (non-contentious and uncontested), liquid (with a specified value) and payable.

Invoices maturing, salaries payable, tax and social payments are part of the liabilities due.

Warning  

if the company has a credit reserve or a payment period from its creditors to meet the liabilities due with its available assets, it is not in default.

Opening of suspicious period

The period suspect shall be between the date of cessation of payments and the judgement initiating the recovery or court.

The date of termination of payments may be postponed one or more times.

However, it must be shown that the default was prior to the date originally set.

The court may extend the date of cessation of payments up to 18 months before the initiation of the collective proceedings.

Certain acts committed during this period are automatically annulled by the court.

This is the case, for example, when an executive does one of the following:

  • He pays an unpaid invoice
  • He enters into a loan agreement knowing that his business is heavily indebted
  • He consents a donation on a property of the business to a creditor

The purpose of the suspicious period is to have the acts that disperse the company's assets or that benefit certain creditors cancelled.

Opening of conciliation or collective proceedings

Where termination of payments is established, the company shall have the obligation within 45 days get closer to the court (commercial or judicial).

Depending on the date of termination of payments and the financial situation, the court shall initiate conciliation, recovery or court.

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Termination of payments less than 45 days

Opening of a conciliation is possible.

Termination of payments over 45 days

Where the termination of payments is more than 45 days old, the court shall initiate judicial remedy or court.

Judicial winding-up is initiated when legal redress is not possible.

The Commercial Court of the company's registered office shall have jurisdiction over commercial and craft activities.

Who shall I contact

The court has jurisdiction over liberal and agricultural activities.

FYI  

if the company official is late in making the declaration, he or she may be ordered by the court to pay part of the debt on his or her personal property.

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