Declaration of cessation of payments (bankruptcy)

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 settle its debts. As soon as this condition is established, the company must, within 45 days, file a declaration (called bankruptcy(b) the commercial court or the judicial court. The cessation of payments shall trigger the opening of proceedings for conciliation, recovery or winding-up by the courts.

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

The available assets and the outstanding liabilities are examined by the court, which will determine a date for the cessation of payments.

The commercial court is competent for a commercial or craft activity and the judicial court for a liberal or agricultural activity.

Available Asset

Available assets are cash on hand and anything that can be turned into cash immediately (e.g., sale of property) or very short-term (just days) by allowing the company to continue.

Liabilities due

Liabilities payable are all liabilities that have matured and whose creditors may immediately claim payment.

These debts must be certain (undisputed and uncontested), liquid (with a fixed value) and payable.

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

Warning  

if the company has credit reserves or is given a period to pay by its creditors to meet its current liabilities with its available assets, it is not in default.

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

  • Business
  • Sole trader (for the professional part of his assets)
  • Micro-entrepreneur

The declaration of cessation of payments shall be made by:

  • For a business: the manager or a co-manager (i.e. one of the 2 managers if the SARL is concerned by the co-management)
  • Individual business For one: the head of company

The cessation of payments procedure shall not apply to individuals in over-indebtedness proceedings, credit institutions and persons covered by extension of collective proceedings already open to a business.

FYI  

where a company is in a state of cessation of payments, it may no longer benefit from the ad hoc mandate or the backup.

Opening of the suspect period

The so-called period suspicious is between the date of cessation of payments and the judgment initiating the procedure recovery or the judicial liquidation.

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

However, it must be shown that the cessation of payments was prior to the date initially set.

The court may extend the date of cessation of payments until 18 months before the commencement of the collective proceedings.

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

This is the case, for example, when a manager takes one of the following actions:

  • He's paying an unexpired bill
  • He enters into a loan contract knowing that his business is highly indebted
  • He grants a gift on a property of the business to a creditor

The purpose of the suspicious period is to annul acts that disperse the assets of the company or that favor certain creditors.

Initiation of conciliation or collective proceedings

Where the cessation of payments is established, the company shall be obliged to 45 days to get closer to the court (commercial or judicial).

Depending on the date of cessation of payments and the financial situation, the court shall initiate proceedings to reconciliation, of recovery or judicial liquidation.

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Termination of payments of less than 45 days

The opening of a procedure for reconciliation is possible.

Termination of payments of more than 45 days

Where the cessation of payments is more than 45 days old, the court shall initiate proceedings to judicial redress or judicial liquidation.

Judicial winding-up shall be initiated where judicial redress is impossible.

The commercial court of the place where the company has its registered office is competent for commercial and craft activities.

The court of justice has jurisdiction over liberal and agricultural activities.

Who shall I contact

FYI  

if the officer is late in making this declaration, he may be ordered by the court to pay part of the company's debts on his personal assets.