Declaration of cessation of payments (bankruptcy)
Verified 15 March 2024 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice
A company is in default when its cash flow is no longer sufficient to settle its debts. As soon as this condition is established, it must, in a 45-day period, file a declaration of cessation of payments form (formerly known as bankruptcy(b) the commercial court or the judicial court.
What is the available asset?
Available assets include the company's cash and credit reserves.
The credit reserves consist in particular of the following:
- Bank check issued to the company even if it is not yet cashed
- Additional aid granted by financial institutions
- Liquidity provided by an officer or partner
- Advances in current account (which are neither blocked nor claimed) consented to by the partners
Warning
Movable or immovable property owned by the company is not available assets.
What is the current liability?
Liabilities payable are all liabilities that have matured and whose creditors may immediately claim payment.
Debts must be filled all conditions following:
- They are not challenged or litigated in court, so they are "certain".
- They have a certain value: they are therefore “liquid”.
- They have not given rise to a moratorium or payment facilities on the part of the creditor, and are therefore "payable".
Invoices due, salaries due, tax and social security payments are part of the liabilities due.
Please note
If the company has credit reserves (and thus a large available asset) or claims deadlines (and thus a small liability), it is not defaulting.
When the official or head of company (assisted by the accountant) identifies the cessation of payments, he must complete the following declaration of cessation (cerfa No 10530):
Declaration of cessation of payments
This form must be submitted in a 45-day period from the termination of payments at the registry of the competent court depending on the nature of the activity.
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Commercial or craft activity
The declaration of cessation of payments must be lodged with the Registry of the Commercial Court of the seat of the company.
Liberal or agricultural activity
The declaration of cessation of payments must be lodged with the registry of the court of the seat of the company.
Who shall I contact
When completing the declaration of cessation of payments, the director must choose between the opening of a procedure for reorganization or judicial winding-up. It opts for recovery if a plan can improve the financial situation of the company, or for liquidation if the situation is irreparably compromised.
FYI
However, it is the court that decides on the procedure to be opened.
When the cessation of payments is declared to the court, it has various effects.
Initiation of recovery or winding-up proceedings
It is the court that sets the date of cessation of payments according to the financial situation of the company. It then initiates judicial reorganization or winding-up proceedings.
FYI
The opening of a procedure for reconciliation is possible when payments are less than 45 days old.
Opening of the suspect period
Where the declaration of cessation of payments is filed with the court, the court shall fix the date of cessation of payments.
The period between the date of cessation of payments and the judgment initiating the administration or winding-up proceedings shall be called suspicious period .
Its duration is limited to 18 months.
The objective of the suspicious period is to annul acts which disperse the assets of the company or which favor certain creditors.
Certain acts taken 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.
Where the declaration of cessation of payments is filed beyond the legal period of 45 days, the court may order the ruler or head of company to prohibition on managing.
This is not an automatic sentence. In order to pronounce this penalty, the court inquires whether the head of company or head of state has deliberately delayed, or not, to declare the cessation of payments. It is from the moment when the manager becomes aware of the state of cessation of payments that he must request the opening of a judicial reorganization or liquidation procedure.
If the court succeeds in showing that the head of company had a sufficient knowledge of the state of cessation of payments, it shall impose the penalty.
Example :
An executive selling business stakes in the hope that business will pick up is well aware of the magnitude of the difficulties. In this case, the court can sentence him to a management ban.
If, on the other hand, a manager has not declared the cessation of payments because he does not have sufficient knowledge of the financial situation of the company, the court does not impose a penalty.
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Definition of cessation of payments
Documents necessary for the initiation of the judicial redress procedure
Nullities of the suspicious period
Individual contractor and collective proceedings
Prohibition to manage