Judicial Redress of a business

Verified 13 October 2023 - Legal and Administrative Information Directorate (Prime Minister)

The judicial redress procedure is a collective proceedings that allows a business that is in a state of cessation of payments. This procedure makes it possible, in particular, to freeze debts and to obtain debt forgiveness and payment periods.

The head of the business in difficulty must apply for judicial redress at the latest within 45 days of the cessation of payments.

This procedure may also be initiated at the request of a creditor or the public prosecutor's office.

The Head of company must request the initiation of judicial redress proceedings at the latest within 45 days that follow the cessation of payments .

Judicial redress proceedings may not be requested where a judicial redress procedure reconciliation is in progress.

The head of company who has been late in seeking judicial redress within 45 days may be sentenced by the court to a penalty of prohibition from managing, directing or administering a commercial or craft company.

However, the court cannot impose a management ban on an entrepreneur engaged in a regulated liberal activity. In this case, only the professional order (e.g. Council of the Bar Association, Architects) can to impose a penalty disciplinary.

The application for judicial redress shall be made to the commercial court or the court of justice depending on the activity carried out:

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Commercial and/or craft activity

In order to apply for judicial redress, the director must complete the following application form:

Form of application for judicial redress or liquidation

He must then file it with the Registry of the Commercial Court of the place where the business 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 (Siren number)
  • 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
  • Quantified statement of claims and debts, indicating as appropriate the name or name and domicile or registered office of the creditors and, for employees, the total amount of sums outstanding
  • Statement of assets and liabilities of collateral and off-balance sheet commitment
  • Summary inventory of company assets
  • In the case of a business with members jointly and severally liable for social debts (for example, a CNS: titleContent), a list of them with their name and domicile
  • Annual accounts for the last financial year
  • Cash position (list of claims and liabilities) 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

In order to apply for judicial redress, the director must complete the following application form:

Form of application for judicial redress or liquidation

He then files it with the court registry of the place where the business of the liberal profession is located.

Who shall I contact

The application for judicial redress must be accompanied by the following documents:

  • Unique identification number of the company (Siren number)
  • 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
  • Quantified statement of claims and debts, indicating as appropriate the name or name and domicile or registered office of the creditors and, for employees, the total amount of sums outstanding
  • Statement of assets and liabilities of collateral and off-balance sheet commitment
  • Summary inventory of company assets
  • In the case of a business with members jointly and severally liable for social debts (for example, a CNS: titleContent), a list of them with their name and domicile
  • Annual accounts for the last financial year
  • Cash position (list of claims and liabilities) 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 the business pursues a liberal profession subject to a legislative or regulatory statute or whose title is protected, designation of the professional order or authority to which it is subject

The court pronounces the judgment to initiate judicial redress when a plan to get the company out of its difficulties seems possible.

The Registrar of the Court inform the contractor the opening of proceedings within 8 days of its delivery.

It shall also carry out the following publicity formalities:

  • Mention toSCR: titleContent  for a commercial activity and/or RNE: titleContent  for artisanal or liberal business
  • Notice to the Official Bulletin of Civil and Commercial Advertisements (bodacc)

This opening decision has the following effects:

  • It is setting up an observation period that will allow a diagnosis of the company to be made and a recovery plan to be prepared.
  • It designates the procedural bodies which will intervene in the procedure: it is the Judge-Commissioner, judicial representative and the court administrator.

1. Establishment of an observation period

The judgment initiating the redress procedure shall open a observation period.

This period allows us to make a diagnosis of the situation. It takes a balance sheet of the business' assets and liabilities to determine what measures will keep the company going.

The observation period lasts a maximum of 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 may request a second renewal. The observation period can therefore last up to 18 months.

2. Appointment of interveners to the proceedings

The court shall designate the different speakers to the proceedings:

  • Judge-Commissioner. He is responsible for ensuring that the procedure is carried out properly.
  • Judicial agent. It represents the community of creditors and acts on their behalf and in their interests.
  • Judicial administrator . He is responsible for assisting the contractor or for the administration of the company, wholly or in part, on the basis of the task assigned to him by the court. It establishes an economic and social balance sheet for the company.

Please note

The court is not not obligatory appoint a court administrator when the company has fewer than 20 employees and a duty-free turnover of less than €3 000 000.

The judgment initiating the judicial redress opens a period of observation during which the director remains at the head of his company and continues the activity of the company.

At any time during the observation period, the court may order the partial cessation of the activity at the request of the Head of company himself, the judicial representative, the public prosecutor,.

The opening of an observation period has consequences for the situation of the Head of company, creditors and ongoing contracts.

Situation of the leader

The officer shall remain in office during the observation period. He or she shall be assisted and supervised by the court-appointed administrator. His remuneration is maintained, but the judicial administrator may ask the judge commissioner to amend it.

The director who has taken the company's responsibility may benefit from the interruption of the interest rate and from any interest for late payment and increase.

He may not dispose of the shares in the business which he holds. On the other hand, the partners have this possibility.

FYI  

In the absence of remuneration, the officer may obtain subsidies (sums of money paid as relief) from the assets of the company, as determined by the judge-commissioner

Situation of creditors, sureties and other guarantors

The judgment initiating the judicial redress procedure entails a prohibition on payment all claim apparent before the opening judgment. Surcharges and interest are also suspended. The bonds natural persons who have guaranteed the company in difficulty may benefit of the interruption of the rate of interest and any interest for delay and increase.

Creditors who demanded payment of their claims prior to the commencement of judicial redress can no longer bring legal proceedings or make seizures to enforce decisions already obtained.

The claims that have appeared after the opening judgment for the purposes of the proceedings or in return for a supply to the company during that period, are paid on maturity.

Creditors who give a new cash flow at the business during the observation period benefit priority of payment over other creditors. In practice, these claims will be repaid 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.

Status of outstanding contracts

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 which are not reserved for the court administrator.

The opening of judicial redress proceedings shall not entail the termination of the contracts in progress. It is the court administrator who determines which contracts are to be continued and which are to cease:

  • The commercial lease continues in principle. It may 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.
  • The employment contracts employees are still going on. When there is a Social and Economic Committee (ESC) in the company, the latter must appoint a representative of the employees. Where economic dismissals are urgent, unavoidable and indispensable, the judge may authorize them.

Please note

For procedures opened since 1er in october 2021, the judge-commissioner may authorize the company in difficulty to pay the carriers' bills during the compliance period.

At the end of the observation period, the Tribunal shall make one of the following determinations:

  • Closure of judicial redress
  • Establishment of a continuation plan (or judicial redress plan)
  • Delivery of the judicial liquidation
Closure of judicial redress

Where the business has sufficient funds to pay its creditors, the court shall order the termination of judicial redress. This situation is very rare in practice.

Establishment of a continuation plan (or judicial redress plan)

Where there are substantial possibilities for redress of the company, the court shall establish a continuation plan (or court redress plan) ending the observation period. This plan is intended to enable the company to continue operating, to maintain jobs and to pay its liabilities.

After hearing the officers of the company, the administrator, the judicial representative and the staff representatives, the court shall adopt a business continuation plan. This plan shall be drawn up for duration 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. At the request of the Public Prosecutor's Office, it may decide to replace one or more business officers.

The recovery plan may provide for redundancies which are necessary for the survival of the company. 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.

The plan may also provide for the cessation or disposal of one or more activities.

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).

Delivery of the judicial liquidation

Where recovery appears to be impossible, the court shall order compulsory liquidation.

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