Judicial Redress of a business

Verified 22 November 2023 - Directorate for Legal and Administrative Information (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 discounts and payment periods when the recovery plan is adopted.

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.

Please note

The judicial redress procedure also concerns the sole proprietor and the micro-contractor. For more details, see the dedicated card.

Companies in difficulty with fewer than 20 employees with a indebted less equity less than €3 million may, under certain conditions, benefit from a simplified judicial remedy: post-crisis treatment procedure.

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

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

  • Extract K-bis or certificate of registration in the National Register of companies (RNE)
  • State of current liabilities and available assets, 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
  • 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

This application must be filed or sent in 2 copies :

  • at the registry of the commercial court of the place where the business has its registered office, or
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  • or online through the digital court

Digital court

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.

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

  • Extract K-bis or certificate of registration in the National Register of companies (RNE)
  • 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 to SCR: 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.

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

The receiver, with the help of the company in difficulty, prepares the draft recovery plan. This draft plan shall be drawn up in consultation with the creditors. The latter shall be consulted in accordance with the constitution of affected party classes .

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. The appointment of a judicial administrator shall be obligatory where the company has more than 20 employees and a turnover excluding taxes of more than €3 000 000.

Please note

The court agent and the court administrator are paid by the company. This remuneration is fixed by a decree for each of their missions (e.g. assistance mission, preparation of the social and economic assessment). It also depends on the number of employees and the turnover of the company.

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's Office.

The opening of a period of observation has consequences for the position of the manager, 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 manager who has taken the responsibility for the business may benefit from the cessation of the interest rate and from the cessation of any interest on arrears and surcharges.

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

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

Status of outstanding contracts

The business' activity 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 result in the termination of open contracts. 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.

Situation of creditors

The opening of judicial redress proceedings affects all creditors. The consequences are different depending on whether their claim arose before or after the opening judgment.

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Claims existing before the opening judgment

The opening of the judicial redress procedure has the following effects:

  • ban for the company in difficulty to pay all claim prior to the opening judgment. In practice, this means that the company no longer pays its claims from the date on which the judgment for judicial redress is issued. Creditors must therefore make a declaration of their claims to the judicial representative.
  • Suspension of individual proceedings : creditors who have not sued the company for the settlement of their claims before the opening judgment can no longer do so after.
  • Interests price interruption (legal, conventional and late) and surcharges. The bonds (natural persons) of the company in difficulty may benefit from the cessation of interest rates. However, loans of one year or more are not affected by the interruption of interest rates.

Please note

Creditors must report their claims to the judicial representative, within two months of the publication of the opening judgment in the official gazette of the civil and commercial advertisements (bodacc).

Claims arising after the opening judgment

In principle, the company in difficulty does not pay claims arising after the judgment initiating the judicial redress procedure.

In practice, the cash contributions made after the opening judgment must be repaid before all other claims. It's called the privilege of judicial redress.

However, wage claims are an exception to this rule and are always paid first.

Others debts they shall also be paid when due:

  • Claims necessary for the conduct of the procedure or observation period (e.g. payment of a delivery of goods necessary for the activity of the business)
  • Consideration for a service provided to the company in difficulty during this period (e.g. payment for plumbing)
  • Maintenance claims

To promote the continuation of the company's activity, the judge-commissioner may also authorize the payment of carriers' invoices.

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)
  • Delivered by 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 the remedy appears to be impossible, the court shall order the judicial liquidation.

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