Judicial winding-up of a business
Verified 01 October 2024 - Directorate for Legal and Administrative Information (Prime Minister)
Judicial winding-up concerns a business in a state of cessation of payments and whose recovery is clearly impossible. The procedure terminates the company's activity. Its assets are then sold to allow payment to the various creditors. Small businesses may, under certain conditions, resort to simplified compulsory winding-up.
Judicial winding-up
Judicial winding-up proceedings must be requested by the head of the business in the 45 days that follow the cessation of payments.
The director who has not requested the commencement of the judicial winding-up within that period of 45 days following the cessation of payments may be sentenced by the court to a management ban.
Where there is no procedure for reconciliation pending, the opening of the judicial liquidation can also be requested by one of the people following:
- Public Prosecutor
- One of creditors of the company in difficulty (supplier, owner of the commercial premises, Urssaf)
Please note
The bankruptcy procedure also concerns the individual entrepreneur (EI) and the micro-entrepreneur. For more details, see the dedicated card.
The director of a self-employed business (SEL) who is late in requesting the opening of a judicial winding-up is not sanctioned by the court. Only the professional body to which it is attached (for example, the Bar Association, architects) can impose a management ban on it. In this case, it is a disciplinary sanction.
The court competent to carry out the judicial winding-up depends on the activity carried out by the business.
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Commercial and/or craft activity
In order to request the opening of winding-up proceedings, the Head of company must complete the request for the opening of winding-up proceedings.
Form of application for judicial redress or liquidation
The application for winding-up proceedings shall 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
- A statement of the amount of the claims and debts, indicating, as appropriate, the name or name and domicile of the creditors and, in the case of employees, the total amount of the sums outstanding
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of company assets, rights and obligations
- In the case of a business with members jointly and severally liable for social debts (for example, a CNS: titleContent, a list of them together with an indication of their name and domicile
- The name and address of the representatives of the Social and Economic Committee (ESC) entitled to be heard by the Court if they have already been appointed
- Annual accounts for the last financial year
- Cash position (list of receivables and debts) 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 company has its seat
- or online through the digital court
Liberal activity
In order to request the opening of a bankruptcy, 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 Court of Justice of the place where the business has its registered office.
Who shall I contact
The application for winding-up proceedings shall 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 the name or name and domicile or registered office of the creditors and, for employees, the total amount of unpaid sums
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of company assets
- Annual accounts for the last financial year
- Cash position (list of receivables and debts) 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 the business belongs
FYI
Judicial winding-up may be ordered during the period of observation of proceedings in backup or judicial redress.
If the liquidation application is accepted by the court, the court orders the opening of proceedings (i.e. opening judgment) and appoints the parties involved in this procedure (liquidator, judge-commissioner, employee representative).
Appointment of interveners to the proceedings
The court shall designate a judge-commissioner responsible for ensuring that the procedure proceeds expeditiously and that the interests at stake are protected. It shall also designate a receivership and one employee representative.
Appointment and assignment of the liquidator
The court shall appoint a liquidator who shall carry out the winding-up operations at the same time as the verification of claims.
As soon as the proceedings are opened, the liquidator shall administer the company and shall:
- Company Management
- Verification of claims
- Sale of the goods (goods, materials, immovable property, right to lease, etc.) either as part of an overall sale of the company (disposal plan) or through separate sales (the funds are then divided among the different creditors according to the rank of each)
- Dismissal of employees and payment of wages
- Recovery of sums due to the company, if necessary in legal proceedings
Please note
The liquidator's fees are not paid by the company.
Appointment of an employee representative
If it exists in the company, the Social and Economic Committee (ESC) must appoint a representative from among the employees of the company. This representative checks claims arising from employment contracts and checks the payment of sums to employees.
Publicity of the opening judgment
The opening judgment shall be published by the Registrar of the Court of First Instance:
- At SCR: titleContent for a commercial activity or RNE: titleContent for an artisanal activity or the register kept by the court registry for other activities
- To the Official Bulletin of Civil and Commercial Advertisements (Bodacc.fr)
- In a legal listing support
FYI
Within 2 months of the publication of the opening judgment in the Bodacc: titleContent, creditors must to declare their claims the liquidator in order to recover the amount of their claims.
The opening judgment has immediate consequences for the company, its manager (manager, president, etc.), its employees, and the creditors.
Immediately stop business activity
The opening of the winding-up proceedings shall entail the immediate cessation of the activity. Occasionally, continued activity is permitted.
Principle: cessation of activity
In principle, liquidation by the court entails the immediate cessation of the business' activity. This solution is necessary insofar as the company must disappear and the objective is to sell the assets to repay the creditors.
Maintenance of activity
The continuation of the activity may be authorized by the court in the following cases:
- Where the total or partial transfer of the company is conceivable.
- In the public interest (e.g.: completing a work in progress or disposal of stocks)
- In the interest of creditors (e.g. sale of goods in stock to be able to repay creditors)
In these three cases, the liquidator is responsible for continuing the activity with the help of thecourt administrator.
The temporary continuation of the activity may not exceed a period of 3 months. This duration may be prolonged 3 months at the request of the public prosecutor's office.
FYI
Continuation of ongoing contracts (e.g. commercial lease) may be useful in sustaining the business. It is the liquidator or administrator who decides on the continuation of the open contracts.
Divestiture of the company manager
The judgment which initiates or pronounces the judicial winding-up shall entail the divestment of the business' director until the winding-up has been completed. That means it's now the liquidator which represents the business. However, the leader may remain in place when the winding-up is commenced unless the statutes of the business or a meeting of members provide otherwise. His powers are very strong reduced : he can no longer sell an asset, cash in, terminate a contract, etc.
Only the liquidator has a warrant once appointed by the court to sell the assets business and prosecution of company debtors.
Termination of employment contracts
The liquidator must implement the procedure for economic redundancy and must consult the Social and Economic Committee (ESC) if it exists.
The employment contracts between the employees and the company in difficulty shall be terminated within 15 days of the judgment pronouncing the winding-up by the courts or of the expiry of the authorization to continue the activity.
This period shall be extended to 21 days where employment protection plan (ESP) is established.
If the liquidator is obliged to set up a PSE, he must submit it to the Dreets: titleContent for validation or approval.
The Dreets shall take a decision within 4 days of the date of the last meeting of the ESC.
The wage claims arising from the termination of the employment contract (wages, bonuses, allowances, social contributions, etc.) are covered by the contribution to the wage guarantee scheme (AGS). The liquidator must therefore refer the matter to the AGS for settlement.
Effects on creditors
All receivables become immediately due (i.e. payable), even if they have not yet matured. The judgment initiating the procedure shall also entail the cessation of individual proceedings and the cessation of interest.
Discontinuation of individual proceedings
The opening judgment prevents creditors from:
- to bring an action for the payment of money due by the business in liquidation. This means that creditors cannot seek payment of a sum in court. For example, if a buyer wants a reduction in the price of a good as a result of the recognition of a guarantee of hidden defects, he may not bring the matter before the courts where the business is the subject of legal proceedings.
- to bring an action for termination of a contract for non-payment of a sum of money. For example, the seller of a goodwill may not request the termination of the sale concluded before the judgment initiating the liquidation of the buyer even when the latter has ceased to repay the seller's credit.
Interests price interruption
The judgment initiating the judicial winding-up stop the price of statutory interest and conventional interest rates (i.e. rates agreed between the parties) coming soon.
The opening judgment shall also entail the cessation of interest on arrears and surcharges.
This rule applies only to loans made for a up to 1 year.
The court shall declare the liquidation closed in one of the following situations:
- When all creditors are disinterested, that is, the liquidator has recovered enough money to settle all creditors’ debts. If there is still a surplus, it is distributed among the partners. This situation is exceptional.
- When the company faces a shortage of assets, that is, the company no longer has enough money to repay all creditors. In this situation (the most frequent), the court issues a judgment closing the liquidation for insufficient assets which results in the dissolution of the business. Its debts are wiped out and no creditor can continue the business.
The closing judgment puts an end to the mission of all the players: liquidator, judge commissioner. It is advertised.
Please note
In case of tax evasion, concealment of assets or personal or criminal sanction imposed on the director, creditors shall have the possibility to prosecute the director of the closed business.
The judgment closing the liquidation shall be published by the Registrar of the Court of First Instance:
- At SCR: titleContent for a commercial activity and RNE: titleContent
- To the Official Bulletin of Civil and Commercial Advertisements (Bodacc.fr)
- In a legal listing support
Simplified judicial winding up
A business may benefit from the simplified winding-up procedure where 3 following conditions are respected:
- The asset does not include real estate (land, building, for example).
- The number of employees during the 6 months preceding the opening of the simplified winding-up procedure shall be no more than 5.
- Revenue excluding tax is less than or equal to €750,000.
The court has the possibility to revert to the common rules of judicial liquidation at any time if the liquidator discovers the existence of a real estate asset.
In order to request the opening of the simplified winding-up procedure, the director must complete the form request opening of the winding-up proceedings.
He must then file it with the registry of the court on which the business depends according to the activity carried out:
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Commercial or craft activity
In order to request the opening of winding-up proceedings, the director must complete an application for the opening of winding-up proceedings.
Form of application for judicial redress or liquidation
The application for winding-up proceedings shall 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
- A statement of the amount of the claims and debts, indicating, as appropriate, the name or name and domicile of the creditors and, in the case of employees, the total amount of the sums outstanding
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of company assets, rights and obligations
- In the case of a business with members jointly and severally liable for social debts (for example, a CNS: titleContent, a list of them together with an indication of their name and domicile
- The names and addresses of the representatives of the Social and Economic Committee entitled to be heard by the Court if they have already been appointed
- Annual accounts for the last financial year
- Cash position (list of receivables and debts) 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 company has its seat
- or online through the digital court
Liberal activity
In order to request the opening of the simplified winding-up procedure, the director must complete the following application form for the opening of the winding-up procedure:
Form of application for judicial redress or liquidation
He must file it with the registry of the court of justice of the place of the registered office of the company.
Who shall I contact
The application for judicial winding-up shall 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 the name or name and domicile or registered office of the creditors and, for employees, the total amount of unpaid sums
- Statement of assets and liabilities of collateral and off-balance sheet commitment
- Summary inventory of company assets
- 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 the business belongs
1. Verification of claims
In practice, debts shall not be verified as a whole.
Only the verification of the wage claims and those that can be settled with the available assets (depending on their rank).
2. Sale of property
The liquidator shall sell the movable property within 4 months of the decision ordering the simplified winding-up procedure.
This is done in one of the following ways:
- Over-the-counter (over-the-counter with the agreement of the seller and buyer)
- At public auction
3. Settlement of creditors
After the verification of claims and the sale of assets, the liquidator shall include his proposals for apportionment in the statement of claims.
It shall assess the amount of foreseeable legal costs.
The statement of claims is thus completed and lodged at the Court Registry.
The statement of claims shall be published only if the sums to be apportioned allow payment of all creditors.
If the sums to be allocated allow only the payment of preferred creditors (i.e. those with a safety or the Treasury, for example), the statement of claims is not published.
Any interested party may take cognizance of this statement of claims and lodge a complaint before the Judge-Commissioner.
The liquidator then allocates the sums according to the proposals of the liquidator or the decision of the judge-commissioner.
The opening judgment has immediate consequences for the company, its manager, its employees and creditors.
Immediately stop business activity
In principle, the simplified winding-up by the court entails the immediate cessation of the business' activity. The goal is to sell the assets to repay the creditors before the business disappears.
The continuation of the activity may be authorized by the court in the following cases:
- Where the total or partial transfer of the company is conceivable.
- In the public interest (e.g.: completing a work in progress or disposal of stocks)
- In the interest of creditors (e.g. sale of goods in stock to be able to repay creditors)
In these three cases, the liquidator is responsible for continuing the activity with the help of thecourt administrator.
The temporary continuation of the activity may not exceed a period of 3 months. This duration may be prolonged 3 months at the request of the public prosecutor's office.
FYI
The continuation of open contracts (e.g. commercial lease) may be useful in sustaining the business. It is the liquidator or administrator who decides which contracts may be continued.
Loss of the powers of the head of the company
The judgment which initiates or pronounces the judicial winding-up shall entail the divestment of the business' director until the winding-up has been completed. That means it's the liquidator which now represents the business. However, the leader may remain in place when the winding-up is commenced unless the statutes of the business or a meeting of members provide otherwise. His powers are very strong reduced : he can no longer sell an asset, cash in, terminate a contract, etc.
Only the liquidator mandate once designated by the court, to sell the business' assets and pursue legal proceedings against the company's debtors.
Termination of employment contracts
The liquidator must implement the procedure for economic redundancy.
The employment contracts between the employees and the company in difficulty shall be terminated within 15 days of the judgment pronouncing the winding-up by the courts or of the expiry of the authorization to continue the activity.
The liquidator must also, in the course of his duties, refer the matter to theAGS: titleContent in order to obtain the settlement of employees’ claims. Claims arising from the termination of the employment contract (wages, bonuses, allowances, social contributions, etc.) are covered by the contribution to the wage guarantee scheme (AGS).
Effects on creditors
All claims become immediately due (i.e. payable immediately) even if they have not yet expired. The opening judgment has the following effects.
Discontinuation of individual creditors' proceedings against the business
The opening judgment prevents creditors from:
- to bring an action for the payment of money due by the business in liquidation. This means that creditors cannot seek payment of a sum in court. For example, if a buyer wants a reduction in the price of a good as a result of the recognition of a guarantee of hidden defects, he may not bring the matter before the courts where the business is the subject of legal proceedings.
- to bring an action for termination of a contract for non-payment of a sum of money. For example, the seller of a goodwill may not request the termination of the sale concluded before the judgment initiating the liquidation of the buyer even when the latter has ceased to repay the seller's credit.
Interests price interruption
The judgment initiating the judicial winding-up stop the price of statutory interest and conventional interest (i.e. the rates agreed between the parties) coming soon.
The opening judgment shall also entail the cessation of interest on arrears and surcharges.
This rule applies only to loans made for a up to 1 year.
The court shall declare the liquidation closed in one of the following situations:
- When all creditors are disinterested, that is, the liquidator has recovered enough money to settle all creditors’ debts. If there is still a surplus, it is distributed among the partners. This situation is exceptional.
- When the company faces a shortage of assets, that is, the company no longer has enough money to repay all creditors. In this situation (the most frequent), the court issues a judgment closing the liquidation for insufficient assets which results in the dissolution of the business. Its debts are wiped out and no creditor can continue the business.
The closing judgment puts an end to the mission of all the players: liquidator, judge commissioner. It is advertised.
Please note
In case of tax evasion, concealment of assets or personal or criminal sanction imposed on the director, creditors shall have the possibility to prosecute the director of the closed business.
Simplified winding-up deadline
The simplified judicial winding-up shall be closed at the latest within 6 months after the opening of the simplified bankruptcy procedure.
However, the proceedings have been closed within one year when the 2 conditions are met:
- The company employs more than one employee
- Duty-free turnover is greater than €300,000
In any case, the court can extend the procedure by 3 months.
Dissolution of the business
The judgment closing the liquidation for lack of assets causes the business to dissolve. The business ends and is thus released from debt.
However, in the event of tax evasion, concealment of assets or personal or criminal sanctions against the director, creditors regain the right to sue the director.
Publication of the judgment closing the judicial liquidation
The judgment closing the liquidation shall be published by the Registrar of the Court of First Instance:
- At SCR: titleContent for a commercial activity and at the RNE: titleContent
- To the Official Bulletin of Civil and Commercial Advertisements (Bodacc.fr)
- In a legal listing support (Shal)
Simplified judicial winding up
Judicial winding-up
Thresholds for simplified bankruptcy
Insurance against the risk of non-payment of wages