Procedure for safeguarding the individual contractor and the micro-contractor

Verified 27 February 2024 - Directorate for Legal and Administrative Information (Prime Minister)

The safeguard procedure is aimed at a company which is in financial difficulties which it is unable to overcome. It must not be in cessation of payments. Safeguarding facilitates the reorganization of the company to allow economic activity to continue, jobs to be maintained and debts to be paid.

In order to benefit from a safeguard procedure, the company must justify difficulties which it is unable to overcome. These difficulties can be legal (e.g., ongoing litigation), economic (e.g., decreasing orders) or financial (e.g., inability to pay invoices).

The company must not be in a state of cessation of payments.

This procedure is intended for all individual companies, including micro-entrepreneurs, regardless of the activity carried out: commercial, craft, liberal or agricultural. The backup procedure is also intended for businesses.

For the turnover thresholds for the micro-company tax system, see the dedicated card.

FYI  

Backup accelerated was reserved until the Ordinance of 15 September 2021 for companies drawing up consolidated accounts or accounts certified by an auditor or drawn up by an accountant and involving 20 employees, or €3 million of HVAC or €1.5 millionbalance sheet total for the last completed financial year. These thresholds have disappeared but in practice, the accelerated safeguard appears to apply to companies of a certain size that should be affected party classes.

Only the company leader may request the opening of a backup procedure.

He must bring the matter before the Commercial Court or the Judicial Court depending on the activity carried out:

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Commercial or craft activity

The individual contractor must complete the following application form:

Request for the opening of collective proceedings for the individual contractor

The request shall indicate the difficulties encountered by the company and the reasons why it is unable to overcome them.

The form must be lodged at the Registry of the Commercial Court on which the seat of the company depends.

Who shall I contact

The request to open is accompanied by the following documents :

  • Annual accounts for the last financial year
  • Unique identification number (Siren)
  • Cash flow situation
  • Projected profit and loss account
  • Number of employees employed
  • Quantified statement of claims and liabilities
  • Statement of assets and liabilities of collateral and statement of off-balance-sheet liabilities
  • Summary inventory of the company's assets, rights and obligations (distinguishing between those of the occupational heritage and personal heritage). The acts of waiver the protection of personal property shall also be mentioned, specifying the name of the creditor concerned and the amount of the commitment.
  • Name and address of the representatives of the staff delegation of the Social and Economic Committee (ESC) if they have already been appointed
  • Attestation on honor certifying the absence of ad hoc mandate or reconciliation within 18 months of the date of application

Liberal activity

The individual contractor must complete the following application form:

Request for the opening of collective proceedings for the individual contractor

The request shall indicate the difficulties encountered by the company and the reasons why it is unable to overcome them.

The form must be lodged at the registry of the court on which the seat of the company depends.

Who shall I contact

The request to open is accompanied by the following documents:

  • Annual accounts for the last financial year
  • Unique identification number (Siren)
  • Cash flow situation
  • Projected profit and loss account
  • Number of employees employed
  • Quantified statement of claims and liabilities
  • Statement of assets and liabilities of collateral and statement of off-balance-sheet liabilities
  • Summary inventory of the property, rights and obligations of the company (distinguishing between those of professional and personal heritage). The acts of waiver the protection of personal property shall also be mentioned, specifying the name of the creditor concerned and the amount of the commitment.
  • Name and address of the representatives of the staff delegation of the Social and Economic Committee (ESC) if they have already been appointed
  • Attestation on honor certifying the absence of ad hoc mandate or reconciliation within 18 months of the date of application
  • Designation of the professional body or authority on which the company depends

The court shall decide whether to initiate proceedings after hearing the individual contractor and the representatives of the ESC: titleContent. It can appoint a judge to gather all information on the financial, economic and social situation of the company. If he considers the request to be well founded, he shall initiate the procedure.

The decision to open the safeguard is mentioned in the RNE: titleContent and the SCR: titleContent if it's a merchant.

The Registrar of the Court shall publish a notice of the opening judgment in the Bodacc. It shall publish the same notice in a legal listing support (Shal) the place where the company has its seat. These advertisements are made within 15 days of the date of judgment.

The opening judgment appoints the organs of the procedure and opens a period of observation during which the company continues its activity.

FYI  

Where the company falls within the sector regulated liberal (e.g., architect, physician), the court must hear the professional order or body to which it belongs.

Appointment of procedural bodies

In the judgment initiating the safeguard procedure, the court shall designate the different speakers to the proceedings:

  • Judicial agent
  • Judicial administrator
  • Judge-Commissioner

The court shall invite the social and economic committee (CSE) where it exists, to appoint a representative from among the employees of the company.

Judicial agent

The court officer is responsible for the verification of the liability. In this capacity, he receives the declarations of the creditors and draws up the list of claims declared together with his proposals for admission and rejection. The judge-commissioner decides the fate of the claim. The statement of wage claims shall be sent to the judicial representative for verification.

Judicial administrator

The appointment of a judicial administrator shall be obligatory where the company has at least 20 employees and a turnover exceeding €3 millionHT: titleContent.

The court shall assign him one of the following tasks:

  • Supervision of the company in difficulty in its management
  • Support for all management acts or for some of them

The court may entrust him with assisting the officer or with the administration of the company, wholly or in part, by himself.

It establishes an economic and social balance sheet for the company.

Judge-Commissioner

He is a member of the Commercial Court responsible for ensuring the protection of the interests of each party and the proper conduct of the proceedings.

In particular, the judge-commissioner may authorize the company in difficulty to:

  • Perform acts of disposition. These are acts that commit the company's assets, for the present or the future (examples: sale of a building, conclusion of a loan, donation). They result in a transfer of rights that can diminish the value of the asset.
  • Subscribe a safety real (e.g. a mortgage) as collateral for a claim after the opening of proceedings.

Establishment of an observation period

This observation period is used to carry out an economic and social assessment of the company. It also allows for the study of recovery options and the development of a draft backup plan.

The duration of the observation period is Maximum 12 months (6 months renewable once for a maximum of 6 months at the request of the court administrator, the company in difficulty or the public prosecutor).

Please note

When it appears that the company was already in cessation of payments before the opening of the safeguard procedure, the court must convert the safeguard into a safeguard procedure judicial redress or judicial liquidation.

The opening of an observation period has consequences for the Head of company and for creditors.

Situation of the Head of company

The judgment of the opening of the safeguard opens a period of observation during which the entrepreneur remains at the head of his company and pursues the activity of the company. However, where a court administrator is appointed, the latter being responsible for supervising or assisting him in all or some of the day-to-day management acts.

Contracts in progress at the time of initiation of proceedings (e.g. franchise or leasing) shall continue on the basis of a decision of thecourt administrator.

Entrepreneurs must be able to pay their employees. Indeed, the wage guarantee scheme (AGS) does not support a company's salaries in the backup process.

It shall draw up an inventory of assets and a list of creditors company.

Once the safeguard procedure has been opened, the contractor may no longer change the composition of his occupational heritage if this results in a decrease in assets.

Situation of creditors

The opening of a safeguard procedure 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

Opening the backup 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 of the opening of the safeguard judgment. Creditors must therefore make a declaration of their claims to the judicial representative in order to be able to obtain the settlement of their claims.
  • 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 declare 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 safeguard procedure.

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

However, wage claims are an exception to this rule and are always paid on a priority basis.

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.

Where there is a serious possibility of the company being safeguarded, the court shall adopt a safeguard plan which shall terminate the period of observation.

If there is no possibility for the company to be safeguarded, the court converts the proceedings into recovery or judicial liquidation.

Warning  

In very rare cases, the situation of the company during the safeguard proceedings improves and the court may terminate the safeguard proceedings. In this case, the creditors are settled and the company resumes its business normally.

Adoption of a backup plan

The Head of company, with the assistance of the judicial administrator, put forward a draft safeguard plan which sets out the prospects for recovery. The implementation of the draft plan imposes payment deadlines or debt forgiveness on creditors. This plan shall be put to the vote by creditors.

It is the court that decides on the safeguard plan.

This plan cannot last more than 10 years. It may involve the cessation, addition or disposal of one or more activities. The court may also decide that goods that it considers essential for the continuation of the activity cannot be sold for a certain period of time.

Conversion to receivership or liquidation

If the adoption of a safeguard plan is manifestly impossible and the termination of the procedure would lead to the cessation of payments, the court may convert the safeguard proceedings into recovery or judicial winding-up.

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