Judicial liquidation suspended: is the company still at risk?

Living in law, vulnerable in reality – Episode 3/4

This story is inspired by a true case. Some details have been changed to protect the anonymity of the people involved.

The first president's decision was a victory. Yet when the leader returned to the company, no one popped the champagne.

The employees have heard about the liquidation. So has the main business partner. Questions are circulating among the teams: Will the company close? Will salaries be paid? Will contracts continue?

The manager reiterates that the liquidation has been suspended. While legally accurate, this statement offers little reassurance. For those unfamiliar with insolvency proceedings, a company "placed in liquidation, but whose liquidation is suspended pending the appeal" remains, first and foremost, a company associated with the word "liquidation.".

The major client isn't thinking in terms of provisional enforcement, serious means of reform, or the competence of the presiding judge. It's assessing an operational risk. Will the company still be around in a few months? Will it be able to retain its teams? Will it be able to fulfill its commitments?

The partner is considering ending the relationship. For the company, this threat is almost as dangerous as the judgment itself. The right to continue operations would lose much of its value if the contract that provides the bulk of the work were to disappear.

Two battles must therefore be fought simultaneously. In court, the appeal must be prepared, demonstrating that the judgment should never have been handed down. Within the company, work must continue as before, even though nothing is quite normal anymore.

Services must be performed without delay. Teams must be reassured. Suppliers must be paid. The partner must receive clear explanations, accompanied by the decision of the First President and evidence confirming that operations are continuing.

The company's cash flow is being closely monitored. The case presented at the emergency hearing was a snapshot in time. The appeal will be heard several months later. In the meantime, new deadlines are approaching and new debts are emerging. The company must prevent the proceedings initiated by a limited unpaid debt from ultimately creating the very difficulties it was expected to address.

The risk is real. A liquidation order is published. This announcement worries partners. Their concern could lead to a reduction or termination of business relationships. The loss of business then weakens cash flow and could create, after the judgment, a cessation of payments that did not previously exist.

This is one of the most violent aspects of this type of case: an erroneous decision can contribute to creating the economic reality it had prematurely described.

The emergency suspension does not allow for any relaxation of measures. It gives the company room to act. But it still needs to be used.

The manager re-establishes contact with her partner. She explains the circumstances surrounding the judgment. She produces the order suspending its execution. She demonstrates that the employees are still working and that the company continues to provide its services. The discussion is no longer solely about the law. It is about trust.

Meanwhile, the appeal file is being meticulously compiled. Each document is reviewed. Addresses are compared to the company registration certificate (Kbis). The entries made by the bailiff are cross-checked with photographs and previous documents. The dates of sending and receiving the summons are reconstructed.

The financial situation is also updated. Bank transactions are verified, and the debt that initiated the proceedings is settled. It is necessary to demonstrate not only what the company was like at the time of the judgment, but also what its status is now at the time the court renders its decision.

Two lines of defense emerge.

The first point concerns the substance of the matter. A debt of a few thousand euros and poorly executed seizures are insufficient to establish the impossibility of meeting liabilities with available assets. Even if a cessation of payments had been established, it would still have been necessary to demonstrate that recovery was manifestly impossible in order to directly order liquidation.

The second point concerns the right to defend oneself. Can a company be dissolved when the summons was served at a former address and the notice arrived too late for it to appear?

The first battle prevented the immediate execution of the judgment. The second must now overturn it. Until the ruling is issued, the company will continue to operate under the protection of a provisional decision and under the watchful and anxious eyes of those on whom its survival depends.

Key takeaways

• The suspension of provisional enforcement does not eliminate either the publication of the judgment or its commercial consequences.
• Communication with employees, banks, suppliers and strategic clients must accompany the legal strategy.
• The cash flow situation must be updated throughout the appeal process. Documents submitted in the immediate aftermath may not be sufficient several months later.
• A liquidation judgment can destabilize a company to the point of itself contributing to creating new difficulties.

In the latest episode: the appeal hearing and the overturning of the judgment that had declared the company bankrupt.

This article belongs to the series "Liquidated Without Knowing It," inspired by a real case handled by ARST Avocats. Some details have been changed to protect the anonymity of the individuals involved.

Series written by Morgan Jamet, partner at the law firm Arst Avocats