Suspending a judicial liquidation: the hearing that needed to be brought about

The audience that needed to be provoked – Episode 2/4

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

A few days. That's all that's left to prevent the liquidation from producing potentially irreversible effects.

The manager has just learned that her company has been liquidated without her being able to attend the hearing. The liquidator has been appointed and the judgment is enforceable. Yet, several dozen employees continue to come to work and the commitments made to clients still need to be honored.

The first decision is immediate: to appeal. However, in insolvency proceedings, an appeal alone does not suspend the execution of the judgment. The proceedings can therefore continue while the court prepares to review the case.

For a company, this time lag is disastrous. An appeals court can take several months to reach a decision. Sometimes, just a few days are enough to lose a crucial contract, disrupt teams, or cause employees to leave. A victory won too late doesn't always undo what has been lost in the meantime.

Therefore, two actions must be carried out in parallel: initiating the appeal on the merits and petitioning the first president of the court of appeal to request a stay of provisional enforcement.

The legal avenue exists. Time, however, is lacking.

A series of calls then begins. The court clerk's office is contacted. Available hearing dates are sought. A bailiff must be able to serve the summons almost immediately. Meanwhile, the firm gathers the accounts, bank statements, sales tax returns, employee documents, and procedural documents.

A hearing date is finally identified. The case is not scheduled for it, and the usual channels no longer allow for obtaining formal authorization in time. Two options remain: wait for a regular hearing date, at the risk of it arriving after the company has already lost its partner, or have the summons served and appear at the hearing, requesting the judge to consider the urgency of the matter.

The second option is chosen.

This initiative guarantees nothing. The presiding judge can refuse to take the case. But abandoning the attempt at a hearing would almost certainly mean letting the liquidation process run its course for several weeks.

Procedural boldness can only be convincing if it is based on an immediately understandable case. The leader's assertions since the first appeal must be transformed into evidence.

The figures show a company with a turnover of several million euros and, at the time of the judgment, cash reserves far exceeding the amount of the claim. The personnel register confirms several dozen employees. The accounts demonstrate real and profitable activity for the last available financial year.

The enforcement measures presented as proof of insolvency are then reviewed one by one. The first seizure was carried out at an institution where the company has no account. The second does not correspond to the company's bank details. Therefore, they did not fail because the accounts were empty, but because the searches did not target the correct accounts.

This distinction changes everything. Cessation of payments corresponds to the inability to meet liabilities as they fall due with available assets. It cannot be automatically deduced from an unpaid debt or a seizure directed at the wrong party.

On the day of the hearing, the lawyers arrived with the summons served and the documents filed. They still didn't know if the case would be called. The judge finally agreed to hear them.

The urgency of the situation must be presented without artificially dramatizing it. The company continues to operate. It has funds. However, maintaining the enforcement of the judgment could lead to the termination of the main contract and jeopardize dozens of jobs before the court issues its ruling.

The case was adjourned for deliberation. A few days later, the decision was handed down: the provisional enforcement of the judgment was stayed. The presiding judge considered that the company had presented a serious argument to support its claim that it was not insolvent.

The company can continue its operations. It has just gained time and, above all, the right to properly defend its case before the Court of Appeal.

But a suspended liquidation is not yet a cancelled liquidation. The decision has been published, the partners have heard about it, and the word "liquidation" is already beginning to have its own effects.

Key takeaways

• Appealing a judgment initiating judicial liquidation does not automatically neutralize its effects.
• The request to stay provisional enforcement must be prepared immediately and supported by recent accounting, banking and operational evidence.
• An unsuccessful seizure does not necessarily demonstrate the debtor's insolvency. The institution contacted and the bank details cited must be verified.
• In an economic emergency, the procedural strategy must take into account the real time of the company, in particular the risk of breach of contracts and loss of jobs.

In the next episode: a company authorized to continue its activity, but already weakened by the publicity of its liquidation.

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