Companies in difficulty and restructuring
Insolvency lawyer, act within 45 days
Reorganization proceedings are for companies that can no longer pay their debts as they fall due with their available assets. The company's management must request the initiation of these proceedings within 45 days of the cessation of payments, unless a settlement has already been requested within that timeframe. The court then opens an observation period: prior debts are frozen, business operations continue, and a plan is developed. Our lawyers will assist you from the initial request through to the finalization of the plan.
- 45 daysto request the opening
- 6-monthobservation period
- 10-year recovery plan at most
Is your company already insolvent?
Article L. 631-1 of the French Commercial Code defines cessation of payments as the inability of a company to meet its liabilities as they fall due with its available assets. Liabilities as they fall due include certain, liquid, and overdue debts: wages, rent, bank loan repayments, social security contributions, and accounts payable. Available assets include funds that can be immediately mobilized. Buildings, equipment, and goodwill are generally not considered available assets.
The same text makes an exception. A company is not considered to be in a state of insolvency if it proves that credit reserves or payment deferrals allow it to pay its liabilities as they fall due. A cash flow problem, even a serious one, does not necessarily mean a state of insolvency.
Our position is simple: the 45-day period is more fragile than it seems. It begins from the date of the cessation of payments itself, not from the day you become aware of it. The court sets this date in its judgment, after having consulted you. It can then be postponed up to 18 months before the commencement of insolvency proceedings (Article L. 631-8). Only the administrator, the court-appointed representative, or the public prosecutor can request this, within one year of the judgment commencing the proceedings.
A deposit that was thought to be made on time may therefore appear late in retrospect. This is the first point we check, by reconstructing the date with the accountant, using the cash flow statement as evidence.
The 45-day period
Judicial reorganization or conciliation: how to choose?
When a company has been insolvent for less than 45 days, two options remain. Conciliation is confidential, but it does not automatically halt legal proceedings. Reorganization proceedings are public, but they freeze liabilities and suspend legal action. Requesting conciliation within the allotted timeframe exempts the company from filing for reorganization within those 45 days (Article L. 631-4). Those involved in conciliation are bound by confidentiality (Article L. 611-15).
Three questions guide our choice. How many creditors can act simultaneously? Is an agreement realistic with the main creditors? Would publicizing the judgment drive away customers and suppliers? One or two key creditors, a potential agreement, and a need for discretion point towards an ad hoc mandate or conciliation. Several creditors ready to act, or no possible agreement, point towards reorganization.
The limit is clear: after 45 days of cessation of payments, conciliation is no longer possible (article L. 611-4). Reorganization or judicial liquidation remains the only options.
Conciliation or rectification
What are the risks for a leader who waits?
A late declaration does not automatically result in a penalty. Two mechanisms exist, with different conditions:
- The ban on managing may be imposed on the manager who knowingly failed to request the opening of proceedings within 45 days, without having sought conciliation (article L. 653-8The court sets the duration, which cannot exceed 15 years (article L. 653-11).
- The order to make up for the asset shortfall presupposes judicial liquidation, mismanagement and a link with insufficient assets (article L. 651-2Simple negligence is not enough.
Regarding the prohibition on managing a business under Article L. 653-8, judges may infer knowledge of the cessation of payments from factual circumstances, such as the age and amount of the outstanding debts (Cass. com., January 12, 2022, No. 20-21.427). Our article on the failure to declare cessation of payments comments on this decision.
Asking early has another, less well-known effect. The business owner chooses the timing, the procedure, and what they present to the court. When a creditor sues the company, it is the owner who sets the schedule.
Who can request the opening, and before which court?
The opening of proceedings is requested by the company's director, by a creditor who sues the company, or by the public prosecutor's office, upon application (Article L. 631-5). Applications by the creditor and the public prosecutor's office are excluded during conciliation proceedings.
The application is filed with the clerk of the court. The commercial court has jurisdiction if the debtor is engaged in a commercial or artisanal activity; the judicial court has jurisdiction in other cases (Article L. 621-2). In twelve jurisdictions, including Paris, Nanterre, Versailles, Lyon, and Marseille, the economic activities court has jurisdiction. It handles these proceedings regardless of the debtor's status, except for regulated liberal professions.
Who is calling for the opening?
What changes with the opening judgment?
The judicial reorganization proceedings here follow the rules of the safeguard procedure (Article L. 631-14). The opening judgment has the following effects:
- Prior debts frozen: The judgment prohibits the payment of debts incurred before its pronouncement, except for exceptions provided by law (article L. 622-7).
- Legal proceedings halted: Prior creditors can no longer take legal action against the company for payment or seize its assets (article L. 622-21).
- Contracts maintained: No current contract may be terminated solely due to the opening of proceedings. If the administrator does not respond within one month to a formal notice from a contracting party, the contract is automatically terminated (article L. 622-13).
- New debts paid at maturity: Those arising after the judgment for the purposes of the proceedings or the observation period are paid when due (article L. 622-17).
- Guaranteed security deposit, for a limited time: Proceedings against the individual guarantor are suspended until the judgment that approves the plan or orders liquidation (article L. 622-28).
Employees continue to work. Our article on collective proceedings and employee rights provides further information on this point, and the FAQ below summarizes the role of the AGS (Wage Guarantee Fund).
The judgment is published in the BODACC. Customers, suppliers and banks must be notified beforehand, with a clear message on the continuation of business.
Debts before and after the judgment
Who runs the company during the observation period?
The court appoints a supervising judge and a judicial representative, who acts in the collective interest of the creditors (Article L. 622-20). It also appoints a judicial administrator. This is not required when the company has fewer than 20 employees and generates less than €3 million in revenue excluding VAT (Articles L. 621-4 and R. 621-11).
The court determines the administrator's role. This consists of assisting the manager in all or part of the management acts, or managing the company alone, in whole or in part (Article L. 631-12). The court may modify this role at any time.
The role of the manager therefore depends on this mission. If the administrator assists, the manager remains in office and the decisions in question are made jointly with them. If the administrator assumes sole responsibility for the management, the manager no longer makes these decisions.
Who runs the company?
How long is the observation period?
The judgment opens an observation period of up to 6 months, renewable once for another 6 months by a specially reasoned decision (Articles L. 621-3 and L. 631-7). Exceptionally, the court may extend it by 6 months at the request of the public prosecutor, for a total of 18 months.
No later than two months after the judgment, the court verifies that the company has sufficient financing capacity to continue the observation period (Article L. 631-15, I). It makes its decision based on a report prepared by the administrator or, failing that, by the debtor. At any time, it may order the partial cessation of activity or declare judicial liquidation if recovery is clearly impossible (Article L. 631-15, II).
The observation period
How does the company emerge from receivership?
There are three possible outcomes.
The reorganization plan arranges for the continuation of the business and the payment of liabilities. It is approved by court order at the end of the observation period (Article L. 631-1). Its duration cannot exceed 10 years, or 15 years for a farm (Article L. 626-12).
A transfer plan allows for the sale of all or part of the company to a buyer. The court may order it, at the request of the administrator, if the proposed plans appear clearly incapable of reviving the company, or in the absence of a plan (Article L. 631-22). See our article on taking over a company in difficulty.
The conversion to judicial liquidation occurs if recovery is clearly impossible. It can be requested at any time during the observation period.
Three outcomes
The situations we deal with
Unpaid bills are piling up
VAT, social security contributions or salary payments are overdue, and cash flow no longer allows them to be caught up.
Summons by a creditor
A supplier or bank files for receivership against the company. The hearing must be prepared, and the true date of cessation of payments must be established.
Conciliation without agreement
The conciliation process failed, and the company remains insolvent. Its situation must be reviewed without delay.
Trustee manager
The manager personally guaranteed the company's loans and wants to understand what the procedure changes for him.
How does our support work?
Reconstruct the date of cessation of payments
We analyze the cash flow, deadlines and reminders with the accountant, and check if a reconciliation is still possible.
Submit the application
We compile the file, file it with the registry and prepare the manager for the opening hearing.
Maintain the observation period
We work with the administrator and the agent, secure essential contracts and prepare for the two-month hearing.
Construct the plan or the transfer
We negotiate the plan with the creditors, or prepare the sale and the defense of the manager in court.
The mistakes we see most often
- Count the 45 days from the day you became aware of the problem. The court retains the actual date, and may postpone it.
- Pay the incumbent supplier first. Acts and payments made since the cessation of payments may be cancelled. Payment of debts not yet due is void (article L. 632-1Payment of overdue debts may be made if the creditor was aware of the situation (article L. 632-2).
- Arriving at the hearing without a cash flow forecast. Without him, the continuation of the observation period is more difficult to justify.
Has a creditor already summoned you? Write to us or call 01 44 56 04 36 before the hearing.
Reorganization and judicial liquidation: what's the difference?
| Criteria | Judicial reorganization | Judicial liquidation |
|---|---|---|
| Terms | Cessation of payments, possible recovery (article L. 631-1) | Cessation of payments, recovery manifestly impossible (article L. 640-1) |
| Objective | Continue operations, maintain employment, clear liabilities | To terminate the business or realize the debtor's assets |
| Management | The manager remains in office, assisted by the administrator, or the administrator assumes sole responsibility for the administration, depending on their role | The debtor is divested of control, the judicial liquidator exercises his rights and actions (article L. 641-9) |
| Issue | Recovery plan, sale plan or conversion into liquidation | Sale of assets or of the business, then closure of the procedure |
Frequently asked questions about judicial reorganization
Is the receivership process public?
Yes. The opening judgment is published in the BODACC (Official Bulletin of Civil and Commercial Announcements) and recorded in the commercial register, allowing clients, suppliers, and banks to access it. If discretion is paramount and the cessation of payments dates back less than 45 days, first consider conciliation, which is confidential.
Is the leader being replaced?
Not necessarily. The court determines the administrator's role. This involves assisting the company's director in all or part of the management activities, or managing the company alone, in whole or in part (Article L. 631-12). The court can modify this role at any time. The director's role depends on it.
What happens to my personal guarantee?
Until the court judgment approving the plan or ordering liquidation, any action against the individual guarantor is suspended (Articles L. 631-14 and L. 622-28). Once the plan is approved, the guarantor can take advantage of it (Articles L. 631-19 and L. 626-11). If the company is liquidated, the suspension ends. Your guarantee must therefore be reviewed as soon as proceedings begin.
Are the salaries being paid?
Employment contracts remain in effect. If the company lacks the necessary funds, the court-appointed administrator will draw up a statement of wage claims. The Wage Guarantee Fund (AGS) will then advance the amounts owed, up to certain limits. Employees should not contact the AGS directly (justice.fr). Any potential dismissals remain subject to labor law, and our social services department will assist the company's management.
Can judicial liquidation be avoided?
Sometimes, recovery remains possible. The court may order liquidation at any time during the observation period if recovery is clearly impossible (Article L. 631-15, II). A recovery plan or a sale to a buyer allows the business to continue operating. No outcome can be guaranteed.
Content prepared by the restructuring and insolvency department of ARST Avocats. Lead lawyer: Morgan Jamet, founding partner, Paris Bar. Rules verified against official sources (French Commercial Code, justice.fr, Infogreffe). Updated October 2026.