Company liquidated without its knowledge: the beginning of a legal battle

Madam, your company has been liquidated – Episode 1/4

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

The phone rings early this Monday morning. On the other end of the line is one of the company's main partners. The manager expects to discuss this week's deliveries, the teams to be mobilized, or upcoming objectives. The conversation takes a completely different turn.

— Did you see what just happened?
— No. What's happening?
— Your company has been placed in receivership.

At first, she thought it was a mistake. A court-ordered liquidation? Her company employed dozens of people. It generated several million euros in revenue. The vehicles were still in use, the employees were working, and the customers were receiving deliveries. Nothing in the company's day-to-day operations suggested a business that had ceased operations.

She didn't inherit this company. She built it. She started as an employee in the same sector. She knew the hours, the constraints, and the demands. Then she decided to take the plunge. Initially, the company employed about ten people. Business grew, a major client placed their trust in her, and the workforce increased.

In a matter of seconds, the call shakes everything she has built. Behind the word "liquidation," she already sees the interrupted contracts, the immobilized vehicles, and the employees to whom she will have to announce that everything is coming to a halt.

She calls the court. No one answers. She calls again. She tries to understand how a company can be liquidated without its director even knowing that a hearing is going to be held.

The pieces of the puzzle are gradually falling into place. A former employee had a court order for a debt of several thousand euros. Having failed to receive payment, he had filed for insolvency proceedings. In principle, a creditor can petition the court. However, this requires that the company be properly summoned and that the conditions for liquidation be met.

However, the company director never appeared. The summons was served at a former address, even though the change of registered office had been duly recorded in the trade and companies register. The court summons arrived on the day of the hearing, after the scheduled time for the case to be heard.

When the case was called, no one was present to explain that the company was still operating. No one to produce the accounts, bank statements, or personnel register. No one to point out that the seizure attempts cited by the creditor were targeting the wrong accounts. The court was presented with nothing but an unpaid debt, enforcement measures presented as unsuccessful, and a company that had vanished.

The liquidation was ordered at this first hearing.

The manager immediately consulted a lawyer. She explained that the summons had arrived too late, the subpoena had been served at the old address, and that she was involved with the employees and available funds. The response came quickly: "The judgment has been rendered. There's nothing more to be done."

That sentence hurts her almost more than the call from her partner. This time, it's hard to believe it was a simple mistake. She thinks of her employees, those she's recruited, their families, and the main contract that could disappear at any moment. She also thinks of the company she created a few years earlier, which she risks losing without having been listened to once.

She nevertheless decides to seek a second opinion. The new lawyer makes no promises. He asks short questions. When was the summons received? What cash flow is available? How many employees does the company have? Can the accounts, bank statements, and proof of the change of registered office be provided immediately?

Then came another response: "It will be difficult and we must act immediately. But all may not be lost."

The judgment is subject to immediate enforcement. A simple appeal will therefore not be sufficient to protect the company while the appeal is being considered. It is necessary to simultaneously file an appeal, gather evidence, and obtain an urgent suspension of the decision.

At this precise moment, no one knows if a hearing can be obtained in time. But the case has just changed in nature. It is no longer simply that of a company in liquidation. It has become that of a company that will try to survive the judgment that has just pronounced its demise.

Key takeaways

• A company may only discover late in the process of taking action against it when its mail reception and legal proceedings monitoring systems are not functioning properly.
• A claim of a limited amount can serve as the basis for a request to initiate insolvency proceedings. Its small amount does not preclude bringing the matter before the court.
• However, a cessation of payments cannot be inferred from a single unpaid debt. It requires comparing liabilities due with available assets.
• Upon discovery of a liquidation judgment, the service documents, dates, addresses and avenues of appeal must be verified immediately.

In the next episode: the public hearing that had to be provoked to prevent the judgment from producing irreversible effects.

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