Legal redress
LexInter | January 8, 2008 | 0 Comments


Table of Contents

The scope of the reorganization procedure

The judicial reorganization procedure is open to:

  • any commercial, craft, agricultural or liberal enterprise (natural or legal person);
  • to legal persons governed by private law (association, civil society, etc.).

The criterion for opening a reorganization procedure

The opening of bankruptcy proceedings is justified in the event of  suspension of payments , a cash flow situation in which the company is unable to meet the payable liabilities with its available assets.

The debtor who establishes that the credit reserves or the moratoriums from which it benefits from its creditors allow it to meet the payable liabilities with its available assets is not in suspension of payments.

The procedures for opening a reorganization procedure

The opening of the proceedings must be requested by:

  • the debtor;
  • at the latest within 45 days of the cessation of payments, unless he has requested the opening of a conciliation procedure

The procedure can also be opened:

  • on summons from a creditor;
  • at the request of the public prosecutor, provided that there is no conciliation procedure in progress;
  • by the court, which may seize it ex officio, in particular in the event of failure of the conciliation procedure.

The request for the opening of the reorganization procedure is filed by the legal representative of the legal person or by the debtor who is a natural person at the registry of the competent court.

Territorial jurisdiction

The territorially competent court is the one in which the debtor, legal person, has its registered office or the debtor, natural person, declared the address of his business or activity.

The “bankruptcy”

The debtor must attach to his request, in addition to the annual accounts for the last financial year, the following documents drawn up on the date of the declaration:

  • the statement of current liabilities and available assets as well as a declaration of cessation of payments (Cerfa form n ° 10530 * 01);
  • a k-bis extract;
  • a cash position (that is to say an accounting document which establishes the debts and receivables of the company and which therefore makes it possible to know its exact situation) dating from less than one month;
  • the number of employees employed on the date of the request, the name and address of each of them and the amount of turnover assessed on the closing date of the last financial year;
  • the quantified statement of receivables and debts with the indication of the name and domicile of the creditors and, for employees, the total amount of unpaid sums;
  • the asset and liability status of collateral (i.e. guarantees granted to creditors for the recovery of their debts) as well as that of off-balance sheet commitments;
  • the summary inventory of the company’s assets: fixed assets (real estate, goodwill, furniture, equipment, financial fixed assets), operating values ​​(stocks, in production), realizable and available values ​​(receivables from customers, other receivables, cash at bank and in hand);
  • in the case of a legal person comprising members jointly responsible for the social debts, the list of these with the indication of their name and domicile;
  • the name and address of the representatives of the works council or of the staff representatives authorized to be heard by the court if they have already been appointed;
  • a sworn statement certifying the absence of the designation of an ad hoc representative or the opening of a conciliation procedure in the 18 months preceding the date of the request (otherwise, a sworn statement indicating such designation or the opening of such procedure, indicating its date and the court which carried out it);
  • the copy of the authorization decision or the declaration, when the debtor operates one or more installations classified within the meaning of Title 1 of Book V of the Environmental Code.

These documents must be dated, signed and certified true and true by the representative of the company.

If it is impossible to provide one of these documents, the request is not inadmissible, the debtor must indicate the reasons for this impediment.

Cost of the procedure

The cost of the reorganization procedure depends on the nature and size of the company’s turnover.

The stages of the reorganization procedure

Within 15 days following the filing of the declaration of suspension of payments, the court summons the manager and the employee representative. They are heard behind closed doors. The court takes cognizance of the company’s situation and at the end of the hearing, renders a judgment opening judicial reorganization or liquidation if reorganization is manifestly impossible (see the sheet Judicial liquidation).

When the court puts the debtor in reorganization, it determines the date of cessation of payments. In case of difficulty, it is fixed on the date of the opening judgment. It may be postponed one or more times without ever being more than 18 months prior to the judgment stating the cessation of payments.

The court appoints the judge-commissioner but also two legal representatives:

  • a judicial representative who has sole capacity to act in the name and in the collective interest of the creditors;
  • a judicial administrator responsible for supervising the debtor in his management or assisting him in his management acts.

Note: the court is not required to appoint a receiver when the proceedings are opened for the benefit of a person whose number of employees is less than twenty and whose turnover excluding tax is less than three million. euros.

The judgment which opens the reorganization procedure is notified to the debtor by the clerk within eight days of the date of the judgment and is mentioned in the trade and companies register.

The clerk proceeds ex officio with the publicity formalities within fifteen days of the date of the judgment (BODACC, notice of publication in a newspaper of legal announcements).

Observation period prior to the reorganization proceedings
The prior observation period

The recovery procedure begins:

  • by an observation period of a maximum duration of 6 months;
  • renewable once and which can be exceptionally extended for 6 months.

During this observation period, the administrator may be responsible for assisting the debtor or alone ensuring the administration of the company.

Inventory of the company’s assets

As of the opening of the procedure, an inventory of the assets of the company is drawn up as well as the guarantees which burden it.

Determination of liabilities

The manager gives the administrator and the legal representative a list of his creditors, the amount of his debts and the main contracts in progress. He also informs them of any pending legal proceedings.

Continuation of the observation period

At the latest after a period of 2 months from the opening judgment, the court may order the continuation of the observation period if it appears to it that the company has sufficient financing capacities.

Third party offers

From the opening of the procedure, third parties interested in taking over the company are allowed to submit to the administrator their offers for the maintenance of its activity, by a total or partial sale of the company.

Events that may occur during the observation period

Closure of the receivership procedure by extinguishing liabilities

If it appears, during the observation period, that the debtor has sufficient sums to indemnify the creditors and pay the costs and debts relating to the proceedings, the court may terminate the observation period and The company can continue its activity.

Total or partial sale of the company

The object of the reorganization proceedings is the continuation of the business.

However, the court can order the total or partial transfer of the business if the debtor is unable to ensure its own recovery. In this case, the court appoints an administrator for the purposes of carrying out all the acts necessary for the preparation of this transfer and, if necessary, for its realization.

Partial cessation of activity or judicial liquidation

When the total or partial cession has been ordered by the court, the procedure is continued.

If the decree of a reorganization plan cannot be obtained, the court pronounces compulsory liquidation and terminates the observation period as well as the administrator’s mission.

Development of the recovery plan

Economic and social report of the company
During the observation period, the administrator with the assistance of the debtor draws up the economic and social balance sheet of the company which specifies the origin, extent and nature of the company’s difficulties. In view of this assessment, he proposes a recovery plan. For his part, the agent draws up the list of declared debts which he transmits to the bankruptcy judge.

Establishment and termination of the recovery plan

The draft reorganization plan is drawn up by the administrator with the assistance of the debtor.

At the end of the observation period, when the company has a chance of being saved, the court adopts a recovery plan which indicates the economic measures for reorganizing the company consisting of stopping, adding or the sale of one or more activities.

The recovery plan provides for the terms and conditions for settling debts, after deduction of deadlines and postponements granted by creditors.

When there is a serious possibility for the company to be reorganized, the court decides on a plan which ends the observation period.

The co-obligated and the persons having granted a personal security or having assigned or assigned a good as security cannot take advantage of the provisions of the plan.

Duration of the plan

The duration of the plan cannot exceed ten years.

Effects of receivership

Fate of the company

Continuation of current contracts

The continuation of certain current contracts may be necessary to maintain the activity of the company. Other contracts, on the other hand, may be likely to worsen the already fragile situation of the company. The administrator alone has the right to demand the execution of current contracts.

A current contract is automatically terminated in two cases:

  • after a formal notice to take sides on the continuation of the contract sent by the co-contracting party to the administrator and remained unanswered for more than a month;
  • in the absence of payment under the conditions defined in article L. 622-13 II of the French Commercial Code and agreement of the co-contracting party to continue the contractual relations. In this case, the public prosecutor, the administrator, the judicial representative or a controller may apply to the court for the purpose of terminating the observation period.

In addition, the decree of December 18 provides that the termination may be pronounced by the judge-commissioner, at the request of the administrator, if it is necessary to protect the debtor and does not unduly prejudice the interests of the co-contracting party. .

When the contract is continued, each of the parties must perform its obligations.

If the administrator decides not to continue the commercial lease, he can request its termination. In this case, it takes effect on the day of its request.

Prohibition of payments

The judgment opening the procedure automatically prohibits the payment of any debt arising before the opening judgment (except set-off of related claims, when two people are creditors and debtors of each other, the set-off allows extinguish the two debts up to the amount of the lower).

It also prohibits the payment of any debt arising after the opening judgment not mentioned in I of article L. 622-17 of the French Commercial Code.

On the other hand, claims arising regularly after the opening judgment for the purposes of the progress of the procedure or the observation period, or in return for a service provided to the debtor during this period, as well as maintenance claims are paid. when they expire.

Fate of the debtor

The administrator is responsible for assisting the debtor with all or some of the acts relating to the management. He can also take care of the administration of the business alone, in whole or in part.

The debtor continues to exercise on his assets the acts of disposal and administration as well as the rights and actions which are not vested in the administrator. Acts of day-to-day management carried out by the debtor alone are deemed to be valid with regard to third parties acting in good faith.

As for the administrator, he is required to take all the acts necessary to preserve the rights of the company and to preserve production capacities.

From the opening judgment, the shares, equity securities or securities giving access to the capital of the legal person which was the subject of the opening judgment and which are held directly or indirectly by the ex officio managers or de facto can only be ceded on pain of nullity under the conditions set by the court.

The judge-commissioner sets the remuneration of the debtor, a natural person, or the manager of the legal person.

Fate of creditors

Creditors committees

They are mandatory when:

  • the accounts have been certified by an auditor or drawn up by a chartered accountant and
  • when the number of employees of the company is greater than 150 and
  • when the turnover exceeds 20 million euros.

Apart from these cases, the constitution of creditors committees is optional.

Within 30 days of the opening judgment, the receiver brings together the credit institutions and the main suppliers of goods or services in two creditors committees.

Credit institutions and the like, as well as any creditor with a claim acquired from one of them or from a supplier of goods, are ex officio members of the first committee.

Suppliers of goods or services whose receivables represent more than 3% of the total receivables of the suppliers are also ex officio members of the second committee, while the others can always be requested by the administrator to be part of it.

Receivables prior to the opening judgment

Statement of claim

All creditors whose claim arose before the opening judgment, with the exception of salary claims, submit their declaration of claims within 2 months of the publication of the opening judgment.

Discontinuation of individual prosecutions

The opening judgment interrupts or prohibits any legal action aimed at:

  • ordering the debtor to pay a sum of money;
  • upon termination of a contract for failure to pay a sum of money.

It is the same for the means of execution (the procedures allowing to obtain the execution of acts and judgments).

Stopping the course of interest

The opening judgment fixes the course of legal and contractual interest, as well as all late interest and surcharges (except in the case of interest resulting from loan contracts concluded for a period equal to or greater than one year). or contracts with a deferred payment of one year or more).

Persons who are co-obligated or who have granted personal security or who have assigned or assigned an asset as collateral do not benefit from the stoppage of the interest rate provided for in Article L. 622-28 of the Commercial Code.

3. Claims subsequent to the opening judgment

Claims arising regularly after the opening judgment for the purposes of the progress of the procedure or the observation period are paid when due. The other debts are paid by privilege before all the other debts with the exception of the superprivilege of salaries, legal costs and the privilege of conciliation (see the file Conciliation).



The objective assigned by the legislator to the judicial reorganization procedure is to allow the safeguard of the company, the maintenance of the activity and the employment and the discharge of the liabilities.

The opening of the proceedings

It is opened either by referral by the debtor, or by summons from a creditor or finally by ex officio referral to the Court. The opening of the procedure is based on the concept of suspension of payments, which is the impossibility of meeting the available assets with the due liabilities.

Insofar as the notion of suspension of payments is a notion of cash flow difficulties, this contradictory attitude only forces the loss of companies whose net asset value can be very significant, a phenomenon which is both denounced and forced by the ambiguous attitude of dealing with business difficulties. This may allow successful takeovers, in particular in the context of disposal plans.

Judicial reorganization is applicable to any trader, to any person registered in the trade register, to any farmer and to any legal person governed by private law. Natural or legal persons who employ a maximum of fifty employees and whose turnover excluding tax is below a threshold set by decree in the Council of State benefit from the simplified procedure. 

The company which is subject to collective proceedings (even if the term “benefiting from collective proceedings” is sometimes used) in fact passes in its management under the control and the decision-making power of the Court. An observation period will be opened, where the “procedural bodies” will in fact either determine or guide the activity of the company.

Organs of the procedure

The organs of the procedure, which are designated in the opening judgment, are

– two legal representatives, one being the administrator responsible for managing or assisting the management of the company and preparing the recovery plan and the other the representative of the creditors

– the other the judge-commissioner “responsible for ensuring the rapid progress of the procedure and the protection of the interests involved (article L 621-12)

Preparation of the economic and social report and recovery plans

 An economic and social report is prepared by the administrator, who will in fact play a fundamental role in the possible preparation of a continuation plan and in the decision of the court to choose this plan or a disposal plan. The continuation plan involves payment of all of the liabilities, the only possible restructuring being a staggering of payments. The disposal plan projects can only be presented by third parties (on the moral basis mentioned above only insofar as the disposal plan not involving the assumption of all of the liabilities cannot be opened to the public. failing company).

The procedure for declaring and then verifying claims will result in a settlement of creditors which will generally be as derisory as it is late.


Judicial reorganization is provided according to the plan adopted by court decision at the end of the observation period. This plan provides for either the continuation of the business or its sale.


Judicial liquidation may be pronounced without opening an observation period when the company has ceased all activity or when reorganization is manifestly impossible.

Legal redress

Opening criterion: cessation of payments

The opening of a procedure is done according to the opening criterion provided for by article L 621-1 of the Commercial Code, such as the impossibility of meeting the payable liabilities with its available assets. This statement constitutes ” suspension of yments “, which is defined by case law and which reflects a cash flow difficulty and not an imbalance between assets and liabilities. The company is in suspension of payments if it no longer has a Cass credit reserve . Com. June 17, 1997 ,;   Cass. Com. November 12, 1997

It is not about an accounting concept: the comparison of the elements of the balance sheet,  is not likely to establish the existence of the suspension of payments, Cass. com. February 2, 1999 .

Liabilities to be considered to characterize the state of insolvency is due and required liability, since the creditor is free to do credit to the debtor ” Cass. Com. April 28, 1998 .   This decision whose scope is discussed presents an ambiguity in relation to the refusal to take into account the moratoriums: the Court of Cassation by a previous judgment had decided that “the court of appeal, called to rule on the existence of the state of suspension of payments of a debtor does not have to find out whether the payable liabilities have actually been demanded, since this debtor does not allege that he had a credit reserve enabling him to meet his payable liabilities ”  Cass. Com . November 12, 1997,

The company must be able to pay its due liabilities with assets which must be immediately available  Cass. com. November 25, 1997

Unpaid invoices do not constitute proof of the cessation of payments Cass. com. March 2, 1999 . The lack of shareholders’ equity, the constant deterioration of the cash position and the loss-making nature of the financial years do not characterize the suspension of payments Cass. com. May 20, 1997 

The decision to assess the situation of the legal person will not have res judicata in the proceedings against the Cass managers . com. November 19, 1996

Referral to the Tribunal

The company can benefit from the procedure by seizing the Court, what is commonly called “bankruptcy” under the conditions provided for in article L621-1 of the Commercial Code.

The procedure can also be implemented by summons of a creditor under the terms of article L622-2 of the Commercial Code. The creditor has the burden of proof of the cessation of payments Cass. com. April 2, 1997

It can be triggered by ex officio referral to the Court ( article L622-3 of the Commercial Code v. REQUEST OF OFFICE OR AT THE REQUEST OF THE ATTORNEY ).

Observation period

If the Court does not rule out the possibility of an adjustment by pronouncing the liquidation, the judgment opens an observation period which will allow the administrator to draw up an economic and social assessment . Company recovery plans   will be drawn up, consisting of plans for the continuation and sale of the company . The plans for the continuation of the company   involve the assumption of the debts of the company, with the staggering provided for in the plans within the limits provided for by law, while the plans for the sale of the company involve the transfer of assets for a specific price.

The assets are determined by setting the liabilities through the procedure for  declaring claims   , which is then subject to a procedure for  verifying and admitting claims . The patrimony is eventually reconstituted by the provisions providing for the  nullity of certain acts while allowing the exercise of the rights of the seller of furniture and claims .

During the observation period, after the precautionary measures have been taken , the procedures for the continuation of the company are defined to allow the  continuation of the company and the management of the company .

Plan decree

On the report and proposal of the administrator, the Court will take a judgment stating the plan   which can only be subject to very limited possibilities of appeal.

Avatar of LexInter


Lexinter Law, with a team of dedicated authors who strive to provide you with all the relevant and actionable tips on the legal aspect of your life. Our goal is to educate you so that you can make legal action with ease, or find the right person who can help you with your unique personal legal dilemma. Take care!

Leave a Comment

Your email address will not be published.

Reload Image