1. When can you be declared bankrupt in France?

Bankruptcy is a common term meaning that you can’t pay for your maturities or debts anymore, i.e. when you have more liability than asset.

It is also called cessation of payment, or bankruptcy petition.

2. How long does it take to process a petition for bankruptcy in France?

When the cessation of payment occurs, the legal representative or at least one of the co-directors of the company must declare it and deposit a petition for bankruptcy with the clerk of the competent commercial court no later than 45 days (article L631-4 of the French Commercial Code).

If the due date is not respected, the legal representative is exposed to various sanctions, including a prohibition to manage for up to 15 years.

3. What can you do if you disagree with the bankruptcy order by the French court?

You can appeal the judgment within 10 days after notification.

Nevertheless as the judgment of judicial liquidation is immediately enforceable, it produces its effects even if you appealed (see article R661-1 of the Code of Commerce – modified by decree n°2014-736 of June 30th, 2014 – art. 115). For this reason it is necessary, at the same time as the appeal, to seize the first president of the court of appeal to request a stay of provisional execution while the file is examined on its merits.

4. What happens if you are declared bankrupt in France?

If you are declared bankrupt it leads to the opening of a collective procedure (that is to say, a suspension of receivables). It can take several forms, depending on the level of gravity assessed by the judge:

  • a backup procedure;
  • a judicial reorganization of proceedings; or
  • a procedure of judicial liquidation.

There is also the nomination of a “mandataire judiciaire” (creditors’ representatives) to collect a declaration of claim, and in some cases an “administrateur judiciaire” (judicial administrator) is nominated to help the company to prepare for the end of the collective insolvency proceedings.

Before the declaration of cessation of payments, the company in difficulty may initiate other procedures with the court such as the ad hoc mandate, the conciliation or the safeguard procedure.

5. What duties and powers does the trustee have in France?

In France there are two types of trustee: the “mandataire judiciaire” and the “administrateur judiciaire”. The first is in charge of the declarations of claim, i.e. he represents the creditors. The second is in charge of administrating or helping the company to exit the procedure.

The duties of the administrateur judiciaire are: monitoring, assistance, or complete management, depending on the financial difficulty the debtor is in. The court decides on the administrator’s mission, which can be changed if necessary.

The trustee acts in place of the legal representative of the company and exercises his rights and actions on his estate. Throughout the duration of the liquidation he is held by the same legal and contractual obligations as the director of the company, according to the article L621-22 of the French Commercial Code.

6. What kind of obligations do I have as a bankrupt in France?

As a bankrupt, the director of the company is held by duty to cooperate with all bodies of the procedure. If the director of the company fails to cooperate it may result in personal bankruptcy or management prohibition (L653-5 paragraph 5 of the French Commercial Code).

7. How can I monitor the progress of the bankruptcy in France?

There are three ways to monitor the progress of bankruptcy in France:

8. How long does a bankruptcy last in France?

Compared to other procedures, a bankruptcy does not last that long. It typically lasts for six months, to a maximum of 18 months.

The bankruptcy ends with:

  • the sell-off of the company to another;
  • the company liquidation; or
  • the adoption of a continuation plan, which can last for a maximum of ten years.

9. Can I make arrangements with my creditors in France?

Arrangements can be made with creditors during the judicial recovery plan. You will have to establish a plan and submit it to the creditors’ committee who will then send it to the various stakeholders for consideration.

10. How can an employee collect outstanding salary from their French bankrupt employer?

The Association for the Management of Employee Claims’ Wage Guarantee Scheme (AGS) is an employers’ organisation based on interprofessional solidarity of employers and financed by their contributions.

This organisation settles payment, as soon as possible, of the sums owed to the employees (salaries, advance notice, severance pay, etc.) in accordance with the French Labour Code.

11. What important advice can be given to a company director in the event of imminent bankruptcy in France?

The company director should keep managing the company with diligence, and comply with what is expected from him throughout the bankruptcy procedure. For example, annual accounts must be established.

If the company director fails in his duties, his personal responsibility can be held according to article L 653-5 of the French Commercial Code, in which case the court may pronounce the personal bankruptcy of the company director.

12. Is there a special arrangement for the private person who is in danger of going bankrupt in France?

In France, such an arrangement is called an Individual Voluntary Arrangement. It allows the debtor to negotiate with all his creditors independently of any intervention by the judge in order to encourage conclusion of friendly settlements and avoid unnecessary bankruptcies.