Too many directors see the court as an admission of failure and wait until the last moment to react. The opposite should be done. Insolvency law offers powerful and often confidential tools, provided you act early. Between the first payment delay and cessation of payments, there is a decisive window during which almost anything remains possible.
A lawyer in business rescue and insolvency proceedings in Paris, Maître Léa Scemama advises directors and businesses on the prevention and treatment of their difficulties, with a constant priority: preserving the activity, jobs and the director's liability.
See all our commercial law services on our commercial law page.
How we work
| Where you stand | What we do | What you receive |
|---|---|---|
| First warning signs, cash under strain | Confidential diagnosis, calculation of the date of suspension of payments | A clear view of the levers still available, and of the time left |
| Negotiating with creditors | Ad hoc mandate or conciliation, both entirely confidential | A negotiated agreement without alerting the market |
| Established difficulty, no suspension of payments | Opening safeguard proceedings, preparing the plan | A stay on enforcement, with the director still in charge |
| Suspension of payments established | Filing within the deadline, observation period, plan or sale | Proceedings opened at the director's initiative, not imposed |
| Personal protection | Analysis of personal guarantees, prevention of liability for insufficiency of assets and of disqualification | Protected conduct through the sensitive period |
Our billing arrangements are set out on our fees page.
The five procedures side by side
The choice of procedure depends first on one question: is the business in cessation of payments, and since when?
| Procedure | Opening condition | Confidential | Purpose |
|---|---|---|---|
| Ad hoc mandate | A difficulty, at the director's request | Yes | Negotiating with the main creditors, with the help of an agent appointed by the president of the court |
| Conciliation | A proven or foreseeable difficulty, without cessation of payments for more than 45 days | Yes | Reaching an agreement with the main creditors, recorded or approved by the court |
| Safeguard | No cessation of payments | No, court proceedings | Staying creditor actions and adopting a plan, with the director remaining in charge |
| Judicial recovery | Cessation of payments | No, court proceedings | Continuing the business, preserving jobs and clearing liabilities |
| Judicial liquidation | Cessation of payments and recovery manifestly impossible (article L. 640-1 of the Commercial Code) | No, court proceedings | Ending the business or selling its assets |
Prevention: the ad hoc mandate
The ad hoc mandate is the most flexible and discreet prevention procedure. At the director's request, the president of the court appoints an agent to help negotiate with the main creditors (banks, suppliers, tax authorities). Entirely confidential, it resolves a difficulty without alerting partners or the market.
Conciliation
Open to companies facing an actual or foreseeable difficulty without being in cessation of payments for more than 45 days, conciliation aims to reach an agreement with the main creditors under the aegis of a conciliator. The agreement can be recorded or approved, then offering valuable protections, notably the 'new money' privilege for cash providers.
The safeguard procedure
Safeguard is a judicial procedure opened at the request of a company not in cessation of payments. It suspends creditor proceedings and allows, during an observation period, the drafting of a safeguard plan spreading the repayment of liabilities. Its great advantage: the director stays in control of their company.
Judicial recovery
When cessation of payments is established, judicial recovery aims to allow continued activity, preservation of jobs and clearance of liabilities. The firm assists the director throughout the observation period, in drafting the recovery plan and, where relevant, in seeking a buyer in a sale plan.
| Step | Time limit |
|---|---|
| Filing for cessation of payments | 45 days from its occurrence, unless conciliation is requested within that period |
| Conciliation | Available if the business has not been in cessation of payments for more than 45 days |
| Observation period in safeguard or recovery | Six months, renewable, within a maximum set by law |
| Maximum length of a plan | Ten years in principle |
| Creditors' proof of claim | Two months from publication in the BODACC, the official commercial gazette |
Judicial liquidation, when recovery is manifestly impossible
Judicial liquidation requires two conditions: the business is in cessation of payments, and its recovery is manifestly impossible (article L. 640-1 of the Commercial Code). It brings the activity to an end, or realises the assets through a global or separate sale of rights and property.
The director must file for it no later than forty-five days after the cessation of payments, unless conciliation was requested within that period (article L. 640-4). This is not a formality. A director who knowingly fails to do so faces a management ban (article L. 653-8) of up to fifteen years (article L. 653-11). Filing on time also protects the director.
The smallest businesses go through a simplified, faster liquidation when their assets include no real property and their headcount and turnover stay below thresholds set by decree (article L. 641-2). A sole trader who has employed no staff for six months and whose assets are modest may instead obtain professional recovery without liquidation (article L. 645-1).
Then comes the question every director asks: what happens to the debts? After closure for insufficient assets, creditors do not, in principle, regain the right to pursue the debtor (article L. 643-11). The rule gives way in cases of personal bankruptcy, fraudulent bankruptcy or fraud, and a guarantor who paid in the debtor's place keeps a claim against them.
Protecting the director and their assets
Beyond the company, difficulty exposes the director: action for liability for insufficiency of assets, personal bankruptcy, management ban, enforcement of personal guarantees. The firm anticipates these risks, secures the director's conduct during the sensitive period and defends them if their liability is pursued.
Insufficient assets, personal guarantees, sole traders: what the texts provide
The action for liability for insufficient assets is available only in judicial liquidation. It requires a management fault that contributed to the shortfall, and mere negligence by the director is not enough (article L. 651-2). It is time-barred three years after the judgment ordering the liquidation.
A director who has given a personal guarantee has every interest in the proceedings being safeguard proceedings. The opening judgment stops interest from running, except on loans of one year or more, and individual guarantors may rely on this. It also stays actions against them until the judgment adopting the plan or ordering liquidation (article L. 622-28). Once the plan is adopted, an individual guarantor may rely on it as well (article L. 626-11).
Finally, since 2022 a sole trader benefits from the separation of personal and business assets: business creditors can in principle seize only the business estate, unless a contractual security or a waiver applies (article L. 526-22).
The company's ongoing contracts and their fate during the proceedings are prepared upstream: see our commercial contracts page.
Why a lawyer when facing difficulties?
When facing difficulty, every week counts and every decision commits. The lawyer helps the director choose the right procedure at the right time and protect their liability. This field often meets debt recovery on the creditor side and disputes between partners when the crisis weakens governance.
Frequently asked questions
What is the state of cessation of payments?
It is the inability to meet due liabilities with available assets. Its occurrence requires the director to declare cessation of payments within 45 days, unless conciliation is sought. Beyond that deadline, the director is exposed to sanctions.
What is the difference between safeguard and judicial recovery?
Safeguard opens at the request of a company not yet in cessation of payments but facing difficulties it cannot overcome alone; the director keeps control. Judicial recovery presupposes cessation of payments and aims to allow continued activity and clearance of liabilities.
Are amicable procedures confidential?
Yes. The ad hoc mandate and conciliation are confidential, flexible and negotiated procedures, allowing difficulties to be handled away from partners view. That is their whole point: preserving trust and the value of the business.
Is anticipating really worthwhile?
It is decisive. The earlier difficulties are addressed, the more numerous and effective the options. A director who seeks advice at the first signals has powerful levers; one who waits for cessation of payments has often already lost them.
Related topics
- Commercial litigation: claims brought before the proceedings are opened.
- Restructuring and mergers: restructuring before payments cease.
- Commercial leases: what happens to the commercial lease during the proceedings.
Written by Maître Léa Scemama, admitted to the Paris Bar, Miraï Avocats. This page states the law applicable at its update date. It is general in nature and does not constitute advice tailored to a particular situation.