Filing bankruptcy chapter -Filing of bankruptcy: definition

You are a Manager of Liam Company and your company is in financial difficulty. You have questions about the bankruptcy procedure because you can not pay the creditors anymore. This situation is accompanied by obligations for the manager, who must initiate a procedure of cessation of payments in order to avoid a fault of management.

This situation can lead to difficult procedures for the company such as judicial liquidation. Thus, using the help of a professional can help you manage this situation at best for the company, but also for the manager, employees and creditors. Captain Contract explains the procedure to follow and the pitfalls to avoid, point on the deposit of balance of a FEH :

  1. Filing of bankruptcy: definition
  2. The procedure of cessation of payments
  3. the conciliation procedure: alternative to collective proceedings
  4. Consequences of filing for bankruptcy
  5. For the company: judicial reorganization or liquidation

Filing of bankruptcy: definition 

Filing of bankruptcy: definition and obligations

When a company is in financial difficulty, it may be unable to settle its debts with its available assets. The company is then in a situation of cessation of payments, and its representative must make a declaration of cessation of payments, that is to say a bankruptcy filing. We reported that over 1.5 million people filed bankruptcy.

It is therefore for the representative of the company to declare publicly that it encounters difficulties. The bankruptcy filing is therefore a mandatory procedure, allowing the competent court to choose the most appropriate procedure for the company in difficulty. The manager of the FEH in difficulty is required to declare the state of cessation of payments of his company, within 45 days following the cessation of payments, with the registry of the commercial court.

Attention: the manager who does not make this declaration or does not respect the filing deadline is liable to a management error.

The procedure of cessation of payments

To declare a cessation of payments, ie a bankruptcy filing, the manager of the LC must gather the following documents:

  • Form cerfa 10530 * 01, completed in 4 copies
  • Extract of registration to the RCS (K or Kbis extract) for traders or trades directory for craftsmen
  • Statement of liabilities and assets of the enterprise
  • Statement of receivables and debts, including details of creditors (name, registered office, amount of claims, etc.)
  • Assets and liabilities status of collateral and off-balance sheet commitments
  • Annual accounts of the last financial year
  • Cash position (less than one month)
  • Number of employees employed at the date of application, with their names and contact information
  • Amount of turnover at the end of the financial year
  • Copy of the legal representative’s ID
  • Summary inventory of the company’s property and assets
  • In case of receivership: cash and operating forecast for 6 months

This file is to file with the registry of the commercial court by the legal representative of the FEH, within 45 days from the cessation of payments. Within the same period, the manager must request the opening of a reorganization or liquidation procedure.

The manager may decide to be replaced by the person of his choice, a legal professional for example, through a nominative power of attorney. In the case of co-management, the signature of the declaration of cessation of payments by a co-manager is sufficient.

The conciliation procedure: an alternative to COLLECTIVE procedures

The conciliation procedure: an alternative to COLLECTIVE procedures

If the company is in a situation of cessation of payments for less than 45 days, the legal representative can request the opening of the conciliation procedure, it is an alternative to the collective procedures. This procedure will aim to find an amicable agreement between the debtor and its main creditors, to put an end to the financial difficulties of the company. This procedure is confidential and involves a third party conciliator.

Attention: the declaration of cessation of payments remains obligatory, even if one of your creditors has already seized the court for a procedure of reorganization or liquidation judicial.

The consequences of the bankruptcy of FEH

The declaration of cessation of payments is accompanied by the opening of a collective procedure to get the company out of its financial difficulties. Within 15 days following the bankruptcy filing, the judge summons the legal representative to determine the procedure to be followed. This notice may be crucial for the company, so it is recommended that the manager be accompanied by a professional. At the end of this appointment is triggered a receivership or liquidation proceedings. Whatever the procedure decided by the judge, there are consequences for the company and its manager, but also for its employees and creditors.

For the company: judicial reorganization or liquidation

For the company: judicial reorganization or liquidation

Once the bankruptcy procedure has been initiated, the company can no longer benefit from certain preventive procedures, such as the had hoc warrant or the safeguarding plan.

If the cessation of payments is accompanied by a receivership, the company is then in observation period for 6 months renewable up to 18 months. This period must allow the company to continue its activity, thanks to the suspension of possible actions of the creditors. Captain Contract can accompany you during this observation period and advise you on management in order to avoid a judicial liquidation. If judicial liquidation is unavoidable, the LC will be dissolved.

For the manager

In the absence of a declaration or a late declaration of the cessation of payments, the manager is liable to penalties for lack of management. The sanctions can go as far as the prohibition to run a business for fifteen years or to personal bankruptcy. This is why the advice of a professional is essential from the first financial difficulties of the company. An expert will help you file a bankruptcy application on time, thus avoiding any management fault.

Attention: in case of fault of management, imprudence or negligence on the part of the manager, the judge can engage the liability of the manager of FEH if the assets of the company is insufficient. Thus, if these mistakes have contributed to the financial difficulties of the company, the manager may have to fill the social liabilities, that is to say to personally pay the social debts.

When the debts concern the Fisc, the late bankruptcy filing may entail the liability of the FEH manager, and the obligation to settle the debts. As for the Urssaf, the manager may be liable for penalties and damages and interest, the remaining outstanding due by the company.

For employees

When the bankruptcy filing gives rise to the opening of a collective procedure, the employees of the company can elect a representative from the works council, formerly known as EC, now called the Social and Economic Committee for the companies of more 50 employees, staff elected (company with less than 50 employees) or any other employee. Employees are legally priority creditors, thanks to the ” privilege of employees “, that is to say that the funds available must be directed in priority to the payment of wages in the event of liquidation.

The association for the management of the employee claims guarantee scheme, can guarantee the payment of certain sums due to employees in case of impossibility of payment by the company.

For creditors

In the context of a collective proceeding, debts being “frozen”, creditors can no longer demand them. In addition, creditors are paid according to an established order. After wages, the payment of court fees and the repayment of bank loans are given priority. Then, the claims of PLD (related to the termination of employment contracts) are paid. Finally, other creditors are paid, with a priority payment for secured creditors.

Bankruptcy or cessation of payments can be a crucial step for your business. The manager of FEH does not have the right to the error if he wants to be able to save his company, and not to see his responsibility engaged to fill the social liability for the repayment of certain creditors.

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