Handling business problems

When an undertaking is unable to meet its liabilities (to pay the suppliers, Public Treasury, Social Security …) out of its disposable assets, the undertaking has become insolvent.

The administrative order procedure shall then be open which aim is to facilitate the undertaking’s recovery by maintaining its activities, safeguarding its jobs and calculating its liabilities (according to the wording of the law of January 25, 1985, which has been completed by the law of June 10, 1994 concerning administrative order and winding-up proceedings).

If no administrative order plan is possible, winding-up proceedings shall be instituted.

TheseTwo proceedings have the common effects of suspending any legal action taken against the undertaking, as well as the interests on the sums it owes.
According to the law, the director or manager of the undertaking in difficulty must make a declaration to the registry by no later than fifteen days after becoming insolvent.

The Court shall inspect different elements of the file: the cash flow statement, the computed statement of claims and debts, accounts of the last financial year…, and hear in chambers the director or manager.

The Court shall decide whether the administrative order procedure shall be commenced. It may, if it considers not having enough information, appoint an insolvency judge in order to obtain more information.

The administrative order judgment activates a period of observation. The administrative order leads to a plan, which provides either for the continuation of the undertaking or for the sale thereof.

If the undertaking has ceased all activity and, or, if recovery is clearly impossible, the court may, as early as the first hearing, order the winding-up. Likewise, the period of observation may be stopped at any time, either to draw up an administrative order plan if it is ready yet, or to order the winding-up if no other solution appears possible.

Referral to the court

Referral to the court may be made by different means :

Referral may be made voluntarily by the debtor who shall declare to the registry that he has become insolvent

It may be made on a summons by a creditor (who has not been paid by the debtor)

The Court may also take charge of the procedure ex officio : the President or the judges are informed by different means that the undertaking has become insolvent. The Court shall then take charge of the procedure ex officio on order of the President.

Referral may be made upon the request of the “Procureur de la République” (public prosecutor): if the latter knows information that the Court was not aware of.

Decision to institute administrative order or winding-up proceedings

After hearing the debtor in chambers, and if it thinks it has enough information, the court shall make its order in open court.
The order must mention several compulsory details, such as the appointment of the proceedings bodies, which are :

The insolvency judge shall be responsible for settling every disputes that may arise by means of an order. He shall also be responsible for ensuring that the proceedings are heard rapidly and that all the relevant interests are protected

The administrator shall draw up a statement of the company’s affairs and propose a reorganisation plan.

The creditors’ representative shall act on behalf and in the interests of the creditors for such time as shall be necessary to verify the debts.

The judgment is subject to publication by the registry in accordance with the terms and conditions in order to notify creditors and third parties.

Order of administrative order proceedings

On the making of an administrative order a period of observation shall commence, which duration may vary from 4 to 20 months depending on the size of the undertaking. During this period, the activity of the undertaking shall be continued. The purpose of this period of observation is to evaluate the possibilities of recovery with the help of an administrator and the attendance of the creditors’ representative.

The administrative order proceedings shall end in either a recovery plan providing a debt redemption plan with longer time limits, or in an assignment plan with the sale of the undertaking for a takeover. The insolvency judge shall examine the recommendations made by the creditors’ representative and shall decide whether to admit or reject the claims. The admission of the claims shall be notified to the creditors by the registry. In the event of dispute, the creditor shall be convened and heard by the judge who rules by an order.

If a plan to continue trading has been drawn up, the proceedings shall be completed after the rendering of accounts by the administrator and the creditors’ representative.

Order of winding-up proceedings

When recovery is clearly impossible, the Court shall order the undertaking’s winding-up, which directly leads to the cessation of trading. The court appoints a listed court-appointed receiver who sells the assets of the undertaking and distributes the proceeds of the sale in accordance with the order of creditors prescribed by law.
The Court shall order winding-up proceedings to be closed.
The proceedings shall be completed either :

where it is impossible to continue with winding-up proceedings because there are insufficient assets or

where there are no more liabilities owing or the liquidator has sufficient funds at his disposal to satisfy the creditors

The closure of administrative order proceedings and winding-up proceedings is also subject to publication.