Associated files

Obligation to file annual accounts

Filing annual accounts and their associated documents with the registry office of the Commercial court is compulsory for several categories of companies.

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Judicial administration

The main reason for the legislation behind judicial administration proceedings is to allow a business in difficulty to continue its activity in the framework of legal processing, while at the same time allowing it to repay its debts and maintain its jobs.

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Judicial liquidation

The judicial liquidation proceedings is intended to end a company's activity or to convert into cash the debtor's assets by means of a global or separate sale of his rights and goods.

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File : Suspension of payments

Part 2

Declaration of insolvency

Declaration of insolvency

Declaration of insolvency is the central element of the application to open judicial liquidation or administration. It should, therefore, be carefully completed and documented prior to being filed in strict respect of the legal deadline.

Court holding competence to receive the declaration

In substance : the Commercial court holds jurisdictional competence where the company in difficulty concerned exercises commercial or artisanal activities, and the district court in all other instances (agricultural exploitations, liberal professions).

Territorially: forsole traderships (physical persons) in difficulty, the court holding jurisdiction is that in whose remit resides the main office. If the physical person does not have a fixed residence and failing residence or domicile, the competent jurisdiction is that in the remit of which the commune is located.

For legal entities in difficulty, the competent court is that in the place of the registered office of the company, under the condition that this is not fictitious (the court retains the possibility of re-characterising the registered office by considering whether it is located within the declared location or in another).

If the company in difficulty does not have a registered office in France, the court holding competence is that in the location of the primary centre of interests in France.

 

Who refers the declaration to the court and by what channels?

The declaration should be undertaken within forty five days following insolvency. Observation of this situation and initiation of insolvency proceedings (where applicable, judicial liquidation, or administration) should both be requested by the company director, subject to potential declaration of a prohibition to manage concerning a sole trader or company director, unless the company has requested conciliation proceedings within forty five days following insolvency.

As the observation of insolvency and initiation of insolvency proceedings are related, the methods for referral to the court are as follows:

  • referral by the company in difficulty by way of deposit, at the latest within forty five days following the date of insolvency, of the entire request for initiation of insolvency proceedings. If the company is a physical person, the declaration should be made by the latter or by a representative who should hold a power of attorney; for legal entities, the legal representative(s) are empowered to make this request, either alone, or by the intermediary of a lawyer holding a special power of attorney;
  • referral by the court to itself solely with the purpose of declaring, where applicable, judicial liquidation ;
  • summons by a company creditor;
  • an application by the Prosecutor of the Republic.

Good to know: referral of the court by either of the four methods indicated is only possible if no conciliation proceedings have officially been initiated by the court and not only requested. Moreover, conciliation is understood as any protection proceedings reserved for companies experiencing legal, economic or financial difficulties, whether duly observed or likely, but without these difficulties being insurmoutable and these companies being insolvent or, where they are insolvent, for no longer than forty five days.

 

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Content of the declaration of insolvency

The request for observation of insolvency should be presented on a form entitled "Declaration of insolvency", generally provided by the court and must be supported (notwithstanding any express motivation of impediment) by the following supporting documents dated, signed and certified as true and accurate by the director:

o    annual accounts for the last financial year for physical persons or legal entities (for private non trading legal entities operating under certain conditions concerning the threshold of staff, turnover and balance sheet totals);
o    liabilities and available assets and the declaration of insolvency;
o    the certificate of incorporation on the trade listing for which it is liable, primarily the Trade and Companies Register or trade register;
o    the cash flow situation darted within the last month, or in other words, an accounting document including the debts and liabilities of the company with a balance;
o    a summary of company employees including the number of employees as at the date of declaration with identity and the address of each of these and the total turnover of the last financial year, turnover understood as the net amount of sales and products and services for daily activities, minus reductions on sales, value added tax and related taxes;
o    a breakdown of debts and liabilities, completed with the identity and residence or registered office of creditors and, for employees, the overall amount of unpaid amounts;
o    the asset and liability position of securities (namely guarantees conferred to creditors to recover credits) and off-balance sheet commitments ;
o    an inventory of assets of the debtor : fixed assets (immoveable property, business, moveable property, hardware, vehicles, financial fixed assets); operating values (stocks, production); values to be settled (client liabilities, other credits) and available cash flow (bank and funds);
o    the list of members jointly and severally liable for company debts with indication of their identity and residence and this in such instance as the debtor is a legal entity with members having this type of liability;
o    the list of names and addresses of representatives of the work's council or failing this staff representatives;
o    a certificate on honour of the lack of any ad hoc representative or conciliation within eighteen months preceding the date of the request or, in the contrary case, indicating the date of appointment of the ad hoc representative or the initiation of such proceedings as well as the authority undertaking this;
o    the document appointing the professional order or authority having control over the debtor if exercising a liberal profession subject to a legislative or regulatory status of which the title is protected;
o    the copy of appointment or registration or the declaration where the debtor operates one or more classified installationsas defined by regulations on environmental protection.

The dossier established may be completed by a freely drafted outline on the cause(s) of insolvency and the request for initiating insolvency proceedings or judicial liquidation proceedings or administration.

Good to know: where the author of referral to the court is a creditor, the company indicated by the referral is not relinquished of the declaration of insolvency and should make this declaration.