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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Last published

The minutes of general meetings for approval of the annual accounts of commercial companies

Once a year, the annual accounts for the last financial year, i.e., the balance sheet, the profit and loss statement and the notes, must be approved of the Annual General Meeting. More specifically, in most commercial companies (SA, SAS, SNC, SCS, SA, SARL etc. ), the members of the executive bodies are liable to heavy criminal and civil sanctions for management error, if they breach the obligation to submit annual accounts for approval by the partners or shareholders. For this reason, the members of these executive bodies must demonstrate that they have indeed submitted the company's annual accounts for the preceding financial year for approval by the partners or shareholders, who generally meet in Annual General Meeting, by drawing up minutes of the general meeting. The approval of the annual accounts is therefore strictly regulated. By approving these annual accounts, these partners or shareholders implicitly demonstrate that the documents concerned contain data that has been prepared on a true and sincere basis. They also presume that, as of the closing date of each financial year, these annual accounts reflect a faithful picture of the assets, the financial position and the book profit (or loss) for the companies' business. More generally, the approval of the annual accounts represent the indispensable tool to provide a minimum of information on the main accounting parameters, financial management and operations of commercial companies. They are therefore an essential decision making tool aiding the diverse interests of any interested person (directors; shareholders; investors; government authorities; creditors, such as bankers, suppliers; customers; competitors; commercial courts and potentially other judicial authorities, responsible for preventing and dealing with companies in difficulty) near or far, through access to the company's business data as well as by their financial, accounting and management position. For all these reasons, it is vital that the annual accounts must be approved in strict compliance with the statutory requirements.

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File : Suspension of payments

Part 3

Legal observation of insolvency

Legal observation of insolvency by the court

Following examination of the situation of the company for which it is referred the matter, the court observes, by way of a ruling, the lack of insolvency or, on the contrary, its real nature. In this instance, the ruling should be sufficiently motivated as its effects are important.

Prerequisites to the ruling initiating proceedings

The court declares initiation of insolvency proceedings whether judicial liquidation or administration, after verification, as at the date of ruling, that insolvency is real and that the company concerned is impossible to respect its liabilities with its available assets.

In this regard, the court is informed of accounting and financial data of the company, ahead of other research on the respect of conditions for referral and the grounds specific to initiation of the proceedings requested.
This is undertaken after having questioned the company concerned as well as any person who may be useful for questioning or where applicable, and as compulsory, notably the Prosecutor of the Republic, representatives of the Work's Council or, failing this, staff representatives, the representative of the professional order or the competent authority over the company, in the event of regulated activities.
Hearings may be complemented by investigations.


Content of the ruling initiating proceedings specially for insolvency

If it believes that the company is not insolvent, the court shall hand down a dismissal of the request to initiate proceedings for judicial liquidation or insolvency.

In the contrary case, the court should rule either on judicial liquidation or immediate judicial liquidation if administration is not possible.

Be that as it may, in the same ruling the court should:

  • on the one hand, provide sufficient motivation for characterisation of insolvency by observation that, as at the date of ruling, the company concerned is unable to respect its liabilities with its available assets;
  • on the other hand, to determine the date of insolvency, without, in principle, this pre-dating by eighteen months the date of initiation of proceedings. Determination of this date by the court isimportant as it is essential for the court to determine the period referred to as "suspect". The suspect period is the time between the date of occurrence of insolvency and the date of initiation of proceedings for insolvency or judicial liquidation. It is the period during which certain types of acts, committed by the director (generally errors in management) or sometimes by third parties, may be identified as invalid (namely automatically considered as not having any effect, and placing the people concerned by these acts in the situation where they were previously) or likely to be annulled (insofar as a request is made in this regard to the court and accepted). Failing indication in the ruling, the date of insolvency is deemed to be the same as the date of initiation of proceedings.

Good to know: The ruling sets this date provisionally, as it may be subsequently and on multiple occasions, amended by eighteen months, in successive rulings following summons (solely by the director, legal representative, administrator or public prosecutor) insofar as these are launched within one year following the ruling initiating proceedings.


Effects of a ruling, identification of the suspect period and its possible consequences

In order to validly initiate insolvency or judicial liquidation proceedings, the ruling should observe, notably, insolvency and the date thereof prior to the date of ruling, without being able to go back further than eighteen months.

Determination of this date may pertain to a specific "suspect" period, during which any abnormal acts committed by a director or, potentially, a third party may be easily identified and restricted.

Consequently, the declaration of insolvency may lead, where applicable:

  • to reconstitution of the company assets, in whole or in part, following annulment of any abnormal actions committed during said period by the director or the third party and/or following a sentence thereagainst for compensation for said acts. It may be that during the "suspect period", certain types of acts which appear to be abnormal or unusual are committed by the director (generally errors in management) or sometimes by third parties towards the company. Due solely to the occurrence thereof during this period, they are presumed as invalid (namely, they are automatically observed as such by the court without the latter having any power of appreciation) or, some, may be optionally declared as invalid (namely likely to be annulled after favourable appreciation by the court). This is why law makes provision for calling into question these acts by legal action for invalidity. Such action is solely reserved for the legal administrator, legal representative, administrator, or commissioner of the administration plan and the public prosecutor.
  • to remove the director, committing these acts, from the company and sometimes from business. It may be that this type of legal sanction be handed down if it is established that, during the "suspect period", the director has not taken account of insolvency in management and direction of the company and/or has committed reprehensible actions.

The following examples allow for more precise illustration of this behaviour and these sanctions:

  • in the event of a director using ruinous means to claim funds, delay insolvency and therefore initiation of proceedings, this is sanctioned by a criminal sentence for bankruptcy crimes;
  • in such instance as a director pays a creditor during this period in prejudice of other creditors, this may be sanctioned by declaration of personal bankruptcy, a legal sanction constituted by a series of prohibitions and deadlines, with the prohibition of managing and the electoral deadline only being examples;
  • in such instance as a director should default in the obligation to declare insolvency within forty five days following occurrence, this is subject to potential prohibition to manage (unless request has already been made for conciliation proceedings within forty five days);
  • in such instance as the director commits one or more errors in management, including the aforementioned acts as examples, this leads to the possibility of legal action for insufficient assets and a sentence to constitute liabilities resulting therefrom.
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