6.1. General information
The legal definition of insolvency is when a debtor is not able to pay their due debts considering their available assets.
The two main insolvency procedures are:
Receivership can be converted into bankruptcy, and in fact, almost 90% of receiverships end up in bankruptcy.
Receivership allows the debtor’s business activity to be saved due to a continuation plan, meaning that the creditors can expect dividends. Bankruptcy means the liquidation of the debtor’s assets when the situation is totally compromised, meaning that the creditors can’t
expect any dividends.
The delay to lodge claims is two months for French creditors and four months for foreign creditors from the date of the debtor’s bankruptcy’s publication in BODACC (official journal). The debts may also be disputed and a convocation from the court is planned to justify the debts.
6.3. Required documents
In order to lodge a claim on your behalf, we need:
- An original power of attorney. We need to have a specific power of attorney. It must be in French, signed by your legal representative, sealed with a commercial stamp, and it must mention the name of your debtor
- Copies of the complete contractual documentation, starting with contracts, orders, confirmations, delivery notes, and invoices
6.4. Expected time frame
The duration can be important, because it’s mandatory to check the debts of all the creditors who lodged the claims before making a proposition of a payment plan (in general in 10 years by annual payment).
6.5. Limited companies and unlimited companies/ individuals
Consequences in the insolvency proceedings for limited and unlimited companies are the same as the consequences in the receivership and bankruptcy proceedings for both kinds of companies.
6.6. Pools of creditors
There are two creditor pools that the court may decide to build. The first is made up of committees of credit institutions, and the second contains the main suppliers of the goods or services. These committees are invited to comment on a draft recovery plan. The creditors’ representatives inform the creditors of the opening of the proceedings, receive their declarations of claims, and ask the bankruptcy judge to accept or reject these claims. They alone are empowered to take action in the collective interests of the creditors.
The suspect period starts on the date of the cessation of payments, and all acts of payment during this period may be declared void if the contracting parties were aware of the cessation of payments.
(End of chapter 6 - Insolvency proceedings)