Compulsory liquidation procedure: stages and consequences

The judicial liquidation procedure is a complex subject that deserves our full attention. Being a specialist in legal law, I suggest that you dissect the different stages and consequences of this process together. My experience taught me that each case is unique, but certain fundamental principles remain unchanged. Let us dive into the details of this procedure which, although difficult, can sometimes open the way to a new start.

Definition and conditions for the opening of judicial liquidation

The judicial liquidation is a collective procedure aimed at putting an end to the activity of a company in financial difficulty. Its main objective is to carry out the heritage of the company by a global assignment or separated from its property. This measurement comes when the company’s recovery is impossible.

Procedure trigger criteria

For a liquidation to be pronounced, two essential conditions must be met:

• The company must be in cessation of paymentsthat is to say unable to deal with his liabilities due with his available assets.
• The recovery of the company must be clearly impossible, without any chance of economic survival.

I have often found that the awareness of these criteria by leaders can be painful, but it is crucial to act quickly and preserve the interests of all.

Who can request the opening of the procedure?

The request for the opening of a judicial liquidation procedure may emanate from several actors:

1. The debtor himself (the manager of the company)
2. A creditor
3. The public prosecutor

It is vital to note that the competent court varies according to the nature of the activity: the commercial court for merchants and craftsmen, and the court for other professions.

Procedure and effects of the judicial liquidation procedure

Once the procedure has started, several stages follow one another, each with significant consequences for the company and its stakeholders. Here is an overview of the process:

The opening judgment and its immediate consequences

The opening judgment marks the official start of the procedure. Its effects are immediate and deep:

• Immediate cessation of the business activity (except exceptional maintenance for a limited period)
• Divesting the administration manager and the provision of the property of the company
• Appointment of a liquidator responsible for managing and selling the assets
• Rupture of employment contracts within 15 days of judgment

I attended many hearings where these decisions were pronounced. It is always a moment charged with emotion for leaders and employees.

The role of the liquidator and the realization of assets

The liquidator plays a central role in the procedure. Its main missions are:

1. Establish an economic and social assessment of the company
2. Carry out the company’s assets
3. Divide the product of sales between creditors according to the order of legal priority

The realization of assets can take different forms, from the overall transfer to the auction of goods. Each situation is unique and requires an appropriate approach.

Consequences for creditors and debtors

Judicial liquidation has significant repercussions on relations between the company and its creditors:

It is essential to understand these consequences to navigate the best in this difficult period. I saw entrepreneurs bounce back after a liquidation, but it requires courage and perseverance.

Closing of the procedure and future perspectives

The judicial liquidation procedure ends with a closing judgment. This can be pronounced for two main reasons: extinction of liabilities or insufficient assets. In the first case, all the debts were paid. In the second, more frequent, the company does not have enough assets to reimburse all of its debts.

The fence for insufficient assets generally leads to the erasure of the remaining debts, thus offering a form of “new start” to the debtor. However, some debts remain, such as food debts or criminal fines. It is essential to understand these nuances to envisage the future calmly.

For small businesses, a simplified procedure exists. It concerns structures without real estate and with a limited turnover. This option can allow faster and less expensive treatment for liquidation.

Being a professional passionate about business law in difficulty, I can only underline the importance of anticipating financial difficulties. Prevention remains the best way to avoid compulsory liquidation. Do not hesitate to consult an expert from the first signs of difficulty. Together, we can find solutions to preserve your activity or, if necessary, support you in this complex procedure that is compulsory liquidation.