Is your company in difficulty? Don't wait for the situation to get worse, and take action to avoid bankruptcy with the help of Cabinet Sion Avocat. In the article below, we explain the preventive measures to take when your company is in difficulty, and the collective procedures that can be put in place to protect your company from creditors (suppliers, bank loans, etc.).
What is a company in difficulty?
A company in difficulty is characterized by its financial and accounting state, close to the point of cessation of payments. At this stage, your company's available assets are not yet less than its current liabilities. In practical terms, this means that your company can pay its current expenses (wages, social security contributions, taxes), but is having difficulty paying its previous debts, such as rent arrears, supplier debts and so on.
There are many reasons for this situation. A company may be recognized as being in difficulty for external reasons, such as a health crisis (e.g. covid-19), or even a social crisis (e.g. strikes).
But more often than not, a company's difficulties are internal, and may be due to poor strategic choices, poorly controlled growth, excessive development costs or poor management despite your best efforts.
Whatever the case, there are a number of solutions to protect you, your company and your employees.
Totally confidential preventive measures
When difficulties become apparent, you can't wait to react, by reinjecting equity, for example, and trying to ride out the storm. You can ask your lawyer to take preventive measures with you, to prevent the situation from worsening. This is known as a mandat ad hoc or conciliation procedure.
To be eligible for these procedures, we will place you under the protection of the Commercial Court or the competent judicial tribunals, depending on the type of company you have set up.
A trustee, or conciliator, as the case may be, will then be appointed and chosen in advance together, then validated if necessary by the President of the competent court to help us in these moments of your company, which is a real oxygen bubble allowing your company to catch its breath, but also for you, as company director, and your employees. The trustee or conciliator will be appointed for a period of 4 months, and his or her mission may be renewed if we wish, and if we still have negotiations to pursue, in particular as regards the staggering of your debts, such as those relating to the French "PGE", which can be spread over 10 years thanks to your lawyer and the trustee.
The conciliator, in the conciliation procedure, is appointed for a maximum of 5 months, which can perfectly well follow on from a mandat ad hoc procedure, and the two procedures can be followed one after the other to pursue our mission of safeguarding your company in difficulty.
In both of these procedures - the ad hoc mandate and judicial conciliation - it is very important for you to know that, as a manager, you retain full control of your company, in complete confidentiality, since these are preventive procedures designed to prevent your financial situation from becoming more complicated and serious. During these two amicable procedures, if an agreement is reached to spread all your debts prior to the start of the procedure, we will put an end to the procedure with the trustee and the conciliator.
Insolvency proceedings: reorganization and liquidation/ or buyout of your company
When your company has already reached the stage of cessation of payments, i.e. when your cash flow is insufficient to meet your day-to-day expenses (social security, salary and tax debts in particular, as well as your loan repayments), Cabinet SION AVOCAT, a specialist tax and insolvency lawyer, recommends that you open insolvency proceedings together, after having explained to you all the stages and advantages of these procedures. The main advantage here, thanks to the protection of the competent court, is to suspend payment of all debts prior to the date of the judgment opening the proceedings, and to find solutions to effectively turn your company around, enabling you to regain sustainable cash flow to meet your day-to-day debts. Once the company has been reorganized, we can then negotiate any outstanding debts that you will be able to settle as a result of the reorganization.
There are several different types of insolvency proceedings, depending on the situation:
This procedure is used when the company is not yet in a state of suspension of payments.
The aim is to preserve and reorganize the company, while maintaining your business and jobs, and at the same time repaying previous debts according to a payment plan based on negotiations led by the court-appointed trustee and us.
The court will examine the case and an observation period will last between 6 and 18 months, during which debt payments are frozen. Following the safeguard period, the judge will decide whether your company can be safeguarded, and if so, a safeguard plan will be drawn up and approved accordingly.
Insolvency proceedings can only be initiated if the company has been in a state of suspension of payments for less than 45 days. The procedure begins with an observation period lasting 6 months, renewable 3 times. This will allow the company to be audited by a judicial administrator. The aim is, of course, to preserve the company's activity and jobs, and to turn around your business and your financial health.
Following the observation period, several solutions can be envisaged:
- A recovery plan will be implemented if the judge considers that the company can get out of its current situation, and Cabinet SION AVOCAT will work with you to ensure that this solution is successful.
- The business may be sold in whole or in part.
- The judge will declare the company in liquidation.
If the judge does not consider that the company can recover, liquidation will be declared.
The aim is to reimburse creditors and put an end to the business, with the help of a judicial liquidator who will take all the best decisions concerning the company and its assets, you as the company director and your employees.
But what about sole traders?
For sole proprietors, i.e. those operating in their own name, with assets of less than 5,000 euros, and who have not employed any employees for at least 6 months, there is a procedure available in the event of suspension of payments: professional recovery.
This will enable an entrepreneur in difficulty to avoid liquidation by paying off all personal and/or business debts.
Some debts, however, cannot be wiped out by this procedure, such as alimony, salary debts, guarantees, etc.
The entrepreneur retains management of his company throughout the procedure, but if he acts in bad faith, the professional recovery procedure may be transformed into a judicial liquidation.
As you can see, insolvency proceedings can be a real breath of fresh air for your company, helping it to get out of financial difficulties of varying severity, and there are many ways of preserving your business despite the financial difficulties encountered. Don't hesitate to contact Cabinet Sion Avocat, a tax lawyer in Marseille (and online!) specializing in companies in difficulty, for any further information you may require, and to support you at every stage, by listening to your needs and protecting your interests!Back