The guide at a glance
Where to start?
- 01The definitionAvailable assets no longer cover the debts due: neither a loss nor negative equity is enough.→
- 02The calculationWhat the company already owes, against what it can pay today: the comparison is enough.→
- 03The date and its effectsThe court sets the date, can move it back up to 18 months, and it opens the suspect period.→
- 04The 45 days45 days to apply for receivership or liquidation, or to request conciliation within that time.→
- 05Receivership or liquidationThe court opens receivership if the business can recover, and liquidation if it cannot.→
- 06By type of businessSAS, SARL, sole trader, association, foreign company: the same test, different consequences.→
01
What does cessation des paiements mean in French law?
Cessation des paiements is the inability to meet the debts that have fallen due (passif exigible) with the assets available (actif disponible) (Article L. 631-1 of the French Commercial Code). Debts due include unpaid suppliers, rent, wages, social security contributions, taxes and loan instalments. Available assets are what can be used to pay at once: cash, and whatever turns into cash immediately. A company that shows its credit reserves or the payment terms granted by its creditors allow it to pay is not insolvent. It is therefore a cash-flow test, not a balance-sheet one: a loss-making company that pays on time is not insolvent, while a company with property but no cash can be. French law also uses the word insolvabilité, for debts that exceed the value of all the assets, but only cessation des paiements triggers the duty to file.
- Test
- Available assets below the debts due
- Exception
- Credit reserves, agreed payment terms
02
How do you know if a French company is insolvent?
On a given date, compare what the company already owes with what it can pay at once: if the second does not cover the first, it is insolvent (Article L. 631-1 of the French Commercial Code). Available assets include bank balances, cash in hand, investments that can be realised immediately and any authorised overdraft still unused. They exclude stock, equipment, premises, the business itself (fonds de commerce) and invoices customers have not yet paid. Debts due include overdue supplier invoices, rent, wages, social security contributions and taxes owed, and past loan instalments. They exclude instalments still to come and debts for which the creditor has granted more time, such as a payment plan with URSSAF, the social security collector, or the tax authorities. This statement is the first document filed with the court (Article R. 631-1). For a buyer, the same comparison shows whether a target's director is already bound by the 45-day deadline.
- Date
- One specific day
- Available assets
- Bank, cash, unused overdraft
- Debts due
- Overdue, with no extra time granted
03
Who sets the insolvency date in France, and why does it matter?
The court sets the date of cessation des paiements in the opening judgment; failing that, it is the date of the judgment (Article L. 631-8 of the French Commercial Code). It can later be moved back, even several times, to no more than 18 months before the judgment, at the request of the receiver (administrateur judiciaire), the creditors' representative (mandataire judiciaire) or the public prosecutor, within a year of the judgment. The 45 days run from it, so an earlier date can make a filing late. It also opens the suspect period (période suspecte), between that date and the judgment: a gift or the payment of a debt not yet due is void, other acts can be set aside (Articles L. 632-1 and L. 632-2). For a buyer, a purchase in that period is void if the price falls well short of the asset's value, and can be set aside if the buyer knew of the insolvency.
- Who sets it
- The court, in the judgment
- Moved back
- Up to 18 months before the judgment
04
What must a director do within 45 days of insolvency in France?
Within 45 days of insolvency, the director must apply to open receivership (redressement judiciaire) or judicial liquidation, unless conciliation has been requested within that time (Articles L. 631-4 and L. 640-4 of the French Commercial Code). Conciliation remains available while insolvency is no more than 45 days old (Article L. 611-4): a conciliator appointed by the court then seeks an agreement with the main creditors. The application is filed at the registry (greffe) of the competent court, with the declaration of insolvency and the documents listed in Article R. 631-1. The duty lies with the legal representative, including one who lives abroad, and the hearing takes place in French. A director who knowingly failed to apply in time can be disqualified from managing (Article L. 653-8). The delay can also be held to be mismanagement that contributed to a shortfall of assets (Article L. 651-2). A lawyer can help prepare the file; the director can also file alone.
- Deadline
- 45 days after insolvency
- Otherwise
- Disqualification possible
05
Insolvency in France: receivership or liquidation?
The court opens receivership if the business can keep trading, and judicial liquidation if its rescue is manifestly impossible (Articles L. 631-1 and L. 640-1 of the French Commercial Code). Receivership opens an observation period of 6 months, renewable, during which creditors' actions stop and a plan can be prepared (Articles L. 621-3 and L. 631-7). Liquidation stops the business and hands the sale of the assets to a liquidator; with no real property, 5 employees and €750,000 of turnover at most, it is simplified (Articles L. 641-2 and D. 641-10). A sole trader with no employee for six months and assets worth less than €15,000 can, under conditions, obtain professional recovery (rétablissement professionnel), without liquidation (Articles L. 645-1 and R. 645-1). Safeguard proceedings (sauvegarde) are no longer available: they require the business not to be insolvent (Article L. 620-1). For a buyer, both receivership and liquidation can lead to a sale of the business supervised by the court.
- Who decides
- The court
- Test
- Whether rescue is possible
06
SAS, SARL, sole trader or foreign company: what changes?
The definition and the 45-day deadline are the same for every form: what changes is who files and what is at stake. In an SAS or an SARL, the legal representative, the président or the gérant, files (Article R. 631-1 of the French Commercial Code); the debts remain the company's, unless there is a personal guarantee or mismanagement. A sole trader, micro-entrepreneur included, files in person; for debts arising since 15 May 2022, only the business assets are liable in principle (Article L. 526-22). An association is also covered (Article L. 631-2). Liberal professions and associations go to the civil court (tribunal judiciaire, Article L. 621-2), except where an economic activities court (tribunal des activités économiques) exists, which hears all businesses except the legal professions. A French subsidiary of a foreign group follows the same rules. A company registered abroad whose centre of main interests is in France comes under the French courts (Article 3 of Regulation (EU) 2015/848).
- Company
- The gérant or président files
- Sole trader
- Files in person
The timeline
The dates that follow insolvency in France
The starting point is the day the company can no longer pay its debts due with what it has available. Every other date follows from it, for the director as for a creditor or a buyer.
- Day 0
InsolvencyThe available assets no longer cover the debts due.
- 45 days at most
Requesting conciliationPossible while insolvency is no more than 45 days old; a request made within this period lifts the duty to file.
- 45 days
Applying to open proceedingsReceivership or judicial liquidation, at the registry of the competent court, with the declaration of insolvency.
- The judgment
The court sets the insolvency dateAfter asking for the debtor's observations; if no date is set, it is the date of the judgment. Acts between that date and the judgment can be challenged.
- 2 months after the BODACC notice
Creditors file their claimsWith the creditors' representative or the liquidator; 2 more months for creditors not based in mainland France.
- 1 year after the judgment
Last day to move the date backOn a request by the receiver, the creditors' representative or the prosecutor, and never to more than 18 months before the judgment.
At a glance
Which French procedure fits which situation?
What the law provides depending on whether the business is insolvent. The choice between receivership and liquidation belongs to the court.
| The situation | What the law provides | Key condition | Article |
|---|
| The company can pay all its debts | Voluntary winding-up: dissolution, then liquidation by a liquidator the shareholders appoint, with no insolvency proceedings | No unpaid debts due at the end | Article 1844-7 of the French Civil Code |
|---|
| Difficulties, not insolvent | Safeguard proceedings or conciliation | Not insolvent | L. 620-1 and L. 611-4 |
|---|
| Insolvent for 45 days at most | Conciliation still possible, otherwise receivership or liquidation | No more than 45 days since insolvency | L. 611-4 and L. 631-4 |
|---|
| Insolvent, the business can recover | Receivership | Rescue possible | L. 631-1 |
|---|
| Insolvent, rescue impossible | Judicial liquidation | Rescue manifestly impossible | L. 640-1 |
|---|
| Same, small business with no real property | Simplified liquidation, by law | 5 employees and €750,000 of turnover at most | L. 641-2 and D. 641-10 |
|---|
| Sole trader with few assets | Professional recovery, without liquidation | No employee for six months, assets below €15,000 | L. 645-1 and R. 645-1 |
|---|
The court assesses the criteria on the file. A lawyer can help choose the procedure to request and prepare the documents; the director can also file alone. Unless stated otherwise, article numbers refer to the French Commercial Code.
Common questions
Your questions about insolvency in France
Is cessation des paiements the same as insolvency?
Not exactly. Cessation des paiements is a cash-flow test: the business cannot pay its debts due with what it has available at once (Article L. 631-1 of the French Commercial Code). Insolvabilité looks at the balance sheet: debts exceed the value of all the assets. A company that owns its premises but has no cash can be in cessation des paiements without its debts exceeding its assets. Only cessation des paiements starts the 45-day deadline.
Does an authorised overdraft count as available assets?
Yes, for the part still available. Article L. 631-1 of the French Commercial Code provides that a business which shows its credit reserves allow it to meet its debts due is not insolvent. An overdraft already fully drawn, or one the bank has terminated, no longer counts.
Does a payment plan with URSSAF or the tax authorities prevent insolvency?
Yes, if it has been granted and is being kept to: a debt for which the creditor has agreed to wait is not due during that time. Article L. 631-1 of the French Commercial Code expressly refers to such agreed payment terms. A request for a payment plan that has gone unanswered is not enough, and a missed instalment becomes due again.
What happens if the director files after 45 days?
The application is still admissible: the court opens proceedings as it would for an application made in time. The delay does expose the director: disqualification from managing can be ordered if they knowingly failed to apply within 45 days (Article L. 653-8 of the French Commercial Code), and the delay can be held to be mismanagement if the assets fall short of the debts (Article L. 651-2).
Can a foreign creditor start insolvency proceedings against a French company?
Yes. Any creditor, whatever the nature of its claim and wherever it is based, can petition for receivership or liquidation, and the public prosecutor can refer the case (Articles L. 631-5 and L. 640-5 of the French Commercial Code). The court then checks the insolvency itself. Proceedings opened on a creditor's petition do not cure a director's delay in filing.
How is the 45-day period counted?
It runs from the date of insolvency, and every calendar day counts. The difficulty lies in that starting date: the court sets it in the judgment and can move it back to as much as 18 months before the judgment (Article L. 631-8 of the French Commercial Code). An insolvency date earlier than the one the director had in mind can make a filing late.
Does insolvency always lead to liquidation in France?
No. The court opens receivership if the business can keep trading, and keeps liquidation for businesses whose rescue is manifestly impossible (Articles L. 631-1 and L. 640-1 of the French Commercial Code). If insolvency is no more than 45 days old, conciliation also remains possible (Article L. 611-4).
What does insolvency change for someone buying a French company?
It changes who sells and how. Before any proceedings, the shareholders sell their shares, but an insolvent target must file within 45 days (Article L. 631-4 of the French Commercial Code), and purchases of its assets after the insolvency date can be challenged (Articles L. 632-1 and L. 632-2). Once receivership or liquidation opens, the business is sold under the court's control, on offers made to the receiver or the liquidator (Articles L. 631-22 and L. 642-2).
Other guides
Other situations
Closing a companyClosing a French companyVoluntary winding-up, dormancy or court: the route depends on the debtsFilingFiling for bankruptcy in FranceThe filing, the documents, the court, what happens nextSafeguardSafeguard proceedingsProtecting a French company before it becomes insolventLiquidationJudicial liquidation in FranceThe judgment, the liquidator, the closing, what remains to be paidReceivershipReceivership in FranceThe observation period, the plan, the sale, the conversionBuy or sellBuying or selling a French businessBuying out of receivership or liquidation, selling before closingDirector's liabilityWhat a director risksPersonal guarantees, mismanagement, disqualification, personal bankruptcyMicro-entrepriseClosing a micro-entrepriseAuto-entrepreneur, sole trader: debts, assets, professional recovery
