A company in difficulty: what to do, and in what order

It always starts with signals : a receivable that stretches out, a tax or social deadline pushed back, an overdraft that no longer clears, a major contract lost. The law draws a line between two very different states, and the border between them governs everything else.

On one side, difficulty, whether legal, economic or financial, actual or merely foreseeable : at this stage the company can still pay its debts and has access to the preventive procedures, discreet and flexible. On the other, suspension of payments (cessation des paiements), defined in article L631-1 of the Commercial Code as the inability to meet debts due with available assets : the debts that have fallen due exceed immediately available cash. Credit lines and moratoria granted by creditors count as available assets ; a negotiated reprieve can therefore, in law, rule out suspension of payments.

This threshold is not merely an accounting notion : it triggers an obligation. The director must declare suspension of payments to the court registry within 45 days (article L631-4), unless, within the same period, they have requested the opening of a conciliation. Declaring late is not harmless : it is one of the main grounds that can support liability for insufficient assets (article L651-2), even personal bankruptcy or a ban on managing (articles L653-1 et seq.). The right reflex is the opposite of instinct : not to hide the difficulty, but to face it and treat it as early as possible.

This is the least known secret of insolvency law : most successful rescues happen before any collective procedure, in discretion. When a statutory auditor triggers an alert procedure (article L234-1) or the president of the court summons a director (article L611-2), it is not a sanction : it is an invitation to open, in time, one of the two amicable procedures.

The ad hoc mandate

At the director's request, the president of the court appoints an ad hoc representative (mandat ad hoc, article L611-3) and sets their mission. The procedure is entirely confidential : neither employees through the works council nor the market are informed. It has no statutory time limit, and above all the director keeps all their powers. The representative has no binding power over creditors : they facilitate the negotiation, they do not impose it.

Conciliation

More structured, conciliation (articles L611-4 to L611-16) is open to companies facing an actual or foreseeable difficulty that have not been in suspension of payments for more than 45 days. The conciliator is appointed for no more than four months, extendable by one (five months in total). The agreement reached can be simply acknowledged by the president of the court (it becomes enforceable and stays confidential), or approved by the court (it is then made public, but opens a decisive advantage). For approval triggers the « new money » privilege (article L611-11) : those who inject fresh cash into the agreement are paid by priority, ahead of almost all other creditors, should a collective procedure follow. A powerful lever to attract an investor at the right moment.

The pre-pack sale

One last subtlety, and not the least : the pre-pack sale (pré-pack cession). The law (article L611-7) allows the conciliator to be given a mission to organise a sale, partial or total, prepared in confidence, then carried out quickly in a collective procedure opened afterwards (article L642-2 II). The acquirer is negotiated away from view, the flight of clients and talent that a public reorganisation announcement causes is avoided, and a mature solution is put to the court. For a serious acquirer, it is the ideal setting : time to analyse, and legal certainty on arrival.

When prevention is no longer enough, the law opens three court procedures, told apart by one simple test : is the company in suspension of payments, or not?

Safeguard (sauvegarde, article L620-1) is the procedure of anticipation : it opens before suspension of payments, at the director's sole initiative, to reorganise a company facing difficulties it cannot overcome. Its variant, accelerated safeguard (sauvegarde accélérée, articles L628-1 et seq.), extends a conciliation and imposes a plan within 2 months, 4 months at most : a fast financial-restructuring tool for larger companies.

Judicial reorganisation (redressement judiciaire, articles L631-1 et seq.) assumes suspension of payments, but with a prospect of recovery. It can be requested by the director, brought by a creditor, or sought by the public prosecutor. The opening judgment sets the date of suspension of payments, which opens a « suspect period » during which certain acts can be voided (article L632-1).

Judicial liquidation (liquidation judiciaire, articles L640-1 et seq.) applies when recovery is manifestly impossible. The director is divested ; a liquidator realises the assets. But liquidation does not always mean disappearance : the court may authorise a temporary continuation of activity (article L641-10) precisely to allow a sale of the business. The smallest structures, with no real estate, fall under a simplified liquidation, faster (mandatory up to 1 employee and 300,000 € turnover ; optional up to 5 employees and 750,000 €).

A collective procedure brings several court-appointed officers on stage, often confused with one another. Telling them apart means understanding who decides, who defends which interests, and whom to talk to.

The court opens the procedure and rules on the big decisions : the Commercial Court (tribunal de commerce) for traders, craftspeople and commercial companies ; the Judicial Court (tribunal judiciaire) for the rest (regulated professions, farmers, associations). Since 1 January 2025, twelve courts have been trialling, until the end of 2028, a Court for Economic Activities (tribunal des activités économiques, TAE) competent for all of these procedures, whatever the debtor's status.

The supervising judge (juge-commissaire, article L621-9), appointed in the opening judgment, ensures the procedure runs swiftly and that the interests at stake stay balanced ; they authorise important acts and admit claims.

The judicial administrator (administrateur judiciaire, article L621-4) assists the director in management, or administers the company, and prepares the plan or the sale. Their appointment becomes mandatory from 20 employees and 3 million euros of turnover. The creditors' representative (mandataire judiciaire, articles L621-4 and L622-20), by contrast, does not defend the company but the collective interest of the creditors : they verify declared claims and, in a liquidation, become the liquidator. Alongside them are the public prosecutor (guarding the economic public order), supervisors (contrôleurs) chosen among the creditors (article L621-10), an employees' representative, and the AGS, the scheme that advances unpaid wages up to around 96,120 € per employee in 2026.

The observation period has one purpose : to choose the best exit. Two broad routes are open to a company that can be saved.

The continuation plan

The company stays owned by its directors and repays its liabilities over time, on a schedule set by the court, up to 10 years. For large structures, the 2021 reform introduced classes of affected parties (articles L626-29 et seq.) : creditors and shareholders vote on the draft plan by class ; the court may, under conditions, impose the plan on dissenting classes (the « cross-class cram-down »). These classes are mandatory above 250 employees and 20 M€ of turnover, or 40 M€ of turnover.

The sale plan

When standalone continuation is not realistic, the sale plan (plan de cession, articles L642-1 et seq.) transfers all or part of the business to a third-party acquirer. Its purpose is set in law : to preserve activities capable of standalone operation, all or part of the jobs, and to clear the liabilities. Offers are filed with the judicial administrator and must set out (article L642-2 II) the scope taken over, the activity and financing forecasts, the price, the guarantees, and above all the level and outlook for employment. The court does not mechanically keep the highest offer : it chooses the one that, on the best terms, preserves employment and pays the creditors.

For the acquirer, the appeal is considerable : they take the designated assets and contracts (article L642-7) free of almost all prior liabilities, while taking on the employees attached to the business (article L1224-1 of the Labour Code). One essential point : the director and their relatives cannot, in principle, buy back their own company at the hearing (article L642-3). The court may authorise it only exceptionally, at the public prosecutor's request.

Buying at the hearing is not speculating on a ruin : it is committing to keep alive, afterwards, what others could not hold. That is why the court looks first at the project, not just the cheque. A winning offer rests on four pillars : a credible operating plan, secured financing, serious guarantees, and a clear commitment on employment. Price counts ; it is never enough.

The hard part, for the acquirer, is time : a procedure demands due diligence in a few weeks where a standard acquisition would take several months. Reading an asset quickly, telling what can recover from what is collapsing, structuring a binding offer within the deadlines : it is a craft. The craft of an investor who has already stood beside directors in these moments, and who knows that the value of an acquired business lies in what is preserved (the teams, the clients, the know-how) far more than in what is dismantled.