Company Liquidation in France
Company liquidation in FranceUpdated on Thursday 07th November 2019
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Company liquidation in France is the process that follows the dissolution of a commercial company. The liquidation phase begins as soon as the dissolution is pronounced and has the purpose of settling any debts of the company and paying all the existing creditors. The liquidation procedure in France is regulated by various article and decrees. The procedure can also be regulated by the by-laws of the French company or through an agreement between the founding partners.Our French lawyers can help you throughout the entire company liquidation process.
Legislation on company liquidation in France
There are several laws which provide for the company liquidation procedure of a French company. Among these are:
- the French Commercial Code from article 610 to 680 and article 811 which was recently introduced in the legislation;
- Law No. 2016-1547 which provides for the modernization of 21st century justice;
- EU Regulation No. 1346/2000 which provides for cross-border insolvency proceedings;
- EU Regulation No. 2015/848 which provides for amended cross-border insolvency proceedings.
Under these regulations, companies, including sole traders in France must first go through insolvency and restructuring procedures and only then start the liquidation process which can be voluntary or compulsory. Our attorneys in France can offer comprehensive information on the national and EU legislation applicable in insolvency and liquidation procedures.
Entities which can undergo insolvency procedures before liquidation
The French Commercial Law contains various articles with respect to the insolvency and restructuring procedures followed by company liquidation for different types of legal entities. The law provides for the following types of entities to first try reorganization before liquidation:
- sole traders;
- legal entities, such as SARL, SA and SAS companies;
- civil companies;
On the other hand, natural persons, entities governed by public laws, partnerships or other associations which are not registered with the Commercial Registrar cannot undergo reorganization. Our law firm in France can assist companies seeking to reorganize in an attempt to avoid liquidation.
Grounds for company liquidation in France
A French company’s liquidation can be decided in one of the following cases:
- the shareholders have passed a resolution through which the decision of closing the company was made;
- the company has accumulated debts and is the position of not being able to pay them, case in which the creditors will file for liquidation with the court;
- the company was created for a limited period of time which has come to an end;
- the number of shareholders has fallen below the minimum imposed by the Company Law.
Commercial companies, partnerships and sole traders can undergo liquidation in France.
Types of company termination in France
The dissolution of a company can be voluntary or ordered by the court. After the dissolution is agreed upon or ordered, the liquidation phase begins. During this time, the company continues to exist, but its sole purpose is to settle any existing debts. The legal entity can no longer perform commercial activities or be transformed into another French company. During the liquidation, the company shall include the fact that it is undergoing this stage in its name. After the liquidation is complete, the company is removed from the Trade Register. It is impossible for the business partners to cancel the procedure and restore the company once the dissolution and liquidation have entered into effect.
Publication of the liquidation decision of a French company
Once the company liquidation is agreed upon and a liquidator is appointed, the decision must be advertised. The following process must be completed in order for the liquidation procedure to begin:
- file the decision of company liquidation with the Official Gazette in France;
- the appoint of the liquidator must be published in the same Gazette;
- a declaration must also be submitted to the local tax office which will issue the latest financial statements of the company;
- file a copy of the liquidation decision with the Commercial Tribunal in France;
- file an application for de-registration with the French Chamber of Commerce.
Our law firm in France can guide foreign company owners who want to liquidate their businesses.
The liquidation procedure in France
When the dissolution is requested internally, a liquidator is appointed during a general shareholders meeting. He or she can be a professional liquidator or one of the former company managers who undertakes to perform this phase. The individual will represent the company throughout the liquidation procedure and will perform all and any necessary activities for completing the liquidation.
When the liquidation is ordered by a court in France, the liquidator will be appointed by the court. The company’s representative will have to prepare the documents needed for company liquidation in France. They usually include a filled in standard form, the most recent annual accounts, a list of assets, receivables and the company employees and also identification details for the company’s representatives.
Company dissolution without liquidation in France
The direct dissolution of a company without liquidation is available for companies owned by other companies in France. This is also the case of holding companies which can be terminated directly. This procedure is shortly known as TUP (transfert universel de patrimoine). Considering in this situation, the company is the sole shareholder in the other business entity, the decision to dissolve the owned company will be taken directly by the shareholder and must consider the following:
- the creditors’ interests must be respected at the moment the decision was made;
- the remaining assets after all debts have been cleared must be transferred to the shareholder;
- the TUP decision must be drafted and signed by the shareholder and then filed with the Trade Register;
- the TUP decision must be published in the Official Gazette within 30 days from its signing;
- in case a creditor arises with claims during the 30-day period, the shareholder must provide a guarantee for the payment of the debt.
Once the company is liquidated, it can also be de-registered with the Commercial Court and Trade Register in France. This procedure will usually take about one month to complete.
Timeframe for filing for company liquidation in France
The French legislation provides for different timeframes when it comes to making decisions and filing for company liquidation and dissolution. In the case of voluntary company liquidation, the decision taken by the shareholders must be transmitted to the Companies Register within 45 days. In the same timeframe, the petition for insolvency must be filed with the court, unless a conciliator is appointed to draft a reorganization plan. In the case of compulsory liquidation, the company has 6 months to prepare a reorganization plan. After that, the court will issue the decision of company liquidation.
Courts specialized in company liquidation in France
In order to simplify the company liquidation procedure, the French Commercial Law provides for specialized courts to handle compulsory liquidation. The following companies can undergo insolvency, restructuring and dissolution with the special commercial courts in France:
- companies with at least 250 employees and a minimum annual net turnover of 20 million euros;
- companies with a minimum annual net revenue of 40 million euros;
- companies owning or controlling other businesses with at least 250 workers and an aggregate annual income of at least 20 million euros;
- companies owning other businesses with consolidated annual net revenues of at least 40 million euros.
It is possible for a commercial court to send the case to another specialized court, under the provisions of the Insolvency Law. It is also possible for members of the same group of companies to undergo separate liquidation procedures.
Assistance offered by French lawyers
The liquidator must issue periodical reports about the status of the procedure. He or she must also verify any existing claims from creditors and draw up financial statements, as needed. When the process is complete, the appointed individual must prepare the final company accounts. A general shareholder’s meeting will take place at this time so that the shareholders can approve the final accounts. The liquidator will make a request to de-register the company from the Commercial Register. The application should be submitted within one month after the termination of the liquidation phase. If the request is not submitted, the company can be automatically removed from the register within three years.
The entire company liquidation procedure should not take more than three years after the decision to dissolve the company. Any remaining assets of the company are distributed among the shareholders but only after every creditor has been paid off. Because the final purpose of the liquidation procedure is to pay all creditors, the liquidator will need to perform a thorough debt collection. Our lawyers in France can assist you throughout this procedure and help you settle any litigation.
Our law firm in France can provide complete assistance for the liquidation of a commercial company in France. Please contact our office in France if you want to deal with other legal matters, such as opening a company in France. You can rely on us no matter if you need company insolvency, restructuring or liquidation and dissolution services.