File for bankruptcy chapter -How to file for bankruptcy?
Filing for bankruptcy means, in common parlance, the declaration of cessation of payments that any entrepreneur must make when he is no longer in a position to pay the debts of the enterprise. It obeys need rules and is a serious situation for the company which, in most cases, will lead to liquidation.
How to file for bankruptcy?
What is the cessation of payments? What are the consequences of filing for bankruptcy? When should it be done and what is the risk of delaying the deadline? How to file for bankruptcy? At Your Domain Name, there is a solution.
It is carried out by the legal representative of the legal person or the natural debtor person at the registry of the competent court (commercial court for traders and craftsmen, the high court in other cases).
The parts to be deposited essentially include:
– the declaration of cessation of payments and the statement of liabilities payable and available assets;
– the annual accounts of the last financial year;
– a registration certificate at the RCS or the register of trades;
– a cash position of less than one month old;
– the name and address of the employees;
– the amount of turnover at the closing date of the last financial year;
– the quantified statement of claims and debts;
– the asset and liability status of collateral and off-balance sheet commitments;
– the summary inventory of the debtor’s assets.
Where certain documents can not be provided, the application must indicate the reasons that prevent such production.
What is the cessation of payments?
The bankruptcy filing occurs when the company is “unable to meet its liabilities due to its available assets, is in cessation of payments” (Articles L. 631-1 and L. 640-1 of the Commercial Code).
Current liabilities consist of debts that creditors may demand immediately. These debts must be certain (not contentious) and liquid (at the determined amount): invoices expired, wages to pay, etc.
Available assets are everything that can be turned into cash immediately or in the very short term without making it impossible to continue the business. These are, for example, goods that are not essential to the business and that can be sold quickly or receivable that come to an end.
The Court of Cassation has thus specified that the purchase price of the goodwill, the amount of work carried out on the premises or the value of the stock of goods can not be taken into account. Similarly, the assets of a corporation consisting of two immovables that are not yet sold are not considered available, nor are any land to be expropriated.
It is sometimes difficult to know whether or not the company is in a state of cessation of payments. The case law has identified the following:
- the state of cessation of payments may not be deducted from the mere statement of a loss result (Com 3 Nov. 1992) or an operating loss and the non-payment of wages (Com 9 Jan. 1996). );
- the concept of cessation of payments should not be confused with that of “irreparably compromised situation” referred to in Article L. 313-12 of the Monetary and Financial Code (Com 31 Mar. 2004);
- there is no cessation of payments unless the debtor is unable to meet its due liabilities, ie due, with its available assets (T. com, Lille, May 5, 1987).
What are the consequences of filing for bankruptcy?
The filing of the balance sheet results in the opening of a collective procedure that places the operation of the company under judicial control. It has the effect of depriving creditors of the right to act individually.
Depending on the chances of survival of the company will be opened a judicial reorganization or liquidation proceedings.
Article L. 631-1 of the Commercial Code states that “the procedure of judicial reorganization is intended to allow the continuation of the activity of the company, the maintenance of the employment and the clearance of the liabilities”.
On the other hand, the liquidation procedure is intended to put an end to the activity of the company or to realize the assets of the debtor by a global or separate assignment of his rights and his property.
When does one have to file for bankruptcy? What is the risk of not doing so?
The bankruptcy filing must occur no later than 45 days after the cessation of payments (Articles L. 631-4 and L. 640-4 of the French Commercial Code). However, the company may, within this period, request the opening of a conciliation procedure (see below), in which case it does not have to file the balance sheet. If the conciliation fails and it appears from the report that the debtor is in cessation of payments, the court ruled ex officio on the opening of a collective procedure (same articles).
It is very important to file for bankruptcy within the time period provided by law. The risks involved are heavy in terms of liability and penalties.
From the point of view of accountability, leaders can be condemned to fill the asset gap. In fact, the management fault referred to in Article L. 651-2 of the French Commercial Code may be characterized by the delay in filing the balance sheet, according to the Court of Cassation’s consistent case law (8 Dec. 1998, 8 Oct 1996, May 28, 1991, etc.).
Warning: this action for liability must be distinguished from the obligation to social debts, wider and without condition of insufficiency of assets, provided for in Article L. 652-1 of the Commercial Code. The latter applies, in particular, to the manager who “abusively pursued, in a personal interest, a loss-making operation that could only lead to the cessation of payments by the legal person”.
From the point of view of sanctions, the leader “who has failed to make the declaration of cessation of payments within 45 days, without, moreover, having requested the opening of a conciliation procedure” may be condemned to “the prohibition to direct, manage , administering or controlling, directly or indirectly, any commercial or artisanal enterprise, any agricultural holding and any legal person, or one or more of them “(Article L. 653-8 of the French Commercial Code).
Personal bankruptcy, which immediately carries all of these prohibitions, may even be pronounced against the person who has “made purchases for resale below the price or used ruinous means to provide funds” with the intention of avoiding or delaying the filing of the balance sheet ( Article L. 653-5 of the French Commercial Code).
Are there alternative solutions to filing for bankruptcy in case of difficulties?
Before being in a position to file for bankruptcy, the company that is in serious difficulty can use the ad hoc mandate or the safeguard procedure. Even if it is already in cessation of payments, it can still, within 45 days, open a procedure of conciliation.
The appointment of an ad hoc agent, recognized as a stand-alone procedure for the prevention of business difficulties, is characterized by its flexibility and confidentiality. The agent’s mission is to assist the manager in the survival of the company.
Warning: This mechanism can not exempt the officer from filing for bankruptcy if the company is in cessation of payments. He can always be punished for not having done so (With 10 May 2005).
Article L. 620-1 of the French Commercial Code provides for a safeguard procedure designed for the company that proves difficulties that it is unable to overcome, such as to lead to the cessation of payments. It is intended to facilitate the reorganization of the company in order to allow the continuation of the economic activity, the maintenance of the employment and the clearance of the liabilities.
This procedure is for companies that are not yet in a state of cessation of payments. Nevertheless, if it appears after its opening that the debtor was already in this case, the court converts it into proceedings for bankruptcy (Article L. 621-12 of the Commercial Code).
The conciliation proceduremay take place even though the company may file a balance sheet. It is addressed, in fact, to people who “experience a legal, economic or financial difficulty, come from or foreseeable, and have not been in cessation of payments for more than 45 days” (Article L. 611-4 of the Code of Trade).
The conciliator is then appointed with the mission of “encouraging the conclusion between the debtor and its main creditors and, if applicable, its usual contractual partners, of an amicable agreement intended to put an end to the difficulties of the company”. The failure of the conciliation gives rise to the opening of a judicial reorganization or liquidation.