What is a judicial liquidation?
A compulsory liquidation is a procedure set up when a debtor is no longer able to pay its debts and is in a situation where it cannot be expected to continue its business operations.
Assets are sold to pay creditors, and legal proceedings are initiated or continued by the insolvency practitioner, in the collective interest of creditors.
The judicial liquidation procedure puts a definitive end to the company’s business, except in exceptional cases where the business can be maintained for a maximum of 6 months.
What situations are covered by judicial liquidation?
Judicial liquidation proceedings are used when a company is insolvent and receivership is impossible. It is also used when the legal receivership procedure has not produced the expected results or is no longer feasible
Who is involved in a judicial liquidation?
The commercial court initiates proceedings and appoints the bodies responsible for conducting them. An insolvency practitioner is appointed as liquidator. The liquidator exercises the debtor’s rights and actions over his assets for the duration of the liquidation. The liquidator is responsible for realising the company’s assets, verifying debts and laying off any employees.
The opening judgment of a judicial liquidation also appoints a juge-commissaire (bankruptcy judge), who is responsible for ensuring that the proceedings run smoothly and protect the interests involved.
When does a judicial liquidation begin?
Judicial liquidation proceedings may be initiated at the request of the debtor (declaration of insolvency), creditors or the Public Prosecutor. A liquidation may be ordered following the conversion of a safeguard or receivership procedure. The court summons the legal representative to appear in chambers on the application to open proceedings.
The request to open liquidation proceedings must be made to the registry of the commercial court where the company’s registered office is located.
How are liquidation proceedings conducted?
The liquidator proceeds with the realisation of assets and the recovery of debts and verifies declared claims. Judicial proceedings are initiated or continued by the insolvency practitioner. At the end of these operations, the liquidator applies to the court for closure.
What are the effects of a judicial liquidation?
As soon as the judicial liquidation order is issued, the company manager is relieved of his duties and the company’s operations are halted, unless otherwise authorised by the court for a period of three months, renewable once.
All legal proceedings are blocked, and any legal action against the debtor becomes impossible or is suspended. Interest payments are stopped, and interest and additional charges are frozen, with the exception of interest on loans of more than one year.
Employees’ contracts of employment are terminated within 15 days, or 21 days if an employment protection plan is drawn up. Claims arising from the termination of employment contracts are eligible for any guarantee provided by the wage guarantee insurance organisation. All creditors’ claims against the company become due and payable.
