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 articles 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;
- merchants;
- farmers.
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 attorneys 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 in 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.
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.
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.
Closing a company in France, in short steps
To better understand how to wind up a company in France, we invite you to read the following guide:
- Shareholders of the company in question unanimously decide to close the company, following a general meeting. A decision is issued in this regard.
- Company dissolution can also be decided by court order in France. In this sense, we move on to the following procedures that involve an analysis of the company in question.
- There is also the option of voluntary company dissolution, a decision that is taken at the general meeting with shareholders.
- A liquidator is appointed in charge of verifying the company assets, after which they must be sold in order to pay the debts.
- The notice of company dissolution is then published in the Official Gazette in France. This document must include information about the reason for closing the company in France, the name of the liquidator and his/her limitation powers, and other details.
- The decision of company liquidation in France must be announced with the French Trade Register in order to make the necessary changes. This decision must be accompanied by form M2, copies of the minutes of dissolution, confirmation of the publication of the notice of projected dissolution plus a declaration of non-conviction of the liquidator in charge.
These are some of the procedures related to winding up a company in France. More about how to close a company in France can be discussed with our French lawyers.
About the liquidator named for company dissolution in France
When closing a company in France, many important aspects must be taken into account, including the appointment of a liquidator. He/she has various responsibilities, as follows:
- Analyzes company assets in the first phase.
- Reports to shareholders the financial situation of the company. This specialist can collaborate with a French accountant.
- Is in charge of selling the assets of the company that is about to be closed.
- After the sale of company assets, he/she will take care of paying the debts of the firm in question.
- The liquidator must also check the bank accounts, following the sale of company assets. Here it will be determined whether there are losses or profits, depending on the debts that the respective company had.
A liquidator has a major significance and support in closing a company in France. This is appointed at the beginning of the company dissolution process.
Assistance offered by French lawyers
The entire company liquidation procedure should not take more than three years after the decision to dissolve the company. Our French lawyers have experience in winding up companies in France and can provide the required assistance. Because the final purpose of the liquidation procedure is to pay all creditors, the liquidator will need to perform a thorough debt collection.
In addition to specialized advice for company liquidation in France, our specialists can also help you in other areas. For example, you can ask for legal advice when buying a property in France and thus ensure that you meet all the conditions in this regard. Please contact our office in France if you want to deal with other legal matters. Our lawyers can also help you open a business in France in approx. 2 weeks