Insolvency 2025

FRANCE Law and Practice Contributed by: Anne-Sophie Noury, Saam Golshani and Alicia Bali, White & Case

5. Statutory Insolvency and Liquidation Procedures 5.1 The Different Types of Liquidation Procedure Judicial liquidation proceedings apply to a debtor that is insolvent and whose recovery is manifestly unfeasi - ble. The liquidation proceeding may be initiated by an insolvent debtor, a creditor or the public prosecutor. The purpose of such a proceeding is to liquidate a company by selling it as a whole or by selling each branch of activities or asset one by one. To request the court to open an immediate liquida - tion proceeding, the debtor must show evidence that its recovery is hopeless and obviously impossible. The court may order the immediate liquidation of the debtor’s assets and will appoint a liquidator to replace the debtor in its management and proceed with the sale of the assets (private sale or auction). However, when it seems possible that all or part of the business has the chance to be sold to a third party, then the operation of the company will continue tem - porarily for up to six months. A simplified variant of such proceedings does exist, if the debtor meets three criteria: (i) it does not own any real estate property; (ii) its number of employees in the six-month period preceding the opening judg - ment is five at most; and (iii) its net turnover is below EUR750,000. Under simplified judicial liquidation proceedings, claims do not have to be verified, the judicial liquida - tor is not required to ask the bankruptcy judge to sell the debtor’s assets and the proceeding should last in principle no more than six months, or one year if the debtor employs at least one employee and has a net turnover in excess of EUR300,000; in both cases, the court may extend the proceeding duration for an additional three-month period. It should be noted that there is no sanction attached to failing to comply with the time limit, and the proceeding is not automatically terminated on expiry of the time limit.

5.2 Course of the Liquidation Procedure Creditors must file a petition for their claims within two months from the publication of the opening judgment in the BODACC ( Bulletin officiel des annonces civiles et commerciales Official Gazette for Civil and Com - mercial Announcements). Creditors residing outside of France can avail themselves of an extension period of up to four months for declaring their claims. Failure to file a claim within this time limit will render the credi - tors unable to take part in the subsequent distribution of funds as part of the plan. All claims are required to be declared, whether contingent or unquestionable. The proceedings may be officially commenced from the judgment ruling, the beginning of the judicial reor - ganisation or the opening of liquidation proceedings. During liquidation proceedings, a liquidator is appoint - ed by the court, and the management of the debtor is usually (but not necessarily) divested of all rights pertaining to the business of the debtor and the dis - posal of assets. Given the severity of the financial difficulties encountered by the distressed debtor, the debtor’s estate will usually be managed entirely by the liquidator. As for statutory restructuring, rehabilitation and reor - ganisation proceedings, the bankruptcy court has exclusive jurisdiction over all disputes arising from the liquidation procedure, but any dispute not directly related to the procedure and arising from facts or con - tracts predating the procedure, and that would have occurred in the same manner irrespective thereof, can be brought before arbitration courts. In practice, how - ever, the use of arbitration in the context of a liquida - tion procedure remains exceedingly rare. 5.3 The End of the Liquidation Procedure(s) The court will end the judicial liquidation proceedings when either of the following occurs: • no due liabilities remain, or the liquidator has suf - ficient funds to pay off the creditors; or • continuation of the liquidation operations becomes impossible due to insufficient assets.

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