File for bankruptcy CT -Filing for bankruptcy: what you need to know in 3 minutes
Bankruptcy filing is the term used in everyday language to refer to the termination of a business. Faced with problems of profitability or cash flow, it is sometimes the only way out for the entrepreneur.
Filing for bankruptcy: what you need to know in 3 minutes
How is a bankruptcy filing? At this Web Site, you will find all necessary information regarding the bankruptcy filing.
Used in familiar language, bankruptcy covers the current legal concept of a declaration of cessation of payments (DCP). This has nothing to do with the obligation to file its balance sheets and annual accounts for commercial companies.
Attention : The SAS have the legal obligation to deposit their accounts with the registry of the commercial court in the sector of which their head office is located. It is a legal and annual obligation that all commercial companies have.
The bankruptcy filing occurs when the company faces unpaid debts, can no longer honor its debts, can no longer pay wages, has no more cash available and no more credit. The declaration of cessation of payments is the starting point of a collective proceeding that may lead to the recovery of the company or its liquidation.
The cessation of payments is reached when the company can no longer meet its current liability with its available assets. The liability payable includes all civil or commercial debts of the company as long as they are certain, liquid and payable. Thus, a disputed invoice does not enter into the liability payable whereas an invoice that has fallen due is in fact part of it even if the creditor does not appear yet to claim payment. Available assets correspond to the credit balances of bank accounts, credit reserves, payment moratoriums granted by creditors. Added to this is the realizable asset, which the company can easily sell as transferable securities or discounted commercial paper but not the stock of goods or real estate.
The bankruptcy filing differs from the insolvency: in the latter case, the entire liability of the company is greater than the entire asset. A company can thus be solvent but be in cessation of payment and vice versa.
Which legal forms of business are affected by bankruptcy? Anyone carrying out a commercial or craft activity: farmer, sole proprietorship, self-entrepreneur, liberal profession, commercial company such as SAS or SA, association.
Once declared cessation of payments, preventive measures such as the appointment of an ad hoc agent or a safeguard procedure, to allow the company to survive are no longer possible. Only an attempt at conciliation with a creditor is still possible.
The manager of the company, legal representative, must file the balance sheet within 45 days after the observation of the cessation of payments. The court analyzes the accounting and financial documents of the company to decide the consequences for the company. Articles R 631-1 and following of the Commercial Code detail the procedure. It is also possible that the insolvency proceedings are initiated by a creditor of the company, which does not exempt the company from subsequently carrying out the procedure described below.
The competent court depends on the legal nature of the business: registry of the commercial court for traders, commercial companies and self-employed craftsmen; Registry of the District Court of the head office for farmers, the liberal professions, self-service contractors and others.
The bankruptcy filing is accompanied by a request to open insolvency proceedings, recovery or liquidation in the SARL for example. The declaration of cessation of payments is made using the form cerfa 10530 * 01. The 9 pages of the document should be carefully completed to allow the court to obtain a comprehensive and realistic view of the situation of the company. The legal representative of the company may add an explanatory statement to justify the situation in which the activity is located.
The bankruptcy filing is accompanied by a large number of supporting documents, dated and signed, recent and therefore the absence must be motivated:
- the latest annual accounts and balance sheets,
- the liability payable and the available assets,
- a cash flow statement that is less than a month old,
- the statement of receivables and debts with details of figures and persons involved,
- number and names of employees,
- inventory of the company’s assets,
- the list of joint and several managers of the company, if any,
- contact details of staff representatives,
- a certificate of honor certifying the absence of an ad hoc mandate or conciliation procedure,
- the designation of the professional order or the competent authority if the enterprise is engaged in a liberal profession,
- a Kbis extract of less than a week
- the copy of an identity document of the legal representative.
How much does a bankruptcy filing cost? The declaration of cessation of payments to the court has no specific cost. Some attachments such as a pledge statement or a Kbis extract have a low cost. The remainder of the proceedings has a real cost since the court-appointed agents receive remuneration, which depends on the length and complexity of the case.
Consequences of filing for bankruptcy
The court seized will study the file, hear the useful persons as the legal representative, the public prosecutor, the representatives of the staff within 15 days. Then he notices the state of cessation of payments and opens a collective procedure. The court may also dismiss the opening application and refuse to acknowledge the cessation of payments.
The judgment must be reasoned as to the reality of the cessation of payments, must determine the actual date of cessation of payments and must initiate a reorganization procedure, or even immediately decide the judicial liquidation of the company if it considers that no survival activity is not possible. In this case, he appoints a liquidator to put a definitive end to the company: the liquidator fires the employees and their rule the amounts due through the National Fund wage guarantee. Then he sells the assets and pays the creditors according to a legal order. The manager of the company is no longer authorized to manage the activity.
The filing date opens a retroactive suspicious period of up to eighteen months during which the management acts and decisions made by the directors may be annulled by the court.
In the event of the opening of a bankruptcy procedure, the judgment opens a period of observation, generally from 2 to 6 months and up to 18 months, during which the activity continues. A court-mandated administrator assists the officer, or manages the company in place of the officer. A creditors’ representative is also appointed to collectively defend the interests of all creditors of the company. Either a continuation plan is established with a staggered repayment of debts, or a plan for the transfer of the business to a buyer is considered. Finally, at the end of this observation period, the conclusion can also lead to the judicial liquidation of the company.
The consequences of bankruptcy for employees are framed: they enjoy a super-privilege to avoid having to declare their debts and placing them in the first rank of people to pay. Either the company finds sufficient funds and pay wages up to twice the ceiling of social security, or the company does not have sufficient liquidity and wages are covered by the AGS. The association for the management of the salary insurance scheme is a mutual fund paid by all companies in the employers’ contributions to ensure the payment of wages in the event of collective proceedings.
From the bankruptcy filing, the company manager is either dismissed or supervised by an agent. He incurs sanctions if he does not respect the 45-day time limit to make the declaration of cessation of payments or if he has committed improper management during the suspect period.