This is the classic French procedure in case of payment default (LIEN VERS LE GLOSSAIRE), not to be confused with winding-up proceedings.

The principle: under the supervision of the administrator, the company benefits from a suspension of payments and an observation period (up to 12 months unless extended further at the request of the Public Prosecutor’s Office) to prove the viability of the business and that its capacity to honour its debts.
The procedure was reformed on several occasions, in 1967, 1985, 1994, 2005 and 2008.


The proceedings addresses to all types of companies (firms, independent workers, liberal professions) facing a payment default.

The Observation Period aims at evaluating the opportunity and feasibility of a recovery of the company. If positive, then the company is reorganised through a continuation plan. The option to sell as a going concern is also available.


The launching of the procedure:

The reorganization proceedings is initiated as follows:
– at the request of the company chief executive officer (unless a conciliation proceedings, eligible to be opened within the first 45 days of default, was opted for)
– by writ of summons from one of the creditors
– initiated by decision of the court
– at the request of the Public Prosecutor’s Office

The court appoints a supervising judge, a judicial administrator as well as a liquidator (who represents the creditors’ interests).
Employees are represented in the proceedings and creditors can take on the role of creditors’ representative. The opening judgment launches a 6-month observation period.

Opening of the observation period
The opening of the observation period automatically infers:
– an immediate suspension on payments due prior to the opening of the proceedings
– a stay on proceedings to recover past amounts due,
– an immediate payment of all debts incurred after the opening of the proceedings,
– the protection of contracts in progress,
– the establishment of “creditors’ committees” and a bondholders’ committee for companies reaching a total amount of 150 employees or a turnover of €20 Million where decision is made with majority of two-third of the voters,

– a simplified layoff program and financial help for restructuring,
– The AGS support, who can advance the funds for layoffs, reimbursed at the confirmation of the reorganization plan.



The administrator performs a financial, labour and environmental assessment to identify potential areas for turnaround and draws up together with the chief executive officer, either:
– a continuation plan and recovery measures for the situation
– or a sale of the business or of the company’s assets.
Profit and losses and cash-flow forecasts are drafted by the debtor with the help of its auditors in order to ensure the financial viability of the business.
This first phase normally lasts 1 to 2 months.
The administrator then submits a first report to the Court.
In view of these elements, the Court authorises the mission to continue

Implementation of recovery measures:
During Observation Period, the company implements recovery measures
– Negotiation with creditors
– Negotiation with clients
– Implementation of restructuring measures (layoff plan, termination of contracts, site transfer)
– Implementation of management tools and reporting.

At the same time, and with the assistance of the administrator, the company must demonstrate, via its accounts, its ability to carry on its business.

Reorganization plan: chief executive officerFollowing negotiations, the administrator presents to the Court a payment schedule project to pay off the debt.

To note: the tax authorities and social charges administrations can agree to to waive all or part of its claims.

This planenforceable against all creditors, can last up to 10 years.

It includes:
– a reimbursement, free of interest, of contract claims with original maturity of less than a year,
– a debt restructuring of claims with original maturity of more than a year, over the plan duration,
– a treatment of creditors’ committees’ claims,
– a possible waiver for tax and social claims,
– a possibility to offer an option for creditors to waive debts in exchange from prompt reimbursement.

To note: The debtor’s guarantors and co-obligators can’t avail themselves of the deadlines and write-offs granted under the safeguard plan, contrary to Safeguard Plan. They are eligible to such a protection only during Observation Period.

Sale of the business
All third parties can bid on the company as a going concern and continued operations with repayment of the debt. The chief executive officer cannot acquire the business. He can however be offered a job contract (employment or services contract) by the transferee.

To note: The sale plan is considered when the perspectives of the business forbids reorganization – especially when the liabilities are too important, or when restructuring costs are overly expensive.


Knowledge of the players and measures available
As soon as the observation period begins, the administrator negotiates adequate financing with specialised institutions; he also acts as an interface with the local government and the DDTEFP (Departmental Administrations of Employment, Labour and Vocational training) in the context of redundancy schemes.

He handles layoff proceedings in the respect of legal frame.

He ensures contracts’ continuation and intervenes with business partners so as to favour the sustainability of the business. He checks cash-flow follow-up and brings to suppliers guaranties of solvency.

The administrator can also put an end to any contract at any time without notice.
Termination penalties are then considered as frozen liabilities.

Files are handled promptly
The diagnosis is decisive in deciding whether to continue the business or to sell it off before liquidation becomes inevitable.

Support for the chief executive officer during a difficult time
Beyond the support provided in the management of the company, the administrator accompanies the chief executive officer through different phases of the proceedings and helps him to anticipate and take on the right decision.


The administrator is appointed by the Court to either assist the chief executive officer in all decisions relating to the management of the company (most frequent situation) – or replace the manager in most or all of his functions.

In practice, the chief executive officer keeps his central role in the management of the company, but must account for its performance to the administrator, who acts as an interface with the Court.
The administrator also acts on his own, with prior hearing of the management.


Upon decision of the Court, the procedure results in:
– either a reorganization plan
– or a disposal plan (sold as a going concern)
– or a third option, the liquidation of the company when turnaround is impossible.

In the first two cases, the administrator’s mission keeps on going:
– for reorganization, as officer supervising the execution of the plan (ensuring that commitments are kept, auditing the accounts, and ensuring funds are available to meet creditors’ payments schedule)
– or for disposal as a going concern, to proceed with the signing of legal documents, the layoffs of employees, and the transfer of contracts.


THOMSON/TECHNICOLOR, TATI, CHAUMET, PALLAS BRED GESTION(bank), LEON DE BRUXELLES, AIR ATLANTIQUE, BFM (radio, licence ART), Groupe MORGAN (ready-to-wear – 600 employees)METROLOGIE (computer industry), DURAN DUBOI (post-production cinema/TV), EMTEC (European bankruptcy, 11 subsidiaries, retail), EX MACHINA, LOCATEL, CODIAM, TROUVAY & CAUVIN(faucets/plumbing, 12 companies, 1000 employees), IFRACHEM (150 employees, classified Seveso 2), Group SIAD, Agence ANGELI (people press agency, photo catalogue), SERPIE (L’Homme Moderne / Modern Man), NEXIA FROID (transport logistics, 25 sites, 1200 persons), EBREX (1200 employees, Safeguard Proceedings), DANEL (printing, 11 sites, 1000 employees), GROUPE APM (foundry, 5 sites, 600 employees), ASKELL, Group TEAM PARTNERS, KEY PLASTIC .