Safeguard and judicial reorganisation proceedings: a guide for directors

When cash-flow pressures become structural, two legal tools can save your business and jobs: safeguard proceedings (sauvegarde, before cessation of payments) and judicial reorganisation (redressement judiciaire, after). This operational guide, based on the Commercial Code and official guidance, helps you decide and act with confidence.

Safeguard or judicial reorganisation: the right procedure at the right time

• Safeguard: opened at the director's request when the business faces difficulties it cannot overcome alone, without being in cessation of payments. Purpose: protect operations and negotiate a plan under court protection. Legal basis: Commercial Code, Title II (safeguard proceedings) on Légifrance — French legislation portal and Service-Public Entreprendre — Safeguard proceedings.

• Judicial reorganisation: for businesses in cessation of payments that can nevertheless recover. It allows operations to continue, jobs to be maintained and liabilities to be settled. References: Commercial Code, Title III (L631-1 et seq.) on Légifrance — Title III and Service-Public Entreprendre — Judicial reorganisation.

Cessation of payments: how to assess and date it

Cessation of payments (cessation des paiements) means being unable to meet due liabilities with available assets (immediately accessible cash). Determine the date with your accountant (aged balances, cash forecasts, repayment schedules); it is key to choosing the procedure and meeting deadlines (art. L631-1 et seq., Légifrance — French legislation portal).

Critical deadline: if you are in cessation of payments, you must request judicial reorganisation within 45 days, unless conciliation is underway (Justice.fr — French justice portal and Service-Public Entreprendre — business guidance). Otherwise, you risk personal sanctions (including a management ban) imposed by the court for management faults.

Before reaching this point, explore amicable alternatives (negotiation, conciliation, mediation). Our advice on using mediation and conciliation details these preventive options.

Opening proceedings: documents, application and timetable

Requesting safeguard proceedings

Voluntarily file a reasoned application with the competent court registry (commercial or judicial). Attach:

• Kbis extract, identity of directors and significant shareholders;
• Annual accounts and a cash position statement less than one month old;
• Quantified statement of claims and debts, security interests, main ongoing contracts;
• Employee headcount and payroll;
• Declaration that there is no cessation of payments at the application date.

See the official Safeguard proceedings guidance.

Requesting judicial reorganisation

File a declaration with the court within 45 days of cessation of payments, providing in particular:

• Business identification (Kbis, articles);
• Statement of assets and due liabilities, creditor list and quantified debts;
• Recent cash position and available accounts;
• Employee list;
• Details of any ongoing conciliation.

References and document list: Service-Public Entreprendre — Reorganisation and Justice.fr — French justice portal.

Immediate effects of the opening judgment

• Freezing of prior debts and prohibition on paying claims arising before the judgment;
• Stay or prohibition of individual creditor proceedings and suspension of enforcement;
• Interest stops accruing on most claims;
• Ongoing contracts continue (unless the administrator or court decides otherwise);
• Appointment of a court-appointed creditors' representative (mandataire judiciaire) and, depending on thresholds, a court-appointed administrator (assisting or supervising the director).

Legal basis: Book VI of the Commercial Code (safeguard and reorganisation), available on Légifrance — French legislation portal. Practical summaries on Safeguard and Reorganisation.

Observation period (6 to 18 months): what happens in practice

The court opens an observation period (generally 6 months, renewable up to a total of 18 months) to assess the economic, social and financial position and prepare solutions (safeguard or reorganisation plan, partial sale where appropriate). See Service-Public Safeguard and Service-Public Reorganisation.

Participants:

• Creditors' representative: verifies and admits liabilities, organises creditor consultation.
• Court-appointed administrator: mandatory above certain thresholds (at least 20 employees and €3m turnover), otherwise at the court's discretion. Assists or supervises the director. Reference: Book VI of the Commercial Code on Légifrance — French legislation portal.
• Director: remains in office, subject to control/supervision, and leads the plan.

Operational objectives:

• Stabilise cash and secure business continuity (key contracts, strategic suppliers, working capital requirements). In the short term, interim payment order proceedings may also accelerate collection of customer debts.
• Identify and, if necessary, dispute filed claims within the deadlines.
• Negotiate debt restructuring (schedules, reductions) and prepare a sustainable plan.

The plan (up to 10 years): content, vote and court approval

The plan sets arrangements for settling liabilities (instalments, reductions, conversions), employment and investment measures, and monitoring commitments. Its maximum duration is 10 years (except special regimes). Book VI references on Légifrance — French legislation portal.

Since implementation of the European restructuring directive, the plan may be adopted by classes of affected parties (creditors by category) with qualified majorities, then approved by the court if tests protecting parties' interests and viability are met. For a practical overview, also see Bpifrance Le Lab — Recovery and proceedings.

Anticipate contractual disputes that could burden the plan: a well-drafted formal demand or targeted action prevents lost revenue, and understanding commercial limitation periods protects your claims.

Fast variants: accelerated safeguard

If conciliation has already begun and a draft plan reasonably likely to be adopted exists, accelerated safeguard allows rapid adoption (a few weeks to 3 months) by focusing the vote on financial and equivalent creditors. It is available only if the business is not in cessation of payments (or has been so only recently, under statutory conditions) and requires substantial preparation. Legal framework: Book VI on Légifrance — French legislation portal and summaries on Justice.fr — French justice portal.

Note: creditors sometimes initiate procedures such as an order for payment in parallel. Opening collective proceedings will then stay these individual actions.

Immediate action plan for directors (Day 0 to Day 45)

• Day 0–Day 7: map due debts and available assets; cautiously date cessation of payments (if established). Secure payroll and vital suppliers.
• Day 7–Day 14: choose the route (safeguard if not in cessation; reorganisation otherwise). Gather documents (Kbis, accounts, claims/debts list, contracts, employees, cash position < 30 days old). Contact a lawyer and prospective administrator.
• Day 14–Day 30: file the application (safeguard) or declaration (reorganisation). Prepare the observation file (business plan, weekly cash budget, scenarios).
• Day 30–Day 45: manage communications (bankers, key customers, teams). Start discussions on the future plan (schedules, conditional reductions, covenants).

Do not exceed the 45-day deadline to declare cessation of payments for reorganisation: the court may sanction the director (management ban). See Service-Public — Reorganisation and applicable texts on Légifrance — French legislation portal.