The sinking of the company: judicial liquidation as a last resort
Financial difficulties encountered by a company can sometimes lead it to the brink of collapse. When all solutions have been explored without success, judicial liquidation appears as the last resort to put an end to the company’s activity. But what are the ins and outs of this procedure?
What is judicial liquidation?
Judicial liquidation is a collective procedure that consists of ending the activity of a company in default of payment. It is pronounced by a commercial court and aims to settle the company’s liabilities by selling its assets to repay the creditors as much as possible.
When a company is unable to meet its debts, it can request its own judicial liquidation or be assigned judicial liquidation by a creditor.
The various stages of judicial liquidation
Judicial liquidation takes place in several stages:
1. The judgment opening the judicial liquidation: the commercial court pronounces the judicial liquidation of the company and appoints a liquidator responsible for selling the company’s assets.
2. Inventory and realization of the assets: the liquidator establishes an inventory of the company’s assets and proceeds to their sale to repay the creditors.
3. Settlement of claims: the company’s creditors are invited to declare their claims to the liquidator. They will then be reimbursed according to the available assets.
4. Closure of judicial liquidation: once all assets have been sold and creditors have been reimbursed as much as possible, the commercial court pronounces the closure of the judicial liquidation.
The consequences of judicial liquidation for the company and its directors
Judicial liquidation results in the dissolution of the company and the end of its activity. The company’s directors may be removed from their positions and prohibited from managing a company for a specified period. Additionally, they may be held responsible for the company’s liabilities if they have committed management errors.
For the company’s employees, judicial liquidation can lead to economic layoffs and the loss of their jobs. However, they may benefit from redeployment measures and compensation provided by law.
FAQ on judicial liquidation
What is the difference between judicial liquidation and judicial reorganization?
Judicial reorganization aims to allow a struggling company to continue its activity by renegotiating its debts with creditors. Judicial liquidation, on the other hand, involves ending the company’s activity and liquidating its assets to repay creditors.
What are the options for a struggling company before considering judicial liquidation?
Before considering judicial liquidation, a struggling company can resort to judicial reorganization, conciliation, or safeguard. These procedures allow for negotiating a recovery plan with creditors and attempting to save the company.
What are the criteria for requesting the judicial liquidation of a company?
To request the judicial liquidation of a company, it is necessary to prove its default of payment, meaning its inability to meet its due debts with its available assets. The commercial court then verifies the admissibility of the request and pronounces judicial liquidation if the conditions are met.
In conclusion, judicial liquidation is a burdensome and restrictive procedure that serves as a last resort for a struggling company. It leads to the dissolution of the company and the sale of its assets to repay creditors. Therefore, it is essential for company directors to take necessary measures to avoid reaching this point and to resort to alternative solutions in case of financial difficulties.
