The most known are the collective procedures, which include receivership and judicial liquidation. Nevertheless, there are alternatives before reaching receivership: the ad hoc mandate and the conciliation procedure. They are confidential and flexible and aim at restoring the company's situation. The sooner they are set up, the more likely they are to succeed.
The choice of procedure depends on the situation of the company:
- Before a state of cessation of payment, an ad hoc mandate procedure will be chosen,
- But after, the company will have to opt for a conciliation procedure.
The ad hoc mandate procedure
The ad hoc mandate procedure is intended for all companies, in case of financial difficulties or a one-time crisis. The only condition is that they are not in a state of suspension of payments.
They help the manager to negotiate with his partners. And also to distribute his debts with the public actors (URSSAF for the employer's contributions and the Public Treasury for the VAT, the CET and the IS). These procedures can be triggered by a simple request to the President of the Commercial Court of the company's registered office to appoint an ad hoc representative. His mission is then defined according to the measures envisaged, while the director remains in office. The duration of the mandate can vary, even if it is generally 3 months renewable. Thus, the objective of the ad hoc representative is to help the manager negotiate an agreement with his main creditors to avoid the cessation of payments.
The conciliation procedure
If the company is already in a state of suspension of payments (but not for more than 45 days), it will opt for a conciliation procedure. It is therefore aimed at companies in a more advanced stage of difficulty, and can be set up after an ad hoc mandate.
Once the conciliation procedure is opened, the creditors can no longer ask for the recovery or the liquidation of the company.
In this case, a conciliator is appointed for a period of 4 months, which can be renewed several times (since August 24, 2020). His objective is similar to that of a mandatary: to find an agreement between the company and its main creditors. Unlike an ad hoc mandate, payment deadlines (maximum 2 years) can be granted to a manager regarding a creditor who would have sued him for payment.
If no agreement is reached between the two parties, the conciliation procedure is stopped. If an agreement is reached, it must be recorded by the court and then implemented. Once the creditors have signed the agreement, they can no longer demand payment of their claims from the company. However, if the agreement is not respected, the court can cancel it.
Then, the court can approve the agreement if the following conditions are met:
- The company in difficulty is not in cessation of payments or the agreement reached puts an end to it
- The terms of the agreement ensure the continuity of the company's activity
- The agreement preserves the interests of non-signatory creditors
A conciliation agreement may include:
- Payment deferrals for the entrepreneur's debts
- Forgiveness of debts
- Remission of interest and penalties for late payment
Once the agreement is approved, the creditors and partners have a priority of payment, and will not be imposed delays in case the company is in safeguard, recovery or judicial liquidation. Note that the confidentiality of the agreement is lost upon approval.
Written by Eléonore Berne, on 22/09/2022.
How to approach Cash management?
Time saving, bank flows management, forecasting... so many benefits offered by Cash management software. But do you know Cashlab?
Deciphering the first real crypto-currency crisis
As the crypto-currency ecosystem is shaken by an unprecedented crisis, financial players are questioning its future.
Stagflation risk: what are the consequences for companies?
Between inflation and weak economic growth, the current context seems to lean towards an economic slowdown.
📍1, rue des Prouvaires