Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.
The laws of 25 January 1985 and 10 June 1994 contain details of France's restructuring and receivership procedures.
Company restructurings or receiverships usually have no repercussions for a director, unless he or she is found to be at fault and therefore liable for a:
professional penalty :
- professional bankruptcy, i.e. a business owner is barred from serving as a company director for at least five years,
- barred from managing a business for at least five years
penalty on assets (two types):
- liability payments, if the court rules that debts are to be paid by the directors,
- bankruptcy or receivership on the part of directors themselves
- criminal penalty, if the director has, for example, misappropriated or concealed business assets.
Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.
Bankruptcy procedure: a step-by-step guide
Once the decision to wind up the business has been taken, its owner must follow the bankruptcy procedure.
If an owner defaults on payments, he/she must open bankruptcy proceedings by notifying the office of the commercial court.
Bankruptcy proceedings are placed under the control of either the commercial court or the district court. A ruling is then issued to commence either restructuring or receivership.
Restructuring results in an observation period during which the business owner draws up an economic and social statement and a restructuring plan with the help of an administrator or expert. This observation period begins at the request of the business owner or debtor no later than 45 days after defaulting on payments.
If restructuring proves impossible, the court will initiate the receivership procedure. This curtails all business activity and allows the firm's shares and assets to be distributed.