French Insolvency Procedures Compared

When a French business hits financial difficulty, the law offers a graded ladder of procedures, from a confidential negotiation to a full winding-up. The four that matter are conciliation, sauvegarde (safeguard), redressement judiciaire (judicial reorganisation) and liquidation judiciaire (judicial liquidation). Which one is available turns almost entirely on a single test - whether the company is in cessation of payments - and on how serious and how reversible the difficulty is. Choosing the right procedure, and choosing it early, can be the difference between saving a company and losing it. This guide compares the four side by side: who can use each, what it aims to do, what it does to the company's debts and contracts, and how they fit together as an escalating response to distress.

The key test: cessation of payments

Everything starts with one concept. A company is in cessation of payments (cessation des paiements) when its available assets no longer cover its due and payable liabilities. The test is about liquidity, not net worth: a company can be balance-sheet solvent yet in cessation of payments if it cannot pay what is currently due, and - importantly - a company is not in cessation of payments if credit lines or moratoria granted by its creditors let it meet its due liabilities. It is the availability of cash to meet current debts that counts.

This single test sorts the procedures. The two preventive routes - conciliation and sauvegarde - are open only to a company that is not in cessation of payments (with a narrow exception for conciliation, and a special accelerated safeguard). The two collective procedures - redressement and liquidation - are for companies that are in cessation of payments, split by whether recovery is realistically possible. So the first question in any distress situation is always the same: can the company still pay its debts as they fall due?

The test also carries a hard deadline. A company that falls into cessation of payments must file within 45 days - opening a redressement or liquidation - unless it has instead applied for conciliation. Missing that deadline is dangerous for the directors, because late filing is one of the classic grounds on which personal liability and management bans are imposed. The 45-day clock is one of the most important dates in French company life, and it is why understanding cessation of payments matters so much.

Fixing the date of cessation of payments is itself a live question, because it defines the start of the "suspect period" (période suspecte) - the window before the opening judgment during which certain acts done by the company can be challenged and unwound. The court sets that date when it opens the procedure, and it can move it back. This is another reason not to drift: the longer a company trades while insolvent, the longer the suspect period and the more of its recent transactions may be reopened. Pinning down when cessation of payments truly began is often one of the first contested issues in a procedure.

Conciliation: the confidential negotiation

Conciliation is the lightest tool and, strictly, not a collective procedure at all - but it often precedes a sauvegarde and is the natural first move for a company in trouble. It can be requested by any business facing a legal, economic or financial difficulty, actual or foreseeable, that is not in cessation of payments for more than 45 days. It is voluntary and can be sought only by the company itself - and it can even be requested after a creditor has served a reorganisation or liquidation writ, so long as the collective procedure has not yet been opened.

The court president appoints a conciliator for up to four months (extendable by one). The conciliator's job is to obtain a rescheduling or write-off of debts, and they can also look for new credit or a restructuring of the business. The great advantage is discretion: appointing a conciliator does not let the company stop paying its debts, but the judge can impose delays of up to two years on a creditor who sues or refuses the conciliator's request to suspend a debt, and while conciliation is under way creditors cannot bring reorganisation or liquidation proceedings. The company must keep paying its employees, as the wage-guarantee scheme (AGS) does not step in.

If the negotiation succeeds, the agreement can be either acknowledged by the court president or homologated by the court. Acknowledgement keeps the agreement secret, which suits the company; homologation is public but rewards those who put in new money (or supplied new goods or services) with a priority ranking (the "new money" privilege) if the company later fails. Conciliation is, in short, a discreet, flexible, court-supervised negotiation - the route to try before any formal insolvency procedure.

Sauvegarde: restructuring before the crisis hits

Sauvegarde is the debtor-friendly formal procedure - a collective procedure opened before cessation of payments. It is available to any company that is not in cessation of payments but faces difficulties it cannot overcome on its own. Like conciliation, it is voluntary and can be requested only by the company itself - a creditor cannot force a company into safeguard. Its aim is to facilitate the company's reorganisation so it can survive, working through an observation period of up to six months (renewable once) toward a safeguard plan.

Opening a sauvegarde has strong protective effects. The company stops paying debts that arose before the opening judgment, and creditors must declare their claims to the court-appointed judicial representative (mandataire judiciaire). An administrator is appointed (optional for smaller companies - under 20 employees and turnover below €3m), and the company can propose a name. Ongoing commercial contracts continue unless the administrator decides otherwise, and each counterparty (except the landlord) can put the administrator on notice to say whether the contract will continue, with silence for one month ending it. Sacrifices can be imposed on creditors through the plan, but the company keeps running, in principle under its existing management.

There is an accelerated safeguard variant for companies already in a conciliation that could not reach agreement - these may even be in cessation of payments - provided they have accounts certified by an auditor or drawn up by a chartered accountant. It runs on a compressed timetable of two months, extendable to a total of four. Sauvegarde is the procedure for a company that sees the crisis coming and wants to restructure from a position of relative strength, with the protection of a court process but without yet being insolvent.

Redressement judiciaire: rescue after insolvency

Redressement judiciaire is the rescue procedure for a company that is already in cessation of payments but whose recovery is not manifestly impossible. Unlike the preventive routes, it is compulsory: the company must open it within 45 days of cessation of payments, unless it has applied for conciliation or liquidation. And it is not the company's decision alone - the court can also open it on the application of the public prosecutor or on a creditor's writ.

Its objectives are threefold: continuing the activity, preserving employment, and clearing the liabilities. In theory it aims at a continuation plan, but the court can order a total or partial sale of the business where the debtor cannot ensure the recovery themselves. In broad terms, the rules mirror those of sauvegarde - an observation period, a stay on pre-opening debts, claim declarations, contracts continuing at the administrator's option - which is why the two are often described together. The company's management may be left in place or supervised, depending on the circumstances.

The main divergences from safeguard concern redundancies and control. Economic redundancies that are urgent, unavoidable and indispensable can be authorised by the supervising judge (juge-commissaire) during the observation period, a faster route than the ordinary redundancy rules that apply in sauvegarde. Redressement is, in essence, sauvegarde's counterpart for a company that has already crossed into insolvency but can still be saved - more constrained, more exposed to third-party initiative, but still oriented toward rescue rather than closure.

Liquidation judiciaire: winding the company up

Liquidation judiciaire is the terminal procedure, for a company that is in cessation of payments and whose recovery is manifestly impossible. Like redressement, it is compulsory within 45 days of cessation of payments (unless conciliation or redressement has been sought), and the court can open it on the prosecutor's application or a creditor's writ. Its purpose is not to save the company but to end its activity and realise its assets by selling them off; continuation of the business can be authorised only exceptionally.

A liquidator is appointed to administer the company, look for a sale plan or sell the assets, carry out the redundancies, and complete the liquidation operations. As in the other procedures, each counterparty (except the landlord) can put the liquidator on notice to decide the fate of a contract, with one month's silence ending it. Where the liquidation closes for insufficiency of assets, the company is struck off the register automatically - the formal end of the company's legal existence.

There is a simplified liquidation variant for smaller companies: it applies to a SARL (or any company) only if it has no real property, no more than five employees, and turnover of no more than €750,000. It compresses the timetable - the liquidation must finish within six months (a year where there is more than one employee and turnover above €300,000), with a possible three-month extension - and the liquidator sells the assets as fast as possible, disregarding supplier claims that cannot be paid. Simplified liquidation exists to wind up small companies quickly and cheaply rather than leaving them in a drawn-out process.

The four procedures side by side

The table below sets the procedures against the criteria that decide which one applies - the company's financial state, who can open it, the objective, and the headline effect on debts.

Read down the "financial state" row and the logic of the ladder is clear: conciliation and sauvegarde for a company that can still pay its way, redressement and liquidation once it cannot, split by whether rescue is realistic. Read across and you see the trade-off - the earlier and more voluntary the procedure, the more control the company keeps and the more discreet the process.

The crisis-exit procedure for small companies

Alongside the four main routes sits a temporary crisis-exit procedure (traitement de sortie de crise), first introduced in 2021 and reopened from 22 November 2023 for a further two years in response to a rise in insolvencies. It is a streamlined hybrid for small companies in cessation of payments that nonetheless have the funds to pay their wage claims and can quickly draw up a debt-settlement plan. It is reserved to companies with fewer than 20 employees and a balance-sheet liability (excluding equity) below €3m.

The procedure aims at a settlement plan within three months. The plan covers only the pre-opening debts the company lists - with some excluded, notably wage claims and claims under €500 - and from the third year the annual instalments cannot be less than 8% of the liabilities. If no plan is settled within the three months, the court opens a redressement or liquidation at the request of the representative, the prosecutor or the company. A supervising judge rules on disputes, and creditors have one month to challenge the listed claims before the plan is built on the list.

The crisis-exit procedure is narrow and time-limited, but for a qualifying small company it offers a faster, cheaper path than a full redressement - a targeted tool worth knowing about when a small business is in cessation of payments but fundamentally viable. Because it is a temporary measure with its own conditions, any company considering it should check that it is still in force and that it qualifies before relying on it.

Choosing and sequencing the procedures

In practice the procedures form a sequence, and the art is to enter at the right rung and as early as possible. A company that senses difficulty but can still pay its debts should reach first for conciliation - confidential, flexible, and capable of producing a rescheduling or a "new money" injection without any public filing. If the difficulties are deeper but the company is still not in cessation of payments, sauvegarde gives the protection of a court process and a stay on old debts while management stays in charge.

Once cessation of payments arrives, the choice narrows to redressement if recovery is realistically possible, or liquidation if it is not - and the 45-day clock makes the decision urgent. The gravest mistake is to delay: waiting past the 45 days exposes the directors to personal liability and bans, and every week of drift usually erodes the options and the value left to save. Early advice is decisive precisely because the best procedures - conciliation and sauvegarde - close off the moment the company tips into insolvency.

The procedures also interlock. A conciliation that fails can lead into an accelerated safeguard; a redressement whose recovery proves impossible can convert to liquidation; a small company in cessation of payments may qualify for the crisis-exit route rather than a full redressement. Mapping where the company sits today, and where it is heading, is the heart of insolvency strategy - and it is far better done with advice before a creditor or the prosecutor forces the issue. The company that reads the ladder correctly, and steps onto it at the right rung and at the right moment, gives itself the best chance of survival.

The observation period and the plan

Both formal rescue procedures - sauvegarde and redressement - run through an observation period during which the company keeps trading under court supervision while its position is assessed and a plan is prepared. In sauvegarde the observation period is up to six months, renewable once; redressement follows broadly the same architecture. This breathing space is the point of the procedures: it combines a stay on pre-opening debts with continued operations, so a viable business is not killed by immediate enforcement while a solution is worked out.

Two actors shape the period. A judicial representative (mandataire judiciaire) is appointed to receive the creditors' claim declarations and represent their collective interest, and - except for the smallest companies - an administrator is appointed to assist or supervise management and decide the fate of ongoing contracts. Creditors must declare their claims within the set time or risk them being unenforceable in the procedure, which is why creditors need to watch for the opening judgment as closely as debtors do.

The period is meant to end in a plan: a safeguard plan in sauvegarde, a continuation plan in redressement, or, where the debtor cannot recover alone, a plan to sell the business in whole or in part. The plan can spread payments over years and impose sacrifices on creditors, which is precisely what makes these procedures more forceful than a purely voluntary negotiation. Understanding that the observation period is a means to a plan - not an end in itself - is central to using the procedures well.

What the procedures mean for directors

Insolvency procedures are not only about the company - they carry real consequences for its directors, and the risk is heavily shaped by timing. A director who lets the company trade on after cessation of payments without filing within the 45 days exposes themselves to the classic sanctions of insolvency law: an action to make them bear part of the shortfall where mismanagement contributed to it, and a ban on managing a business. Filing on time, by contrast, is treated as the responsible course and is the single best protection.

Certain conduct around insolvency is also criminal. Banqueroute can be charged where a director, once the company is failing, diverts or conceals assets, fraudulently increases the liabilities, keeps fictitious or grossly incomplete accounts, or uses ruinous means to raise funds to delay the opening of proceedings. Transfers to a related company or to the director, made under the pressure of looming insolvency, are exactly the decisions later scrutinised - and can also look like a misuse of company assets. The safest path near insolvency is to make no unusual transfer without advice.

The practical message for a director is that the procedures are not something to fear and avoid, but tools to use in time. The company that files promptly, cooperates with the administrator and works toward a plan protects both the business and its management; the one that hides the problem and trades on risks losing the company and exposing its directors personally. Getting advice at the first sign of serious difficulty is what keeps both outcomes on the right side of the line.

Frequently asked questions about French insolvency procedures

This article states general principles of French law as at its date of publication and is provided for information only. It does not constitute legal or tax advice and creates no lawyer-client relationship. Thresholds, time limits and temporary procedures evolve; verify the current texts before acting, and take advice on your specific situation.