The French procedure to safeguard the company: what is it?

Safeguarding your French company

The procedure to safeguard the company (in French, “procedure de sauvegarde”) is a legal device French companies have to save the company and avoid suspension of payments. It is regularly used to help companies that are struggling and prevent them from disappearing.

When can I make use of this procedure?

Be careful! You can only make use of this procedure when you are not in a state of suspension of payments! At this stage, it is too late to open these procedures.

The company must also face problems that it cannot solve on its own with its current situation. Here, it’s up to the judge to decide whether or not the company can do it on its own or not.

What are its effects?

The main effects of this procedure are as follows:

  • You will be forbidden from paying any and all debts you had prior to this procedure
  • For debts that you collect once this procedure has begun, you’re also unable to pay them, unless they are recurring debts that happen as a result of this procedure

What do I need to do to make use of it?

Step 1:

The first thing you need to do is to file a request for a safeguard procedure to a court. You must also submit it to the Commercial Court in 6 different copies. You should remember that this file has to explain exactly what difficulties you have, why your company can’t overcome them alone, and why your company could grow in the future nonetheless.

Step 2:

Then, the judge will interview you (and potentially other people) to collect information before making a final decision.

Step 3:

If this procedure has been approved by the judge, there will then be an observation period that can last for up to 6 months. Here, judicial agents will observe how you run your company on a daily basis.

Step 4:

Then, the administrator will formulate a plan based on these observations. In particular, they can decide that certain activities of the company need to be abandoned, and will find a method for paying your debts.

Once this plan has been approved by the court, it will be up to you to follow it! You will be supervised by the administrator and judicial agent, though.