On the brink: The judicial liquidation of a company
When a company faces financial difficulties, judicial liquidation may be the only solution to end its activities in an orderly manner. This procedure, regulated by law, allows for the sale of the company’s assets to repay its creditors. But what are the steps of judicial liquidation and what are the consequences for the executives and employees?
The steps of judicial liquidation
Judicial liquidation is a complex procedure that must be followed carefully to ensure respect for everyone’s rights. Here are the main steps of this process:
- Declaration of cessation of payments: The company must file a declaration of cessation of payments with the commercial court to initiate the judicial liquidation procedure.
- Appointment of a liquidator: The court appoints a liquidator responsible for selling the company’s assets and repaying the creditors.
- Sale of assets: The liquidator proceeds with the sale of the company’s assets to recover funds and repay debts.
- Settlement of claims: Creditors are repaid according to the priority order established by law.
- Closure of judicial liquidation: Once all debts have been repaid, the judicial liquidation is closed, and the company is deregistered from the commercial registry.
Consequences of judicial liquidation
Judicial liquidation has significant consequences for the various stakeholders of the company:
- Executives: Company executives may be banned from managing a company for a period of up to 15 years in case of mismanagement.
- Employees: Employees of a company undergoing judicial liquidation lose their jobs and may receive severance pay.
- Creditors: Creditors of the company may obtain reimbursement of their debts within the limits of available assets.
FAQ
What is the difference between judicial liquidation and bankruptcy?
Judicial liquidation is a procedure regulated by law that allows for the sale of the assets of a struggling company to repay its creditors. Bankruptcy, on the other hand, is a situation of insolvency that may be declared by the court in the absence of a judicial liquidation procedure.
What are the possible options to avoid judicial liquidation?
Before resorting to judicial liquidation, a struggling company can implement restructuring measures, such as a safeguard plan or judicial reorganization, to try to improve its financial situation.
What are the rights of employees in case of judicial liquidation?
Employees of a company undergoing judicial liquidation are entitled to severance pay and priority rehiring if the business is taken over by a new owner. They may also benefit from support measures in finding new employment.
