The last days of a company: Judicial liquidation
Judicial liquidation is a procedure feared by many struggling companies. It is the last resort when all other solutions to rectify the situation have failed. This procedure leads to the end of the company’s activity and the sale of its assets to repay its creditors. Let’s look back at the key stages of this often painful process.
The first signs of difficulties
Before reaching judicial liquidation, a company generally experiences financial difficulties. The first signs may include a decrease in turnover, unpaid bills, payment delays, or increasing debt. It is important for the managers to react quickly and seek solutions to rectify the situation, such as debt restructuring, seeking new financing, or selling non-strategic assets.
The decision for judicial liquidation
If despite all efforts, the company is unable to rectify its financial situation, the managers may be compelled to request the opening of a judicial liquidation procedure. This decision is made by the commercial court, at the request of the company itself or one of its creditors. Once judicial liquidation is declared, a judicial administrator is appointed to manage the sale of the company’s assets and organize the repayment of creditors.
The process of judicial liquidation
Judicial liquidation unfolds in several stages. Initially, the judicial administrator establishes an inventory of the company’s assets and organizes their auction sale. Employees are laid off, and their severance payments are covered by the AGS (Association for the Management of the Salary Guarantee Fund). The company’s creditors are then reimbursed according to a priority order determined by law.
Once all the company’s assets have been sold and creditors have been repaid as much as possible, the commercial court declares the closure of the judicial liquidation. The company is then deregistered from the trade and companies register, thus definitively ending its activity.
The consequences of judicial liquidation
Judicial liquidation has significant consequences for the company’s managers and employees. Managers may be held personally liable for the company’s debts if they have committed management errors. Employees lose their jobs and must face a period of unemployment, even though their severance payments are guaranteed by the AGS.
From an economic standpoint, judicial liquidation can have repercussions on the entire ecosystem of the company, including its suppliers and customers. It can also weaken the trust of investors and commercial partners, making it difficult for companies that wish to relaunch after a judicial liquidation.
FAQ about judicial liquidation
What is the difference between judicial liquidation and bankruptcy?
Judicial liquidation is a collective procedure aimed at selling the company’s assets to repay its creditors, while bankruptcy is an individual procedure aimed at declaring an individual in a situation of over-indebtedness.
Is it possible to get out of judicial liquidation?
It is rare to get out of judicial liquidation once it has been declared. However, it is possible to request a judicial reorganization if the company has sufficiently strong prospects for recovery.
What are the alternatives to judicial liquidation?
Before resorting to judicial liquidation, struggling companies can explore other solutions, such as debt restructuring, selling non-strategic assets, or using a conciliator to negotiate a recovery plan.
In conclusion, judicial liquidation is a procedure heavy with consequences for struggling companies. It is important for managers to react quickly to the first signs of difficulties and seek solutions to rectify the situation before resorting to this last resort.
