FAQ: judicial reorganisation (redressement judiciaire) of a company 2026

Faced with the economic difficulties that can affect any business, judicial reorganisation (redressement judiciaire) is often a lifeline to avoid liquidation. This collective insolvency procedure (procédure collective), governed by the French Commercial Code, raises many questions among company directors. Understanding its mechanisms, its conditions and its consequences becomes essential in order to take the right decisions at the right time.

What exactly is judicial reorganisation?

Judicial reorganisation is a collective insolvency procedure intended to allow the business to be safeguarded, activity and employment to be maintained, and liabilities to be cleared. Unlike compulsory liquidation (liquidation judiciaire), this procedure aims to give a second chance to the business in difficulty.

This procedure is opened when the business is in cessation of payments (cessation des paiements), that is, unable to meet its liabilities that have fallen due with its available assets. The competent court then examines the situation and determines whether a recovery remains possible.

The main objective is to draw up a recovery plan allowing the business to be restructured, its debts to be renegotiated and a viable financial position to be restored. This process generally involves the appointment of a court-appointed administrator (administrateur judiciaire) who supervises the operations.

Who can request the opening of judicial reorganisation?

Several parties can initiate a judicial reorganisation procedure, according to precise methods defined by law.

The director of the business has the right, and indeed the obligation, to file a request within forty-five days of the cessation of payments. This legal obligation protects creditors and avoids a worsening of the financial situation.

Creditors may also apply to the court when they find that their debtor has ceased payments. This possibility gives them a remedy against a director who delays in acting. The conditions in which a creditor can summon its debtor into judicial reorganisation are detailed in our article devoted to this lever.

The public prosecutor's office (ministère public) also has this power, particularly in situations where the general interest is at stake, notably for businesses employing many staff or occupying a strategic position in their sector.

Finally, the court may of its own motion convert a safeguard procedure (procédure de sauvegarde) into judicial reorganisation if cessation of payments occurs during the procedure.

What are the conditions for opening judicial reorganisation?

The opening of a judicial reorganisation procedure meets strict criteria that the court examines carefully.

Cessation of payments is the main condition. The business must be unable to meet its liabilities that have fallen due with its available assets. This situation is assessed in concrete terms by analysing cash flow and short-term maturities.

The business must carry on a commercial, craft, agricultural or professional activity. Natural persons and legal entities may be concerned, subject to statutory exceptions.

The court also checks that the business has not been the subject of a compulsory liquidation judgment in the preceding five years, save for exceptions provided by law.

The potential viability of the business is an important element of assessment. The court examines whether a recovery remains conceivable given the economic and financial situation.

How does the judicial reorganisation procedure unfold?

The judicial reorganisation procedure follows a precise course, organised in several distinct phases.

The procedure is opened by judgment of the competent court. This judgment appoints a supervisory judge (juge-commissaire) responsible for ensuring the proper conduct of the procedure and a court-appointed administrator who assists or replaces the director as the case may be.

The observation period, of an initial duration of six months and renewable, allows the situation of the business to be analysed. During this phase, activity continues under court supervision and individual proceedings are suspended.

Drawing up the economic and social assessment (bilan économique et social) is a crucial step. The administrator draws up a complete inventory of the business: assets, liabilities, prospects of recovery, employment situation.

As Article L631-22 of the French Commercial Code states, "if the adoption of a recovery plan cannot be obtained, the court orders compulsory liquidation". This provision underlines the importance of this assessment phase.

What are the effects of judicial reorganisation on contracts?

Judicial reorganisation has significant effects on the contractual relationships of the business, significantly altering its legal situation.

Current contracts continue in principle, unless the administrator decides otherwise. This continuity aims to preserve activity and essential commercial relationships. However, the administrator may decide to terminate certain loss-making or non-strategic contracts.

Automatic termination clauses linked to the opening of the procedure become unenforceable. This rule protects the business against automatic terminations that could jeopardise its survival.

Leasing contracts (crédit-bail) benefit from a particular regime. The administrator may request continuation of the contract by undertaking to pay the future instalments.

Employment contracts are maintained, providing protection for employees. The employer may carry out redundancies on economic grounds only with the authorisation of the supervisory judge and according to a specific procedure.

What is the position of creditors during judicial reorganisation?

The situation of creditors receives particular treatment intended to reconcile their legitimate interests with the objective of recovery.

Claims arising before the opening judgment are declared according to a specific procedure. Creditors have a period of two months to declare their claims to the creditors' representative (mandataire judiciaire).

The principle of equality between creditors applies, save for statutory preferences. This rule avoids a race for preferences that could harm the recovery.

Individual proceedings are suspended, giving the business a respite. This protective measure prevents the situation from worsening and favours a collective solution.

Claims arising during the procedure receive preferential treatment and are paid at their normal due date, which facilitates the continuation of activity.

How is the recovery plan drawn up?

Drawing up the recovery plan is the central objective of the procedure and determines the future of the business.

The preliminary analysis covers economic viability, market prospects, the financial situation and the possible means of recovery. This in-depth study conditions the success of the plan.

The methods of recovery may include debt write-offs, payment periods, capital contributions or asset disposals. The combination of these measures must make it possible to restore financial balance. The solutions arising from the procedure and their consequences for directors and shareholders are set out in our article on the company in judicial reorganisation.

Article L631-19-2 of the French Commercial Code provides specific provisions for large businesses: "Where the cessation of activity of a business of at least one hundred and fifty employees" is envisaged, particular information measures apply.

The plan generally sets a maximum term of ten years for clearing the liabilities, allowing a realistic spreading of repayments.

What are the alternatives to judicial reorganisation?

Several alternatives may be considered depending on the situation of the business and the stage of the difficulties encountered.

The safeguard procedure is aimed at businesses that are not yet in cessation of payments but are experiencing difficulties likely to lead them there. This preventive procedure offers a legal framework for restructuring the business before the situation deteriorates.

Accelerated financial safeguard (sauvegarde financière accélérée) specifically concerns businesses whose difficulties are mainly financial. This simplified procedure allows financial restructurings to be dealt with more quickly.

Amicable procedures, such as the ad hoc mandate (mandat ad hoc) or conciliation, are confidential alternatives that preserve the image of the business. These procedures make it possible to negotiate with creditors without legal publicity. On the interplay between conciliation, safeguard and judicial reorganisation, see our general guide to collective insolvency procedures applicable to businesses.

A sale of the business may also be a solution, particularly when recovery in situ appears compromised but the activity retains value.

What are the director's responsibilities?

The director's responsibilities receive particular attention in judicial reorganisation, with potentially heavy consequences.

The obligation to file within forty-five days of the cessation of payments engages the director's liability. Failure to comply with this obligation may lead to a conviction for the offence of bankruptcy (banqueroute).

De facto management (gestion de fait) may be alleged against a director who has disposed of the company's assets as if they were his or her own. This characterisation carries significant civil and criminal consequences.

The action in liability for insufficiency of assets allows creditors to seek the director's personal liability against his or her own assets. This action targets management errors that contributed to the insufficiency of assets.

Personal bankruptcy (faillite personnelle) or a management ban may be imposed on the director in case of serious faults in the management of the business.

How to prepare effectively for judicial reorganisation?

Preparing for judicial reorganisation requires a methodical approach and the involvement of competent professionals.

The preliminary financial analysis must precisely identify the causes of the difficulties and the possible solutions. This step conditions the recovery strategy and the chances of success.

Putting together a complete file facilitates the court's examination of the request. This file must include the annual accounts, the cash position, the statement of claims and debts, and the prospects of recovery.

Support from professionals with the relevant expertise proves indispensable. A lawyer practising in business law provides legal expertise, while the chartered accountant clarifies the financial aspects.

Communication with economic partners must be handled with care in order to preserve the commercial relationships essential to the survival of the business.

Judicial reorganisation is a complex procedure but one that can offer a second chance to businesses in difficulty. As Article L631-7 of the French Commercial Code indicates, this procedure rests on the general principles of collective insolvency procedures while pursuing a specific objective of recovery. Faced with these major stakes, the assistance of a lawyer practising in business law becomes essential to navigate this procedure effectively and maximise the chances of success of your business's recovery.