Temporary financial difficulties: have you considered bankruptcy proceedings?

What are collective proceedings?

Although this term may seem obscure, it refers to a set of legal processes designed to support companies in difficulty.

In France, there are three types of collective proceedings:

Safeguard: for companies facing challenges but still able to pay their creditors;
Receivership: for those who can no longer honour their previous debts;
Judicial liquidation: for situations with no way out.

We’ll be focusing on the first two options, which are often misunderstood yet crucial.

A poorly perceived but effective tool

Despite their bad reputation, insolvency proceedings are a particularly useful tool for company directors who are experiencing temporary difficulties but wish to preserve their business. They offer a lifeline for managers facing temporary turbulence. Early intervention is key: the sooner the procedure is initiated, the better the chances of recovery.

How it works

As soon as the decision to open insolvency proceedings is pronounced, all legal actions by creditors are suspended. In addition, it is forbidden to settle debts incurred prior to the opening of insolvency proceedings.

The second effect of a decision to open insolvency proceedings is the provision of support. If requested at the outset of insolvency proceedings, the company can ask for the appointment of an administrator to help it make the right management decisions for the good of the business. In addition, throughout the duration of the proceedings, the judge can help the company, for example by ordering the termination of contracts deemed to be detrimental to the business (e.g. expensive and unnecessary franchise or lease management contracts, which the customer is not free to terminate).

Finally, the last effect of collective proceedings is the adoption of a safeguard or recovery plan which, once the business has stabilized, spreads debt repayment by the debtor over several months or years.

How can I benefit from collective proceedings?

If you are experiencing difficulties and would like to find out more about insolvency proceedings, or even apply for the opening of insolvency proceedings, DESRUMAUX AVOCATS can support you from the application stage and throughout the proceedings.

This will enable you to benefit from all the advantages of this procedure and ensure the long-term future of your company.

14 December 202317 April 2025

Non-competition clause in commercial contracts: crucial attention to the proportionality criterion

Non-competition clauses are not exclusive to employment contracts; they also feature in many commercial contracts to limit a business partner’s scope of activity at the end of his or her assignment.

To be valid, such clauses must protect the legitimate interests of the beneficiary, while at the same time being sufficiently limited in time and space, without unduly restricting the freedom of exercise of the debtor of the obligation.

In practice, these clauses often prohibit us from operating in a given geographical area or with specific customers for a period of one year.

The Versailles Court of Appeal (CA Versailles, September 14, 2023, no. 21/05171) considered the case of a service provider hired for a three-month contract, renewed over two years, with a company that had assigned him to one of its customers. The Court ruled that the one-year duration of the clause was disproportionate to the initial term of the contract.

This decision highlights the danger of standard clauses, which are not, by definition, adapted to the specific situation of each contract, and which can backfire on a contractor in the event of a dispute. As each situation is unique, an effective non-competition clause needs to be tailored to each individual case.

At DESRUMAUX AVOCATS, we understand the importance of these nuances. We are at your side to draw up customized commercial and employment contracts, offering you peace of mind and adequate protection. Your business is unique, and so should your contracts.

8 December 202317 April 2025

Redundancy for economic reasons: economic operating losses alone do not justify dismissal

Article abstract:

To justify redundancy, it is essential to demonstrate the serious and lasting nature of economic difficulties, such as a significant drop in orders or sales, technological change, reorganization of the company, or cessation of activity.

The French Supreme Court insists that these difficulties, notably operating losses or deteriorating cash flow, must be significant, serious and lasting.

In the absence of sufficient evidence of the extent of these difficulties, the dismissal may be deemed to be without real and serious cause.

(Cass. Soc. October 18, 2023, no. 22-18.852)

Read the full article:

Article L. 1233-3 of the French Labor Code sets out a list of objective criteria for determining the existence of economic difficulties justifying redundancy, including :

- Significant drop in orders or sales, operating losses, deterioration in cash flow;
- Technological change ;
- Company reorganization ;
- Company ceases trading.

Legal provisions lay down specific conditions for declining orders and sales. For operating losses or cash flow deterioration, legal provisions require only a “significant change”.

The French Supreme Court has therefore clarified the conditions under which these factors, which are not specified by legal provisions, can justify redundancy for economic reasons, stating that they must be “serious and lasting” in order to justify redundancy for economic reasons. The Court of Cassation had already stated in the past that changes in EBITDA could justify redundancy if the deterioration in this economic indicator was of a “serious and lasting” nature. In other words, the employer cannot invoke economic difficulties if the deterioration in the economic index concerned is only slight or temporary.

Mere temporary or minor disruptions do not justify redundancy. Here, the Cour de cassation has made similar clarifications concerning business losses.

To be considered grounds for redundancy, business losses must be significant, serious and lasting in the sector concerned, and of a sufficiently large scale. If there is insufficient evidence of the extent of the deterioration in economic indicators, the dismissal may be considered to be without real and serious cause.

It is advisable to enlist the support of experts such as DESRUMAUX AVOCATS when implementing redundancy procedures.