La failure of payments is a common concept in business law. It is a term used at a specific stage in the life of a company; when faced with financial problems. In some cases, the cessation of payments may lead to its closure. But that may not be the case. Foundation-company-ricard offers a file defining the failure of payments.
According to legal definition, cessation of payments is the incapacity for a moral or physical person (of private law) to satisfy its payable liabilities with its active available.
The Commercial Code (article L.631-1) defines cessation of payments as any debtor who finds himself in the impossibility to meet its current liabilities with its available assets.
This distinction is important because it differs from insolvency, which is defined by the comparison between liabilities and assets as a whole.
Every person carrying out commercial, craft, liberal, industrial or agricultural activities may be a victim of insolvency.
Le statut juridique chosen did no consequence. This may be :
As mentioned above, the payable liabilities is a more restrictive concept than the passive. The legislation provides a definition of it, referring only to debts to be settled immediately.
Specifically, they correspond to balance sheet liability items and claims :
Disputed debts or debts not yet matured are not assimilated to payable liabilities.
Le well available represents only a fraction of a company's general assets. These are the following assets:
This may include, for example, amounts of money that are in cash or in bank accounts, or even financial instruments that can be sold very quickly (commercial paper or marketable securities, for example).
Movable or real estate assets owned by the company, its stocks or its receivables, are not considered as disposable assets.
When a business is in a state of cessation of repayments, it must, by law, to declare this state to the competent authorities within a period of 45 days maximum. A special file must be submitted and many forms filled out. Then, the company can request, under certain conditions, the opening of a procedure of conciliation.
If this is not done, the judges can pronounce the opening of a procedure of recovery (when the difficulties encountered are reparable) or placement in liquidation (when his situation is irremediably compromised). There is also a simplified judicial liquidation applicable under certain conditions. The precise date of occurrence of the state of cessation of payments is fixed by the court.
When a company is insolvent, it cannot choose an amicable closure.
Answer: Cessation of payments is the term used to refer to the situation in which a company is no longer able to repay its creditors and, therefore, declares bankruptcy.
Answer: The main signs that can indicate a cessation of payments are a drop in revenue, high indebtedness, an increase in expenses, recurring late payments, an increase in delinquencies and difficulties in obtaining financing.
Answer: The consequences of a cessation of payments are liquidation of assets and cessation of activities, risk of bankruptcy, loss of access to credits and loans, loss of reputation and loss of market share .
