During its existence, any company is bound to encounter difficulties. While some difficulties are transient and relate to day-to-day management, others of greater concern are likely to cause business failure if not addressed on time.
The business manager has various tools to anticipate or solve the problems encountered, depending on their nature and intensity.
Business difficulties: when to react?
Contrary to popular belief, financial issues, and more specifically cash, are not the only difficulties that need to be monitored and addressed. Whether legal, social or economic, all the difficulties likely to have consequences on the viability of the business plan, must be considered by the manager.
Even if the profitability of the company and cash flow statement are the main signals to watch, the deterioration of these performance indicators can be anticipated by taking into account the evolution of the economic environment, of the sector in which the company operates (transformation of consumption patterns, loss of a market …), As well as the internal climate (dispute between partners, departure of a founding partner of the company, etc.).
Which procedure for which difficulty?
Each difficulty has its own procedure. The use of a preventive procedure must make it possible to anticipate difficulties and prevent the company’s financial situation from deteriorating. However, when the company is no longer able to overcome these difficulties, the opening of a collective procedure may be required to maintain employment, while respecting the rights of creditors.
Preventive procedures
Two preventive procedures allow the difficulties encountered to be resolved amicably:
- Le sends to : it allows, thanks to the assistance of a trusted third party, to find an amicable agreement with the creditors or between partners for example, to put an end to financial difficulties or blocking situations. This procedure has the advantage of confidentiality and speed.
- The conciliation procedure : it aims to involve a third party to reach the conclusion of an agreement putting an end to legal, economic or financial difficulties which are existing or foreseeable. To give more force to the agreement, it can be homologated by the court.
Collective proceedings
There are three collective proceedings depending on the importance of the difficulties encountered:
- The safeguard procedure : it is intended for companies which can justify legal, economic or financial difficulties which they are not able to overcome, without however being in a state of suspension of payments. The purpose of the safeguard is to allow the reorganization of the company to settle debts and to envisage a serene continuation of the activity.
- The judicial reorganization procedure : it is aimed at companies whose situation is not irreparably compromised, but which are in insolvency status. In other words, to entities whose available liquidity does not allow all debts to be honored. The objective of the recovery procedure is to allow the continuation of the activity, the maintenance of employment and the discharge of liabilities.
- The judicial liquidation procedure : it applies to companies for which it is clearly impossible to maintain activity. The purpose of the liquidation is to reimburse the creditors and then to close the business.
(Photo credit: iStock)
Article written by
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Faustine Nègre holds a Master II in Business Law from the University of Paris I Panthéon-Sorbonne. She joined Legalstart to support entrepreneurs in their projects and contribute to …
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This text is published under the responsibility of its author. Its content in no way binds the editorial staff of Echos Solutions.
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