The suspension of payments represents an alternative to bankruptcy.
It enables a trader to deal with temporary financial difficulties by authorising him/her to suspend his payments to creditors for a given period of time.
However, it does not rule out a declaration of bankruptcy in the event that the business meets the conditions for bankruptcy.
A suspension of payments may be granted to:
- any trader, i.e. any natural or legal person who carries out commercial acts as a profession, and;
- operators of industrial establishments who are not legally defined as traders.
Financial establishments are not concerned: they fall under a different regime of suspension of payments.
The suspension of payments may only be granted to a trader:
- who, as a result of unforeseen and extraordinary events, is forced to temporarily cease making payments;
- but who, on the basis of his duly-examined balance sheet, has sufficient assets or means to pay back his creditors in principal and interest.
The suspension of payments may also be granted if the trader's situation, although currently showing a deficit, holds genuine potential in terms of re-establishing the balance between assets and liabilities.
Submission of the request
The trader must submit a request on plain paper:
- to the commercial district court (tribunal d’arrondissement siégeant en matière commerciale) with jurisdiction over his address;
- as well as to the Supreme Court of Justice (Cour supérieure de justice).
The following must be enclosed with the request:
- an account of the events on which the request is based;
- a detailed estimate statement of his assets and liabilities;
- a list indicating the names of his creditors, their addresses and the amount of their claims.
Appointment of experts and an examining magistrate
The district court appoints one or more experts to verify the state of the trader's affairs as well as an examining magistrate to supervise the operations.
The district court may also grant a temporary suspension to the debtor either immediately or during the investigation. The debtor's operations are then placed under the supervision of the examining magistrate.
Meeting of creditors
The examining magistrate issues a notice to the creditors to attend a meeting with the debtor by registered letter at least 8 days prior to the meeting.
At this meeting, the examining magistrate presents his report on the situation of the debtor to the district court.
The creditors then individually declare the amount of their receivable debts and whether they approve or reject the request for a suspension of payments.
The suspension of payments may only be granted with the agreement of the majority of creditors representing, in terms of their receivable debts, 3/4 of the sums due.
On the basis of this meeting, the district court delivers its opinion as well as the documents submitted by the debtor and creditors to the public prosecutor who will submit them along with his conclusions to the president of the Supreme Court. The Supreme Court will issue a ruling within one week of receiving the documents.
Granting the suspension of payments
If the Supreme Court grants the suspension of payments, it will set the duration of the suspension and appoint the official receivers responsible for supervising and monitoring the operations of the debtor throughout the suspension.
The ruling and any extension of the suspension of payments shall be posted within 3 days of being issued in the auditorium of the commercial district court and published in the newspapers stipulated by the president of the Supreme Court.
The debtor may then suspend payments for the period set by the Supreme Court of Justice.
The suspension only applies to liabilities contracted prior to obtaining it.
Furthermore, it does not apply to certain debts such as taxes and other public charges, debt covered by a lien, pledge or mortgage, or debt in respect of alimony.
Throughout the period of suspension of payments:
- creditors whose receivable debts are covered by a lien or mortgage may no longer enforce their guarantee by seizing or selling the real estate and accessories necessary for carrying out the debtor's profession or business activity, provided that the debtor pays the accruing interest on the guaranteed debts;
- the debtor must make payments in respect of debts existing at the time of the request to all creditors in proportion to their receivable debts;
the debtor may not carry out a certain number of acts alone. Without the prior authorisation of the official receivers appointed by the Supreme Court, he may not:
- dispose of, pledge or mortgage movable or immovable assets;
- plead, compromise, borrow or receive any sum;
- make any payment or carry out any administrative act.
End of the suspension of payments
The suspension of payments ends on the date set by the Supreme Court of Justice.
However, the creditors may request the repeal of the suspension of payments if the debtor:
- has acted in bad faith or with the intention of harming the creditors;
- has made payments in respect of certain unsecured debts during the period of suspension of payments;
- no longer has sufficient assets to honour his debts in full.
A court that receives a request for the suspension of payments may automatically declare the debtor bankrupt if the investigation into the request determines that the conditions for bankruptcy are met.
Furthermore, in the event of the bankruptcy of the debtor within 6 months following the end of the suspension of payments, the period of cessation of payments will date from the date of the request for the suspension of payments.