Judicial Reorganization in France 2026: Complete Procedure, Observation Period, Continuation Plan and Sale Plan

Judicial reorganization (redressement judiciaire) is governed by Articles L. 631-1 to L. 632-4 of the French Commercial Code. It applies to businesses in cessation of payments whose recovery is deemed possible.

1. Opening Conditions

Pursuant to Article L. 631-1, two cumulative conditions are required:

Cessation of payments: inability to meet due liabilities with available assets.
Possibility of recovery: if recovery is manifestly impossible, the court directly orders judicial liquidation (Art. L. 640-1).

The opening may be requested by the debtor (mandatory within 45 days of cessation of payments, Art. L. 631-4), summoned by a creditor or required by the public prosecutor.

2. Opening Judgment

The competent court (commercial court or judicial court):

Establishes cessation of payments and sets its date (retroactivity up to 18 months).
Appoints a supervisory judge, a judicial administrator (above certain thresholds) and a judicial representative representing creditors.
Opens the observation period.

3. Observation Period

The central phase of reorganization, lasting 6 months renewable up to 18 months (Art. L. 621-3).

Immediate Effects

Stay of individual creditor proceedings (Art. L. 622-21).
Prohibition on paying pre-opening claims (Art. L. 622-7).
Continuation of ongoing contracts at administrator's option (Art. L. 622-13).
Business continuation under supervision.

Administrator's Mission

The administrator prepares an economic, social and environmental assessment and proposes a draft plan: continuation, sale or liquidation.

4. Continuation Plan

If recovery is viable, the court may adopt a continuation plan (Art. L. 626-1 and L. 631-19):

Maximum duration: 10 years (15 years for farmers).
Spreading of liabilities over the plan duration.
Retention of management unless duly opposed.
Monitoring by a plan execution commissioner.

5. Sale Plan

When standalone continuation is impossible, the court may order a sale plan (Art. L. 642-1): transfer of all or part of the business to a buyer, with selective takeover of contracts and jobs.

6. Classes of Affected Parties (2021 Reform)

For proceedings exceeding certain thresholds (250 employees or €20M turnover), the plan is submitted to the vote of classes of affected parties (Art. L. 626-30). This procedure transposes Directive (EU) 2019/1023 and allows, under conditions, cross-class cram-down.

7. AGS and Wage Guarantee

The AGS (Wage Guarantee Association) guarantees payment of unpaid wages in reorganization (Art. L. 3253-6 of the Labor Code).

8. Possible Outcomes

Continuation plan adopted: business continues.
Sale plan: transfer to a buyer.
Conversion to liquidation: if no viable plan (Art. L. 631-15).

Conclusion

Judicial reorganization is a technical procedure requiring an early strategy. Intervention at the first signs of difficulty (ad hoc mandate, conciliation) often avoids reorganization or optimizes its outcome.