Your Customer Enters Safeguard, Receivership or Liquidation in France: what happens to contracts and invoices?

When a French customer is placed under sauvegarde (safeguard), redressement judiciaire (judicial reorganisation/receivership) or liquidation judiciaire (judicial liquidation), the first instinct of many suppliers is to “stop everything” until old invoices are paid. In many jurisdictions that reflex is logical. In France, it is often illegal — and it can quickly expose the supplier to court action, damages, or forced continuation of performance.

What’s the difference between Safeguard, Receivership and Liquidation in France?

Before looking at ongoing contracts and supplier rights, it helps to understand what each French collective procedure is meant to achieve:

• Sauvegarde (Safeguard proceedings): This is a preventive restructuring procedure. The company is in difficulty but is typically not yet insolvent (in the strict “cessation des paiements” sense) when it files. The goal is to reorganise early, protect the business from creditor pressure, and continue operations while a plan is prepared. Management often stays in place, and an administrator may be appointed to supervise or assist.
• Redressement judiciaire (Judicial reorganisation / Receivership): This procedure is opened when the company is already insolvent (“cessation des paiements”), but the court believes rescue may still be possible. The objective is to keep the business running, preserve jobs, and attempt a recovery plan (or a sale) during an observation period. Control is tighter than safeguard, and the administrator’s role is often more central.
• Liquidation judiciaire (Judicial liquidation): This is the “end-of-road” procedure: the court concludes the company cannot realistically be rescued. The purpose is to stop or wind down the activity, sell assets, and distribute proceeds according to the insolvency ranking rules. A liquidator replaces the administrator as the key actor, and contracts are generally managed with a view to orderly shutdown or asset sale.

French insolvency law is designed to keep the debtor’s business alive (or at least organised) and to prevent the collapse of the debtor’s contractual network. The result is a strict framework for ongoing contracts (contrats en cours): the opening judgment does not automatically terminate contracts, and the creditor cannot unilaterally change the rules simply because a collective procedure has been opened.

This article explains, in clear operational terms, what you can and cannot do when your client enters a French collective procedure, and how to protect your position without stepping outside the law.

1. The Core Rule: The Opening Judgment Does Not Terminate Ongoing Contracts

French commercial law states a very strong principle: even if the contract contains a clause providing for termination upon insolvency (an “ipso facto clause”), that clause cannot produce its effects merely because the procedure has been opened.

In safeguard proceedings, the rule is expressly stated in Article L.622-13 of the French Commercial Code. Equivalent protections exist for reorganisation and liquidation (the texts differ, but the logic is the same): the opening of the procedure cannot, by itself, cause indivisibility, termination or rescission of the ongoing contract.

Two immediate consequences follow:

1. You remain bound by the contract (at least initially).

2. You cannot use old unpaid invoices (pre-opening debts) as a reason to stop performing, unless the law provides a specific mechanism.

This is often the biggest surprise for foreign suppliers. You may be owed money, and yet still have to deliver or perform — at least until the contract is lawfully discontinued by the proper insolvency actor.

2. Deliveries Already Paid Before Liquidation: No “Self-Help” Compensation

A classic trap is the idea of “I’ll hold back this delivery to offset what they already owe me.”

French case law is clear: if the customer ordered and paid for goods before liquidation, the supplier generally cannot refuse delivery simply to compensate for other unpaid orders. The contract and the payment are treated as separate obligations; set-off and leverage are heavily restricted once insolvency proceedings are opened.

Operationally: if you have received payment for a specific delivery that was due, do not assume you may retain the goods as a bargaining chip for other invoices.

3. You Must Perform Despite Unpaid Debts From Before the Opening Judgment

One of the most important lines in Article L.622-13 is the following idea: the counterparty must fulfil its obligations despite the debtor’s non-performance of obligations that arose before the opening judgment.

This is precisely why many “refusal to sell” strategies that are valid in a normal commercial context become unlawful once the customer is under safeguard or receivership. A supplier who stops delivering because the debtor did not pay past invoices risks being sanctioned, because the correct route is:

• declare your pre-opening claim in the insolvency process; and

• deal separately with post-opening performance under the ongoing-contract rules.

That does not mean you are helpless. It means you must use the right tools, at the right time, with the right wording.

4. What Counts as an “Ongoing Contract” in Practice?

An “ongoing contract” is broadly a contract that was not fully performed by both sides at the date of the opening judgment. Many supply agreements, service contracts, leases, insurance policies, and framework contracts fall into this category.

French courts also treat some financial arrangements as ongoing contracts. For example, the French Supreme Court (Commercial Chamber) confirmed that a current account not closed before the opening judgment is an ongoing contract, and that opening liquidation does not automatically close it.

The classification matters, because the “ongoing contract” regime triggers specific rights and deadlines (including the famous one-month notice mechanism discussed below).

5. Clauses That Are Prohibited (Even If They Look “Reasonable”)

French law goes beyond banning termination clauses. Courts also prohibit clauses that, solely because the procedure is opened, worsen the debtor’s obligations or reduce the debtor’s rights under an ongoing contract.

This is why some “risk-management” clauses become unenforceable if they effectively penalise the debtor merely due to the opening judgment. The French Supreme Court has censured contractual attempts to modify the balance of obligations to the debtor’s detriment based only on the existence of insolvency proceedings.

Practical message: once the opening judgment exists, changing the deal “because they’re in insolvency” is precisely what the law tries to prevent.

6. The Key Strategic Tool for Creditors: Formal Notice to the Administrator (One-Month Rule)

If you want clarity — and possibly to exit the relationship — French law provides a structured mechanism.

Where an administrator (administrateur judiciaire) is appointed, the creditor may send a formal notice asking whether the administrator intends to continue the ongoing contract. Under Article L.622-13, if the notice remains unanswered for more than one month, the contract may be terminated by operation of law (subject to the procedural details of the case).

This is not a casual email. It should be done carefully and provably (registered mail, clear identification of the contract, clear legal basis, clear request).

Why this matters

Because it forces a decision. If the administrator wants the contract continued, the administrator must accept the legal consequences of continuation (especially on payment terms depending on the procedure). If the administrator declines or stays silent, you gain a clean exit route and can quantify your claim.

Important nuance: “Silence” can sometimes be overridden by conduct

French case law accepts that certain actions by the administrator can show an intention to continue, even without a formal written reply—most notably when the administrator pays post-opening amounts under the contract. The safest approach is to document everything and avoid ambiguity.

7. Model Letter (English) — Formal Notice to the Administrator

Below is a practical template you can adapt. Use registered mail (or a method producing reliable proof of receipt).

Subject: Formal notice — ongoing contract / request to confirm continuation (Article L.622-13 French Commercial Code)

This letter does two things: it protects you, and it creates a timetable.

8. Can You Demand Immediate Payment if the Contract Is Continued?

Safeguard vs Receivership: Not the Same Answer

Creditors often ask: “If I must keep performing, can I at least require cash payment going forward?”

The answer depends on the procedure.

• In safeguard (sauvegarde), continuation generally preserves the contract’s existing structure, including any payment terms previously agreed, because the aim is to stabilise the business. Article L.622-13 frames continuation as the administrator’s right to demand performance while providing the promised counter-performance.

• In judicial reorganisation (redressement judiciaire), the law tends to be stricter about post-opening performance: the logic is that if the administrator wants continuation, the creditor should not become a forced lender. The source text you provided reflects this distinction and it is widely used in practice.

What never changes is the following: pre-opening debts cannot be used as a condition to continue the contract. Those debts belong to the insolvency “past” and must be dealt with through declaration of claim (déclaration de créance).

9. Pre-Opening Unpaid Invoices: You Usually Cannot Make Continuation Conditional on Paying Them

This is another major trap. Even if your customer owes you substantial sums from before the opening judgment, you generally cannot say:

“I will only continue the contract if you pay all old invoices first.”

French insolvency law deliberately prevents that approach because it would allow one creditor to leap ahead of others and destroy the collective nature of the process. Instead, the correct route is to declare the claim within the legal deadline and follow the insolvency distribution rules.

That said, if you are continuing performance, you should focus on securing post-opening payments and ensuring the contract is either properly continued (with reliable payment) or cleanly terminated.

10. If the Administrator Refuses or Fails to Answer: Termination and Damages Claims

If the administrator indicates they do not wish to continue the contract — or if they do not respond within the applicable period — the contract is treated as terminated in accordance with the regime.

At that stage, the creditor usually has two objectives:

1. obtain confirmation of the termination date (often via the supervisory judge / judge-commissioner, depending on the procedural pathway); and

2. quantify and declare any resulting damages claim arising from the non-performance (termination losses, decommissioning costs, etc.).

A harsh reality in France is that undelared claims are often lost in practice. So the legal strategy is inseparable from insolvency proof-management: dates, receipts, contract documents, and accounting must be assembled quickly.

11. No Administrator Appointed: You Must Address the Debtor, Copy the Judicial Representative

In some cases, the court opens safeguard or reorganisation without appointing an administrator. When that happens, the decision power over ongoing contracts is exercised by the company itself, under the control of the insolvency actors (typically the judicial representative / mandataire judiciaire).

Operationally, you should send the same type of formal notice to the debtor company, and send a copy to the judicial representative using a provable method. Timelines can be tight, and procedural missteps can cost you leverage.

12. Liquidation Judiciale: Similar Logic, Different Actor (Liquidator)

In liquidation, the relevant decision-maker is the liquidator (liquidateur judiciaire). If you want a decision on whether your contract continues, the formal notice must be addressed to the liquidator — and it must ask the right question (continuation or not), not merely demand payment. The wording matters because French courts are strict about what counts as a valid “request to take a position.”

13. Insurance Contracts: Insolvency Does Not Justify Reducing Coverage

Insurance disputes show another crucial principle: it is not only termination that is restricted; modifying the insurer’s obligations to the debtor’s detriment because of insolvency is also problematic.

Courts have censured clauses that attempt to deprive the debtor of a benefit (such as coverage elements) solely because the debtor is in collective proceedings. The opening judgment should not become a pretext for downgrading contractual commitments.

A second recurring insurance issue is premium non-payment: even in liquidation, the insurer must respect the formal rules for suspension/termination for non-payment (including formal notice requirements under insurance law). If the insurer does not follow those steps, it may not be able to rely on termination.

14. Commercial Leases: Opening the Procedure Does Not Automatically Terminate the Lease

Commercial leases are a world of their own, but one key idea is constant: the opening of safeguard/reorganisation/liquidation does not, by itself, terminate the lease, and any clause stating otherwise is typically ineffective.

For the landlord, the game revolves around two questions: (i) are the unpaid rents pre- or post-opening, and (ii) has the three-month statutory waiting period been respected?

Article L.622-14 provides, in substance, that if the landlord seeks termination for non-payment of rents and charges relating to post-opening occupation, the landlord may only act after three months from the opening judgment.

Recent commentary also stresses that the judge-commissioner examines the debt situation in the procedural context, not as a pure automatic mechanism.

For creditors who are not landlords, the lease regime matters because it shapes the debtor’s ability to continue operations — and therefore the realism of any recovery plan.