When a business goes bust

In UK a business can go into receivership owing masses of money to
supppliers,tax offices, employees and landlords.
In some cases it is millions!
The crazy thing is that the same business owners open up with a
fresh start using the name of another person.
The debts are never paid and the suppliers and employees have to grin
and suffer.
Is the system similar in France?
No this does not relate to me…just in case you may have considered the
AE would never fit into the big business regime.
Would you infact be able to borrow money from the banks to start AE?

I think you’re talking about limited companies where a director immediately starts a new limited company in a different name.

I’d guess there’s the same possibility here.

I think it would be difficult in France to open a business in someone else’s name and keep your own name out of it if you are involved, there are too many checks carried out. I can’t see how it would be possible to do that legally. However I don’t think there is anything to stop you from opening another business in your own name, provided you weren’t judged guilty of some kind of fraud during the liquidation investigations. Businesses fail and it’s not usually the fault of the business owner, sometimes there will have been mistakes but sometimes he might have been entirely blameless.

I seem to recall that 5 years ago they lightened up on the automatic interdition bancaire for business owners for their first bankruptcy, can’t remember the exact details. But it’s still going to be an obstacle to getting a loan. The details of any previous failed businesses stay on your record on insee forever so the bank will know, so it’s up to the individual to convince the bank that they’ve learned from the experience and it won’t happen again, and this business will succeed.

But loans and MEs don’t really go together, in most cases it wouldn’t make sense, ME is most advantageous if you can cut your business expenditure to the bone. If you’re already paying off a loan together with interest before you even start on the business activity, you’ve hamstrung yourself from the start. Any business that requires enough upfront investment to be looking at a bank loan, should probably be on a régime where you can write that investment off against eventual profits. Not being funny but I think if someone goes along and ask for a loan to set up an ME, the bank is going to question their business acumen straight away. Of course there are exceptions but you would need to have thought it through very clearly, be convinced in your own mind that ME is the right option, and be ready to convince the bank.

That’s how it seems to me from my limited knowledge but no doubt there are lots of other factors to think about too.

It happens a lot in UK with restaurants.
Yes limited companies…as I had.
Just recently a famous chef was owing seventy one million pounds.
I know that there are huge warning signs before you could owe even
I think you just have to say…failed and close up and pay every one what is
owed before the debt becomes big.

If only it were so simple…
Probably most businesses fail due to bad debts and cashflow problems. On paper they have plenty of money to pay everyone and keep trading, but there’s no money in the bank because they haven’t managed to collect the money they’re owed.
Mind you I don’t see how that could be the case in the restaurant business unless you have a lot of corporate accounts with credit terms. Don’t most customers pay on the spot?

Yes with restaurants you know exactly how everything is going.
Banking is done on a weekly or even daily bases but the credit
card payments hit the bank balance with in days.
Once a restaurant is up and running it should not need an overdraft?

Suppliers are paid monthly.
Sometimes suppliers extend credit because they are dealing with famous chefs
and trust that credential.
With chains you would still have to be running them really very badly or have
no interest in what you were doing.
I have only really run restaurants as a self employed person so I can only speak about

I should have gone into catering! The part of running a business that I dislike by far the most, is having to chase late payers. And I’m sure a lot of people would agree. It’s one of the oft-discussed topics on French business forums.

No it really is hard chasing people to pay…however working in a restaurant demands
long hours and high stamina.
If I were to write a book…with a ghost writer, of course it would be about the people I had
met whilst operating my restaurants. But I would be opening a huge can of worms.

The business high up on the food chain are usually in the strongest position. It is the suppliers lower down who are more likely to suffer. As Barbara has pointed out, at her level, a restaurant cashes it’s takings daily but has credit with its suppliers. If a problem occurs it’s those suppliers who are vulnerable. The taxman, utility services, accountants and even shareholders are first in line for payment, the suppliers are left to fight over the scraps. This scenario is probably most common within the building industry, you only have to look at the recent big news items to see the fallout.

Some businesses are decent and do think about their small suppliers. Back in the UK many years ago I had a client that I’d worked for a long time on an occasional basis and had a good relationship with, in fact he’d been one of my very first clients when I first went freelance, I used to invoice him once every few months when there was an amount worth invoicing for. One day he contacted me out of the blue and said “send me an invoice for what I owe you, I want to pay it off”. I was surprised but I did, it was a few hundred and he paid me, and shortly after that his business went into administration. I had no contact with him since, but I’ll always remember him as one of the good guys and I hope he got back on his feet.

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Sad that his business went bust…
It is sad enough when you sell and then pay every one.
In fine dining you have what I will call " chasing the Michelin"
when owners and chefs will follow that dream beyond all
The true money to be made in restaurants is by investing
in a good property then building up a stable business slowly.
Then selling for a big profit and paying the gov a very handsome
figure in capital gains.

Unfortunately it is a recognised problem that some traders who seem to possess a minimum in the way of scruples see limited liability companies as a way to serially walk away from liabilities - both financial and product guarantees.

The building and double glazing sectors seem to be particularly affected.

Eventually such people might be identified and barred from being a director but they often find ways around this.

I guess some will seek any opportunity to bend the system to their advantage with little regard for others.

I’m guessing that setting up an SARL or EURL is more closely regulated in France?

My BIL was a self employed electrician and most of his work came from subcontracting for big firms usually in and around London. He was involved in arbitration at least once a year over late payments from the big boys as his suppliers and bank manager were chasing him. I asked him why he stuck with that business model and he said at the end of the day it was still the best bet as late payers or not there was always work.
Our shared father in law was a quantity surveyor. He also acted as an arbitrator and was kept fairly busy in that role.

I spent 20+ years working for a large construction company in the UK and we had a prority system for paying subcontractors - first to be paid were Nominated (where there was a contractual obligation to make payment), second were Domestic (often long standing subcontractoring companies) and last were the Labour Only guys who frequently went bust and simply started again under a different name.