Putting a company to sleep: how to do it?

The mothballing of a company, limited to two years, is a period without activity which does not lead to dissolution or removal from the trade and companies register.

Competent body

It is the manager of the company who makes the decision to put the company on hold, except in the case where the statutes of the latter mention a contrary clause. However, in order to limit his liability, it is up to the legal representative to validate this decision via a collective decision of the partners, taken at a general meeting.

Formalities

Following this decision, the manager must proceed with the formalities for putting his company on hold with the CFE (Center for Business Formalities) of the Chamber of Commerce and Industry on which he depends. He must complete, then file, the M2 form which will lead to an amending registration of the RCS (Register of commerce and companies) as well as an insertion in the BODACC (Official bulletin of civil and commercial announcements) at the initiative of the clerk of the Court of business. Once these formalities have been completed, the mothballing is enforceable against third parties.

Legal regime

During dormancy, society functions normally. Also, the manager is obliged to keep annual accounts, at the end of each financial year, and to convene the annual meeting to approve the accounts. As the company cannot have a commercial activity, the manager proceeds, possibly, to the closure of secondary establishments. The dormancy of a company may result in the termination or non-renewal of the commercial lease.

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Social regime

During the period of the company’s dormancy, the social security contributions of the person who runs it must be paid. The same applies to payroll costs relating to employees.

Tax system

As far as VAT is concerned, the suspension of a company’s activity causes it to lose its status as liable. Also, it no longer has the obligation to send its monthly or quarterly declarations to the business tax service.
The company is liable for property contributions for 12 months and then is exempted.

End of sleep

The mothballing of a company ends with a new amending entry in the Trade and Companies Register which mentions the resumption of activity, the dissolution or the transfer of the said company.

Automatic removal

Failing this, and at the end of a maximum period of two years from the mention of the suspension of activity in the Trade and Companies Register, the registry seizes the judge empowered to manage the register so that he studies the opportunity of deregistration, after sending the company a registered letter with acknowledgment of receipt. To avoid this automatic cancellation, the manager must reactivate the company, before the expiry of the two years, via an amending registration of the RCS.

Pronounced radiation

Once the cancellation has been pronounced, a period of six months is granted to the legal representative in order to allow him to seize the judge to remedy the situation.

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