Are you a company director looking to put your business on hold? It's possible to put it on hold!
But what is company mothballing, and what purpose does it serve?
Putting a company into mothballs means putting its activities on hold for a limited time, without dissolving it. Such a procedure is useful for a number of reasons:
- A company that has just been set up can be immediately mothballed to provide a "ready-to-use" company that the entrepreneur can simply resell. Buying such a company avoids the need for registration formalities . In this case, the entrepreneur mothballs the company as soon as it is created, for as long as it takes to find a buyer.
- Mothballing a company can also limit the deterioration in its financial health, and buy time to find a solution.
- Finally, placing your company in a dormant state can make it easier to change its activity, while avoiding the need to deregister or file a new declaration.
Even so, there are a number of steps involved in mothballing a company, which must be followed to the letter.
To make things easier for you, today we're going to focus on the mothballing of a company!
To begin with, we need to look at the steps involved in putting your company into mothball mode.
There are two steps to follow:
- First and foremost, the decision of the company's legal representative must be obtained in order to mothball a company. The holding of a shareholders' meeting is optional, however, unless otherwise stipulated in the articles of association. However, it is essential to confirm the decision of the legal representative collectively, in order to limit his or her legal liability.
- Following this, it is necessary to declare the company's incorporation to the relevant Centre de Formalités des Entreprises or CFE , and to file the company's financial statements.
Once these two steps have been completed, the court clerk's office will publish the mothballing in the BODACC.
The mothballing procedure is designed to put a company's activities on hold for a set period of time. During the mothballing period, the company must nevertheless meet a number of obligations.
Accounting obligations
First and foremost, the company is subject to accounting obligations while it is dormant. The first accounting obligation is to prepare, close and submit the company's statutory accounts.
Secondly, you must continue to organize general meetings.
It's important to note that accounting obligations can be reduced if the company in question has no employees.
If applicable :
- The preparation of a balance sheet or income statement is by no means compulsory for companies with a commercial activity.
- The balance sheet and income statement should be drawn up in a reduced form for VSEs that are legal entities.
Tax and social security obligations
Secondly, the company is also subject to tax and social security obligations in the event of a mothballing.
These are many and varied:
- The company must continue to declare its results as "nil", as its sales are nil. However, it does not have to declare VAT.
- The company must also pay CFE for the 12 months following the mothballing operation. Once this period has elapsed, it is exempt.
- Finally, the company director can keep ACRE and his social security cover.
Finally, it is important to describe the process involved in putting an entrepreneurial structure to sleep.
To put an end to the mothballing, the company president must file an amending declaration with the CFE. Such a declaration is imperative if the company is not to be struck off by the Tribunal de Commerce.
This statement may mention three different things:
- Reactivating the company and getting back to business
- Company reactivation and sale
- Reactivating the structure and dissolving the company
In conclusion, the mothballing procedure can be very useful.
But beware: after 2 years of dormancy, the company may be struck off automatically.
So be on the lookout!
Written by our expert Quentin Moyon
November 28, 2018
