Mise en Sommeil (Temporary Cessation of Activity) for French Companies
May 15, 2024
Written by : Marc Huynh
In French business law, "mise en sommeil," also referred to as "cessation temporaire d'activité" (temporary cessation of activity), is a procedure that allows a company to temporarily halt its operations without undergoing dissolution or removal from the Register of Commerce and Companies (Registre du Commerce et des Sociétés or RCS). This status enables the company to retain its registration and continue fulfilling its fiscal and social obligations during the period of inactivity.
When Can a Company Use Mise en Sommeil?
Generally, a company can opt for mise en sommeil unless it faces financial difficulties that could lead to a cessation of payments. If the company has a secondary establishment, it must close the establishment by filing a cessation of activity form with the business formalities window before proceeding with the mise en sommeil of the company itself.
Decision and Declaration Process
The legal representative of the company, such as the manager or president, holds the authority to decide on placing the company into mise en sommeil. Unless the company's statutes specify otherwise, an extraordinary general meeting of the shareholders is not mandatory for this decision. Furthermore, there's no requirement to publish the temporary cessation of activity in a legal announcement publication.
Within one month of the decision (or the shareholders’ meeting), the company must declare the temporary cessation of activity through the single window for business formalities.
Duration of Mise en Sommeil
The maximum duration for a mise en sommeil is two years.
Tax and Accounting Obligations During Mise en Sommeil
Even in a state of mise en sommeil, the company must adhere to specific accounting and tax responsibilities:
The company director is obligated to continue preparing and filing annual financial statements and must convene the annual meeting for their approval.
Regarding VAT, the company is exempt from declaration and payment.
For corporate income tax, a "nil" tax return must be submitted.
With respect to the business property tax (Cotisation Foncière des Entreprises or CFE), the suspension of activity is treated as a cessation of activity after 12 consecutive months.
Social Security Implications
The company director remains affiliated with their existing social security scheme.
If under the self-employed scheme, minimal contributions are still due.
If under the general social security scheme, contributions are based on the director's remuneration.
Social contributions for any employees must continue to be paid.
If the company benefits from the benefit of the aid to company creation or takeover (Acre), the social contributions exemption is maintained during the temporary cessation.
Ending Mise en Sommeil
The mise en sommeil can be terminated in two ways: the company either resumes its activity or is dissolved. If no action is taken within the two-year period, the company will be automatically removed (radiée d'office). At the end of the two years, the director must reactivate the company or definitively cease the activity.
If there is no resumption of activity after two years, the clerk of the commercial court can initiate the automatic removal of the company, and the company's manager will be informed by registered letter with acknowledgment of receipt.
Legal References (French Commercial Code)
The legal framework for "mise en sommeil" is primarily found in the French Commercial Code:
Articles L123-25 to L123-28.
Article R123-66.
Article R123-69.
Article R123-130.