Cessation of Payments in Tunisia: Legal and Financial Action Plan for Executives

You realize that your company can no longer meet its due debts: delayed salaries, suppliers blocking deliveries, banks refusing any new financing. This is a critical situation, the cessation of payments in Tunisia, which requires a rapid and structured response to avoid bankruptcy and limit risks for executives.

This article offers a practical, legal, and financial step-by-step action plan: how to assess the situation, stabilize cash flow within 7 days, negotiate with creditors, choose the appropriate collective procedure, and take subsequent measures to prevent a relapse.

1. Identifying cessation of payments: signs, thresholds, and legal obligations

How to recognize cessation of payments: financial warning signs

Cessation of payments occurs when a company can no longer meet its due liabilities with available assets (immediate cash, receivables, short-term realizable assets). Clear signs include recurring unpaid bills, repeated overdrafts, account freezes by banks, unpaid salaries, seizure notices from creditors, or suppliers refusing to deliver. Identifying these signals allows action before the situation fully deteriorates.

Difference between cash flow tension and cessation of payments

Note: tight cash flow (short-term negative forecasts) does not necessarily mean cessation of payments. The distinction depends on the due nature of liabilities: if the company can mobilize realizable assets or negotiate extensions, it can avoid being in a state of cessation. Precisely assessing due liabilities and available assets is the first priority.

Obligation to declare to the court within the legal deadlines

As soon as an executive notices cessation of payments, they must declare this situation to the court of first instance of the company’s registered office within a maximum of 45 days (Law No. 2016-36 of April 29, 2016). Failure to meet this deadline exposes the executive to civil sanctions (personal liability) and criminal sanctions (in case of asset concealment or fraudulent management). In Tunisia, applicable collective procedures are amicable settlement (before cessation), judicial settlement (after cessation), and judicial liquidation (bankruptcy).

In case of cessation of payments, being assisted by a business law attorney in Tunisia helps avoid procedural errors and prepare a solid file before the mandatory court declaration.

2. Acting within the first 7 days: emergency plan to prevent worsening

Freeze non-essential expenses and prioritize cash flow

Immediately cut all non-essential expenses: investments, non-urgent orders, and non-priority external services. Prioritize payment of salaries and fiscal/social debts that may incur immediate penalties. A simplified weekly cash flow plan (expected receipts vs. due payments) provides an operational view of the runway

Make a complete inventory of debts: suppliers, banks, social security (CNSS), tax authorities

Prepare a comprehensive list of liabilities: amount, due date, creditor, status (in collection, formal notice, seizure). Rank debts by priority (salaries, social security, taxes, bank guarantees, critical suppliers). This table is a key document for any negotiation or filing with a court.

Tip: Create a simple file with columns labeled “Creditor / Amount / Due Date / Contact / Option for Installment Plan.”

Prepare a financial situation file for advisors and attorneys

Gather the essential documents: latest balance sheets and income statements, bank ledger, bank statements, key contracts (leases, supplier contracts, loans), pay slips, and lists of receivables and payables. This package will allow your advisors to quickly assess the situation and propose scenarios (renegotiation, amicable settlement, judicial settlement). In practice, a clear file speeds up action and reassures partners.

3. Negotiating with creditors: winning strategies and mistakes to avoid

How to prepare for negotiations with your creditors

Before any contact:

• Have a consolidated financial statement ready
• Determine a credible proposal (deferment, installment plan, partial write-off)
• Identifiez les créanciers prioritaires et ceux stratégiques
• Identify priority and strategic creditors

Preparation demonstrates your seriousness and increases the likelihood of reaching an agreement.

Possible options: reports, deferrals, discounts, payment plans.

Common solutions include deferring due dates, setting up installment plans (spreading payments over several months), offering partial discounts in exchange for immediate payment, and reaching compensation agreements or selling non-strategic assets. For banks, a written protocol—such as a moratorium or a short-term credit line—can buy time to restructure. Always document every agreement in writing and have it reviewed and approved by your advisors.

Mistakes to avoid: uncontrolled admissions, unrealistic promises, and lack of supporting documentation.

Avoid acknowledging debts you don’t formally recognize or making payment promises you can’t fulfill—doing so undermines your credibility. Always negotiate based on verifiable data and quantified scenarios. Keep all records of agreements (emails, meeting minutes, etc.), and whenever possible, request a confidentiality clause to protect your company’s reputation.

4. Legal Solutions: Out-of-Court Settlement, Judicial Reorganization, Judicial Liquidation

Out-of-court settlement: act before cessation of payments

This preventive procedure allows you to negotiate with creditors only before the company reaches cessation of payments. It cannot be initiated once cessation has been established.

Judicial settlement: rescuing the business after cessation of payments

If the situation warrants judicial intervention, judicial reorganization provides for an observation period during which a recovery plan is developed—typically involving debt restructuring, partial asset sales, and operational reorganization. The goal is to preserve business operations and jobs whenever possible. This observation period is time-limited and comes with enhanced judicial oversight, so it’s essential to prepare a robust dossier before initiating the procedure.

Judicial liquidation: the final step in case of failure

When judicial reorganization fails or business continuation proves impossible, the court orders judicial liquidation. The company’s assets are then sold off to repay creditors. The manager may be held personally liable for mismanagement—such as concealing assets or making preferential payments—and could even face bans from managing a company. It is therefore essential to act transparently and thoroughly document all decisions to limit personal exposure.

Key documents to prepare for the court

Prepare the following documents: audited financial statements, profit and loss accounts, bank statements for the past 12 months, a detailed list of creditors (with supporting evidence of debts), an inventory of assets and stock, current contracts, payroll records and social security (CNSS) statements, and minutes of strategic decisions. A complete file speeds up the court’s review and increases the likelihood of a favorable continuation plan.

5. Preventing Crisis: Best Practices for Managers and SMEs

Implement appropriate management controls: dashboards and performance indicators.

Establish regular monitoring: weekly cash flow forecasts, liquidity coverage ratios, gross margin by product or customer, and average payment terms for customers and suppliers. These KPIs help detect early warning signs and enable timely corrective action before a crisis occurs.

Strengthen relationships with banks and optimize financing arrangements.

Maintain transparent communication with your bankers through regular reports and financial forecasts—trust makes it easier to access temporary solutions such as overdraft facilities or loan rescheduling. Diversify your financing sources (factoring, leasing, investors) to reduce reliance on bank credit.

Review governance, internal organization, and commercial contracts.

Reduce operational complexity, renegotiate commercial terms (payment deadlines, penalties), and secure key contracts to minimize future risks. Train managers in forward-looking financial management and implement an early-warning system that triggers as soon as a critical KPI deteriorates.

Conclusion

Cessation of payments is a serious warning sign—but not a death sentence. A rapid diagnosis, mandatory filing with the court within 45 days, structured negotiations, and timely use of Tunisian legal procedures (judicial reorganization or judicial liquidation) can help preserve business operations or mitigate the consequences.

Don’t wait for a creditor to take legal action: gather your documents, seek specialized advice, and initiate negotiations within the legally required timeframes.

Obtenez une consultation confidentielle pour évaluer votre situation et bâtir un plan d’action sur-mesure.