FRANCE Law and Practice Contributed by: Anne-Sophie Noury, Saam Golshani and Alicia Bali, White & Case
In safeguard and judicial reorganisation proceed - ings, the public prosecutor may submit to the court the name of a judicial administrator and the creditors’ representatives to be appointed, upon which the court shall request the debtor’s observations. The rejection of such proposals must be duly motivated. The debtor may also propose the name of a judicial administrator. In liquidation proceedings, the public prosecutor can suggest the appointment of a particular liquidator. The court can replace the officers on its own initiative, or at the request of the public prosecutor or the super - visory judge (at the request of the debtor or creditors). The officers can request their own replacement. To be eligible, the officers must pass a national exam and be registered on a list. In the course of court-administered proceedings, creditors are subject to the same rules regardless of whether they are secured or unsecured, particularly the stay on payment and enforcement. As such, they need to file a petition in relation to pre-insolvency claims within a limited period of time starting from the judgment opening the procedure. Certain creditors benefit, however, from some privileg - es, an efficient security package or rights that enable them to prime other creditors notwithstanding the general rules set out in the foregoing: 2. Creditors 2.1 Types of Creditors • certain creditors benefit from a privilege, such as employees (who are not subordinated to the gen - eral effect of the court-administered proceedings) and public creditors; • “meritorious” creditors are better treated in safe - guard and judicial reorganisation proceedings as they prime other creditors, as an incentive for granting new credit and pursuing business opera - tions with the debtor; • security interests granting only a preferential right over the value of the asset (absent any retention right) are usually inefficient in case of restructur -
ing and insolvency proceedings (eg, mortgage, pledge); • creditors benefitting from efficient retention rights have an exclusive right over the value of the retained assets and may require full repayment to release the retention, whatever their ranking (eg, pledge over the securities account); and • property-based security interests such as a French security trust arrangement ( fiducie ) or Dailly assign - ment benefit from an exclusive right over the value of the assets up to the value of their claims. 2.2 Priority Claims in Restructuring and Insolvency Proceedings Employment claims, procedural costs and new money claims (including conciliation and safeguard/reorgani - sation privilege) have a very favourable ranking in the legal waterfall of liquidation proceedings under French insolvency law. The priority of payment among these creditors is as follows: • any allowances granted by the supervisory judge by way of remuneration to managers or individual debtors; • claims benefitting from the wage super-privilege; • legal costs arising after the opening judgment; • claims benefitting from the privilege of sums due to agricultural producers; • claims benefitting from the “new money privilege” or “conciliation privilege”; • claims secured by real estate security interests, classified in accordance with the ranking provided for in the Civil Code; • claims benefitting from the privilege of wages (where not paid by the Association for the Manage - ment of the Employees’ Debt Guarantee Scheme (AGS)); • claims benefitting from the “post-money privilege”; • “meritorious” claims resulting from the perfor - mance of ongoing contracts and for which the contracting party has agreed to receive deferred payment; • claims benefiting from the privilege of wages (where paid by the AGS); • other post claims and prior claims for which pay - ment is authorised; • claims benefitting from the Treasury’s lien (except for indirect taxes);
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