FRANCE Law and Practice Contributed by: Anne-Sophie Noury, Saam Golshani and Alicia Bali, White & Case
The judicial administrator shall notify each affected party of the criteria for class formation and the deter - mination of the voting rights corresponding to the affected claims or rights allowing them to cast a vote. The consultation involves the submission of a draft plan prepared by the debtor with the assistance of the judicial administrator for consideration by the affected parties (except in judicial reorganisation proceedings, where any affected party may submit an alternative plan to the vote of the class(es)). The decision shall be taken by each class by a two- thirds majority of the votes held by the members cast - ing a vote. Treatment of Dissenting Creditors To cram-down dissenting minority creditors and ena - ble the court to adopt a plan despite the negative vote of one or several classes, the following general condi - tions must be met. • The plan complies with these conditions for its adoption by the court: (a) the classes have been duly formed in accord - ance with the rules; (b) affected parties that share a sufficient com - monality of interest within the same class are treated equally and in proportion to their claim or right; (c) the plan has been duly notified to all the af - fected parties; (d) if there are dissenting affected parties, the plan meets the “best interests of creditors” test – ie, no dissenting party is worse off as a result of the plan than it would be if the order of prior - ity of payments in a judicial liquidation were applied (whether in the event of a piecemeal sale or a court-ordered disposal plan – plan de cession ) or in the event of a better alternative solution if the plan was not approved; (e) where applicable, any new financing is nec - essary to implement the plan and does not excessively impair the interests of the affected parties; and (f) the interests of all affected parties are suffi - ciently protected;
• approval of the plan by a majority of classes (nec - essarily including a class of secured claims or a class having a higher rank than the class of unse - cured creditors) or by a class “in the money” other than capital holders; • compliance with the absolute priority rule – ie, the claims held by a dissenting class of affected par - ties are fully paid (by identical or equivalent means) if a lower-ranking class is entitled to be paid or retains an interest within the plan; and • compliance with the rule according to which the plan shall not permit a class to receive or retain more than the total amount of its receivables or interests. Where one or more classes of equity holders have been constituted and have not approved the plan, the plan can be imposed on such dissenting equity hold - ers in the following circumstances: • if the threshold criteria are met (see the foregoing) – if there is no economic interest left, it is reasonable to assume that the shareholders will be “out of the money” in the event of a liquidation/disposal plan; • in respect of the preferential subscription rights of the shareholders; and • if the plan does not provide for the transfer of all or part of the rights of the dissenting class or classes of equity holders. Judicial reorganisation proceedings broadly take place in a manner that is similar to safeguard proceed - ings, subject to certain specifics. The main differences are as follows: • if the debtor does not meet the required threshold(s), the authorisation to form classes of affected parties may also be requested from the supervisory judge by the judicial administrator on its own, without the debtor’s approval (in addition to being requested by the debtor); • any affected party may submit a draft plan to the vote of the classes; • if the plan has not been approved by all classes of affected parties, the court can decide to apply the cross-class cram-down mechanism at the request of any affected party (in addition to the debtor or the administrator, with the debtor’s consent); and
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