FRANCE Law and Practice Contributed by: Fernand Arsanios, Delphine Guillotte, Guillaume Chaboureau, Houda Idaroussi and El Sayegh, King & Spalding
Monetary and Financial Code, prior approval of the Ministry of Economy will be required. Foreign investment means (i) the acquisition by an EU or non-EU foreign company of (a) control of a French company or (b) all or part of a line of business of a French company, or (ii) the acquisition by a non-EU foreign company of a stake of (a) 25% or more of the voting rights in a French company, or (b) 10% or more of the voting rights in a French company whose shares are admitted to trading to a regulated market. Foreign investment will be subject to prior approval if the French company in which the investment is made carries out an activity related to the exercise of pub- lic authority or falling within certain sectors identified by French law (eg, national defence, public security, research, production or marketing of weapons). It should be noted that the list of “sensitive” sectors is broader for non-EU companies than for EU compa- nies. Commencement of insolvency proceedings (ie, reor- ganisation proceedings ( redressement judiciaire ), safeguard proceedings ( sauvegarde ) and acceler- ated safeguard proceedings ( sauvegarde accélérée )) will freeze the debtor’s financial situation as at the commencement date of the relevant insolvency pro- ceedings and stay payments. The commencement of these proceedings does not trigger the acceleration of debts, and debt cannot be accelerated solely as a result of the commencement of such proceedings. Secured creditors generally retain their priority over the collateral, but may not enforce their security over the debtor’s assets during the observation period. Any individual legal actions and enforcement proceedings (i) against the debtor and its assets; or (ii) against indi- viduals who granted a guarantee and/or security inter- est to secure the debtor’s debt, will be stayed during the observation period. This period starts on the date of the court decision commencing the proceedings and ends on the date on which the court takes a deci- sion on the outcome of the proceedings. This may 7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
last up to 18 months in the case of reorganisation proceedings. At the end of the observation period, a continuation plan ( plan de sauvegarde ou de redressement ), possi- bly after implementation of a cross-class cram-down, or a sale of the debtor’s assets ( plan de cession ) will be implemented. Commencement of liquidation proceedings will freeze the debtor’s financial situation as at the commence- ment date of such proceedings in the same way as other proceedings described above. However, contra- ry to the opening of the above-mentioned insolvency proceedings, unmatured claims become immediately due and payable. French law does not set a time limit for judicial liquidation proceedings. The duration therefore usually depends on the number of employ- ees, the assets to be sold and any litigation, which could take years. There is a hardening period ( période suspecte ) from the date of cessation of payments ( cessation des paie- ments ) of the debtor until the court decision opening the insolvency proceedings. During this period, cer- tain transactions entered into (such as the granting of security interest over the debtor’s assets as collateral for a debt previously incurred) are automatically void or voidable by the court. The date of insolvency ( ces- sation des paiements ) of a debtor is deemed to be the date of the court order commencing the proceed- ings, unless the court sets an earlier date, which may be no earlier than 18 months before the date of the court order. 7.2 Waterfall of Payments French insolvency law assigns priority to the payment of certain preferred creditors as follows: • employees’ super-privileged claims (ie, wages for the last 60 days of work before the opening of the insolvency proceedings); • post-commencement legal costs (ie, court officials’ fees); • liens benefiting new money made available dur- ing conciliation (described in section 7.4 Rescue or Reorganisation Procedures Other Than Insol- vency );
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