FRANCE Law and Practice Contributed by: Fernand Arsanios, Delphine Guillotte, Guillaume Chaboureau, Houda Idaroussi and El Sayegh, King & Spalding
• pre-commencement claims secured by security interests over real estate assets (only in the context of judicial liquidation proceedings); • post-commencement wages claims not advanced through the French wages guarantee scheme (AGS); • liens benefiting new money made available during safeguard/reorganisation proceedings; • post-commencement privileged creditors; • other post-commencement claims (wages due and AGS claims); • creditors benefiting from other privileges; and • unsecured claims. In the event of judicial liquidation proceedings only, certain pre-commencement secured creditors with claims secured by real estate are paid prior to post- commencement creditors. There may be exceptions to this order of priority for certain types of creditors, who would be treated sepa- rately. This is the case, for example, for creditors with a retention right over assets relating to their claim. 7.3 Length of Insolvency Process and Recoveries The maximum duration of each type of proceeding may vary as follows. • Mandat ad hoc ( pre-insolvency proceedings) – French law does not provide any maximum dura- tion; in practice, this usually does not last more than one year. • Conciliation ( pre-insolvency proceedings) – four months (or up to five months in total, if the initial length is extended). • Safeguard proceedings – 12 months. • Accelerated safeguard proceedings – four months. • Reorganisation proceedings – 18 months. • Liquidation proceedings – French law does not provide any maximum duration for liquidation pro- ceedings; in practice, the duration will depend on the ongoing litigation, the size of the company and the value of its assets. • Simplified liquidation proceedings (available to certain small business only) – 12 months.
The duration of the implementation phase of the con- tinuation plan reached can range from a few weeks to ten years, depending on the complexity of the case. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency A French debtor may, in certain conditions, voluntar- ily request the commencement of the mandat ad hoc or conciliation pre-insolvency proceedings, which are flexible and confidential, with the intention of reaching an agreement with the debtor’s main creditors and stakeholders. The main characteristics of the pre-insolvency pro- ceedings are as follows. • The mandat ad hoc and conciliation may only be initiated by the debtor itself, at its sole discretion. • A mandat ad hoc may be initiated if the debtor faces difficulties but is not insolvent, while the con- ciliation may be initiated if the debtor faces actual or foreseeable difficulties of a legal, economic or financial nature and is not insolvent, or has not been in a state of cessation of payment ( cessation des paiements ), for more than 45 calendar days. • Both are carried out under the aegis of a court- appointed officer ( mandataire ad hoc or concili- ateur ) to facilitate negotiations with creditors. • In both cases, any agreement between the debtor and its creditors will be negotiated on a purely con- sensual and voluntary basis; creditors not willing to take part in the agreement cannot be bound by it or forced to accept it. • None of these proceedings automatically stays any pending proceedings, and creditors are not barred from taking legal action against the debtor to recover their claims; those that have accepted to take part in the proceedings usually accept not to do so during the proceedings. • Contractual provisions increasing the debtors’ obligations (or reducing its rights) under an existing contract upon the opening of such pre-insolvency proceedings are null and void. This is a public order provision of French law. In addition, in the case of conciliation, the agreement reached between the parties may be approved ( homo- logué ) by the president of the competent court at the
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