FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
judge and the lenders are entitled to a privileged ranking for the repayment of the financing. As part of out-of-court proceedings, a mediator ( mandataire ad hoc or conciliator ) is appointed by the President of the Court at the request of the debtor, but is not granted any coercive pow - ers. The debtor remains in possession. 7.2 Waterfall of Payments The purpose of in-court proceedings (save for liquidation proceedings) is to reorganise the debtor through the agreement of a continuation plan. Such plan is prepared by the debtor with the assistance of the JA and may provide for debt restructuring (rescheduling, debtor write- off) or capital reorganisation (including by way of debt-for-equity swap). Most plans will be submit - ted for the prior approval of creditors within the framework of classes of affected parties, which will be constituted by the JA. Creditors sharing a sufficient community of interests will be gath - ered in the same class and should benefit from equal treatment under the plan. In addition, to constitute classes, the JA has to take into con - sideration existing subordination agreements and security packages (eg, creditors secured by security interest in rem are gathered into sepa - rate class(es) and there are likely to be separate classes for preferential creditors and strategic suppliers). Certain claims such as those arising from employment contracts or those secured by a fiducie cannot be affected by a restructur - ing plan. Claims secured by a new money or rescue money privilege cannot be subject to a debt write-off or debt rescheduling which has not been accepted. Should no viable continuation plan be present - ed, the JA could be empowered by the court to organise the sale of the company’s business as a going concern following a tender bid process.
Thus, creditors would be repaid upon the alloca - tion of the proceeds of the sale of the bankrupt debtor’s assets. In such event, creditors must be repaid accord to statutory order of priority with certain preferred creditors taking priority: certain salary payments, court fees, new-money financings (provided in the context of conciliation proceedings and approved by the court), and post-petition debts and rescue finance are paid in priority to all other debts whether secured or unsecured. The same ranking would also apply to the allo - cation of the proceeds of the assets sold on a piecemeal basis under liquidation proceedings if no solution is provided as part of the tender bid process. 7.3 Length of Insolvency Process and Recoveries Accelerated safeguard proceedings are opened for a maximum of four months (opening of con - ciliation proceedings which can last up to five months is a prerequisite (please see 7.4 Res- cue or Reorganisation Procedures Other Than Insolvency for a more detailed presentation of conciliation proceedings). Safeguard proceedings are opened for a maxi - mum of 12 months and insolvency proceed - ings ( redressement judiciaire ) are opened for a maximum of 18 months. There is no maximum duration by law for liquidation proceedings (in the authors’ experience, an average of 18 to 36 months depending on the difficulty of the case). The aim of the French system is to facilitate consensual restructurings negotiated as part of out-of-court proceedings, enabling the debtor company to preserve its value, hence maxim - ising recovery for creditors. In addition, please
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