FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
note that historically, French insolvency law has been known to be borrower friendly, but legis - lative updates (2021 Reform) promote a more balanced rescue culture in France with the avail - ability of the accelerated safeguard proceedings which are designed to offer a streamlined rescue mechanism, without the unanimous consent of all creditors (please see 7.9 Dissenting Lenders and Non-Consensual Restructurings regarding implementation of potential cram-down of dis - senting lenders). Creditors’ chances of recovery would be drasti - cally reduced if no amicable solution is found as part of out-of-court/safeguard proceedings or if the debtor company delayed filing a petition for the opening of such proceedings and is there - fore compelled to file for insolvency proceedings ( redressement judiciaire or liquidation judiciaire ). 7.4 Rescue or Reorganisation Procedures Other Than Insolvency The two consensual options available under the French legal system are mandat ad hoc and conciliation proceedings, each of them having the advantage of being entirely confidential by law. They are very flexible, opened upon the sole initiative of the debtor and can be used by com - panies facing difficulties for a variety of reasons and purposes. They are consensual: discussions are held under the aegis of a mediator ( man- dataire ad hoc or conciliator ), appointed by the President of the Court, and no creditor can be forced into a restructuring agreement. In practice, mandat ad hoc proceedings are used by debtors at an early stage since debtors must not be in “a state of cessation of payments” ( état de cessation des paiements ). Mandat ad hoc proceedings are not limited in time, and when a consensual agreement is reached, it is reported
to the President of the Court, but it is not formally approved by the court. Likewise, conciliation proceedings may only be initiated if the debtor is not in a state of cessation of payments or has not been so for more than 45 calendar days. These proceedings may last up to five months. When an agreement is reached during the course of the conciliation, it may be acknowledged ( constaté ) by the President of the Court, in which case the proceedings remain fully confidential. Alternatively, the conciliation agreement may be approved ( homologué ) by the court. Such approval will be made public, but the agreement itself remains confidential. New money providers may benefit from a priority of payment and may not be compromised in a restructuring plan in the event of subsequent insolvency proceedings. In addition, in the event of subsequent insolvency proceedings, claw-back risk is mitigated where a conciliation agreement has been homologated by the court. 7.5 Risk Areas for Lenders See 7.1 Impact of Insolvency Processes on the general stay applied to the enforcement of col - lateral. Contractual provisions such as those customar - ily contained in credit facility agreements that would accelerate the payment of the debtor’s obligations upon the occurrence of certain insol - vency events are not enforceable under French law. The opening of liquidation judiciaire pro - ceedings generally automatically accelerates the maturity of all of the debtor’s obligations, how - ever, the court may allow the business to con - tinue for a period of no more than three months (renewable once for another three months) if it considers that a sale of part or all of the business
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