FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
often convert it into a conciliation to have the long form documentation approved by the court and to obtain a recognition by the court that the debtor was not insolvent at that time – this pro - vides substantial comfort, typically in the event that voidable transactions were implemented as part of the agreement between the debtor and its creditors. However, this court “stamping” (known as homologation ) lifts the confidentiality. There is no mandatory co-operation principle at play in either of these proceedings. That being said (and depending perhaps on the personality of the mandataire or conciliateur) , creditors and/ or shareholders will generally participate in such proceedings when called to do so. 7.9 Dissenting Lenders and Non- Consensual Restructurings As mentioned in 7.8 Out-of-Court v In-Cort Enforcement , no creditors can be forced into a restructuring as part of out-of-court proceed - ings. When no unanimous deal is found during the conciliation, the debtor can decide to file for in- court proceedings (generally accelerated safe - guard proceedings which are designed to offer a streamlined rescue mechanism) to present a plan where, upon certain conditions, a cross- class cram-down of dissenting creditors can be implemented. Constitutions of classes of affected parties are systematic under accelerated safeguard and only mandatory in safeguard and insolvency proceedings ( redressement judiciaire ) for large companies (and their holdings and subsidiaries) – ie, more than (i) 250 employees and EUR20 million turnover or (ii) EUR40 million turnover.
To be adopted, the plan must be approved by a two-third majority vote within each class (only parties affected by the draft restructuring plan may be included in the classes (including equity holders/shareholders if the company’s share capital, the articles of association or their rights are altered by the draft restructuring plan)). After the restructuring plan has been adopted with a two-thirds majority vote within each class, the plan must be approved by the court. Before rendering its decision, the court verifies that the overall process has been conducted in accord - ance with applicable rules. The court also veri - fies several conditions, such as that individual dissenting creditors are no worse off than in a liquidation scenario (best interests of creditors test) and that any new funding granted to the company under the plan is necessary to imple - ment the plan and does not excessively impact the interests of affected parties. The plan can be imposed by the court on dis - senting classes (cross-class cram-down) where the two-thirds majorities have not been met, provided several additional conditions are met: • the restructuring plan has been approved by: (i) a majority of the classes of affected parties, provided that at least one of those classes is secured or senior to ordinary unsecured creditors or (ii) at least one of the classes of affected parties other than an equity holders’ class is “in the money” (eventually upon a valuation of the company); and • the restructuring plan must comply with the absolute priority rule (ie, dissenting senior creditors must be fully repaid when a junior ranking class is entitled to be paid or retains an interest).
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