As of October 1, 2021, corporate restructuring in prevention changes in France!

As of October 1, 2021, corporate restructuring in prevention changes in France!

By an Ordinance n° 2021-1193 of September 15, 2021 amending Book VI of the Commercial Code and by its implementing decree n° 2021-1218 of September 23, 2021, the European Directive 2019/1023 of June 20, 2019 known as “restructuring and insolvency” has been transposed into French law. As the directive offers numerous transposition options, the transposition carried out in France aims at preserving the strong assets of French law on companies in difficulty and the diversity of tools, particularly in terms of prevention. The amendments to Book VI of the French Commercial Code also take into account Ordinance 2021-1192 of September 15, 2021 on the modification of the French law on securities.

The new provisions are applicable to proceedings opened as of October 1, 2021. However, for proceedings opened before May 22, 2020, amendments to the plans adopted are subject to the new provisions relating to creditor consultation.

Among the main provisions, we can quickly mention :

– A strengthening of the alert procedure

– A reinforcement of the confidential conciliation procedure with, in particular, the maintenance of the mechanism adopted during the “Covid” crisis allowing to freeze certain debts during the conciliation period

– An extension of the scope of the accelerated safeguard

– A confirmation of the May 2020 “Covid orders” on the so-called “post-money” privilege granted to creditors providing new cash contributions in the context of the proceedings (and the plan); this privilege will not be available to contributions made by the debtor’s shareholders and partners in the context of a capital increase

– The creation of “classes of affected parties“ by the draft plan in replacement of the creditors’ committees; these classes include equity holders if their shareholding in the debtor, the articles of association or their rights are modified by the draft plan. The constitution of classes of affected parties is required (i) for the opening of an accelerated safeguard procedure, (ii) when the company reaches the thresholds of 250 employees and 20 million euros of net turnover, or 40 million euros of turnover, (iii) when the companies that own or control another company when the totality of the companies concerned is greater than these thresholds (the aim being to target holding companies). Public creditors should be able to be integrated into one or more classes and thus have a plan imposed on them.

– Increase of the role of the judicial administrator in conciliation/safeguard as he/she is in charge, together with the debtor and a chartered accountant, of the modalities of division into classes and of the calculation of the votes corresponding to the claims allowing them to express a vote by taking into account the “parties allocated into classes representing a sufficient community of economic interest” in view of the claims arising prior to the judgment of opening of the procedure; subordination agreements are integrated under conditions.

– Introduction of the “cross class cram down“, the “best interest test” and the absolute priority rule within the framework of the plan proposed by the debtor, which can only be adopted if it receives a favourable vote within each of the classes, or a majority of the classes constituted, or at least one class of creditors other than the equity holders and who are “in the money”.

– Reduction of the observation period in safeguard to 12 months

– Modification of the rights of creditors and guarantors via the insolvency judge, who may, in particular, authorize the creation of any conventional security interest or authorize the making of a disposition unrelated to the day-to-day management of the company, the granting of a conventional security interest to guarantee a claim subsequent to the opening of the procedure, the payment in certain cases of prior claims due to a carrier, or the making of a compromise or settlement.

The firm’s partners, Georges-Louis Harang, Hadrien de Lauriston and Catherine Ottaway, are at your disposal to discuss the details of the reform with you.