Ordinance 2021-1193 of September 15, 2021 taken upon authorization of the Pacte law and reforming Book VI of the Commercial Code has a triple objective:
- Transpose directive 2019/1023 of June 20, 2019 known as “restructuring and insolvency”
- Coordinate and adapt the provisions of the law of insolvency proceedings to the reform of security law carried out by ordinance 2021-1192 of September 15, 2021
- Perpetuate certain measures for the prevention and treatment of the difficulties introduced by the "Covid orders" (orders 2020-341 of March 27, 2020 and 2020-596 of May 20, 2020)
It comes into force on October 1 , 2021 and is not applicable to ongoing proceedings .
Prevention
The detection of difficulties
The ordinance introduces two changes relating to the powers of the president of the commercial court:
- The possibility of obtaining the communication of information likely to give him exact information on the situation of the debtor, as soon as the summons is sent to the manager , and no longer only after the interview with the latter. (L.611-2 C.com)
- The possibility of adopting immediate measures when it appears to him that the urgency requires it and that the manager refuses to do so or considers insufficient measures, after having been informed by the auditor.
Conciliation
The judge is now entitled, in the event of a simple refusal by a creditor of the conciliator's request to this effect, to suspend the enforceability of his claim and to grant deferrals/delays for payment under the conditions of article 1343-5 of the Civil Code , within the limit, for debts not due, of the duration of the mission of the conciliator. (L.611-7 al5 C.com)
Lapse and resolution “do not deprive of effect the clauses whose purpose is to organize the consequences”.
Classes and adopting plans
- Major innovation of the ordinance which replaces "creditors' committees" with "classes of creditors" and/or " classes of affected parties "
- While the creditors' committees grouped the creditors by category (financiers, etc.), the classes are designed to group together creditors who, by the nature of their claim, take comparable risks.
Constitution
- In accelerated backup, their implementation is imposed. ( C. com., art. L. 628-4 mod )
- In safeguard or receivership, it depends either on the thresholds reached by the company and assessed on the date of the request for the opening of the procedure (250 employees and 20 million euros in turnover or 40 million euros of net turnover [single criterion]) or thresholds reached by the group (the figures then being consolidated).
- Optionally, below said thresholds, at the request of the debtor with the authorization of the supervising judge (L626-29), or if the debtor company is part of a group whose whole exceeds the thresholds (L626-29).
Organization
- It is up to the administrator, in view of the claims and rights prior to the opening judgment, to divide the affected parties (the creditors affected by the draft plan) into classes representative of a "community of 'sufficient economic interest' .
- Creditors holding real securities and unsecured creditors will necessarily have to be divided into separate classes.
- Claims resulting from an employment contract, pension rights acquired under an occupational pension scheme and maintenance claims will be excluded from the classes.
- Equity holders will also have to form one or more classes, if their equity participation, the company's articles of association or their rights are modified by the draft plan.
Appeal
The status of affected party, the terms of distribution into classes and calculation of votes may be contested by each affected party, the debtor, administrator, the legal representative and the public prosecutor.
The supervising judge is seized of this challenge by motion within 10 days of the notification provided for in the 1st paragraph of article R.626-58, on pain of inadmissibility.
- If the supervising judge does not rule within 10 days of his referral, the court may be seized by motion.
- An appeal can be lodged within 5 days of the notification of the decision rendered by the supervising judge or the court.
- The court of appeal rules within 15 days from its referral.
The primary role of classes
- The classes must decide on the draft plan within 20 to 30 days following the transmission of the plan (this period may nevertheless be increased or reduced by the judge-commissioner).
- The administrator must submit to each affected party the procedures for calculating the votes corresponding to the claims or rights affected allowing them to cast a vote.
Protection of affected parties
- Maintaining court control over the adoption of the plan to ensure that the interests of affected parties are sufficiently protected.
- Establishment of best interest : criterion which aims to protect dissenting creditors by verifying that they are not in a less favorable situation because of the plan than that which they would know if the payment order of a judicial liquidation were applicable , whether as part of a disposal plan, or any other more favorable alternative.
Forced adoption of the plan or the cross cram down
Mechanism which consists in applying, in a forced way, the plan to dissident classes. It constitutes a limit to the power of creditors as well as that of capital holders, who should no longer be able to exercise their veto against the adoption of a plan.
Several conditions must be met:
- Respect for the best interest
- The plan must have been adopted by a majority of classes, provided that at least one class is composed of security holders or creditors whose rank is higher than unsecured creditors.
- A specific control is planned in case of rejection of the plan by the class of capital holders.
- Observance of the absolute priority rule.
Collateral
Guarantor protection
- The protection of natural person guarantors, whether they have entered into a personal surety or a real surety to guarantee the debt of others, is increased by the Ordinance.
- In conciliation : the guarantors will be able to take advantage of the new grace periods granted to the debtor during the procedure.
- In receivership : natural person guarantors can now invoke the provisions of the plan.
- It is therefore only in court-ordered liquidation that security for others granted by natural persons will remain effective.
Prohibition of prosecution
- Securities that are not regularly declared are, like debts, unenforceable in the proceedings.
- The non-opposability to the procedure benefits co-obligors and natural person guarantors under the same conditions as the debtor and no longer only during the execution of the plan.
- These solutions are extended to recovery, co-obligors and natural person guarantors also benefiting from the stoppage of interest in recovery.
- On the other hand, they remain exposed to lawsuits from creditors, having declared their claims, once the plan has been approved or liquidation has been pronounced.
- The ban on legal proceedings for the debtor's creditors is now binding on the beneficiary (required to report) of real security constituted by the debtor as a guarantee for the debt of others.
- Prohibition from the opening judgment of any increase in the base of a conventional real security.
The suspicious period
While the current provisions list the securities whose creation as security for a previous debt must be cancelled, the ordinance now covers "any conventional real security or conventional right of retention constituted on the property or rights of the debtor for debts previously contracted". .
Two exceptions are provided for by the text:
- Substitution of a security for a prior guarantee of at least equivalent nature and basis.
- The Dailly sale carried out in execution of a framework contract entered into prior to the date of cessation of payments.
post money privilege
- The privilege of "new money" in conciliation is extended to safeguard and receivership proceedings, thus perpetuating one of the key measures of Ordinance 2020-596.
- Subject to a decision of the judge-commissioner and its publicity, will benefit from a preferential rank of payment (privilege of safeguard or recovery) under the conditions of articles L. 622-17 and L. 643-8 the debts resulting a cash contribution:
- granted during the observation period in order to ensure the continuation of the activity;
- corresponding to a commitment mentioned in the draft plan, decided or modified by the court.
Ranking of creditors
- The provisions significantly enrich the current classification, by the insertion of many securities regulated outside of Book VI of the Commercial Code (pledge, privilege of lessor and seller of business, privileges granted to the Treasury).
- The rank of the post-money is specified, as it is paid in competition with the cash-providing creditors during the observation period.
- The court costs subsequent to the opening judgment are paid, according to the order, after the super-privilege of wages.
Miscellaneous
Accelerated safeguard: “the framework for restructuring preventive procedures”
- The ordinance generalizes the use of accelerated safeguard by opening it to all companies without threshold conditions, as allowed by ordinance no. 2020-596.
- It also abolishes the accelerated financial safeguard, but retains a substitute by leaving the possibility of limiting the procedure to certain financial creditors.
- For the rest, the fundamentals of the accelerated safeguard are maintained: it can only be opened for the benefit of a debtor who justifies having drawn up a draft conciliation plan aimed at ensuring the sustainability of the company and who is not not in cessation of payments for more than 45 days.
- Speed requires, the duration of the procedure is reduced to two months, extendable for a total duration which cannot exceed 4.
Overall procedural architecture unchanged
Certain measures have been taken to increase the speed and efficiency of procedures:
- The safeguard observation period cannot now exceed 12 months (initial duration of 6 months extended only once on a "specially reasoned decision" of the court .
- A creditor's failure to respond to a written consultation on the liability settlement terms constitutes acceptance of the modifications thus proposed, except in the case of debt forgiveness.
- Continuation of the benefit of the classes already constituted in the event of conversion of the safeguard into receivership. It being specified that it is only in receivership that the affected parties gathered in classes can submit draft plans competing with that of the debtor.
