Under French law, two different amicable restructuring proceedings allow a company which is facing existing or foreseeable difficulties (legal, economic or financial) to seek a voluntary arrangement with its main creditors. These contractual and confidential proceedings aim at facilitating the conclusion of an agreement, allowing the difficulties to be solved outside a formal insolvency proceeding with the help of an officer appointed by the President of the Court (mandataire ad hoc or conciliateur):
- a mandat ad hoc can be opened when a debtor is not in cessation of payments
- a conciliation can be opened before the debtor reaches a state of cessation of payments, or no more than 45 days thereafter. At the end of the negotiations, the agreement can either be approved (constaté) by the President of the commercial court or homologated (homologué) by the Commercial Court. During these proceedings, the company operates normally and can be subject to enforcement measures from its creditors.
Both these proceedings are confidential.
In contrast to amicable restructuring proceedings, the opening judgement of an insolvency proceeding entails the freezing of claims arising before said judgement and the stay of corresponding recovery actions and proceedings against the debtor.
The three insolvency proceedings provided for by French law are as follows:
This is opened by the court when the applying debtor is facing difficulties that it is unable to overcome on its own, but it is not already in cessation of payments. It allows the debtor to keep performing its activity and to pay its debts through the implementation of an instalment plan.
Judicial reorganisation (redressement judiciaire)
This is opened by the Court when the applying debtor is in a state of cessation of payments. It allows the debtor to keep performing its activity and to pay its debts through the implementation of an instalment plan or the sale of its assets and activities to a third party (i.e. disposal plan).
Winding up (liquidation judiciaire)
This is opened by the Court when the applying debtor is in a state of cessation of payments and turnaround is impossible. It usually implies the immediate closure of the business and the sale of assets for the satisfaction of its creditors. However, the Court might authorise the continuation of the activity for a short period of time in order to sell the activities and/or the assets under the best conditions possible.