Codified in articles 407-1 to 407-14 of the Commercial Code and inspired by French law, it establishes a preventive mechanism aimed at resolving the difficulties of companies before the opening of collective insolvency proceedings.
Its objective is to promote the rescue of viable companies by facilitating an amicable resolution to the company's difficulties through an agreement between the debtor and its main creditors, and where applicable, its usual co-contractors.
I. Conditions for conciliation
The mechanism is available to debtors engaged in commercial or artisanal activities. This definition includes individual traders as well as commercial companies, regardless of their legal form.
To benefit from the procedure, the debtor must meet two cumulative conditions:
- Actual or foreseeable difficulties: the text refers to debtors who "are experiencing actual or foreseeable legal, economic or financial difficulties". This wording makes it possible to intervene at an early stage, even before the difficulties have fully materialised.
- Absence of cessation of payments: the debtor must not have been in a state of cessation of payments for more than fifteen days.
The Monegasque conciliation procedure has two essential characteristics that distinguish it from the two collective insolvency procedures, judicial settlement and liquidation of assets:
- Confidentiality: unlike collective insolvency proceedings, conciliation takes place in a confidential setting, thereby preserving the reputation and credit of the concerned company.
- Voluntary approach: the procedure is based exclusively on the debtor's initiative, ensuring its adherence to the process and promoting their active participation in finding solutions.
II. Conciliation procedure
Opening phase
The procedure is opened exclusively upon debtor’s request. This request is addressed to the President of the Court of First Instance, who decides after consulting the Public Prosecutor.
The order refusing to open the conciliation procedure may be appealed.
Negotiation phase
- Appointment and mission of the conciliator: when the request is accepted, the President of the Court appoints a conciliator. The conciliator's main mission is to encourage and facilitate an amicable agreement to be reached between the debtor and its main creditors and, where applicable, its usual co-contractors.
- Extension to the sale of a business: at the request of the debtor and after consultation with the participating creditors, the conciliator may also be asked to organise a partial or total sale of the business. This sale could be implemented at a later date as part of a judicial settlement or liquidation procedure, if necessary.
Protection of the debtor during the procedure
A crucial aspect of this procedure is the suspensive effect it produces: as from the filing of the request and for the duration of the conciliation, the Court cannot declare the debtor to be in a state of cessation of payments, or order a judicial settlement or liquidation of assets against the debtor.
This gives the conciliation procedure a chance to resolve the debtor's difficulties by avoiding binding collective insolvency proceedings, that could significantly impact the debtor even in case of a return to better fortunes.
III. Outcome of the procedure
Simple recording of the agreement
Upon joint request of the parties, the President of the Court of First Instance may record their agreement and make it enforceable. This has the advantage of discretion, as the decision is not published.
The decision recording the agreement is not subject to appeal, which reinforces its legal stability and the security of the parties.
Judicial approval of the agreement
The debtor may apply to the Court for approval of the agreement if three cumulative conditions are met:
- The debtor is not in cessation of payments or the agreement reached puts an end to it
- The terms of the agreement are such as to ensure the continuity of the company's activity
- The agreement does not affect the interests of non-signatory creditor
Judicial approval ends the conciliation procedure. It gives the agreement superior legal force and a degree of publicity, that may be useful in dealing with third parties.
Above all, judicial approval grants a "new money" privilege on creditors who have provided the debtor with a new cash injection, or supplied a new good or service, to ensure the continuation of the business.
So, if despite the agreement reached in the conciliation, the company does not manage to recover and judicial settlement or liquidation proceedings are initiated, the creditors holding the new money privilege will be paid preferentially to other non-privileged creditors, up to the amount of the support granted.
An appeal may be lodged against the judgment approving the agreement within two months of the date on which the matter was referred to the Court. It may also be challenged by creditors or other interested parties who are not party to the agreement.
Conclusion
The conciliation procedure introduced by Law no. 1.573 of 8 April 2025 represents a significant step forward in the modernization of Monegasque law governing companies in difficulty.
Inspired by the French model, this procedure reflects a modern approach to dealing with business difficulties, favouring negotiation and consensus over a restrictive judicial approach.
For Monegasque lawyers, this new system broadens the range of solutions available to support companies in difficulty, while preserving confidentiality and promoting the continuity of economic activity.
