The Restructuring Review: France

Overview of restructuring and insolvency activity

With gross domestic product (GDP) growth of 7 per cent in 2021, the French economy has recovered a growth level similar to that before the pandemic, following a severe recession in 2020 (illustrated by a GDP drop of around 8 per cent in 2020). With the extension in 2021 of extraordinary measures introduced to support companies during this economic crisis, the overall number of bankruptcies in France remained exceptionally low throughout 2021, with a total of 27,540 court-monitored bankruptcy proceedings (safeguard, rehabilitation and liquidation proceedings; see Section II) opened in 2021, down by 12 per cent compared with 2020.

As was the case in previous years, the bulk of these proceedings relates to very small enterprises: only 589 insolvency proceedings were opened for small and medium-sized enterprises. In this particular context, the industries that have faced the most restructuring issues are the tourism sector (restaurants, carriers, hotels and tour operators); the construction sector; and the automotive, railway and aircraft sectors. Retail and household services sectors were also heavily impacted.

Noting that a significant number of restructuring cases are negotiated within the framework of out-of-court proceedings (ad hoc and conciliation proceedings; see Section II) and thus are not captured by these figures, this very low number of court-monitored bankruptcy proceedings is the direct result of the extension of exceptional relief measures implemented in response to the covid-19 pandemic and related substantial state subsidies and aids (e.g., state-guaranteed loans, solidarity funds and partial activities schemes, etc.). Their progressive reduction or withdrawal, coupled with rising costs (especially for natural gas and electricity) and supply disruptions, as well as the growing uncertainty about the international context, could, however, result in an increased number of restructurings in the coming years.

The year 2021 also saw the implementation of numerous total or partial sale plans in rehabilitation proceedings to transfer the business and assets of companies for which restructuring options were or proved impossible or that needed to scale down their operations. Turnaround funds have also remained very active in this period and participated in most of these court-monitored auctions.

General introduction to the restructuring and insolvency legal framework

French bankruptcy law was extensively reformed in 2005 to promote reorganisation at a preventive stage and prompt creditors to take a more active role in pre-insolvency and insolvency proceedings, essentially through creating a safer environment for them to extend new credit facilities during both pre-insolvency and insolvency phases. The major innovation was the creation of safeguard proceedings, which are intended to enable debtors that are in financial distress, but not yet insolvent, to reorganise and restructure under the court's protection (essentially with stay of enforcement actions, subject to very few exceptions) and negotiate a consensual restructuring plan with creditors.

French bankruptcy law has been amended regularly since 2005 to promote reorganisation at a preventive stage and prompt creditors to take a more active role in all types of proceedings, essentially through creating a safer environment to favour new credit facilities in this context. In this respect, an ordinance dated 12 March 2014 (the 2014 Ordinance) reformed bankruptcy laws with a view to favouring reorganisation at a preventive stage, strengthening the efficiency of out-of-court proceedings and increasing the rights of creditors in insolvency proceedings. In addition, a bill dated 6 August 2015 (the 2015 Bill) introduced the possibility, under certain conditions, of squeezing out the shareholders of a bankrupt company in rehabilitation proceedings. Bankruptcy law was also slightly reformed in 2016 to improve certain technical provisions regarding insolvency proceedings, and in 2017 to take into account the entry into force of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).

However, in the context of the covid-19 pandemic, this balance between debtors' and creditors' interests has been slightly altered by some of the temporary measures to adapt French bankruptcy law to these specific circumstances.

Eventually, the transposition of Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 by an ordinance dated 15 September 2021 and its implementing decree dated 23 September 2021 (the 2021 Ordinance) has substantially amended certain aspects of French bankruptcy laws with a view to (1) strengthening the attractiveness of conciliation proceedings and (2) facilitating the adoption of restructuring plans in safeguard, accelerated safeguard, or rehabilitation proceedings with the creation of classes of affected parties and the possibility to cram down dissenting classes, including, under certain conditions, classes of equity holders.

The main provisions of each of the French proceedings are set out below.

i Out-of-court proceedings

Ad hoc proceedings

Ad hoc proceedings are flexible, voluntary and confidential proceedings in which the president of the court appoints an agent to carry out appropriate tasks. In practice, these proceedings are used to organise informal negotiation between a company and its major creditors under the supervision of the court agent.

Only the company's legal representative can file a petition to the president of the court. It is usually considered that ad hoc proceedings are available to solvent2 companies only, but there have been some precedents whereby ad hoc proceedings were opened for insolvent companies (but for a very short period of time only). Major creditors are invited to consider debt rescheduling, cancellation and new money injection. In addition, the main shareholders can be invited to negotiate and potentially recapitalise the company. A debt restructuring agreement accepted by some creditors cannot be imposed on other dissenting creditors, as the process is consensual and no cramdown can be imposed. In practice, majority rules provided for in the existing credit documentation (loan or bond, etc.) apply.

In addition, the opening of ad hoc proceedings does not trigger any automatic stay. However, the debtor can apply for a moratorium (for a maximum of two years) if any creditor attempts to enforce its rights while ad hoc proceedings are pending. Since the 2014 Ordinance, ipso facto provisions are deemed null and void in ad hoc proceedings: creditors are therefore prohibited from accelerating a loan or terminating an ongoing contract by the sole reason of the opening of ad hoc proceedings (or of any filing for that purpose). More generally, any contractual provision increasing the debtor's obligations (or reducing its rights) by that sole same reason is also null and void.

If an agreement is reached between a company and its creditors, the agent's duties end. If there is no solution to the company's financial difficulties and it later becomes insolvent, the only option is to initiate insolvency proceedings.

Conciliation proceedings

Conciliation proceedings are also flexible, voluntary and (to a certain extent) confidential proceedings that, under the supervision of a court-appointed agent, aim at facilitating negotiations between the company and its major creditors and reaching a workout agreement that sets out the terms and conditions for the restructuring of the existing debt (waiver or rescheduling, etc.) and, if any, new loans extended by creditors or shareholders. Since the 2014 Ordinance, the court-appointed agent may be entrusted with the mission to arrange a pre-packaged sale of a business in conciliation proceedings, the sale of which could ultimately be implemented in safeguard, rehabilitation or liquidation proceedings.

The company must face legal, economic or financial difficulties (whether actual or foreseeable) to benefit from conciliation proceedings. Conciliation proceedings are available to solvent or insolvent companies provided that they have been insolvent for less than 45 days before the petition is filed.

Conciliation proceedings are opened by the president of the court for a maximum period of four months, which can be extended to five months in total at the agent's request. The management must cooperate with the court-appointed agent and the major creditors to negotiate a solution to the company's difficulties. The court agent does not have any management responsibilities. There are no restrictions on business activities.

Trade creditors and major shareholders can also be invited to take part in the negotiations. Social and tax authorities can be asked to consent to a debt rescheduling plan or a cancellation of debts. As in ad hoc proceedings, a restructuring workout accepted by some creditors cannot be imposed on other dissenting creditors in conciliation proceedings (subject to the opening of accelerated safeguard proceedings). Majority rules provided for in the existing finance documentation will apply.

Even though the opening of conciliation does not trigger any automatic stay, the court can force any creditor that attempts to enforce its rights while conciliation is pending to accept a two-year maximum moratorium. In conciliation, a petition is submitted to a judge who has jurisdiction to open such proceedings. The 2021 Ordinance extended the scope of forced moratorium to creditors having refused to grant a standstill for the duration of the conciliation proceedings (i.e., before any formal enforcement attempt). In that case, the forced standstill can also apply to claims not yet fallen due, but for the duration of conciliation proceedings only (i.e., five months maximum). Eventually, the 2021 Ordinance clarified that any third party acting as joint debtor, as guarantor, or having secured or transferred an asset as guarantee shall also benefit from any court-imposed moratorium so ordered.

As in ad hoc proceedings, creditors are prohibited from accelerating a loan or terminating an ongoing contract by the sole reason of the opening of ad hoc proceedings (or of any filing for that purpose). More generally, any contractual provision increasing the debtor's obligations (or reducing its rights) by that sole same reason is also null and void.

When an agreement is reached between the debtor and its creditors, the parties have two options.

  1. The debtor can request formal court approval of the workout agreement. This is to encourage creditors to extend new credit facilities. Indeed, new money facilities granted in the framework of a court-approved workout benefit from a statutory priority of payment should the company subsequently file for insolvency. Except when fraud has taken place, a court-approved workout agreement is also protected from the risk of being voided in the future. However, this court approval must be recorded in a full judgment accessible to the public and therefore subject to challenge by a third party or appeal.
  2. The parties can obtain a simple acknowledgement from the president of the court. This option does not involve publicity but implies that the creditors, having granted new money facilities in the framework of such conciliation proceedings, waive their right to priority of payment and, more generally, to protection against the risk of clawback in the future.

If subsequent court-monitored bankruptcy proceedings are commenced, the workout agreement will automatically be terminated, in which case the creditors will recover their claims (as they existed prior to the conclusion of the conciliation agreement) and their pre-existing security interests, with the exception of those amounts already paid to them. The 2021 Ordinance, however, confirmed that contractual clauses organising the consequences of such an automatic termination of conciliation agreements in cases of bankruptcy remain valid and applicable.

ii Court-monitored bankruptcy proceedings

Safeguard proceedings

Safeguard proceedings allow companies that, though still solvent, face difficulties that they cannot overcome to be restructured at a preventive stage under the court's supervision. Safeguard proceedings have three objectives in the following order of priority: (1) to allow the company's business activities to be continued, (2) to preserve jobs and (3) to repay creditors.

To open safeguard proceedings, the company must be solvent but facing difficulties that cannot be overcome. In the Coeur Défense case, the Supreme Court held that no restriction should apply to the concept of 'difficulty' justifying the opening of a safeguard. In particular, to be granted the benefit of safeguard court protection, the debtor cannot be requested to characterise such difficulty as affecting its business activities. In that particular case, the Court ruled that the necessity for the debtor to renegotiate, in case of occurrence of an event of default, the terms and conditions of a loan may constitute a difficulty allowing such a debtor to petition for safeguard proceedings. The 2016 reform specified that if it appears that the debtor's difficulties could be overcome, the court must invite the debtor to request the opening of conciliation proceedings before ruling on the opening of safeguard proceedings.

If the company is insolvent or becomes insolvent after the opening of safeguard proceedings (i.e., the company is unable to pay its due and payable liabilities arising post-filing), the court orders the proceedings to be converted into rehabilitation or liquidation proceedings.

Safeguard proceedings begin with an observation period of up to six months to assess the company's financial position. This period can be extended once for six months (i.e., 12 months maximum). During this period, any decision that does not fall within the scope of day-to-day management must be approved by the bankruptcy judge. The bankruptcy judge must also approve any decision to settle pending disputes.

Once safeguard proceedings have been ordered by the court, there is an automatic stay of all creditor payment actions – subject to few exceptions (and notably claims secured by a security interest conferring a retention right, claims secured by a fiduciary agreement and set-off of related claims) – against the main debtor and individuals acting as guarantors and joint debtors, but not against companies acting as guarantors or joint debtors. Hence the need, when group companies are acting as guarantors, to have all of them, as well as the main debtor, placed under court protection.

Interest for loans with a duration of one year or more, or for contracts having a deferred payment of one year or more, will continue to accrue but cannot be paid cash when due, and will be restructured as part of the safeguard plan.

The general outcome of safeguard is the approval by the court of a safeguard plan that can involve debt restructuring, recapitalisation of the company, debt-for-equity swap, sale of assets and a partial sale of the business. The safeguard plan cannot include a proposal to sell the business as a whole.

For companies of a certain size,3 stakeholders impaired by the draft safeguard plan (i.e., creditors whose rights are directly affected by the draft plan and, as the case may be, equity holders (e.g., if the plan provides for a debt-for-equity swap)) are mandatorily gathered by the administrator into classes of affected parties. Each class shall gather stakeholders sharing a sufficient commonality of economic interest determined on the basis of verifiable objective criteria. French law requires that equity holders and creditors vote in different classes and that secured creditors vote in a separate class than that of unsecured creditors. If there is one, a subordination agreement shall be taken into account as well.

Each class is invited to vote on the draft safeguard plan prepared by the debtor at a two-thirds majority (in amount) without any quorum requirement. In safeguard proceedings, no member of a class has the ability to submit a competing plan.

To approve the plan, the court must verify that certain conditions are complied with, the scope of which depends on the outcome of the vote of the classes (see the below scenarios).

  1. If the plan has been approved by each class: the court must notably verify that the plan provides for an equal treatment of affected parties within the same class and complies with the best interest of creditors rule (under which no dissenting affected party shall be worse off as a result of the plan than it would have been if the order of priority for the distribution of proceeds in a liquidation scenario was applied or under a better alternative solution if the plan was not approved). If any, new financings granted as part of the plan must be deemed necessary and cannot excessively prejudice the interests of affected parties.
  2. If the plan has been rejected by one or more classes: the court may, at the request of the debtor or the administrator (with the debtor's consent), impose the plan on dissenting classes provided that the plan meets additional conditions regarding, notably (1) the type of class(es) having approved the plan (the majority of the classes including at least one class of secured creditors or, failing that, at least one class of affected parties deemed to be in the money) and (2) compliance with the absolute priority rule under which all claims held by an impaired creditor of a dissenting class must be fully satisfied by the same or equivalent means when a more junior class is entitled to a payment or retains an interest under the plan (the court, however, being able to grant some exemptions when deemed necessary and proportionate).

Additional conditions apply when one or more classes of equity holders have been set up and have refused the plan, to impose onto them the plan approved by other classes.

Once approved by the court, the safeguard plan is enforceable against all affected parties, including minority dissenting creditors within a class and all members of dissenting classes. In cases of failure to adopt the plan, the possibility to switch to individual consultation of creditors is no longer available, and safeguard proceedings will be either closed or converted into rehabilitation proceedings.

If classes of affected parties are not set up, the plan must be negotiated on a one-to-one basis with each creditor and the court can impose a 10-year maximum term-out to dissenting creditors. However, this 10-year maximum term-out is without prejudice to any longer maturity date agreed in the original loan agreement. Consenting creditors benefit from the shorter maturity date (if any) that they would have negotiated. The court cannot impose any debt-to-equity swap or debt write-off of principal or interest claims in a term-out scenario. The yearly instalments under the term-out plan must not be less than (1) 5 per cent of the total admitted pre-filing liabilities after the third year following court approval of the plan and (2) 10 per cent after the sixth year, except if the contract initially provides for a longer maturity date. In this scenario, if required, shareholders' consent must be obtained in accordance with French corporate laws. However, the court can reduce the majority applicable to shareholder meetings on first notice.

Upon the approval of a safeguard plan, the court appoints an agent to supervise its implementation. If the company fails to meet its obligations under the plan and becomes insolvent, the court must order the plan to be cancelled and initiate rehabilitation proceedings or, if the rescue of the company appears obviously impossible, liquidation proceedings.

Pre-packaged safeguard proceedings

Pre-packaged safeguard proceedings aim at enabling debtors for which conciliation proved unsuccessful to reach all participating creditors' consent to implement a restructuring deal pre-negotiated in conciliation with the subsequent opening of fast-track safeguard proceedings and the vote of classes of affected parties.

Pre-packaged safeguard proceedings are opened at the debtor's request provided that the following eligibility criteria are satisfied:

  1. the debtor's financial statements must be audited or established by a certified accountant;
  2. conciliation proceedings must be pending (direct access to pre-packaged safeguard proceedings is strictly prohibited);
  3. the company must be solvent (from a cash flow standpoint) or, as the case may be, must have been insolvent for less than 45 days when it applied for conciliation; and
  4. the company must have prepared a draft plan in conciliation that is likely to receive sufficiently broad support from affected parties, making its approval within the statutory period feasible.

Pre-packaged safeguard proceedings only impair the rights of affected parties, which are gathered into classes of affected parties by the court-appointed administrators as in safeguard proceedings. However, the process must be completed within two months (renewable once (i.e., four months in total)). If no plan is approved by the court within this deadline, the court must close the proceedings.

Rehabilitation proceedings

Rehabilitation proceedings are the appropriate remedy if the company is insolvent (from a cash flow standpoint) but rescue does not appear to be impossible. Any company must file for rehabilitation (or, as the case may be, liquidation if there is no prospect for recovery) no later than 45 days from the date on which it becomes insolvent (provided that conciliation proceedings are not pending).

The objectives of rehabilitation proceedings are the same as for safeguard proceedings. Rules applicable to the observation period, the automatic stay and classes of creditors are also the same as in safeguard proceedings (with some exceptions, notably regarding shareholder consent). Unlike in safeguard proceedings, however, the observation period may be renewed twice for a maximum period of 18 months in total.

In rehabilitation proceedings, the court-appointed administrator can simply assist the management to make decisions or can be appointed to take control of the company's management in whole or in part. Any decision that does not fall within the scope of day-to-day management must be approved by the bankruptcy judge. The bankruptcy judge must also approve any decision to settle pending disputes.

The priority outcome of rehabilitation proceedings is the approval of a rehabilitation plan, whereby the same principles apply as in safeguard proceedings. However, in rehabilitation proceedings only, a member of a class can submit a competing plan and request the application by the court of the cross-class cramdown mechanism.

When no class of affected parties is set up or if the draft rehabilitation plan is not approved following the vote of the classes, creditors are consulted on a one-to-one basis and the court can impose a 10-year maximum term-out plan on dissenting creditors (under the same conditions as a court-ordered term-out scenario in safeguard proceedings when no class is set up). If required, a shareholders' meeting is convened to obtain shareholders' consent before the court hearing to review the plan. As in safeguard proceedings, the court can reduce majority rules applicable on first notice. Moreover, in rehabilitation proceedings only, French bankruptcy laws provide for some legal mechanisms to cram down dissenting shareholders to facilitate the restructuring of the company.

The 2014 Ordinance introduced a limited possibility to have a court-appointed agent vote at shareholder meetings, which was further amended in 2016. If the insolvent company's net equity is not restored and the shareholders have refused to increase the company's equity to at least half of its share value (which is a legal requirement in France), the administrator can petition the court to appoint an agent in charge of convening the shareholder meeting and to vote on behalf on the dissenting shareholders on the recapitalisation of the company for the amount suggested by the court-appointed administrator, when the draft plan provides for a change in the share capital in favour of one or several committed investors.

In addition, the 2015 Bill further introduced the possibility to squeeze out shareholders of a company under rehabilitation proceedings through a forced sale of all or part of the shares of the shareholders that have refused to implement the required change in the equity structure and that hold, directly or indirectly, a majority stake or a blocking minority stake in the capital of the company, or an imposed dilution of their equity stake. However, the application of this squeeze-out is limited to the following circumstances:

  1. the shareholders have refused to implement the change in the equity structure contemplated under the draft rehabilitation plan;
  2. the bankrupt company employs (directly or indirectly) a minimum of 150 employees;
  3. the disappearance of the company is likely to cause serious disturbance to the local economy and employment; and
  4. a share capital reorganisation is the only solution to allow business activities to continue (a partial or total sale of the company's assets must be contemplated before allowing such a squeeze-out).

Unlike in safeguard proceedings, should the debtor prove unable to present a sustainable rehabilitation plan (as the case may be with a term-out plan), the court can authorise the administrator to auction the business as a whole or in part. Creditors (except for limited exceptions (e.g., creditors benefiting from a retention right)) have no say on the choice of the purchaser, which is made by the court when approving the sale plan. No credit bid is allowed (there are some precedents but only in exceptional circumstances (e.g., pure special purpose vehicles with no employees and only one creditor benefiting from a security interest over the quasi-sole asset)).

Liquidation proceedings

Liquidation is the appropriate remedy when the company is insolvent and its rehabilitation appears to be impossible. The aim is to liquidate a company by selling its business, as a whole or by branch of activity, or by selling its assets one by one. Liquidation is the only possible outcome when a rehabilitation is attempted without success. Creditors are, as far as possible, repaid according to their rank and privilege out of the proceeds of the sale of the company's business or assets.

Liquidation proceedings trigger an automatic stay of proceedings against the company. All pre-filing creditors are barred from enforcing their rights to seek payment from the debtor, subject to some exceptions (the same as those applicable in safeguard and rehabilitation proceedings). In a liquidation (unlike a safeguard or in rehabilitation), secured creditors benefiting from a pledge can also enforce their security interest through a court-monitored allocation process (i.e., request the court to be transferred ownership of the pledged assets).

Liquidation proceedings last until the liquidator finds that no more proceeds can be expected from the sale of the company's business or assets. After two years (calculated from the judgment ordering liquidation), any creditor may request the court to order the liquidator to wind up liquidation proceedings.

There is a simplified form of liquidation proceedings available for small businesses, which lasts for a maximum of one year. The 2021 Ordinance facilitated access to this proceeding for natural persons by waiving the threshold conditions provided that the debtor's assets do not include any real estate property.

iii Selected topics

Directors' liability

Liability can arise in liquidation when, as a result of management errors (other than mere negligence), a company's assets do not cover its debts. An action for mismanagement, which applies only in liquidation proceedings, can lead to an insolvent company's management being liable for all or part of its debts. This liability can extend to formally appointed directors or managers with representation powers and to any individual or entity that is not officially a director or manager but that has repeatedly influenced the company's management or strategic decisions (i.e., shadow (de facto) directors or managers).

A parent company can also be held liable for an insolvent subsidiary's debts if it has been appointed as a director or is deemed a shadow director or manager of that subsidiary (e.g., through an individual appointed at the shareholders' request).

The liquidator or the prosecutor can initiate the action. In addition, the majority of the supervising creditors (which would have been appointed by the court to assist the liquidator) can summon the liquidator to bring an action or commence proceedings on their own initiative if the liquidator does not do so after such a summoning.

Directors found liable for certain specific breaches can (independent of any liability action or criminal prosecution based on the same facts) be forced to assign their equity interest in the company and prohibited from managing any business for up to 15 years and from holding any public office for up to five years.

Breaches include:

  1. using the company's assets or credit for their own benefit or the benefit of another corporate entity in which they have a direct or indirect interest;
  2. using the company to conduct and conceal business transactions for their own benefit;
  3. carrying out business activities at a loss to further their own interests, knowing that this would lead to the company's insolvency;
  4. fraudulently embezzling or concealing all or part of the company's assets; and
  5. fraudulently increasing the company's debts.


In rehabilitation or liquidation only (but not in safeguard proceedings), any transaction entered into during the hardening period (including transactions entered into with members of the same corporate family) can be subject to clawback provisions. The hardening period runs from the date when the company is deemed insolvent and can be backdated by the court by up to 18 months before the insolvency judgment. If rehabilitation or liquidation proceedings are preceded by a pre-bankruptcy conciliation workout, the insolvency date cannot be backdated to a date before the court order approving the workout agreement.

The following transactions are automatically void (i.e., the court must declare these transactions void on petition by the administrator, the liquidator or the public prosecutor) if performed during the hardening period:

  1. any deed entered into without consideration transferring title to movable or immovable property;
  2. any bilateral contract in which the debtor's obligations significantly exceed those of the other party;
  3. any payment, by whatever means, made for debts that have not fallen due on the date when payment is made;
  4. all payments for outstanding debts, if not made by cash settlement or wire transfers, remittance of negotiable instruments, or Dailly-type assignment of receivables or any other means commonly used in business transactions;
  5. deposits or consignments of money made under Article 2350 of the Civil Code (governing pledges over certain intangible assets, including claims) in the absence of a final judgment;
  6. any contractual security interests or retention right granted to secure a pre-existing debt, unless such a mortgage or pledge replaces an existing security interest similar in nature and equivalent in scope, safe for Dailly-type assignment of receivables implemented in execution of a framework agreement entered into before the hardening period;
  7. any legal mortgage granted to secure pre-existing debts;
  8. any protective measure, unless this measure was recorded or registered before the date of insolvency;
  9. any grant, exercise or resale of stock options made under Article L225-177 et seq. of the Commercial Code;
  10. any transfer of movables or assignment of rights into a trust estate, unless this transfer or assignment occurred as a guarantee of a debt concurrently undertaken;
  11. any amendment to a trust agreement affecting the rights and movables already assigned or transferred to a trust estate as a guarantee of debts undertaken prior to such an amendment; and
  12. any declaration of non-seizability filed by the debtor, under Article L526-1 of the Commercial Code (i.e., a declaration under which an individual entrepreneur can protect from creditors immovable goods that are not used for business activities). A declaration of non-seizability can be cancelled if made during the six months preceding the insolvency date.

Any payment made or any transaction entered into during the hardening period is also subject to optional voidance (i.e., subject to the court's discretionary decision on petition by the administrator, the liquidator or the public prosecutor) if proper evidence is brought before the court that, at the time of the payment or transaction, the contracting party knew about the company's insolvency. When dealing with intra-group transactions, this knowledge is presumed for companies belonging to the same corporate group. Third-party rights, including bona fide third parties, can be affected by those voidance provisions.

Recent legal developments

The latest major reform of French bankruptcy law was implemented by the 2021 Ordinance (applicable to pre-insolvency and insolvency proceedings since 1 October 2021) implementing the Restructuring and Insolvency Directive (EU) 2019/1023), which, notably (1) strengthened protective tools available to debtors in conciliation proceedings; (2) reshaped the French class system applicable in safeguard, accelerated safeguard or rehabilitation proceedings by replacing existing 'creditors classes' with 'classes of affected parties'; and (3) introduced the possibility to cram down dissenting classes, including classes of equity holders.

The 2021 Ordinance also permanently introduced the 'post-money' privilege, created on a temporary basis during the covid-19 pandemic, which may secure new financing facilities granted during the observation period with a view to ensuring the continuation of the business for the duration of the proceedings or as part of the safeguard or rehabilitation plan approved by the court. As the 'new money' privilege secures new money injected in the context of a court-approved conciliation agreement, the post-money privilege protects those claims from any forced rescheduling or write-off unless otherwise agreed in cases of subsequent openings of court-monitored proceedings, either in the context of a term-out plan or through the vote of classes of affected parties.

The 2021 Ordinance was coupled with another ordinance, dated 15 September 2021, applicable from January 2022, which reformed French security laws with a view to increasing legal protection and attractiveness of French law and strengthening the efficiency of security interests, to facilitate financings and better balance the interests of creditors and those of debtors and guarantors.

Significant transactions, key developments and most active industries

Following the severe economic crisis resulting from the covid-19 pandemic in 2020, exceptional support measures implemented by the French government in 2020 have been extended and have considerably limited the number of bankruptcies in 2021.

However, despite the important decrease in the number of insolvency proceedings in 2021, there were still active situations in the restructuring market with a surge in the number of sizeable and complex situations, many of them being listed companies or belonging to international corporate groups, or both. In the tourism sector, this was notably the case with the major debt restructuring of AccorInvest (€4.5 billion of debt restructuring and €447 million of new money financings through state-guaranteed loans, implemented in conciliation proceedings) and Pierre & Vacances – Center Parcs (€300 million of bridge financing negotiated in conciliation proceedings, to prepare a €1.1 billion debt restructuring, including the restructuring of state-guaranteed loans, to be implemented in accelerated safeguard proceedings).

Although many of the restructuring matters were negotiated in out-of-court proceedings, major cases were implemented in court-monitored proceedings, such as that of Comexposium, one of the word leaders in the organisation of professional exhibitions, for which safeguard plans were approved in 2021.

As in 2020, a certain number of restructuring cases related to the retail sector, with, notably, the sale of Go Sport (leading sports equipment stores) and the new money financing implemented in the Rallye matter (the parent company of the Casino group), coupled with a global offer of unsecured debt and a subsequent amendment of its safeguard plan.

Eventually, major restructurings had to be negotiated in the industry sector, including for actors of the aeronautical, railway and automotive industries, such as Latécoère and Geismar.


France has not adopted legislation based on the UNCITRAL Model Law on Cross-Border Insolvency. The recognition and enforceability of insolvency proceedings commenced in another jurisdiction depends on whether such a jurisdiction is party to a treaty with France. As such, Regulation (EC) 1346/2000 on insolvency proceedings (the Insolvency Regulation) allows insolvency procedures in different EU Member States to be recognised automatically. Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) reforming Regulation 1346/2000 applies only to insolvency proceedings to be commenced after 26 June 2017.

If a company's centre of main interests (COMI) is in France, the main proceedings can be commenced before the French courts under the Insolvency Regulation. A company's COMI is presumed to be the place of its registered office unless it is proven that its COMI, as defined in the Eurofood decision of the European Court of Justice (Case C-341/04, Eurofood IFSC Ltd), is in a country other than its place of incorporation, and that the company's trade and financial partners are fully aware that the COMI of the company is not its place of incorporation.

Secondary proceedings can subsequently be commenced to liquidate an establishment's assets located in another EU Member State. Secondary proceedings under the Insolvency Regulation are also appropriate if a company has an establishment in France but its COMI is in another EU Member State.

In the Mansford case (Court of Appeals of Paris, 25 February 2010), several Luxembourg holding companies filed safeguard proceedings in France on the grounds that their COMI was in France. In early 2010, the Paris Court of Appeals, applying the rationale of the Eurofood decision, held that French courts had jurisdiction over the matter for the following reasons:

  1. all management and other meetings were held either in Paris or locally where the real estate assets were located;
  2. the companies had no assets or activities other than a property asset and a letting activity in France (no Luxembourg activity whatsoever);
  3. the two holding companies' sole purpose was to hold 100 per cent of their 10 subsidiaries (themselves carrying no activity in Luxembourg);
  4. the ultimate parent company's sole purpose was to own 100 per cent of holding companies that had no activity in Luxembourg; and
  5. the relationship with the lenders was initiated in France and the renegotiation of the financing documentation took place in France.

If the Insolvency Regulation does not apply and insolvency judgments are made in a jurisdiction that does not have a treaty with France (such as the United Kingdom following Brexit), they are not recognised automatically. Foreign judgments can be enforced only if they have been subject to an inter partes procedure known as exequatur, which is intended to verify that the foreign court had proper jurisdiction, international public policy has been complied with and no fraud has taken place. Such an exequatur process usually takes a couple of months, excluding appeal, which could lengthen the process.

Future developments

French bankruptcy law has been substantially reformed by the 2021 Ordinance, which will be the object of a ratification act in the coming months, expected at this stage only to address practical difficulties encountered by some practitioners.


1 Joanna Gumpelson and Philippe Dubois are partners at De Pardieu Brocas Maffei AARPI.

2 The French insolvency test is a pure cash flow test (in contrast to a balance sheet test) whereby a company is deemed insolvent when it is unable to meet its due debts out of its available assets (i.e., those in the form of cash or those that can be quickly turned into cash), taking into account undrawn committed facilities and other credit reserves and moratoriums or standstills accepted by creditors.

3 That is, companies that, alone or together with the companies they own or control, reach one of the following thresholds: 250 employees and €20 million in net turnover or €40 million in net turnover.

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