French insolvency reforms 2021: key features

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On 16 September 2021, ordinance 2021-1193 implemented the European Directive on preventive restructuring frameworks into French law. The Ordinance applies to proceedings opened from 1 October 2021.

Key features

Introduction of a (single) accelerated safeguard proceeding - the implementation of a pre-negotiated restructuring plan within four months following ‘conciliation proceedings’ (if its acceptance is likely).

Replacement of creditor committees with creditor classes - the constitution of creditor classes is mandatory in accelerated safeguard proceedings for any debtor company, and in ordinary safeguard and rehabilitation proceedings for certain debtor companies. Only creditors and members whose rights are impaired by the proposed plan will be included. Each class approves a plan by a two-third majority. The cross-class cram-down feature permits approval of the plan over the dissent of one or more classes.

Demarcation of regular safeguard proceedings and rehabilitation proceedings -regular safeguard proceedings are now more ‘debtor-driven’ meaning that only the debtor is entitled to propose a plan, the judge is no longer entitled to reschedule the debtor's liabilities and the observation period is now six months renewable once.

‘Super priority ranking’ of new money financing.

Clarification of the interaction between certain types of security and insolvency proceedings.

Cross-border recognition

In the EU - all proceedings remain listed in Annex A of the recast EU regulation – no change expected.
In the UK, post-Brexit - recognition of new safeguard proceedings in the UK could be sought under the Cross-Border Insolvency Regulations 2006. If the safeguard proceedings purport to compromise English law-governed debt, the enforcement of the plan may be denied.