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Backup procedure

Verified 15 May 2022 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Justice

The backup procedure is for a company that is not termination It justifies difficulties that it is unable to overcome. The purpose of the safeguard is to facilitate the reorganisation of the company in order to allow the continuation of economic activity, the maintenance of jobs and the settlement of debts. Companies which have obtained conciliation without the agreement of all creditors can benefit from an accelerated backup procedure.

Ordinary backup procedure

The safeguard procedure shall cover any company which justifies difficulties which it is unable to overcome.

These difficulties may be legal, economic or financial.

These companies may include:

  • Individual entrepreneurs engaged in commercial, craft, liberal or agricultural activities
  • Micro entrepreneurs
  • Businesses

Company should not be in termination.

The initiation of a safeguard procedure is only at the request of the contractor or business manager.

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Commercial or craft activity

The application to initiate the procedure shall be lodged at the Registry of the Commercial Court where the company's registered office is located.

This request indicates the difficulties the company is experiencing and the reasons why it is not able to overcome them.

It also specifies whether the contractor or manager is committed to establishing a heritage inventory.

The request for opening shall be accompanied by the following documents:

  • Annual accounts for the last financial year
  • Unique identification number
  • Cash position
  • Forecast income statement
  • Number of employees
  • Encrypted Statement of Receivables and Debts
  • Assets and liabilities and off-balance sheet liabilities
  • Summary Inventory of Debtor Assets
  • Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
  • Certificate of absence of ad hoc mandate or conciliation within 18 months of the date of application

The contractor or officer must complete an application form. This must be lodged at the Registry of the Commercial Court where the company's head office is located.

Request to initiate a backup procedure

Who shall I contact

Liberal activity

The request to initiate the procedure shall be lodged with the Registry of the Court of Justice of the company's seat.

This request sets out the nature of the difficulties that the company faces and the reasons why it is not able to overcome them.

It also specifies whether the contractor or manager is committed to establishing a heritage inventory.

The request for opening shall be accompanied by the following documents:

  • Annual accounts for the last financial year
  • Unique company identification number
  • Cash position
  • Forecast income statement
  • Number of employees employed on the date of application
  • Encrypted Statement of Receivables and Debts
  • Assets and liabilities and off-balance sheet liabilities
  • Summary Inventory of Debtor Assets
  • Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
  • Certificate of absence of ad hoc mandate or conciliation within 18 months of the date of application
  • Designation of the professional order or authority on which the company depends

Request to initiate a backup procedure

Who shall I contact

The court shall decide on the initiation of the proceedings after hearing the individual contractor or business manager and the representatives of the CSE: titleContent.

The court may appoint a judge to collect all information on the company's financial, economic and social situation. If the court finds that the application is well founded, it shall initiate the proceedings.

The Registrar of the Court shall publish a notice of the opening judgement in the Bodacc: titleContent and legal ad support of the place where the company has its registered office.

The opening judgement shall appoint the bodies responsible for the proceedings and shall open a period of observation during which the company shall continue its activity.

The objective of the compliance period is to arrive at a safeguard plan under the supervision of the court and usually with the assistance of a judicial administrator.

FYI  

where the company falls under the liberal regulated sector (for example, architect, doctor or judicial officer), the court must hear the professional order or the body to which it falls.

Procedural bodies

The court shall designate judicial officer defending the collective interest of creditors, a judicial administrator responsible for supervising the contractor or the officer in his management, and judge.

The court shall invite social and economic committee (CSE) where available, to appoint a representative from the company's employees.

Mission of the judicial administrator

The appointment of a judicial administrator is mandatory when the company has at least 20 employees and a turnover that exceeds €3 millionHT: titleContent.

The court shall assign one of the following tasks to him:

  • Supervision of the company in difficulty in its management
  • Assistance for all or some management acts
Mission of the Judge-Commissioner

The Judge-Commissioner may authorise the company in difficulty to:

  • Disposal (such as a sale or loan) foreigners to the day-to-day management of the company
  • Establishment of security actual (such as a mortgage) as security for a claim after the initiation of the proceedings.
Role of leader during backup process
individual business

The individual contractor carries out the current management actions (e.g., a supply order) that are not included in the administrator's mission.

Once the backup procedure has been initiated, the user cannot change the composition of his professional heritage if this results in a decrease in the professional asset.

Business

The managing contractor carries out the day-to-day management actions (e.g. ordering supplies) that are not included in the administrator's mission.

The executive continues to perceive remuneration unless otherwise decided by the members or shareholders.

Backup observation period

Backup begins with a period of observation.

This period serves to carry out an economic and social assessment of the company.

It also allows for the study of recovery options.

An inventory of the company's assets is drawn up by the manager.

During this period, the company continues its activity.

The court may, at any time, order the partial cessation of activity.

During this period, the draft backup plan is drawn up and the procedure for checking claims begins.

Duration of observation period

She is Maximum 12 months (6 months renewable once for a maximum period of 6 months at the request of the administrator, the company in difficulty or the prosecution).

Prohibition of payment of prior claims and prosecution of creditors

The judgement initiating the proceedings shall the prohibition for the company in difficulty to pay any debt arising before the opening judgement.

In practice, this means that the company no longer pays its debts once the safeguard judgement has been opened. Creditors must therefore declaration of claims the judicial representative.

The opening judgement shall also entail suspension of individual proceedings : creditors who had not yet initiated proceedings on the day of the opening judgement can no longer do so afterwards.

The opening judgement determines the rate of interest (statutory, conventional and late) and increases except loans over 1 year.

The guarantees (natural persons) of the company in difficulty may take advantage of the interruption of the interest rate.

FYI  

creditors have an obligation to report their claims to the judicial officer, within 2 months of the publication of the opening judgement in the Official Gazette of the civil and commercial announcements (Bodacc). For procedures opened since 1to October 2021, the debt declaration must specify the nature of the security and its plate.

Situation of claims following the opening judgement

In principle, the company in difficulty does not pay the debts after the judgement opening the safeguard procedure. Salaries are an exception to this rule and are always paid first.

Others claims shall also be paid on maturity:

  • Claims required to conduct the compliance procedure or period (e.g. payment of a delivery of goods necessary for the business' activity)
  • Consideration for a benefit provided to the company in difficulty during this period (for example, payment for plumbing work)
  • Maintenance claims

To deal with the health crisis, a backup privilege encouraging cash flows during the observation period. In practice, the funds provided must be repaid before all other claims. However, salary claims remain a priority.

In order to facilitate the continuation of its activity, the Judge-Commissioner may also authorise the company in difficulty to pay the invoices of the carriers.

Continuation of current contracts

Commercial contracts shall continue unless the court administrator decides otherwise.

At the end of the observation period, several solutions are available to the company in difficulty.

Where there is a serious possibility for the company to be safeguarded, the court shall, for this purpose, draw up a plan that terminates the observation period.

Setting up a backup plan

The backup plan allows the manager to take a set of steps to restructure his company and allow its backup.

This plan shall be subject to the vote of the creditors and assigned party classes if they exist.

Companies shall be required to establish classes of affected parties in any of the following cases:

  • Where the company has more than 250 employees and a net annual turnover exceeding €20 million
  • When the net annual turnover exceeds €40 million

The backup plan shall not last more than 10 years and shall include, where appropriate, the termination, addition or disposal of one or more activities.

The implementation of the plan imposes payment deadlines or debt forgiveness on creditors.

In the judgement setting out the plan or amending it, the court may decide that the property which it considers essential for the continuation of the company cannot be sold for a certain period of time.

Transformation of the safeguard procedure into a judicial remedy

When it appears that the company was already in termination before the safeguard procedure is initiated, the court must convert the safeguard into a judicial remedy.

Disappearance of conditions justifying opening

If during the safeguard procedure the company's situation improves, the court may terminate the safeguard procedure.

Accelerated Backup

Accelerated backup is a procedure subject to the rules of backup with a period of observation and a plan implemented very quickly. It concerns companies that have obtained the opening of conciliation proceedings but are unable to reach agreement with their creditors.

The accelerated backup procedure is initiated when all of the following conditions are met:

  • The company is engaged in conciliation
  • It has developed a draft business continuity plan that is acceptable to creditors
  • Its accounts shall be certified by an auditor or drawn up by an auditor

FYI  

the accelerated backup procedure can be initiated against a company that is in a state of termination for less than 45 days from the date of the request to initiate the procedure.

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Commercial or craft activity

Once the conditions have been met, the company must complete an application form.

This must be deposited at the registry of the commercial court where the company's head office is located.

Request for an accelerated or accelerated financial backup procedure

Who shall I contact

The documents to be attached to the opening application are as follows:

  • Annual accounts for the last financial year
  • Unique company identification number
  • Cash position
  • Forecast income statement
  • Number of employees employed on the date of the request to open
  • Encrypted Statement of Receivables and Debts
  • Assets and liabilities and off-balance sheet liabilities
  • Summary Inventory of company Assets
  • Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
  • Financing table and, where the debtor prepares consolidated accounts, cash flow table
  • Cash budget for the next three months
  • Projected Funding Plan
  • Backup Plan Project

Liberal activity

Once the conditions are met, the company must complete a form.

The application for an accelerated safeguard procedure shall be lodged at the registry of the judicial court where the company's head office is located.

Request for an accelerated or accelerated financial backup procedure

Who shall I contact

The documents to be attached to the opening application are as follows:

  • Annual accounts for the last financial year
  • Unique company identification number
  • Cash position
  • Forecast income statement
  • Number of employees employed on the date of application
  • Encrypted Statement of Receivables and Debts
  • Assets and liabilities and off-balance sheet liabilities
  • Summary Inventory of company Assets
  • Name and address of the representatives of the staff delegation of the Social and Economic Committee (SSC) if they have already been appointed
  • Designation of the professional order or authority of the company practising a regulated profession
  • Financing table and, where the debtor prepares consolidated accounts, cash flow table
  • Cash budget for the next three months
  • Projected Funding Plan
  • Backup Plan Project

Appointment of procedural bodies and duration of proceedings

The Court shall decide on the opening of the proceedings after a report by the conciliator on the conduct of the conciliation and the prospects for the adoption of the draft plan.

The court shall appoint one or more judicial administrators.

The opening judgement also constitutes assigned party classes. The company in difficulty shall draw up a list of the claims of each affected party which participated in the conciliation. This list shall be certified by the auditor or attested by the auditor.

Accelerated backup time

The court shall decide on the plan within 2 months of the opening judgement.

At the request of the company in difficulty and the judicial administrator, the court may extend this period without the total duration of the proceedings exceeding 4 months.

Accelerated Backup Plan Agreement

The officer and the court administrator shall present the draft safeguard plan to the classes of parties affected.

Each assigned party class must vote the plan.

The decision is made by each class by a majority of 2/3 of the voters.

The court may refuse to stop the plan if it does not prevent the cessation of payments.

The fast-track safeguard is effective against all creditors prior to the opening judgement. Employees and creditors are not concerned.

Its effects are more limited than those of other collective proceedings. This means that fast backup cannot be converted to recovery or court.

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