Publications

27/03/2020

[COVID-19] Ad hoc mandate and conciliation

Information current as of the date of publication of this article.


You have not been able to obtain an extension of maturities from your bank or a new loan;

Your cash facilities or promissory notes have been terminated;

You owe money to your creditors and have not obtained a payment term from them.

If all of the avenues that will be proposed have not been successful, and you have not been in a state of suspension of payments for more than 45 days, you have the possibility of placing yourself under the protection of the Commercial Court through two effective and confidential tools.

  1. The ad hoc mandate (Article L.611-3 of the French Commercial Code)
  • – If you are not in a state of suspension of payments, you may request the appointment of an ad hoc representative from the President of the Commercial Court, an ad hoc representative usually chosen from the list of judicial administrators and who, in the majority of cases, is the one you have proposed;
  • – You will choose the mission that will be assigned to the ad hoc representative and the perimeter of this mission;
  • – The advantage of using an ad hoc representative is that it allows:

> To assist you and negotiate with a large number of your partners (banks, suppliers, tax and social security bodies) or co-contractors, the intervention of a professional appointed by the Court being an important support vis-à-vis creditors,

> To reach agreement with creditors on debt rescheduling/restructuring and/or other difficulties encountered, if necessary.

  • – The ad hoc mandate is not limited in time and may be used as a precondition for the opening of conciliation proceedings;
  • – All exchanges within the framework of the ad hoc mandate are covered by the strictest confidentiality and you choose the partners and creditors that you wish to inform of the opening of the procedure;
  • – The ad hoc mandate procedure may be terminated at any time;
  • – Be careful however, the ad hoc representative is not your counsel, his objective is to find an agreement. You must keep your counsel.
  1. Conciliation procedure (Articles L.611-4 to L.611-12 of the French Commercial Code)
  • – If you are not in a state of cessation of payments, or if your state of cessation is less than 45 days old, you can request the appointment of a conciliator from the President of the Commercial Court;
  • – The conditions for the opening and conduct of the conciliation procedure are similar to the ad hoc mandate procedure;
  • – All exchanges in the conciliation procedure are covered by the strictest confidentiality and you choose the partners and creditors you wish to inform of the opening of the procedure, the conciliation agreement only becoming public if it is approved by the Court;
  • – The duration of the procedure shall be set at a maximum of four months and may be extended to a maximum of five months;
  • – If an agreement is reached, it can be the subject of:

> A statement by the Court, in order to secure the agreement for its signatories and, if necessary, to be able to request payment deadlines from non-signatory creditors,

> Court probate, with similar effects, as banking institutions generally seek such probate so that their new cash contributions benefit from a repayment priority (“new money privilege”) in the event of your company’s insolvency proceedings.