When faced with financial difficulties, farmers can take advantage of a preventive tool that is specifically tailored to their situation: the agricultural out-of-court settlement (RAA). The aim of this confidential procedure, which is separate from the mechanisms of ordinary law, is to reach an agreement with creditors to ensure the long-term survival of the farm. Properly understood and implemented, it is an effective solution for protecting a farmer's business, assets and sometimes even his home. Navigating the intricacies of this procedure does, however, require specialist expertise, and the assistance of a lawyer specialised in insolvency proceedings can be crucial to the success of the approach.
Agricultural out-of-court settlements: a specific preventive mechanism
Agricultural out-of-court settlement is a preventive procedure designed to help farmers overcome financial, legal or economic difficulties before they lead to suspension of payments. Confidential and voluntary, it offers a privileged framework for negotiation with the main creditors to restructure the debt so that the business can continue to operate.
A. Definition and legal basis of the RAA
Set out in articles L. 351-1 et seq. of the French Rural and Maritime Fishing Code, the out-of-court settlement of agricultural debts is a procedure designed to "prevent and resolve financial difficulties on agricultural holdings as soon as they can be foreseen or as soon as they arise". Its main objective is to reach an amicable agreement between the debtor and its creditors. This procedure is open to any natural or legal person carrying on an agricultural activity within the meaning of article L. 311-1 of the same code. The aim is to find lasting solutions, such as extended payment terms or debt forgiveness, under the aegis of a conciliator appointed by the President of the Tribunal de Grande Instance (TGI).
B. Distinctions from ordinary law procedures (conciliation, over-indebtedness of private individuals)
The RAA is fundamentally different from other amicable procedures. Unlike the conciliation procedure under ordinary law, it is specifically adapted to the realities of the agricultural sector. The law expressly excludes farmers from the scope of traditional conciliation (CRPM, art. L. 351-1, para. 2). Similarly, it should not be confused with the personal over-indebtedness procedurewhich deals with the non-business debts of individuals. The RAA, on the other hand, concerns the overall difficulties of the farm, including business debts, and takes into account the specific characteristics of assets and agricultural income cycles, such as the crop year, which justify different treatment.
Actors and conditions of access to out-of-court settlements in the agricultural sector
Access to out-of-court settlements in the agricultural sector is governed by precise conditions concerning the beneficiaries and involves legal players whose role is central. Understanding who can benefit and how the procedure is initiated is a fundamental step for any farmer in difficulty.
A. Beneficiaries: individual and corporate farmers
The procedure is open to any individual or private legal entity engaged in farming. This includes individual farmers, GAECs (Groupements Agricoles d'Exploitation en Commun), EARLs (Exploitations Agricoles à Responsabilité Limitée) and other non-trading agricultural companies. On the other hand, article L. 351-1 of the French Rural and Maritime Fishing Code explicitly excludes any commercial company that carries on an agricultural activity; such companies are subject to the procedures for preventing and dealing with business difficulties set out in the French Commercial Code, often before the Commercial Court.
B. The central role of the president of the court and the conciliator
The procedure is initiated by a petition addressed to the president of the competent judicial court (often at the seat of the TGI). The application may be made by the farmer himself or, more rarely, by a creditor. The president of the court examines the application and, if he considers it to be well-founded, appoints a conciliator within a few weeks. The choice of conciliator is crucial: he or she may be an agricultural expert, a court-appointed administrator or any other qualified person. The conciliator's task, as defined by the Chairman, is to encourage an amicable agreement by negotiating with the debtor and its main creditors to find viable solutions such as payment deadlines, discounts on individual debts or waiver of securities. The powers of the president of the judicial court are therefore at the heart of the system, guaranteeing a legal and balanced framework for negotiations.
Conduct and effects of the agricultural out-of-court settlement procedure
The RAA procedure involves several key stages, marked by the essential principle of confidentiality. One of the most significant effects of the procedure is the possibility of obtaining a stay of proceedings, providing the operator with an essential respite to negotiate calmly.
A. Key stages in the procedure and confidentiality
Once the case has been referred to the President of the High Court and the conciliator has been appointed, a negotiation phase begins. The conciliator brings together the operator and its main creditors (suppliers, banks, social security and tax authorities) to assess the situation and draw up proposals. The entire procedure is confidential: nothing is revealed publicly, which preserves the reputation of the business and avoids alarming commercial partners. If the negotiations are successful and the creditors accept the plan, an agreement is formalised in writing. At the request of the parties, the agreement may be recorded or approved by the High Court judge to make it enforceable and close the proceedings.
B. Provisional suspension of proceedings: a respite for the operator
To facilitate negotiations, article L. 351-5 of the French Code rural et de la pêche maritime (Rural and Maritime Fishing Code) allows the president of the court, at the request of the debtor, to temporarily suspend proceedings for a maximum period of two months, renewable once. This crucial decision prohibits any legal action by creditors to obtain payment of a sum of money and stops any enforcement action (seizure, etc.) against the farmer's assets. During this period of several weeks, the debtor may not, without authorisation, pay his previous debts or dispose of his assets outside the normal management of the business. This moratorium is a real breath of fresh air when it comes to bringing the negotiations to a successful conclusion.
The consequences of the amicable agreement and the post-RAA outlook
A successful out-of-court settlement in agricultural matters has important legal consequences, both for the farmer and for his creditors. It is a strategic tool that, if successful, avoids more restrictive legal proceedings. The agreement also opens up the prospect of financing to ensure that the business recovers.
A. Formalisation and enforceability of the amicable agreement
The agreement reached under the aegis of the conciliator is formalised in a protocol signed by the operator and the participating creditors. To give it greater force, it may be recorded by the President of the High Court, which makes it enforceable. Similar to the outcome of a conciliation agreement, it can also be approved, which increases its legal certainty and makes it enforceable against all signatory creditors. It is worth noting that the financial authorities (Treasury) and social security bodies (MSA) can grant debt remissions under this agreement, which is a powerful lever for farm recovery.
B. The RAA: a shield against insolvency proceedings
One of the major advantages of amicable settlement is its preventive nature. By intervening before payments cease, this system makes it possible to avoid the opening of insolvency proceedings. more cumbersome collective procedure such as safeguard, receivership or liquidation proceedings. Unlike these public and often costly procedures, the RAA preserves confidentiality, offers greater flexibility in the solutions negotiated and keeps the manager at the head of the business. It is a crisis management tool that favours negotiation and consensus-building over judicial constraint.
C. The privilege of "new money" in the context of the RAA
Although the RAA is a specific procedure, it can be inspired by certain mechanisms of collective procedures under ordinary law. This is the case with the "new money" privilege, provided for in article L. 611-11 of the French Commercial Code for conciliation proceedings. If a creditor (often a bank) agrees to provide new money to a business in difficulty as part of the agreement that has been approved, it can benefit from a payment privilege. This means that if safeguard, receivership or liquidation proceedings are subsequently opened, the creditor will be paid in priority to other creditors. This mechanism is an essential lever for promoting the financing of restructuring and ensuring the continuation of the business.
Protection of guarantors and assessment of the farmer's good faith
The out-of-court settlement is not limited to the relationship between the farmer and his creditors. It also has important implications for people who have stood surety for the farm's debts. Moreover, access to the procedure and the success of the negotiations are based on an essential criterion: the farmer's good faith.
A. Information and protection of guarantors in the AAR
The farmer's family (spouse, parents) are often called upon to act as personal guarantors for business loans. Protecting them is a major issue. Visit reform of securities lawThe new French law on guarantees, which came into force on 15 September 2021, strengthens the information obligations of professional creditors. In addition, a guarantee that is manifestly disproportionate to the guarantor's assets and income at the time it is entered into may be challenged. As part of an AAR, the agreement reached with the creditors may provide for adjustments to be made to the guarantors' commitments, or even for them to be partially waived. It is therefore essential that guarantors are informed of the opening of the procedure and its consequences for their own commitments.
B. Assessing the good faith of the farmer
Good faith is a fundamental condition for benefiting from the AAR procedure and getting creditors to agree to a reorganisation plan. It is assessed on a case-by-case basis. The judge and the conciliator will examine whether the farmer has sought to conceal his situation, whether he has unfairly increased his indebtedness or whether he has demonstrated transparency in the communication of each financial document. A constructive and honest attitude is a vital confidence-building measure to convince creditors to make an effort. On the other hand, proven bad faith may result in the president of the TGI rejecting the application, or in negotiations breaking down, leaving the farmer with no solution other than insolvency proceedings.
Deadlines and statistics for the agricultural out-of-court settlement procedure
For an operator considering an out-of-court settlement, it is legitimate to wonder about the length of the procedure and its chances of success. Although each case is unique, there are time benchmarks and key factors that influence the outcome of negotiations.
A. Key procedural deadlines
The procedure begins with a referral to the president of the judicial court (the TGI). Once the application has been deemed admissible, the law stipulates an initial duration for the conciliator's mission, which may not exceed four months, extendable once for a further month (CRPM, art. L. 351-4 and C. com., art. L. 611-6). If a provisional suspension of proceedings is granted, it is limited to two months, renewable once. The aim is to reach an agreement within a few weeks so as not to leave the company in difficulty in a state of uncertainty. The speed of the procedure will depend on the complexity of the case, the number of creditors and the willingness of the parties to find common ground.
B. Success rates and failure factors for AAR
There are no publicly available consolidated national statistics on the specific success rate of the RAA. However, experience shows that out-of-court procedures, when initiated early enough, have a high success rate. Success is based on several factors: the responsiveness of the operator in acknowledging its difficulties, the transparency of the financial information provided, the viability of the proposed recovery plan and the cooperation of creditors who accept the new deadline. Conversely, the main factors leading to failure are often the fact that the application is made too late, when the situation has already been irretrievably compromised, with too many outstanding liabilities, a lack of trust between the parties, or unrealistic economic forecasts that fail to convince creditors of the farm's ability to recover.
Supporting farmers in preventing difficulties
Given the complexity of the financial and legal issues at stake, farmers must not remain isolated. Taking competent advice is a key factor in the success of an out-of-court settlement procedure and in ensuring the long-term future of the farm.
A. The role of chartered accountants and farm advisers
The chartered accountant and farm management adviser are key partners. They play an essential role upstream, detecting the first signs of difficulty and analysing the farm's financial situation. As part of an AAR, they help to prepare a solid dossier, attach every useful document, draw up a realistic business forecast and quantify the efforts required. Their technical expertise is invaluable to the business owner during negotiations with creditors. Their intervention is often decisive in structuring a viable recovery plan, which may include renegotiating a rural lease, adjusting payments according to the crop year, or mobilising specific guarantees such as the agricultural warrant to ensure the continuity of the business. sustainability of the business.
Protecting the living and working environment of farmers through the RAA
Financial difficulties on a farm often have direct and dramatic repercussions on the personal life of the farmer and his family. By acting upstream, out-of-court settlements can be an effective bulwark against the most serious consequences, such as the loss of a home.
A. Suspension of eviction from farm-related accommodation
When the farmer's home is located on the farm, an unpaid debt can lead to seizure proceedings and, ultimately, eviction. The RAA offers a protective mechanism. The provisional suspension of proceedings, granted by the district court judge at the start of the proceedings, applies to all enforcement procedures and effectively halts any eviction proceedings in progress. Beyond the purely financial aspects, the RAA is a powerful tool for prevent eviction This is a particularly devastating measure. The aim of the resulting amicable agreement, which reschedules the debts, is to make payment possible again and to secure the farmer's living and working environment for the long term.
Agricultural out-of-court settlements are a demanding but valuable procedure. By acting preventively and confidentially, it offers a real opportunity to overcome difficulties. In order to successfully navigate the procedure and maximise your chances of success, it is essential to be accompanied by an experienced law firm to defend your interests against the creditors at each hearing. Our firm is at your disposal to advise and assist you in this process.
Sources
- Code rural et de la pêche maritime, in particular articles L. 351-1 to L. 351-7
- French Commercial Code, in particular articles L. 611-4 et seq (relating to conciliation)
- Civil Code, in particular the provisions relating to the law on sureties and suretyship
- Code of Civil Procedure, for aspects relating to referral to the TGI.