Financial difficulties are a fact of business life. Fortunately, French law offers several tools for anticipating and dealing with them before a situation becomes irremediable. Among these tools, the accelerated safeguard procedure stands out as a fast and effective solution, particularly suited to companies that have already made good progress in negotiating a recovery plan with their creditors.
This article explores how this procedure works, modernised by a major reform in 2021. We will look at how it fits in with the amicable negotiation phase (conciliation), which companies are eligible, how it works in practice and what the effects are for the company and its partners. Understanding this mechanism can open up interesting prospects for overcoming a difficult period.
What is accelerated backup?
Accelerated Safeguard is a judicial collective procedure. Its main objective is not to deal with insurmountable difficulties, but rather to finalise and make binding a restructuring plan that has already been largely negotiated and approved by a majority of creditors during a prior amicable phase: conciliation. Imagine a negotiation that is well underway but stalled by a few recalcitrant creditors: the accelerated safeguard makes it possible, under certain conditions, to override their refusal and impose the plan on everyone.
Its current legal framework derives mainly from Order no. 2021-1193 of 15 September 2021. This major reform has had several significant impacts. First, it merged the former sauvegarde accélérée with a related procedure, the sauvegarde financière accélérée (SFA), into a single, more coherent procedure. Secondly, it brought French law into line with European Directive (EU) 2019/1023 on preventive restructuring frameworks. The aim is clear: to provide European companies with effective tools to restructure quickly and avoid bankruptcy where possible.
The fundamental difference with the classic" backup lies in its entry point and duration. You cannot apply for accelerated protection directly. You have to go through a prior conciliation procedure and have a draft plan that is already well advanced. It is a procedure designed for efficiency and speed, with the aim of adopting a plan in a maximum of four months, whereas a conventional safeguard can extend over a much longer period. It is therefore less an observation procedure than a procedure for rapid approval of a solution negotiated upstream.
What conditions need to be met to qualify for accelerated safeguarding?
Access to this fast-track procedure is governed by precise conditions, defined in particular by article L. 628-1 of the French Commercial Code. They are designed to ensure that the procedure is used wisely, i.e. when there is a real chance of success thanks to the preparatory work carried out.
Going through conciliation
This is the sine qua non condition: the company must be engaged in a conciliation procedure at the time it applies to open the accelerated safeguard, or this conciliation procedure must have been completed very recently. Conciliation is the amicable and confidential phase where, under the aegis of a conciliator appointed by the president of the court, the company negotiates with its main creditors to reach an agreement that will enable it to overcome its difficulties.
Accelerated Safeguard thus appears to be a "derivative procedure", a judicial extension of conciliation. It is used when a majority consensus has been reached during conciliation, but the unanimity often required for a traditional conciliation agreement has not been achieved, or when the agreement must be imposed on certain creditors in order to be viable. The report drawn up by the conciliator on the progress of the negotiations and the prospects for adoption of the plan will play a decisive role in the court's decision whether or not to initiate accelerated safeguard proceedings.
A draft plan that is well advanced and likely to be adopted
To understand how prepare and negotiate an effective safeguard planHowever, it is not enough to be in conciliation. The debtor must be able to present the court with a draft safeguard plan that has already been drawn up and is sufficiently mature. What's more, this draft plan must receive "sufficiently broad support" from the creditors who will be affected by the proceedings (the "affected parties"). What does this mean in practice? The court will assess whether the support already obtained makes it "likely" that the plan will be formally adopted by the future voting bodies (the classes of affected parties) within the short period allowed by law.
This requirement reflects the "prepack" approach imported from Anglo-Saxon law. The idea is that most of the restructuring work (analysis of the situation, drafting of proposals, negotiations) must be done by before the opening of legal proceedings. The support of the creditors can take the form of an agreement in principle or, ideally, a memorandum of understanding signed during the conciliation, committing the majority creditors to vote in favour of the plan during the judicial phase.
Company eligibility criteria
Historically, access to the accelerated safeguard procedure (and especially the SFA) was limited by size thresholds (number of employees, turnover, balance sheet total). The 2021 reform signalled a desire for openness by abolishing these thresholds for general eligibility for the merged procedure.
From now on, the main condition relating to the company itself is an accounting one: it must be able to prove that its accounts have been certified by a statutory auditor or, failing that, drawn up by a chartered accountant. This requirement is intended to guarantee the reliability of the financial information on which the draft plan and the court's decision are based.
Suspension of payments is not an absolute obstacle
Unlike the traditional safeguard procedure, which assumes that the company is not in a state of suspension of payments (i.e. unable to meet its current liabilities with its available assets), the accelerated safeguard procedure can be opened even if this situation has been established. This is an important flexibility.
However, this tolerance is strictly limited in time. For accelerated safeguard measures to be possible, the company must not have been in a situation of suspension of payments for more than 45 days. before the date of the request to initiate conciliation proceedings application. Note that the reference point is not the accelerated safeguard application, but the conciliation application that preceded it. This rule prevents companies that are permanently insolvent from using this fast-track procedure, which was designed for preventive restructuring. The court will check this point carefully, and if the date of cessation of payments ultimately turns out to be before this limit, the accelerated safeguard procedure will have to be closed, as provided for in article L. 628-8 of the French Commercial Code.
How does the procedure work?
Once the conditions for access have been met, the opening and running of the accelerated safeguard procedure follows its own set of formalities, which are simplified in certain respects in order to meet the very tight deadlines.
Opening by the court
Neither creditors nor the public prosecutor's office can apply for the procedure. It is filed with the competent commercial court (or judicial court for certain professions), generally the one where the company has its registered office. If the prior conciliation has been deferred (referred to another court), that court retains jurisdiction for the accelerated safeguard.
The court examines the application at a hearing at which the public prosecutor must be present. Its decision is based primarily on the conciliator's report, which sets out the history of the negotiations and assesses the chances of success of the proposed plan, as well as on the supporting documents provided by the debtor to prove that the conditions for opening the procedure have been met. The court may request disclosure of all documents relating to the conciliation, even if they are confidential.
Designated players
If the court orders the opening of the accelerated safeguard procedure, it appoints the usual bodies involved in collective proceedings, with a few specific features.
- One or more court-appointed administrators are systematically appointed. Article L. 628-3 of the French Commercial Code states that the court will give priority to the conciliator who conducted the amicable phase, if he or she is registered on the professional lists. This is a very common and logical practice: who knows the case better than the conciliator, the potential sticking points and how to finalise the agreement quickly? This continuity is a guarantee of efficiency.
- A judicial representative is also appointed. His role is to represent the collective interests of the creditors and to verify the declared liabilities.
- A official receiver is appointed to oversee the rapid progress of the procedure.
- It is worth noting that the debtor may ask the court to dispense with the obligation to draw up a full inventory of his assets, a formality that is sometimes cumbersome and less relevant in this context, where the objective is the rapid adoption of a financial plan.
The central role of affected party classes
This is one of the major innovations resulting from the transposition of the European Directive and the 2021 reform. Accelerated safeguard procedures must now be based on the constitution of classes of parts affected. These classes replace the former creditor committees (Credit Institutions Committee, Main Suppliers Committee) that existed previously.
Their purpose is to group together, in different classes, creditors but also, where applicable, partners or shareholders whose rights (claims, shareholdings) are likely to be modified by the draft plan. Creditors are grouped together on the basis of a "sufficient community of economic interest". For example, secured creditors will not have the same interests as unsecured creditors (those with no particular security), and could therefore be placed in separate classes. Recent case law has refined the criteria for establishing these classes (see, for example, rulings by the Versailles Court of Appeal in 2023). It is within these classes that the draft plan will be put to the vote. Their constitution is ordered as soon as the opening judgment is issued.
The practical effects of openness
One of the key features of the accelerated safeguard procedure is the limited scope of its effects. Article L. 628-6 of the French Commercial Code is very clear: the procedure only has effect in relation to affected parties by the draft plan.
In practical terms, this means that the classic rules of insolvency proceedings (suspension of individual lawsuits, prohibition on paying debts that pre-date the opening judgment, suspension of interest on certain debts) only apply to creditors and partners whose rights are to be modified under the plan. For all other creditors (for example, a supplier whose payment terms have not been modified by the plan, or a public creditor not affected by the plan), the contractual relationship will continue as normal: they must be paid on the due date and may take legal action in the event of non-payment. This is a considerable advantage for the company, which can preserve its current commercial relations while restructuring its financial or strategic debt. Employees, although not directly "affected" by the vote on the plan, continue to benefit from the protections of employment law and the wage guarantee scheme (AGS) if applicable.
As regards ongoing contracts, the general rules on their continuation (set out in Article L. 622-13 of the French Commercial Code) apply. The administrator may require the continuation of contracts necessary for the business. However, in order to save time, some of the administrator's powers (such as giving formal notice to the co-contractor to decide whether to continue or requesting judicial termination) are excluded in the strict context of accelerated protection.
Simplified declaration of assigned receivables
Collective proceedings generally mean the declaration of claims. Accelerated safeguard greatly simplifies this process for creditors already identified during conciliation. The mechanism is based on a list of the claims of the parties affected, drawn up by the debtor and then certified by the auditor or certified by the chartered accountant.
This list is filed with the court registry. Article L. 628-7 of the French Commercial Code stipulates that this filing must is equivalent to a statement of claim on behalf of the creditors appearing on it. The judicial representative is then responsible for informing each creditor concerned of the amount and nature of their claim as it appears on the list. If a creditor notices an error or omission, or if his claim has changed since the list was drawn up, he retains the possibility (and even has an interest) of making his own individual declaration within the usual legal time limits (generally two months after publication of the opening judgment in the BODACC). Their individual declaration will then take precedence over the list. Creditors who have not taken part in the conciliation and who are not on the list must declare their claims under the normal procedure if they wish to assert their rights.
What is the outcome of the accelerated safeguard procedure?
The procedure is designed to lead quickly to a permanent solution. Its duration and exit procedures are therefore strictly regulated.
A maximum duration of 4 months
The effectiveness of the accelerated safeguard procedure depends on its brevity. Article L. 628-8 of the French Commercial Code sets a deadline for the court to rule on the plan. within a maximum of four months from the opening judgment. This is a maximum period, which cannot be extended. It covers all the stages: finalising the draft plan, informing the parties affected, voting in the classes, and finally the court's decision. This imposes a sustained pace on all those involved.
Adoption and approval of the plan
For find out about the various measures that can be included in a safeguard planThe decisive step is the vote on the draft plan within each class of affected parties. To be adopted, the draft plan must receive a specific majority in each class: a two-thirds majority of the votes held by the members who took part in the vote, as detailed in article L. 626-30-2 of the French Commercial Code. It is important to note that creditors whose plan does not change the terms of payment or provides for rapid repayment in full do not take part in the vote.
Once the plan has been approved by the classes, it is submitted to the court for "approval" (i.e. homologation). The court does more than simply record the results of the votes. It also verifies the legality and appropriateness of the plan. In particular, as stipulated in article L. 626-31, it must check that "the interests of all the parties affected are sufficiently protected". This means that it can refuse to approve a plan, even one approved by the required majority, if it considers, for example, that the sacrifices required of minority shareholders are disproportionate or that the plan is not viable. This is an important safeguard for minority creditors or shareholders.
Failure of the procedure
If the outcome of the procedure is positive, implementing, monitoring and modifying the backup plan are key stages. But what happens if the plan is not approved by the classes or if the court refuses to approve it? Unlike traditional sauvegarde, where alternatives exist (individual consultation of creditors), sauvegarde accélérée is more binary. Article L. 628-8 provides that if no plan is approved within four months, the court shall terminates the procedure accelerated backup.
It is then a failure for this specific way. The company finds itself without the benefit of the hoped-for plan. Its financial situation has probably not disappeared, or has even worsened. It will then have to consider other solutions: perhaps a new attempt at negotiation, or, more probably, if the conditions are met, the opening of another collective procedure such as a classic safeguard (if it is no longer in cessation of payments), a judicial reorganisation, or unfortunately a judicial liquidation if no reorganisation can be envisaged.
Accelerated Safeguard represents an interesting opportunity for companies that have already gone through major stages of negotiation with their creditors in conciliation. Its speed and effectiveness can be decisive. However, its implementation requires preparation and legal expertise. If you think this procedure might be right for your company, it's essential to get the right advice. For a personalised analysis of your options and a expert support in implementing accelerated backupcontact our office.
Sources
- French Commercial Code: Articles L. 611-4 et seq. (Conciliation), L. 628-1 to L. 628-8 (Accelerated Safeguard), L. 622-1 et seq. (General provisions applicable), L. 626-29 et seq.
- Order no. 2021-1193 of 15 September 2021 amending Book VI of the French Commercial Code.
- Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks.
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