The adoption of a backup plan marks a decisive step for a company facing difficulties that it is unable to overcome on its own. Far from being a mere formality, this plan is a detailed roadmap, validated by the court, designed to ensure the continuity of the business, maintain employment and pay off liabilities.. Its structure and content are governed by law and are often the result of a plan negotiation with the company's creditors and partners. Understanding the various measures it may contain is essential to grasping the scope of this procedure, which comes under the authority of the collective proceedings. This article details the usual components of a safeguard plan.
Economic and structural reorganisation measures
The heart of the safeguard plan lies in its ability to propose concrete solutions to turn around the company's economic situation. The aim is not just to deal with past debts, but above all to make the company viable for the future. This inevitably involves an in-depth analysis of its operations and, where necessary, significant adjustments to its business model or processes..
Adapting the business and the means of production
The plan must set out and justify the level and prospects of employment and the social conditions envisaged for the continuation of the business. It identifies the necessary adjustments to the business itself. This may involve redefining the product or service offering, reorienting the strategy towards more buoyant markets, or optimising internal processes to improve efficiency.
The means of production are also a central concern. The plan may provide for targeted investment to modernise production facilities, improve productivity or reduce costs. Conversely, it may also acknowledge the need to reduce certain production resources deemed to be oversized or obsolete in relation to the redefined business outlook. The aim is to bring production capacity into line with actual requirements and the profitability targets set by the business plan.. This analysis and decision-making phase is a delicate one, requiring a clear vision of the company's future.
Examples of possible economic measures
There are many economic levers for action, depending closely on the specific situation of each company. Among the measures frequently included in a safeguard plan are :
- Renegotiating current contracts Whether it involves supplier contracts, commercial leases or other commitments, the plan may seek to obtain more favourable terms.
- Optimising operating costs Reducing overheads, rationalising purchasing and improving stock management.
- The search for new sources of financing Although the plan aims to restore cash flow, external financing may be needed to support the recovery.
- The introduction of new management and monitoring tools : To improve business management and decision-making.
- Developing new activities or partnerships : To diversify sources of income or access new markets.
These measures are not mutually exclusive and must form a coherent whole aimed at restoring the company's economic performance over the long term.
Company reorganisation measures
In addition to purely economic adjustments, the safeguard plan may also provide for more far-reaching changes affecting the structure of the company itself. These measures are designed to adapt the legal and capital structure to the new realities and objectives of the plan..
Changes to share capital: conditions and limits
Where the survival of the business so requires, the plan may provide for a change in the share capital. Under article L. 626-3 of the French Commercial Code, this may take the form of a capital increase, often necessary to recapitalise the business, or a capital reduction to cover losses. These operations are subject to strict conditions.
The capital increase must be subscribed by existing members or shareholders, or by new entrants who undertake to pay up their subscriptions.. The plan may even provide that only certain shareholders or new subscribers will participate, subject to respect for shareholders' rights and the legal provisions relating to capital increases. If the existing shareholders refuse the change in capital provided for in the plan, their shares may be compulsorily transferred to those who have undertaken to carry out the capital increase.. These mechanisms are complex and their implementation often requires the advice of a lawyer.
A change in capital can only be imposed if it is an essential condition for the continuation of the business and if the shareholders' equity is less than half the share capital.. This is an impacting measure that changes the distribution of power and value within the company.
Disposal of assets not essential to the business
To generate cash, improve the financial structure or refocus the company on its core business, the plan may include the sale of certain assets. These are generally assets considered to be non-strategic or not essential to the continuation of the main business (unused property, minority shareholdings, surplus equipment, etc.).
The precise designation of the assets to be disposed of, the method of disposal (sale by mutual agreement, auction, etc.) and the provisional timetable must be included in the plan. The proceeds of these disposals are allocated as a priority to the payment of claims secured on these assets, and then contribute to the financing of the plan and the repayment of other creditors.. This strategy makes it possible to rationalise the company's assets while freeing up resources for the turnaround.
The cessation, addition or transfer of one or more activities
More radical restructuring may involve decisions affecting entire branches of activity. The safeguard plan may therefore provide for:
- Cessation of a loss-making or non-strategic activity The aim of this difficult decision is to stop the financial haemorrhaging caused by an unprofitable business and to concentrate resources on viable activities.
- Adding a new activity To diversify the business or exploit new market opportunities identified when the plan was drawn up.
- Disposal of one or more businesses This is a partial sale of a business, governed by specific provisions of the French Commercial Code (articles L. 642-1 et seq., applicable by reference). The aim is to sell a complete business (goodwill, contracts, staff, etc.) to a buyer, which can facilitate the turnaround of the rest of the company while preserving part of the business and jobs.
These structural decisions have a major impact on the organisation, scope and future of the company. They must be carefully thought through and justified in the plan.
Social reorganisation measures
The social component is a sensitive and essential part of the safeguard plan. Economic and structural measures often have repercussions on employment, and the plan must explicitly address the social consequences of the planned reorganisations, particularly in terms of redundancies..
Links with employment law
The safeguard plan does not depart from the fundamental principles of employment law, but it does introduce certain procedures. Staff representative bodies (social and economic committee - CSE) must be informed and consulted on the social measures envisaged when the plan is drawn up. Their opinion is required, in particular on proposed redundancies..
The plan must take into account future employment prospects and working conditions. It may include training, retraining or internal mobility measures to support employees whose jobs are affected by the reorganisation. The stated aim is to maintain employment as far as possible, but staffing levels may have to be adjusted to ensure the company's viability.
Redundancies under the redundancy plan
If the economic or structural reorganisation provided for in the plan results in job losses, these must take the form of redundancies for economic reasons. The French Commercial Code (article L. 626-10) stipulates that the safeguard plan must set out and justify the level and prospects of employment as well as the social conditions envisaged for the continuation of the business. Where the plan provides for redundancies for economic reasons, it must include a job protection plan (PSE) if the legal thresholds are reached (depending in particular on the number of redundancies envisaged and the size of the company)..
Redundancies must be justified by economic difficulties or the need to reorganise the company as set out in the plan. The procedure for collective redundancies must be followed (consultation of the works council, notification of the labour authorities - DREETS). However, the adoption of the plan by the court is tantamount to validation (or approval, depending on the case) of the PSE included in the plan, thus simplifying part of the usual administrative procedure.. Despite this specific framework, employees' individual rights (compensation, notice period, priority for re-employment) remain applicable.
Settling liabilities: paying off debts
A major objective of the safeguard plan is to organise the repayment of the company's debts accumulated prior to the opening of the procedure. The plan must contain specific proposals for paying off these liabilities, while respecting the rights of creditors and the company's financial resources.. Le performance monitoring is essential.
Which claims are covered by the plan (prior to the opening judgment)?
The safeguard plan only concerns claims arising prior to the decision to open the procedure.. These claims must have been declared and recognised as liabilities by the official receiver (or be the subject of ongoing proceedings). Receivables arising after the opening judgment, which are necessary for the conduct of the proceedings or the observation period, or in return for a service provided to the debtor, benefit from preferential treatment and must in principle be paid when due..
All previous debts, whether unsecured (with no particular guarantee) or secured (with guarantees), are therefore subject to the potential deadlines and remissions in the plan, with the exception of certain specific claims such as super-privileged employee claims, which are paid promptly by the AGS (Association pour la gestion du régime de Garantie des créances des Salariés)..
Proposed payment terms
One of the key measures in the plan is the granting of payment extensions to creditors. The maximum duration of the plan, and therefore of the payment periods, is set by law: it cannot exceed ten years (fifteen years for farmers).. The plan must include a precise repayment schedule.
The first payment must be made no later than one year after the plan is approved by the court.. The annual instalments provided for may not, except in the case of farmers, be less than 5 % of the admitted liabilities for each of the first two years of the plan.. These proposals are submitted to the court for approval, which checks that they are serious and compatible with the company's projected financial capacity. Creditors are consulted on these proposals, either individually or collectively via creditors' committees in larger companies..
Applications for debt remission
In addition to, or as an alternative to, the deadlines, the plan may propose debt write-offs. These waivers may be partial and mainly concern unsecured creditors. Preferential creditors (such as banks with mortgages or pledges) find it more difficult to accept debt write-offs, but this can be negotiated, in particular through creditors' committees.
Proposals for remission must be accepted by the creditors concerned. The court cannot impose a debt remission on a creditor who refuses it, except in the very specific context of voting by creditors' committees, where the majority decision can prevail over the minority.. Obtaining significant rebates can greatly facilitate recovery by lightening the burden of the liabilities to be repaid.
Specific treatment of tax and social security receivables
Public debts (taxes, social security contributions) are subject to special treatment. Tax authorities and social security bodies (URSSAF, supplementary pension funds, etc.) can grant discounts and payment terms under specific conditions, often negotiated via the CCSF (Commission des chefs de services financiers)..
These organisations generally agree to terms in line with the duration of the plan, but the remissions are more restricted. They often relate to increases, penalties or debt collection costs, and more rarely to the principal of the debt, with some exceptions. The agreement of these institutional creditors is often a decisive condition for the adoption and success of the safeguard plan..
Drawing up a safeguard plan is a complex exercise, requiring a detailed analysis of the company's situation and a realistic projection of its future. The measures it contains must form a coherent and credible whole to convince the court and creditors. If you are facing difficulties that are likely to lead to a safeguard procedure, it is strongly recommended that you seek the assistance of a professional legal and strategic assistance. Contact our firm to assess your situation and define the most appropriate strategy.
Sources
- French Commercial Code, in particular articles L. 626-1 to L. 626-32 (Safeguard plan)
- Commercial Code, articles L. 642-1 et seq. (Transfer of a business, applicable by reference to the transfer of a business)
- Labour Code (Provisions relating to redundancies and the PSE)
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