Preparing and negotiating an effective safeguard plan

By Yasmine EDDAM4 May 2025

Opening a safeguard procedure is a decisive step for a company facing difficulties that it is unable to overcome on its own, even if it is not in a state of suspension of payments. Far from being an end in itself, the primary aim of the procedure is to reorganise the company so that it can continue to operate, maintain employment and pay off its debts. At the heart of this process is the safeguard plan, the drafting and negotiation of which are decisive phases for the company's future. To succeed in this exercise requires anticipation, rigour and a well-defined negotiation strategy with creditors. This article sets out the key stages in preparing and negotiating this plan under the best possible conditions. For a full presentation of the safeguard procedureFor more information and an overview, please consult our comprehensive guide to procedures.

The importance of anticipation: preparing the ground before the procedure

The success of a safeguard plan depends to a large extent on the quality of the preparatory work carried out even before the formal opening of the procedure, or at the very beginning of the observation period. This anticipatory phase is essential for making an accurate diagnosis and identifying viable solutions.

Preliminary analysis and internal investigation

First and foremost, the manager, often with the help of his or her advisers, must carry out an in-depth analysis of the company's situation.. The aim is to understand the origins of the difficulties: are they cyclical or structural? Are they linked to the market, internal organisation or financial factors? This investigation must be lucid and exhaustive.

This involves gathering and analysing all the relevant data: accounting (balance sheets, projected income statements), financial (debt, cash flow), commercial (order book, market positioning), social (workforce, social climate) and operational (production process, supply chain). The aim is to obtain an accurate picture of the situation and identify the company's strengths and weaknesses. An accurate diagnosis is the sine qua non for drawing up a realistic and credible business plan.

Identify potential reorganisation levers

On the basis of this diagnosis, the next step is to identify the levers for action to rectify the situation. These levers can be of different kinds:

Economic : Refocusing on profitable activities, abandoning loss-making businesses, developing new products or markets, optimising purchasing costs, improving margins.
Financial : Search for new financing, renegotiation of existing debt, capital increase, disposal of non-strategic assets.
Organisational : Reviewing internal processes, reorganising departments, optimising the supply chain and improving productivity.
Socaux : Adapting the workforce to the company's real needs, reorganising working hours, training plans. Although often sensitive, this aspect must be approached objectively within the framework of the legal provisions.

This early identification of areas for recovery will provide input for the draft plan and demonstrate the company's ability to reform and return to a sustainable path. It is also on this basis that negotiations with creditors can begin constructively.

Drawing up the draft safeguard plan

Once the procedure has been opened and the observation period The formal preparation of the draft plan can then begin, under the aegis of the insolvency administrator, if one has been appointed, and with the active participation of the debtor. The draft plan is the central document summarising the recovery strategy.

Economic, social and environmental report

The court-appointed administrator (or the debtor if there is none) is responsible for drawing up an economic, social and, where applicable, environmental report on the company. This document, provided for in article L. 626-8 of the French Commercial Code, gives a complete overview of the situation at a given point in time. It analyses the causes of the difficulties, and details the company's financial situation, market prospects, available financing and social conditions.

This assessment forms the objective basis on which the draft plan will be drawn up. It enables the court and the creditors to have a clear and shared view of the situation, which is an essential prerequisite for assessing the reorganisation proposals. It must be accurate, well-documented and an accurate reflection of the company's situation.

Defining the recovery outlook

The heart of the draft plan lies in defining the outlook for recovery. This involves translating the levers identified above into concrete, costed measures. The draft plan must set out in detail :

Terms of settlement of liabilities : This is a key point. The draft proposes payment deadlines, and possibly debt write-offs, for creditors whose claims arose prior to the opening judgement. These proposals must be realistic and sustainable for the company in terms of its future repayment capacity.
Employment levels and prospects : The plan must specify the impact of the reorganisation measures on employment and justify any redundancy measures envisaged.
Company reorganisation measures : It details the concrete actions that will be implemented (restructuring, asset disposals, internal reorganisation, etc.). For more information, visit contents of the backup plan.
Financing the plan : The project must demonstrate how the company will finance its activity during the implementation of the plan and how it will ensure repayment of creditors (equity capital, self-financing capacity, new loans, etc.).

This draft plan is then submitted to the bodies involved in the proceedings (judicial representative, public prosecutor) and, above all, to the creditors, whose support is often decisive.

Negotiating liabilities: a key stage

Discharge of liabilities is one of the major objectives of the sauvegarde procedure. The draft plan contains proposals for deadlines and/or discounts, but these must be accepted by the creditors. The law provides for two main forms of consultation: individual or collective via committees.

Individual consultation with creditors: when and how?

When the formation of creditors' committees is not mandatory (which is the most common case for SMEs), the draft plan is submitted for individual consultation to each creditor concerned by the proposed settlement of liabilities.. This consultation is organised by the judicial representative.

In practical terms, the judicial representative sends each creditor (whose claim has been accepted or provisioned) the debtor's proposals concerning that creditor. These proposals may include payment deadlines (which may not exceed the duration of the plan, i.e. 10 years maximum, or 15 years for farmers) and/or debt write-offs. The creditors then have a period of time (set by law, generally 30 days) in which to make their response known..

If no response is received within the allotted time, this constitutes acceptance of the proposals.. If a creditor explicitly refuses, the maximum legal time limits apply (10 or 15 years), with no possibility of enforced remission of the unmatured portion of the debt. This individual consultation requires rigorous management of exchanges and deadlines.

Information to be provided to consulted creditors

To enable creditors to make an informed decision, clear and comprehensive information must be provided with the settlement proposals. This information generally includes :

An overview of the company's situation (often based on the economic and social report).
The detailed draft plan (recovery measures, financial outlook).
Specific proposals for deadlines and/or discounts for the creditor consulted.
The consequences of acceptance or refusal.

Transparency builds trust. The better creditors understand the situation and the logic of the proposed plan, the more likely they are to accept the efforts requested. A accompaniment by a lawyer can prove invaluable at this stage in structuring communication and negotiation.

Collective consultation via creditor committees

For companies of a certain size or financial complexity, the law requires or allows the formation of creditors' committees. This approach is designed to facilitate negotiations with the main groups of creditors.

Mandatory or optional constitution of committees

Creditors' committees must be set up in the following cases (in accordance with Article L. 626-29 of the French Commercial Code):

Companies with at least 150 employees or sales of at least €20 million excluding VAT.
Companies owning or controlling another company meeting one of the above conditions.

In other cases, the debtor or the insolvency administrator may request that committees be set up if the company exceeds certain lower thresholds (20 employees and sales of €3 million excluding VAT, or a majority shareholding in such a company), or if the request is made voluntarily. The court will rule on the application.

Membership of committees (credit institutions, main suppliers)

When committees are set up, the law generally provides for the establishment of two separate committees:

The Credit Institutions and Related Entities Committee : Includes banks, finance companies and other entities providing financing to companies.
Committee of main suppliers of goods or services : Includes suppliers whose receivables represent a significant proportion of supplier liabilities. The list is drawn up by the director.

Public creditors (Treasury, social security bodies) do not take part in committees but are consulted individually. A bondholders' committee may also be convened if the company has issued bonds.

The role of the committees in validating the draft plan

The draft safeguard plan is submitted for approval to each of the following committees. The aim is to reach a collective agreement on proposals for dealing with the liabilities and recovery measures affecting the members of the committee.

Each committee deliberates separately on the project. Adoption of the plan by a committee requires a double majority:

The majority of members present or represented having cast a vote.
These members must hold at least two-thirds of the total amount of claims held by members who have cast a vote.

Agreement within each committee greatly facilitates adoption of the plan by the court. The absence of agreement in a committee does not systematically prevent the plan from being adopted, but it does make it more complex, as the court then has to check whether the interests of the dissenting creditors are sufficiently protected.

Voting deadlines and procedures

The insolvency administrator convenes the members of each committee and submits the draft plan to them. A period for reflection and voting is set, generally between 20 and 30 days from the date of transmission of the draft plan..

The vote is taken on the draft plan as a whole. Members may appoint a representative to vote on their behalf. The result of each committee's vote is then communicated to the court. This structured procedure makes it possible to obtain a collective position from the main groups of creditors within a set timeframe.

Finalisation and presentation of the draft plan to the court

Whether the consultation has been individual or collective via the committees, the final stage consists of presenting the draft plan (possibly amended following negotiations) to the court. It is the court that has the power to approve the safeguard plan.

The court examines the project against a number of criteria:

The economic and financial viability of the plan.
The company's ability to meet its commitments (in particular the repayment of liabilities).
Respect for the interests of the various stakeholders (company, employees, creditors).
The legality of the creditor consultation procedure.

The court hears the debtor, the administrator, the court-appointed agent, the staff representatives and may hear any useful person. If it considers the plan to be sound and suitable for safeguarding the business, it adopts it by judgment. This judgment makes the plan enforceable against everyone, including creditors who have refused the proposals or not taken part in the consultation. It marks the start of theexecution of the plan.

Preparing and negotiating a safeguard plan is a complex process that requires a strategic vision, rigorous analysis and the ability to engage in dialogue with all stakeholders. Anticipation and a structured approach are the best guarantees of success if the company is to overcome its difficulties and start afresh on a sound footing.

If you anticipate difficulties for your company or if you are already involved in proceedings, do not hesitate to contact our firm for tailor-made legal supportto discuss your specific situation and consider appropriate strategies.