Safeguard plan, recovery plan, sale plan: what outcomes for a company in difficulty?

By Yasmine EDDAM11 April 2025

"`html

When a company enters into safeguard or receivership proceedingsThe observation period is a phase of intense activity aimed at finding a lasting solution to the company's difficulties. The aim is, as far as possible, to come up with a "plan" for the future. But what exactly do these plans cover? Are they always the same thing? And what does the third option - selling the company - involve? For managers, creditors, employees and potential buyers, it is vital to understand the characteristics, issues and consequences of each type of plan.

The aim of this article is to demystify the three main outcomes organised by French insolvency law: the safeguard plan, the continuation recovery plan and the disposal plan. We will explore how they are drawn up, what they generally contain, how creditors are consulted, and what happens after they are adopted by the court, including the risks of modification or failure.

The Safeguard Plan: a negotiated reorganisation

The safeguard plan is the natural and desired outcome of a safeguard procedurethis open procedure before cessation of payments. This is a negotiated solution, initiated and implemented by the company director himself, with the possible assistance of the court-appointed administrator (article L. 626-2 of the French Commercial Code).

Context Adopted as part of a safeguard procedure.
Typical content The plan details the measures taken to reorganise the company and ensure its long-term survival (internal restructuring, new commercial strategies, search for financing, etc.). Above all, it includes a schedule for settlement of liabilitiesIn other words, a precise repayment schedule for debts incurred prior to the opening judgment. This schedule may be spread over a maximum period of 10 years (or even 15 years for individual farmers, as specified in article L. 626-12 of the French Commercial Code). The plan may also propose debt forgiveness (partial abandonment) or debt to equity conversionsbut these require their explicit agreement.
Consultation with creditors Proposals for deadlines and postponements are submitted to the creditors concerned (those who have declared their claims). This consultation may be individual (the judicial representative sends the proposals, and the creditor's silence within 30 days often constitutes acceptance of the deadlines and postponements - article L. 626-5). For companies of a certain size, the Creditor committees committees may be set up (bringing together the main credit institutions and suppliers - article L. 626-30). These committees vote on the draft plan; their approval (by a two-thirds majority of the claims held in each committee) greatly facilitates its adoption by the court.
Approval by the Tribunal The court examines the draft plan proposed by the debtor. It checks that the plan is economically feasible and that it does not excessively prejudice the interests of creditors (articles L. 626-9 and L. 626-31). If approved, the plan becomes binding on the company and all previous creditors (even those who voted against it, excluding committees).
Significant advantage The guarantees for individuals (for example, a director who has guaranteed a loan for his company) automatically benefit from the deadlines and discounts provided for in the safeguard plan (article L. 626-11). They cannot therefore be sued for immediate payment by the creditor.

The safeguard plan is therefore a powerful tool for amicable restructuring under judicial supervision, offering a real chance of recovery to companies that have anticipated their difficulties.

The Recovery Plan: saving the business through continuation

A recovery plan is drawn up at the end of receivership proceedings, when the company has already ceased payments but a rescue is still possible. Unlike safeguard proceedings, the draft plan is drawn up mainly by the company's insolvency representative.receiver (if any), with the assistance of the debtor (article L. 631-19).

Context Adopted in the context of receivership proceedings.
Typical content Recovery plan: Very similar in structure to the safeguard plan (reorganisation measures, repayment schedule for liabilities over a maximum of 10 or 15 years). However, the reorganisation plan may include more detailed measures. binding :
- It must specify the redundancies which are deemed necessary and which will take place rapidly after the adoption of the plan (article L. 631-19, II).
- The court may make the adoption of the plan subject to replacement of manager(s) if their continued existence is an obstacle to recovery (at the request of the Public Prosecutor - article L. 631-19-1).
- In certain cases (large companies, blocking by partners), the court may even impose a fine. changes in capital or the compulsory transfer of shares recalcitrant shareholders to allow the entry of a new investor who will support the plan (article L. 631-19-2).
Consultation with creditors The mechanisms are identical to those for safeguarding (individual consultation or via creditors' committees).
Approval by the Tribunal The court will validate the plan if it meets the following criteria serious prospects for recovery and debt repayment (article L. 631-19). The bar is potentially higher than in safeguard, because the initial situation is more deteriorated.
No advantage for guarantors Article L. 631-20: In contrast to safeguard measures, guarantors (even individuals) do not benefit from the deadlines and discounts provided for in the reorganisation plan. The creditor may therefore sue them immediately for the entire guaranteed debt, subject to payments made under the plan.

The recovery plan therefore also aims to ensure the company's survival, but often at the cost of more far-reaching and potentially more painful restructuring measures.

The Disposal Plan: selling the company to preserve business and jobs

When the continuation of the business by the debtor himself cannot be envisaged (reorganisation manifestly impossible in compulsory liquidationThe law favours an alternative solution: the sale of a company to a third party. sale of the company to a third party buyer. The objective is no longer to save the debtor legal entity, but to preserving economic activity and jobs by transferring them to a new player.

Context : Mainly in compulsory liquidation (in which case it is a form of sale of assets - article L. 642-1), but also possible in legal redress if a continuation plan fails or is not proposed (article L. 631-22), or very exceptionally in backup for a sale partial with the agreement of the debtor.
Process :
- Call for tenders The administrator (in the case of receivership) or liquidator (in the case of liquidation) organises a procedure to find potential buyers, often by advertising.
- Submission of tenders Candidates submit written bids specifying the scope of the takeover (assets, employees, contracts, etc.), the proposed price, financial guarantees and their plans for the future of the business.
- Analysis and selection The trustee analyses the bids received according to legal criteria: business continuity, job retentionthe guarantees offered and the ability to pay creditors (article L. 642-5). The court chooses the offer (or offers in the case of a sale by lots) that it considers to be the best in the light of these objectives.
Contents of the assignment order The court approves the sale plan. Its ruling :
- Designate the chosen buyer(s).
- Determines the exact scope of the sale (which tangible and intangible assets are transferred).
- Specifies the contracts that are transferred to the purchaser (employment contracts of employees taken over, certain leases, licences, etc.). - article L. 642-7). The transferee must have the capacity to assume these contracts.
- Determines the sale price and the terms of payment.
- May declare certain essential assets non-transferable for a specific period to ensure their continuity (article L. 642-10).
Effects of the transfer : This is an essential point: the buyer acquires the assets free of previous debts. It is not liable for the transferor's liabilities, with the notable exception of loans secured by a special security (mortgage, pledge) on a transferred asset, which it will have to repay if it wants to keep the asset (article L. 642-12). This "purging" of liabilities is what makes the takeover attractive.

The sale plan is therefore a major alternative when the company cannot continue on its own, often making it possible to save a significant part of the business and jobs.

Consultation with creditors: a key element

In safeguard and continuation recovery plans, the opinion of creditors on repayment proposals is an essential part of the process.

Individual consultation

The court-appointed trustee sends each creditor concerned the proposed plan (deadlines, any rebates). The law lays down an important rule: for deadlines and rebates (but not for capital conversions), the silence from the creditor for 30 days is equivalent to acceptance (article L. 626-5). It is therefore essential for creditors to respond if they object to the proposals.

Creditor Committees

For companies of a certain size (criteria linked to turnover, number of employees, or if the company has issued securities on a regulated market), the law requires (or allows by decision of the juge-commissaire) the constitution of Creditor committees (article L. 626-30):

A committee of lending institutions.
A committee of main suppliers of goods or services.

The draft plan is submitted to these committees, which must vote within strict deadlines. To be adopted by a committee, the project must receive a favourable vote from creditors representing at least two-thirds of total receivables of the members voting on this committee.

The outcome of the committee vote is decisive:

If the committees approve the project is submitted to the court, which will check in particular that the interests of creditors who are not members of the committees or who have voted against the project are sufficiently protected.
If one or more committees reject the draft plan cannot be adopted as it stands. The procedure then reverts to individual consultation, or the court may decide to convert the procedure into reorganisation (if it was a safeguard procedure) or judicial liquidation.

Post-plan: execution, modification, resolution

Once the safeguard or recovery plan has been approved by the court, a new phase begins: that of its executionwhich can last up to 10 or 15 years.

The Commissioner for the Execution of the Plan (CEP) The court appoints a CEP (often the administrator or the judicial representative who was in office) to monitor proper execution of the plan (compliance with payment deadlines, fulfilment of restructuring commitments, etc.) (article L. 626-25). It reports annually to the court.
Modification of the Plan If the company's situation changes (positively or negatively) in a significant way, a substantial modification of the plan may be requested from the court by the debtor (Article L. 626-26). Since a 2014 reform, the CEP can also request it in the interest of creditors if the situation improves significantly. This requires a new approval procedure.
Plan Resolution The plan fails. If the debtor does not honour its commitments (in particular payment of scheduled instalments), the court may, at the request of a creditor, the CEP or the Public Prosecutor, order the resolution of the plan (article L. 626-27). This resolution has serious consequences:
- It puts an end to the plan and the deadlines granted.
- Creditors recover all their initial rights (less any sums already collected).
- Very often, the resolution is accompanied by the immediate opening of a compulsory liquidationThis is because the company is once again unable to meet all its debts that have fallen due.

Safeguard and recovery plans therefore offer the prospect of survival, but their success depends on rigorous implementation over the long term. Disposal plans, on the other hand, mark a break with the past but often make it possible to preserve most of the industrial and social assets.

Choosing the right strategy, negotiating a realistic and balanced plan, or analysing a sale offer all require in-depth legal and financial expertise. If your company is considering one of these options, or if you are a creditor faced with a proposed plan or sale, support from an experienced consultant is essential. Our firm will be happy to provide you with a strategic analysis and defend your interests.

Sources

French Commercial Code (mainly Book VI)

years of activity that you would like to be able to deduct or carry forward.
You need a detailed accounting to monitor your management or for your partners (banks, etc.).

Deadlines and terms for opting in or opting out

Option for an actual regime (RSI or RN) : If you are covered by the micro-BIC scheme, you must opt for the actual scheme before the deadline for filing your income tax return for the year preceding the year for which you wish to apply the actual scheme (i.e. at the beginning of May N-1 for application in N). The option is valid for 1 year and is tacitly renewable.
Option for RN (if RSI applicable) : You can opt for RN simply by filing your income tax return in accordance with RN.
Return to Micro (if turnover conditions met) : If you are on the actual tax system (by option or by operation of law) and your turnover falls below the micro thresholds, you can return to it. The option to opt for the actual tax system must be withdrawn before the deadline for filing the tax return for the year preceding the year in which you return to the micro tax system.

The choice of tax regime is not insignificant. It has a direct impact on the amount of tax you pay and the burden of your administrative obligations. A case-by-case analysis is often necessary.

Sources

General Tax Code (CGI), in particular articles 50-0, 151-0, 302 septies A, 302 septies A bis.

Your choice of tax regime has a direct impact on your tax situation and your obligations. Micro-BIC for simplicity? Simplified Real for balance? Normal Real for fine-tuned management? Our firm can help you assess which system is best suited to your business and your development strategy. Contact us for a personalised assessment.

" `