In addition, in case a sale plan is approved by the court, some supply contracts deemed necessary to continue the transferred activity are judicially assigned to the transferee by the sole effect of the court’s decision. On the creditor side, whether the debt waiver will be treated as a tax-deductible loss will mainly depend on whether it can qualify as a “commercial debt waiver”, in which case, it will typically be treated as deductible, or as a “financial debt waiver”. Social and tax authorities can be asked to consent to a debt-rescheduling plan or a cancellation of debt. Contrariwise, it is far more common for foreign companies to seek protection under French Bankruptcy Law and to commence insolvency proceedings in front of French Courts, based on the location of their COMI in France (e.g. That report was followed by an Insolvency Service Consultation on proposals for “ Strengthening the regulatory regime and fee structure for insolvency practitioners ”. Interpretation - meaning of initial and subsequent capacity, Revocations and transitional and saving provisions, Matters for determining whether an applicant for an authorisation is a fit and proper person, Requirements as to education and training – applicants who have never previously been authorised to act as insolvency practitioners, Requirements relating to education and training, Records of continuing professional development activities, Returns by insolvency practitioners authorised by the Secretary of State. 7.2 Is there scope for a restructuring or insolvency process commenced elsewhere to be recognised in your jurisdiction? When a company faces difficulties, the French Commercial Code provides for different types of warning proceedings (procédures d’alerte) to draw the directors’ attention to any matter likely to jeopardise the continued operation of the company. Departure from the standards established in SIPs is a matter that may be taken into account … Where creditors rank on insolvency is complex, and any attempt to provide a simple list can be misleading. In practice, majority rules provided for in the existing credit documentation apply. In safeguard and rehabilitation proceedings, post-petition claims arising for the purpose of funding the observation period benefit from a certain statutory privilege (see question 4.6). The principal business address of the insolvency practitioner. Instead of granting debt waivers, creditors may subscribe to a share capital increase of the debtor by way of offset against their receivables, thereby implementing a debt-for-equity swap. 2.2 Which other stakeholders may influence the company’s situation? For obligations resulting from certain kinds of financial instruments only, early termination and set-off provisions remain enforceable, irrespective of the opening of insolvency proceedings. 4.The name of — (a) any body by virtue of... 6.The type of the insolvency proceedings. However, a simplified ranking of claims could be summed-up as follows: In liquidation proceedings, the creditors’ ranking is the same, except that pre-petition mortgage claims rank ahead of post-petition claims benefitting from the statutory privilege. This would generally not trigger the recognition of taxable income at the level of the debtor, which would then retain its existing carry-forward losses intact. French law relating to security interests is also expected to be amended in the coming years. Trade creditors and major shareholders can also be invited to take part in the negotiations. 4.5 What impact does each winding up procedure have on existing contracts? In addition, employees’ claims are guaranteed, under certain circumstances, by a national wage insurance system (AGS), which pays these claims as advances (subject to certain caps). The opening of court-monitored proceedings triggers a stay on enforcement (subject to few exceptions, see question 3.2). Rehabilitation proceedings: the company must be insolvent, but rescue does not appear to be impossible. Is there any court involvement? Thepractitioner should maintain each case as a separate entity with separateaccounting, banking and cash control and operate timely investment proceduresalthough these may be within the overall office work organisation procedure.Clients' Monies Regulations and the Statement of Insolvency Practice inHandling of Funds in Formal Insolvency Proceedings require that no funds orassets of cases should be inter-mingled with those of the practitioner or withother cases. Log in In addition, if the taxpayer benefits from debt waivers granted by creditors as part of these proceedings, the amount of these debt waivers will typically be included in its taxable income, thereby potentially generating additional tax liabilities. Liquidation proceedings aim at liquidating a company by selling its business, as a whole or per branch of activity, or by selling its assets one by one. Once approved by the court, the safeguard plan is enforceable against all members of the creditors’ classes, including the dissenting minority within each class. 4.1 What is/are the key insolvency procedure(s) available to wind up a company? Two types of pre-packaged safeguard proceedings are available: accelerated financial safeguard; and accelerated safeguard. In the case of the Insolvency Service, the code applies to regulation under part XIII of the Insolvency Act 1986, which deals with insolvency practitioners and their qualification. Creditors are repaid according to their rank and privilege with the sale proceeds. A financial debt waiver may be tax deductible at the level of the creditor if granted as part of safeguard, rehabilitation or liquidation proceedings or pursuant to a court-approved conciliation agreement, subject to limitations where the creditor is a shareholder of the debtor. Insolvency Practice Rules (Corporations) 2016. The liquidation aims to sell the company’s assets (as a whole where possible or on an asset-by-asset basis) where the rescue of the company appears as obviously impossible. Access essential accompanying documents and information for this legislation item from this tab. A successful restructuring will thus also involve reconciling the interest of both the creditors and the debtor from a tax standpoint. (1) These Regulations may be cited as the Insolvency Regulations, 2016. In addition, when insolvency proceedings are commenced against a company, the same court has jurisdiction to hear any proceedings relating to a company it controls or is controlled by, and a common administrator and a common creditors’ representative may be appointed for all the proceedings. In rehabilitation or liquidation (but not in safeguard as those proceedings are available to solvent companies only), any transaction entered into during the hardening period (période suspecte) can be subject to claw-back provisions. Furthermore, at least two administrators and creditors’ representatives must be appointed by the court, if the net revenues of the debtor or of one of the companies mentioned below reach at least a threshold of €20 million and the debtor either: 9.1 Are there any other governmental proposals for reform of the corporate rescue and insolvency regime in your jurisdiction? Their global purpose is to enable debtors, for which conciliation proved unsuccessful to reach all participating creditors’ consent, to be restructured in a very short timeframe with the consent of a two-thirds majority within creditor classes. Is there a specific point at which a company must enter a restructuring or insolvency process? Original (As Enacted or Made): The original version of the legislation as it stood when it was enacted or made. insolvency practitioner or their firm and or/any associates may have with a company in the period prior to the company entering administration. If those classes are not set up, or if one of them has rejected the draft plan, the plan must be negotiated on a one-to-one basis with each creditor. 1. Division 1 -- Introduction . Is there any court involvement? 4.3 Who manages each winding up process? Are there any restrictions on the action that they can take (including the enforcement of security)? Insolvency Practitioners licensed by the IPA are also required: to comply with Statements of Insolvency Practice (SIPs) to take account of Guidance issued by the IPA; to take note of “Dear IP” Newsletter issued by the Insolvency Service on a quarterly basis for Insolvency Practitioners and any interested parties. Agents Regulation Agents Regulation. ■ A liquidator, who is responsible for: The liquidator has sole authority to bind the company and assumes all management responsibilities. Different options to open legislation in order to view more content on screen at once. any mortgage or pledge (both contractually agreed or court-ordered) granted to secure a pre-existing debt (being noted that, in view of the pending reform currently under discussion, other types of security could be subject to voidance in the future. Finally, a major reform of French bankruptcy laws is expected in the coming months, to implement the Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 and, in particular, to reinforce creditors’ rights in insolvency proceedings (see question 9.1). For the purposes of Chartered Accountants Ireland's rules and regulations, an Insolvency Practitioner is a member who, regardless of his own location or place of business, acts in Ireland in any of the following capacities: Are moratoria and stays on enforcement available? Post-petition court costs, which arose for the purpose of the proceedings. The debtor’s contracting party must perform its obligations despite non-performance by the debtor of its own pre-petition obligations, which will only allow the contracting party the right to file proof of claim. Restructuring & Insolvency > If a court-approved conciliation agreement has been entered into prior to the opening of insolvency proceedings, the insolvency date cannot be backdated to a date before the court order approving the conciliation work-out agreement. Are debt-for-equity swaps and pre-packaged sales possible? Notwithstanding any contractual provisions, ongoing contracts cannot be terminated by the sole reason of the opening of such proceedings (or the debtor’s insolvency, according to case law). Unlike in safeguard, however, there are two main possible outcomes for rehabilitation proceedings: As in a safeguard, if shareholder approval is required, the court can reduce majority rules applicable on first notice. Regarding shareholders of a distressed company, liability may also arise following the sale of the company, if bankruptcy proceedings are subsequently commenced against the transferred company and employees are made redundant: in this case, French courts ruled that indemnification actions could be initiated by the laid-off employees against their former employer if it could be evidenced that the sale was implemented without adequate care (“blameworthy lightness”) and that the new owner had no credible project nor financial capabilities to finance and run the business. Practice Areas > For Professionals & the Public. 8.1 How are groups of companies treated on the insolvency of one or more members? A company’s COMI is presumed to be the place of its registered office unless it is proven that both: Under this framework, a company incorporated in another EU Member State can commence insolvency proceedings in France if its COMI is located in France. De Pardieu Brocas Maffei, The International Comparative Legal Guides and the International Business Reports are published by: Global Legal Group, This guide will be of great help in my practice as head of the Group Legal Department.Franck Tassan, Group General Counsel - CARREFOUR, Paris, France, © 2002-2021 Copyright: ICLG.com | Our Privacy, Unlock 3 FREE PDF chapters by registering with us FREE (2) A direction to the external administrator of a company to convene a meeting of the creditors is not … In particular, an ordinance dated 12 March 2014 reformed bankruptcy laws with a view to favouring reorganisation at a preventive stage, strengthening the efficiency of out-of-court proceedings and increasing the rights of creditors. Insolvency Practice Rules (Corporations) 2016 (1) This section is made for the purposes of section 75‑15 of the Insolvency Practice Schedule (Corporations). Safeguard proceedings: the company must be solvent and facing difficulties that cannot be overcome, with no restrictions applied to the concept of “difficulty”. From IP completion day (11pm on 31 December 2020), despite the trade deal, the Insolvency (Amendment) (EU Exit) Regulations 2019, SI 2019/146 kick in and amend both the Regulation (EU) 2015/848 (OJ L141/19), Recast Regulation on Insolvency [EU Recast Regulation on Insolvency] and various other legislation including the CBIR (see News Analysis: Brexit impact on Cross-Border Insolvency … Still under discussion, this reform is expected to simplify and clarify rules pertaining to security interests in the context of restructuring and insolvency proceedings. Dependent on the legislation item being viewed this may include: Click 'View More' or select 'More Resources' tab for additional information including: All content is available under the Open Government Licence v3.0 except where otherwise stated. 5.1 What are the tax risks which might apply to a restructuring or insolvency procedure? Can you cram-down dissenting classes of stakeholder? The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 came into force on 26 November 2020 and revive the temporary suspension of liability for wrongful trading for company directors until 30 April 2021. a sale plan, where the court can authorise the administrator to auction the business as a whole or in part. 3.1 Is it possible to implement an informal work-out in your jurisdiction? What remedies are available? In conciliation specifically, the company has two options to implement the work-out agreement: Since 2014, the court-appointed agent may be entrusted with the mission to arrange a pre-packaged sale of a business in conciliation, which could ultimately be implemented in rehabilitation or liquidation proceedings. A work-out agreement accepted by some creditors cannot be imposed onto other dissenting creditors, as the process is consensual and no cram-down can be imposed (subject to the subsequent opening of pre-packed safeguard proceedings, see question 3.2). Insolvency Practice Schedule Schedule 2 to the Corporations Act 2001 Legislation Act Legislation Act 2003 . Best Practice: Subject line in e-mail sharing notice of CoC meeting shall state the name of the corporate debtor, the place (if any), the time and the date on which the meeting is scheduled. Historically, French bankruptcy law was generally considered to be rather debtor-friendly. 3.6 How is each restructuring process funded? This Practice Direction is to be read with, and subject to, the Insolvency Regulations 2015 (“Regulations”), the ADGM Court Procedure Rules 2016 (“CPR”) and the Divisions and Jurisdiction (Court of First Instance) Rules 2015. The purpose of Statements of Insolvency Practice (SIPs) is to promote and maintain high standards by setting out required practice and harmonising the approach of insolvency practitioners to particular aspects of insolvency practice. The purpose of SIPs is to outline basic principles and essential procedures with which insolvency practitioners are required to comply. 7.3 Do companies incorporated in your jurisdiction restructure or enter into insolvency proceedings in other jurisdictions? Instruments amending the Corporations Regulations and the Insolvency Practice Rules, being the Corporations Amendment (Corporate Insolvency Reforms) Regulations 2020 (Regulations) and the Insolvency Practice Rules (Corporations) Amendment (Corporate Insolvency Reforms) Rules 2020 (Rules), respectively, commenced on 1 January 2020 following a short period of consultation. 4.6 What is the ranking of claims in each procedure, including the costs of the procedure? Under French law, a corporation is deemed to be an autonomous entity, and the company’s assets should not be affected by insolvency proceedings commenced against other companies within the same group. Since the 2014 reform of the French Bankruptcy Code, ipso facto provisions are deemed null and void. 6 | P a g e INDIAN INSTITUTE OF INSOLVENCY PROFESSIONALS OF ICAI 10. Under the provisions of the Insolvency Act 1986, the Secretary of State recognises certain independent professional bodies, called recognised professional bodies or RPBs, for the purposes of authorising their members to act as insolvency practitioners. Shareholders do not receive any repayment of their capital investment, unless a surplus remains after all the creditors have been paid in full (which is extremely rare). What claims would employees have and where do they rank? Published: 20/05/2020. Court-monitored formal proceedings: safeguard (as well as pre-packaged safeguard); rehabilitation; and liquidation proceedings. The … to Connected Persons) Regulations 2021 have now been laid in Parliament, with a commencement date of 30 April 2021. assessing proofs of claim and representing the creditors’ interests. Is there scope for co-operation between officeholders? Safeguard and rehabilitation are formal proceedings that aim, depending on the situation of the company, to restructure the company’s liabilities whether through a restructuring plan or a total or partial sale of its business and/or assets. They must comply with the law, statements of insolvency practice (SIPs), the Code of Ethics and ICAEW’s insolvency regulations. In addition, a bill dated 6 August 2015 introduced the possibility, under certain limited conditions, to squeeze-out dissenting shareholders of a bankrupt company in rehabilitation proceedings, notably to favour debt-for-equity swap restructurings. There is a simplified form of liquidation proceedings available for small businesses, which lasts for a maximum of six months or one year, depending on the size of the company. There are no restrictions on business activities. In addition, the Insolvency Regulation allows insolvency procedures in different EU Member States to be automatically recognised. Creditors (except for limited exceptions, e.g., creditors benefitting from a retention right) have no say on the choice of the purchaser made by the court when approving the sale plan. Part 1 -- Introduction . However, the debtor can apply for a moratorium (for a maximum of two years) if any creditor attempts to enforce its right while ad hoc proceedings or conciliation proceedings are pending. Are the parties obliged to perform outstanding obligations? 4.7 Is it possible for the company to be revived in the future? This, however, needs to be reviewed on a case-by-case basis, having in mind also the resulting consequences for the relevant creditors. ICLG - Restructuring & Insolvency Laws & Regulations - old Act means the Bankruptcy Act 1966 , as in force immediately before the day on which Schedule 1 to the Insolvency Law Reform Act 2016 commences. These liabilities can extend to formally appointed directors/managers with representation powers, and to any individual or entity that, although they are not officially a director/manager, repeatedly influenced the company’s management or strategic decisions (de facto directors/managers). They can be triggered by the company’s external auditors, the employees’ representatives, or shareholders, provided that they own at least 5% of the share capital. This Practice Note is archived from IP completion day onwards and is no longer maintained. 3.4 Who manages each process? The French insolvency test is a pure cash-flow test: a company is deemed insolvent (en état de cessation des paiements) when it is unable to meet its due and payable liabilities out of its available assets (those in the form of cash or those that can be quickly turned into cash), taking into account undrawn committed facilities and other credit reserves and moratoriums/standstills accepted by creditors. 3.3 What are the criteria for entry into each restructuring procedure? Monitoring of Statements of Insolvency Practice 16 (SIP 16) disclosure statements in pre-pack administration. Where funds are received which are clea… Changes we have not yet applied to the text, can be found in the ‘Changes to Legislation’ area. Yet, such inter-class cram-down mechanism is very likely to be soon introduced by the upcoming reform of French bankruptcy laws, under certain conditions which are still yet to be determined (see question 9.1). In rehabilitation proceedings, when the assumed ongoing contract involves the payment of a sum of money, the contracting party can require that the payment be made in cash on delivery. If a debt waiver is granted as part of safeguard, rehabilitation or liquidation proceedings or pursuant to a court-approved conciliation agreement, the debtor can, however, fully offset its available carry-forward losses against the amount waived. The court can impose a 10-year maximum term-out to dissenting creditors, but cannot impose any debt write-off. (2) The “Insolvency Rules” means the rules for the time being in force and made under s.411 and s.412 of the Act in relation to Insolvency Proceedings (currently The Insolvency (England and Wales) Rules 2016, as amended), and, save where otherwise provided, any reference to a ‘rule’ is to a rule in the Insolvency … For companies of a certain size, three classes of creditors must be arranged, comprising financial institutions, major trade creditors and bondholders, which are invited to vote on the draft safeguard plan at a two-thirds majority in value for each class. Insert: 50‑6 Virtual meetings (1) This section applies in relation to any meeting of a Part 2 committee, including a meeting convened for the purposes of interviewing an applicant under the Insolvency Practice Schedule (Corporations). any deed entered into without consideration transferring a title to moveable or immoveable property; any bilateral contract in which the debtor’s obligations significantly exceed those of the other party; any payment by whatever means, made for debts that have not fallen due on the date when payment is made; any payment for outstanding debts, if not made by cash settlement or wire transfers, remittance of negotiable instruments, or Dailly-type assignment of receivables or any other means commonly used in business transactions; or. As the regulations will introduce a requirement for a connected party purchaser to obtain a report from an independent and suitably qualified person before a pre pack can be undertaken, changes will need to be made to statement of insolvency practice … Documents. collecting all of the company’s assets and paying the creditors to the extent that funds are available; and. Lack of liquidity – the company has insufficient assets to fulfil at least 80% of its payment obligations due on the date that the restructuring proceeding was filed. The court closes the liquidation in two hypotheticals: hardly ever, when all the creditors are repaid; or when no more proceeds can be expected from the sale of the company’s business/assets. An insolvency practitioner should recognise that a different insolvency practitioner may be the eventual administrator. The Insurers (Reorganisation and Winding-Up) Regulations 2003 (SI 2003/1102) (2003 Regulations) were introduced to implement the EU Directive on the Reorganisation and Winding-up of Insurance Undertakings (2001/17/EC) (the Directive)(which has since been recast by the Solvency II … Restructuring & Insolvency Laws & Regulations 2020 ICLG - Restructuring & Insolvency covers common issues in restructuring and insolvency, including issues that arise when a company is in financial difficulties, restructuring options, insolvency procedures, tax, employees, cross-border issues in … Chapter 6 of the Public Practice Regulations provides details of those insolvency activities where an Insolvency Practising Certificate is required. - the Insolvency Practitioners Regulations, 2004 (the “ Regulations”) - the Insolvency Code of Practice (the “Code”) - the explanatory notes Words or terms used throughout the form have the meanings given to them in the Act, Rules, Regulations and Code. Its COMI, as defined in the Eurofood decision of the European Court of Justice, is in a country other than its place of incorporation. 6. SIPs are issued to insolvency practitioners with a view to maintaining standards by setting out required practice and harmonising practitioners’ approach to particular aspects of insolvency. Mainly relating to the voting process by classes of creditors on the draft safeguard or rehabilitation plan (see question 3.2), this pending reform may provide for the set-up of more homogeneous classes of creditors and the possibility, under certain conditions which are still to be determined, to impose on dissenting classes a plan that was accepted by one class of creditors only. Finally, if court-monitored proceedings are subsequently opened, the work-out agreement entered into in conciliation is automatically terminated, meaning that participating creditors recover all their claims (deduction made of any payment already received). Liquidation proceedings trigger an automatic stay of enforcement against the company, subject to few exceptions. However, the court can, under certain circumstances, find that there is a ground for a consolidation of estates (confusion des patrimoines), so that debt of several companies can be paid from a larger consolidated pool of assets. Conciliation proceedings: the company must face legal or financial difficulties (whether actual or foreseeable) and can be insolvent but for less than 45 days before the petition is filed. Ad hoc proceedings: the company must be solvent, although there have been some recent precedents where ad hoc proceedings were opened for insolvent companies (but for a very short period of time only). 10.Meetings (other than any final meeting of creditors). SIPs set principles and key compliance standards with which insolvency practitioners are required to comply. Employment contracts remain in force during the restructuring procedure. Under Regulation (EU) 2015/848 of the European Parliament of the Council of 20 May 2015 on insolvency proceedings, reforming the Regulation (EC) 1346/2000 on insolvency proceedings and applicable to insolvency proceedings commenced after 26 June 2017 (the Insolvency Regulation), the EU Member State where a company’s centre of main interests (COMI) is located shall have exclusive jurisdiction to commence insolvency proceedings regarding this company. Is any protection given to rescue financing? Insolvency practitioners who are appointed without the involvement of a judicial body should, under national law, be appropr iately regulated and author ised to act in insolvency proceedings. However, it is not common practice. As a whole, rules applicable to the observation period, the automatic stay and classes of creditors are the same as in safeguard. debt-for-equity swap), shareholders must also be consulted and vote at a two-thirds majority. 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