French ad hoc mandate (mandat ad hoc)

The ad hoc mandate is the most flexible prevention procedure in Book VI of the French Commercial Code. Article L. 611-3 allows the president of the commercial court, on application by the debtor alone, to appoint an ad hoc agent (mandataire ad hoc) and to set the agent’s mission. The chief executive proposes the agent’s name if they wish. The text sets no duration and exempts the company from informing its social and economic committee (comité social et économique). The law imposes secrecy on any person called to the mandate or aware of it (article L. 611-15). For a company that owes €20m to €300m to a bank syndicate, Euro PP holders or private debt funds, the mandate opens a supervised negotiation before the situation deteriorates: a waiver request, the deferral of a repayment date, an amendment of the covenants or the search for a new lender. Article L. 611-16 deems unwritten any clause that increases the debtor’s obligations solely because the agent has been appointed. Article L. 611-3 provides for no stay of proceedings, and the agreement binds only the lenders who sign it. When the company wants the court to approve an agreement or wants to grant a funder the new money privilege, it opens a conciliation.

A mid-sized industrial company with €180m of revenue expects to breach the leverage covenant on a €90m syndicated loan. Its chief executive asks the president of the commercial court to appoint an ad hoc agent. The agent brings together the six banks in the syndicate and obtains a waiver for two quarters and the deferral of €15m of amortisation to the final maturity date.

• The agent’s name: the chief executive proposes it to the president of the court (article L. 611-3).
• Default clauses triggered by the mandate alone are deemed unwritten (article L. 611-16).
• The scope: senior lenders, Euro PP holders, private debt funds, credit insurers.
• The move to conciliation if the agreement needs court approval or must open the new money privilege.