French conciliation proceedings (conciliation)

Conciliation is open to companies facing a legal, economic or financial difficulty, actual or foreseeable, that have not been in cessation of payments for more than forty-five days (article L. 611-4 of the French Commercial Code). The chief executive applies to the president of the court with a petition that sets out the company’s financial position, its financing needs and the means of meeting them. The president appoints a conciliator for four months at most, extendable by reasoned decision to no more than five months in total (article L. 611-6). The conciliator seeks an agreement between the company, its main creditors and its usual contracting parties (article L. 611-7). When a lender refuses to suspend the enforceability of its claim, the judge has the power to defer or reschedule the claims not yet due for the duration of the mission. The agreement follows one of two routes (article L. 611-8). The president of the court records it and makes it enforceable; this decision is not published. The court approves it (homologation) at the debtor’s request: the judgment is made public (article L. 611-10) and opens the conciliation privilege to providers of new money (article L. 611-11). While the recorded or approved agreement is being performed, it bars the signatory creditors from taking action over the claims it covers (article L. 611-10-1). For a company with €20m to €300m of debt, conciliation provides the framework for the negotiated refinancing of a syndicated loan, unitranche debt or a Euro PP. It is the mandatory prerequisite for accelerated safeguard proceedings (article L. 628-1).

A services group with €250m of revenue owes €140m to a syndicate of seven banks and €40m to Euro PP holders. In conciliation, it obtains a two-year extension of the senior debt and a new €25m loan from a private debt fund. The court approves the agreement, which gives the new loan the benefit of the conciliation privilege.

• The duration: four months, five at most with the extension (article L. 611-6).
• The choice between unpublished recording and public court approval with the privilege.
• The court’s deferral or rescheduling of the claims of a holdout lender (article L. 611-7).
• The access condition: no cessation of payments for more than forty-five days.