Key points
- A pre-pack sale (prépack cession) prepares the sale of the business confidentially before insolvency proceedings (procédure collective) open, so that the court can quickly adopt the sale plan.
- It avoids the deterioration caused by the publicity of ordinary proceedings (departures, contract terminations) by conducting the search for a buyer before the proceedings open.
- It is prepared within the confidential framework of a mandat ad hoc or a conciliation procedure, in which the court-appointed officer assists the company director in organising the sale.
- The process involves a diagnosis, the search for buyers, the negotiation of the offer, then the court phase: opening of the proceedings and submission of the plan.
- The court selects the offer that most durably ensures employment and the payment of creditors and that offers the strongest guarantees of performance; the pre-negotiated offer is not automatically selected.
A pre-pack sale is a technique for preparing, confidentially, the sale of all or part of the business before insolvency proceedings open. The aim is that, once the proceedings have opened, the sale plan has already been negotiated and is ready to be submitted to the court, which rules swiftly on its adoption. This approach limits the period of public uncertainty, preserves the value of the business and increases the chances of the sale succeeding.
Why prepare the sale in advance?
In ordinary insolvency proceedings, the search for and selection of a buyer take place during the observation period, under the responsibility of the court-appointed administrator (administrateur judiciaire). This period is public: customers, suppliers, employees and partners know that the company is in difficulty. This can lead to departures, contract terminations and a decline in business at the very moment a buyer must be persuaded to commit.
A pre-pack sale avoids this deterioration by conducting the process confidentially, before the proceedings open.
The procedural framework: mandat ad hoc or conciliation
A pre-pack sale is generally prepared within a mandat ad hoc or a conciliation procedure, both of which are confidential and opened at the debtor’s request. The mandataire ad hoc (court-appointed agent) or the conciliator appointed by the president of the court assists the director in organising the sale process: identifying potential buyers, organising the selection process, negotiating the takeover offer and preparing the documentation. At the debtor’s request and after consulting the participating creditors, the conciliator may be tasked with organising a partial or total sale of the business, to be implemented, where applicable, in subsequent safeguard proceedings (sauvegarde), judicial reorganisation (redressement judiciaire) or judicial liquidation (liquidation judiciaire) (Article L. 611-7 of the French Commercial Code (Code de commerce) (in French)).
What are the steps of a pre-pack sale?
The pre-pack sale process has several phases. The diagnosis phase assesses the company’s situation, the assets to be sold, the estimated value and the stakes for creditors and employees. The buyer search phase identifies potential candidates (trade buyers, funds, internal managers) and organises their access to information under confidentiality conditions. The negotiation phase structures the takeover offer, the scope of the sale (assets, contracts, employees taken over) and the price. The court phase consists of opening the insolvency proceedings and submitting the offer to the court, which adopts the sale plan.
The criteria for adopting the sale plan
The court selects the offer that makes it possible, in the most favourable conditions, to ensure most durably the employment attached to the business sold and the payment of creditors, and that offers the strongest guarantees of performance (Article L. 642-5 of the Commercial Code (in French)). Every offer must be in writing and must specify, in particular, the assets and contracts taken over, the price, the level of employment and the guarantees of performance. If the offers received by the mandataire ad hoc or the conciliator meet these conditions and are satisfactory, the court may dispense with setting a deadline for submitting new offers, after obtaining the opinion of the public prosecutor (ministère public) (Article L. 642-2 of the Commercial Code (in French)). The pre-negotiated offer is therefore not automatically selected: the court may choose between several competing offers.
What makes a pre-pack sale succeed?
A successful pre-pack sale rests on several factors: sufficient anticipation (the process must start before the situation has deteriorated beyond repair), strictly maintained confidentiality, rapid identification of serious buyers, an economically viable takeover offer and effective coordination between the lawyer, the court-appointed officer and the officers of the proceedings (organes de la procédure).
For assistance, see our dedicated pages on the pre-pack lawyer and the safeguard proceedings lawyer (in French).
For assistance: pre-pack lawyer.
