Key points
- The conciliation procedure, set up by the business safeguard law of 26 July 2005, is an amicable procedure that assists the company in resolving its difficulties.
- Article L611-4 of the French Commercial Code (Code de commerce) establishes this procedure before the Commercial Court (tribunal de commerce).
- The company must be facing a legal, economic or financial difficulty, actual or foreseeable, without having been in cessation of payments (cessation des paiements) for more than forty-five days.
- The procedure is opened at the debtor’s initiative, by a request to the president of the court setting out its economic, financial, social and asset position (Article L611-6).
- The president appoints a conciliator for a maximum of 4 months, which may be extended provided the total does not exceed 5 months (Article L611-6, paragraph 2).
- The conciliator negotiates with the creditors an agreement that is either recorded (constaté) or court-approved (homologué); if this fails, judicial reorganisation (redressement judiciaire) or judicial liquidation (liquidation judiciaire) may follow.
Alongside the mandat ad hoc procedure, Law no. 2005-845 of 26 July 2005 on business safeguard (loi de sauvegarde des entreprises) set up a procedure known as conciliation.
The conciliation procedure is an amicable procedure that allows companies to be assisted by a conciliator in resolving the difficulties they may face.
Article L611-4 of the Commercial Code provides that “a conciliation procedure is established before the Commercial Court (…)” (unofficial translation).
Who can open a conciliation procedure in France?
Article L611-4 of the Commercial Code, which sets the conditions for opening a conciliation procedure, imposes several requirements: it covers debtors “facing a legal, economic or financial difficulty, actual or foreseeable, and who have not been in cessation of payments for more than forty-five days” (unofficial translation).
It is therefore enough for the company to be facing a difficulty and not to have been in a state of cessation of payments for more than forty-five days to be eligible for the opening of a conciliation procedure.
The conciliation procedure is opened at the debtor’s initiative.
Indeed, Article L611-6 of the Commercial Code provides that “the president of the court is seised by a request from the debtor setting out its economic, financial, social and asset position, its financing needs and, where applicable, the means of meeting them” (unofficial translation).
How the procedure unfolds and the role of the conciliator
The Commercial Code governs how the conciliation procedure unfolds. It is opened by the president of the court, who appoints a conciliator for a maximum of 4 months. This period may, however, be extended by a reasoned decision, provided that the total length of the procedure does not exceed 5 months (Article L611-6, paragraph 2, of the Commercial Code).
The conciliator’s task will include negotiating an agreement designed to enable the company to overcome its difficulties, or preparing its sale.
The conciliator’s task will therefore be to negotiate with the debtor’s creditors and reach a settlement agreement, which may be recorded or court-approved, and whose purpose is to put an end to the difficulties facing the company.
If, on the other hand, the conciliator fails, more restrictive insolvency proceedings (procédure collective), such as judicial reorganisation (redressement judiciaire) or judicial liquidation (liquidation judiciaire), may be opened if the company is in cessation of payments.
