The European regulation of 20 May 2015 on insolvency proceedings (the "Insolvency Regulation") came into force a year ago, significantly modifying European insolvency law. An ordinance published in November 2017 started the process of adapting French law to reflect the requirements of the Insolvency Regulation. A decree of 5 June 2018 (the "Decree") modifying the regulatory part of Book VI of the French Code de Commerce is the final piece in the jigsaw.
Articulation of main and secondary insolvency proceedings. The Insolvency Regulation provides that main insolvency proceedings must be opened in the Member State where the debtor has its centre of main interests, or COMI. Secondary insolvency proceedings may be opened in any Member State where the debtor has an establishment.
The Decree indicates that the Court petitioned for the opening of secondary proceedings shall notify the insolvency practitioner in the main insolvency proceedings (or the debtor, in situations where no insolvency practitioner has been appointed) by registered letter. Such notification shall mention the deadline and the conditions for challenging the opening of secondary proceedings and for requesting a temporary stay of the opening of secondary insolvency proceedings.
Undertaking to avoid secondary insolvency proceedings. Under the Insolvency Regulation, in order to avoid the opening of secondary insolvency proceedings, the insolvency practitioner in the main insolvency proceedings may give a unilateral undertaking in respect of the assets located in the Member State in which secondary insolvency proceedings could be opened, that when distributing those assets or the proceeds received as a result of their realisation, it will comply with the distribution and priority rights that creditors would have if the secondary insolvency proceedings were opened in that Member State.
The Decree indicates that to avoid secondary insolvency proceedings, the insolvency practitioner shall notify the terms and conditions of the undertaking to the creditors, obtain their agreement (failure to reply is understood as acceptance, except for employees) and petition the Court to approve the undertaking.
Stay of realisation of assets. The Insolvency Regulation allows the insolvency practitioner in the main proceedings to request the Court that opened secondary insolvency proceedings to stay the process of realisation of assets.
The Decree indicates that, when the realisation of assets is envisaged during secondary insolvency proceedings, the insolvency practitioner in the secondary insolvency proceedings shall inform the insolvency practitioner in the main proceedings of that fact by registered letter, mentioning the deadline for the insolvency practitioner in the main proceedings to request a stay of the realisation process.
Interconnection of insolvency registers. To achieve the interconnection of insolvency registers required by the Insolvency Regulation, the Decree provides that additional information shall be included on the Trade Register of Companies (RCS) and on the BODACC, in particular whether the insolvency proceedings are main or secondary proceedings, the competent judge, and the appeal period.
Proof of claim. The creditors located in another Member State shall be informed of the opening of insolvency proceedings in France, and of the deadline to submit their proof of claim in French or – if not in French – with a translation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.