Anticipating the difficulties and negotiating with creditors and labour to resolve conflicts amicably before it’s too late, is the spirit of the preventive measures introduced by the legislator and developed by the courts.  This prevention can take on two forms:
–      the Ad hoc mandate, a very flexible negotiating tool, with few legal prescription,
–      the Conciliation, a more structured procedure, allowing for court registration of an agreement if needed.

In both cases, the administrator takes on the role of mediator assisting all parties attempting to reach an agreement.  He invests himself entirely in the transactions put forward, placing his professional reputation at stake, in the respect of the interests involved

This made-to-measure intervention remains confidential. chief executive officers remain free to manage their company.  In more than 70% of cases, the prevention measures result in the sustainability of the business.


All companies experiencing actual or foreseeable difficulties may apply for prevention, on the condition that they not be in payment default (for the option of Ad hoc mandate) or that they have been in default for less than 45 days (for Conciliation). The objective of prevention measures is the resolution of conflicts and disputes through amicable arrangements to favour the continuity/recovery of the Company.  Situations soliciting prevention measures:

– Decreases in turnover/ sales revenue rendering the cost of borrowing too high – compromised banking facilities – management disputes affecting the business – litigation with a supplier – undercapitalisation of the business – LBO inferring debt restructuring


The ad hoc mediator and conciliator (both mandates assumed by the administrator) are appointed by the President of the Court at the request of the company chief executive officer.  To note:  The Chief executive officer may put forward his choice of mediator/conciliator.  The President then issues an order setting the scope and length of the mission, the raising of the order and its contents remaining confidential.  The Ad hoc mandate is not subject to any time limits, it may be extended as the need arises.  As for Conciliation, its maximum length is 4 months, and is centred upon negotiations with creditors.  The conciliation mission may be extended one month further on a case-by-case basis (and exceptionally) at the request of the conciliator.  Both procedures, the Ad hoc mandate and Conciliation, remain confidential; all parties to the negotiations are held to secrecy.


The four steps to the measure

1. Diagnostic and identification of leverage tools necessary to financial recovery.  An initial analysis provides for:
– a first look at the financial and legal issues at hand and future developments anticipated
– calculation of forecasts/estimates on immediate cash and operating needs

2. The drawing up of an action plan and negotiation strategy.  The administrator along with the company chief executive officers and its counsel elaborate an action plan taking into account the realistic means of the company, balancing its needs with those of its creditors.  Together, they draw up a negotiation strategy with the creditors.

3. Implementation of the action plan and ensuing negotiations.  The administrator invites the creditors and concerned parties to the table.  He sets the negotiation schedule and assists the chief executive officer in the discussions.

4. Conclusions and drafting of agreement (s).

The leverage tools
In order to durably restore the financial health of the company, the administrator disposes of four main tools:

Negotiation of moratoria with the creditors

Obtaining of extensions on payment deadlines from suppliers and banks; Consolidation of bank loans; Debt restructuring; Negotiation with tax authorities and social security administrations (Conciliation).

Identification of new sources of financing

Shareholders’ equity: negotiation with current stockholders, inflow of capital, new investors
Working capital needs:  Identification of short-term/ back-up lines of credit, new banking facilities, and public grants/subsidies.

Restructuring of company

The administrator working alongside the company and its counsel helps preparing costed restructuring proposals – a key element in the context of negotiations.


A second chance for the distressed company

The intervention of the French Judicial Administrator, officially mandated by Court Order, provides an incentive to both creditors and business partners to negotiate on new foundations and in the shortest timeframes. This intervention places all parties around the global negotiating table, and not just on a piecemeal basis. As legal and judicial authority partaking fully in the negotiations, the administrator thus renders both credibility and transparency in the search for solutions.  His independent professional status also guarantees the reliability of the information that he provides to the parties.

Familiarity with the environment / parties to the process

Specialist of distressed companies, the administrator is the interface between tax and social security administrations, the banks’ litigation departments.
If needed, the negotiations continue under the umbrella of the CIRI (Interdepartmental Committee on Industrial Restructurings).


Even though the administrator assists the chief executive officer in the negotiations, his role remains that of mediator, an interface between the parties.  He does not replace the company’s legal advisors, nor does he substitute for them as counsel. The chief executive officer remains free in his decisions affecting the company.  At any moment, he may end the administrator’s mission.  The joint obligors/ security and guarantors (legal and natural persons) can benefit from the court-registered agreements in Conciliation.


The mission concludes with signed agreements between the parties.  In the case of Conciliation, the draft agreement can be signed off by the President, which binds the agreement on the contracting parties or it can be court-registered and given full force of law, which will produce the following effects:  Stay on collection activities by creditors having signed the agreement – the securing of new financing or of new supplies of goods and services as set out in Conciliation (“new money” privilege for suppliers of new funds or services, whose creditors are conferred a “superprivileged” status only preceded by salary claims) – in the event of a future derailing of the company the date of insolvency cannot be reset to a date anterior to the court registration of the conciliation agreement thereby impossibility of cancelling binding agreements (this answering to a need for legal security for the new money creditors) –to not be held liable for a management error.  Refer to text:  Articles L611-1 to L612-5 of the Company Safeguard Law of 26 July 2005 (then click on Enforcement Decree and Company Safeguard Law).