is often viewed as synonymous with failure

Reworked by the order of December 18, 2008, backup plan has undoubtedly gained attractiveness for companies. The reform now more clearly distinguishes the safeguarding of the relief judicial, is often viewed as synonymous with failure, and replace the leader at the centre of the conduct of the proceedings. But these improvements, which must be welcomed, is not without risk to the business manager. Two innovations in particular show that is not quite the master of the destiny of society: the new opening of the committees of creditors and the possible conversion of claims in capital securities.

The order establishes a Committee of creditors that includes credit institutions "and those assimilated", such as "hedge funds". But the faculty to be part of a Committee is transmitted of right to successive holders of the debt; investment funds may therefore enter the committees by purchase of receivables. The decisions of the Committee to be, since the order of December 18, adopted by a majority of two thirds of the votes expressed and calculated the amount of receivables and by head, taking control becomes easier.

Conversion of debts

The order also provides that the draft plan may provide for the conversion of debts into shares. Only the debtor may, in the project of reorganization to creditors, provide this conversion. This may appear as a bulwark against the attempts of taking control of the company by the creditors. Nevertheless, access to the Committee of creditors who have facilitated, they can exert pressure on the debtor and the "force" to authorize the conversion of claims in actions paving the way for a takeover. These mechanisms, relatively rare France far, could develop and provide a new scheme for the acquisition of firms in difficulty.

Finally, the backup procedure, allowing a company to completely from its creditors, not guarantee this protection because of the recent jurisprudential developments - commendable - the Court of cassation. June 30, 2009, the High Court had the opportunity to decide the question of the admissibility of the third-party opposition from foreign creditors against the judgment of the initiation of the safeguard of Eurotunnel. Setting aside a judgment of the Court of appeal of Paris, it recognized clearly, for the first time, that "the creditors domiciled in one Member State other than that of jurisdiction which opened a main proceeding cannot be deprived of effective opportunity to challenge the jurisdiction assumed by this Court". This decision is part of the right line of the Eurofood judgment by the European Court of the European Communities (ECJ). It states that if an interested party intends to contest the jurisdiction of the tribunal which opened the procedure, it should use the remedies under national law.

This judgment of the Court of cassation was a first consequence in the media business viewpoint. In this case, the debtor had been faced with different funds which had bought a variable rate bonds. They claimed the immediate liability on the ground that the debtor had violated its commitments and ratios. With the backup procedure, Lookout had obtained from the tribunal de commerce de Dijon the prohibition to pay any debt. Funds, including foreigners, had immediately formed third party opposition to this judgment which suspended their rights. The Court of appeal of Dijon has finally declared them inadmissible and unfounded on 30 June 2009. But in the light of the judgment delivered on the same day by the Court of cassation, the Committee of the holders of variable rate of society lookout duty decided to appeal in cassation.

Thus, if the order of December 2008 greatly increases the flexibility of the payor leader, it also strengthens the influence of the creditors. Although they regularly criticize the backup scheduling, that they consider to be abusive, it can indeed enable them to take control of the company. However, these considerations should not undermine development, both hoped the legislature, the France procedure, especially in the current economic context. Its use seems already multiply for several months, including within companies under LBO occurring in difficulty.