The forms of judicial reorganisation

The purpose of the law that created judicial reorganisation comes down to two things: preserving economic activity and employment on one side, protecting creditors’ interests on the other. To that end, the Business Continuity Act provided for different forms of proceedings, matching different situations.

The first thing it does is grant you a stay, during which your debts are suspended. But to allow you to do what? That is where the forms differ.

The three options

• Reorganisation to find a buyer. The buyer undertakes to maintain the activity and the jobs, in whole or in part. The stay is then used to find that buyer and to negotiate the terms of the purchase, which must set out how the debt will be repaid. If the buyer does not intend to repay the amounts due in full on their due dates, the negotiation must involve the creditors and the delegated judge. The buyer must also state his intentions regarding employment.
• Reorganisation to raise funds or reach an amicable settlement. The settlement may include a write-down, a rescheduling of repayments, or both. Here the delegated judge and the court take no part in the discussions: the procedure ends favourably when you submit a signed agreement to the court, or unfavourably at the end of the stay if no agreement could be negotiated.
• Reorganisation to obtain a collective agreement. This is the hardest form to bring off. It provides for part of the debt to be written down, and is considered when the company is viable but cannot carry the full burden of its debt. In practice it means negotiating repayment terms on a basis that can be called fair, then putting the proposal to a vote. If the plan is approved by 50.01% of creditors representing 50.01% of the debt, it is automatically confirmed. In certain cases the judge may impose your plan without a favourable vote, but that is exceptional.

What the court expects of you

Judicial reorganisation gives you a second chance, and the delegated judges will support you provided they are convinced you have a real chance of turning the company round through the form you have chosen.

You therefore have to be credible. That means a serious strategy for coming out of the crisis, a solid business plan, an early start to negotiations with partners and creditors, and constant communication with the delegated judge.

The subject is complex and it is better to take advice. For the recovery strategy, from a management specialist: a financial adviser will generally not be enough. Legal support is also to be recommended.

Nady Bilani