French insolvency law Overview and latest trends Insol

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French insolvency law Overview and latest trends Insol Europe, November 2014 Hélène BOURBOULOUX, Judicial

French insolvency law Overview and latest trends Insol Europe, November 2014 Hélène BOURBOULOUX, Judicial Administrator FHB, www. fhbx. eu

Agenda 1. Overview of French (Pre)-insolvency proceedings 2. Practical implementation of Pre-Insolvency proceedings 3.

Agenda 1. Overview of French (Pre)-insolvency proceedings 2. Practical implementation of Pre-Insolvency proceedings 3. The main axes of the Reform of French Insolvency Law 4. Next steps: remaining expectations PAGE N° 2

Overview of French (Pre)-Insolvency proceedings 1. French (Pre)-Insolvency Proceedings in a nutshell 2. Main

Overview of French (Pre)-Insolvency proceedings 1. French (Pre)-Insolvency Proceedings in a nutshell 2. Main features of Court-assisted proceedings 3. Main features of Court-controlled proceedings PRÉSENTATION DU 00/00/0000 PAGE N° 3

1. 1 French (Pre)-Insolvency Proceedings in a nutshell Out of court agreement Court-assisted proceedings

1. 1 French (Pre)-Insolvency Proceedings in a nutshell Out of court agreement Court-assisted proceedings Mandat ad hoc No Court acknowledgement Acknowledgment of the agreement Conciliation Homologation of the agreement Court –controlled proceedings AS / AFS Safeguard plan Observation period (up to 18 months) Safeguard Failure Judicial reorganisation Observation period (up to 18 months) Sale plan Liquidation proceeding Failure Judicial liquidation Continuation plan Possible 6 months continuation Total or partial sale PAGE N° 4

1. 1 French (Pre)-Insolvency Proceedings in a nutshell Overview French insolvency law currently provides

1. 1 French (Pre)-Insolvency Proceedings in a nutshell Overview French insolvency law currently provides for seven restructuring and (pre-)insolvency proceedings, which can be classified into two sub-groups: • two court-assisted proceedings (the mandat ad hoc and conciliation proceedings) • five court-controlled proceedings (the judicial reorganisation or redressement judiciaire, judicial liquidation or liquidation judiciaire and three types of sauvegarde proceedings). The two court-assisted proceedings (the mandat ad hoc and conciliation proceedings) are both informal, amicable proceedings where no creditor can be forced into a restructuring agreement and where the management still runs the business. All five court-controlled proceedings are public but vary in terms of involvement of the court-appointed practitioner in running the business and the possible outcome of the proceedings. AS and AFS can be considered as hybrid proceedings, since they are by nature an outcome of a court-assisted proceeding. In practice, some meaningful restructuring cases are first handled via court-assisted proceedings, then implemented through a courtcontrolled proceeding, typically through an AS, AFS or sauvegarde (section 2) PAGE N° 5

1. 2 Main features of court-assisted proceedings Main features Only the debtor can decide

1. 2 Main features of court-assisted proceedings Main features Only the debtor can decide to enter into these kinds of non-compulsory proceedings. Negotiations remain governed by the terms of the contract for the duration of the proceeding, which implies obtaining the consent of each and every creditors involved in the restructuring process (e. g. , the debtor, financial creditors and shareholders). These proceedings are conducted under the supervision of a court-appointed practitioner (mandataire ad hoc or conciliator) to help the debtor reach an agreement with its creditors in particular by reducing or rescheduling its indebtedness. Both are confidential proceedings. • The conciliation proceeding can, however, become public if the debtor seeks the approval of the commercial court, so that new money provided to the distressed debtor benefits from a legal privilege in case of future insolvency proceedings. • Although the conciliation becomes public, the terms and conditions of the conciliation agreement remain confidential and can only be disclosed to its signatory parties. PAGE N° 6

1. 3 Main features of Court-controlled proceedings Common features of the safeguard and judicial

1. 3 Main features of Court-controlled proceedings Common features of the safeguard and judicial reorganization All pre-filing claims (with very few exceptions) are automatically stayed All creditors (except employees) must file proof of their claim after the opening judgment. Debts arising after the commencement of the proceedings will be given priority over debts incurred prior to their commencement (other than certain employment claims and, as noted above, claims of creditors who provided new money as part of a previous conciliation proceeding). Starting upon the opening Judgement, the observation period (up to 18 months) shall serve as a basis for drawing up a plan of readjustment or reorganization. PAGE N° 7

1. 3 Main features of Court-controlled proceedings Preparation of a plan of reorganisation For

1. 3 Main features of Court-controlled proceedings Preparation of a plan of reorganisation For large companies, main creditors are included in two creditors’ committees (one of financial creditors and the other of main trade creditors) and, where applicable, a bondholders’ committee to which the debtor submits proposals to reach agreement on a recovery plan. The plan submitted to the committees may include debt reschedulings, debt writeoffs and debt-for-equity swaps and may also provide for a partial sale of the business. In addition to the approval of the committees at a two-thirds majority, debt-to-equity swaps require the approval of shareholders. Outcome Provided that the plan is approved by the committees and – for debt-to-equity swaps – the shareholders, and that creditors’ interests are adequately preserved, the court approves the plan, which becomes binding also on dissenting committee members. If the plan is not approved, the court can only impose a rescheduling of debt repayments over a maximum period of 10 years, but cannot impose a write-off of claim In a judicial reorganisation, the court may also order a total or partial sale of the business at the request of the court-appointed administrator. PAGE N° 8

1. 3 Main features of Court-controlled proceedings Role of managers The sauvegarde, AS and

1. 3 Main features of Court-controlled proceedings Role of managers The sauvegarde, AS and AFS are debtor-in-possession proceedings, whereas, in a judicial reorganisation proceeding, the court has discretion to decide whether to set aside the managers. The role of management is particularly reduced in a judicial liquidation proceeding because the debtor generally ceases to conduct any business since the aim of judicial liquidation is to liquidate a company by selling its business when there is no prospect of recovery, as a whole or per branch of activity, or each of its assets individually. Starting the procedures Sauvegarde may only be started by the debtor Judicial reorganisations and judicial liquidations may be initiated by the debtors themselves, creditors or the state prosecutor. The sauvegarde can only be opened as long as the debtor remains solvent (i. e. , when the debtor is still able to pay its debts as they fall due out of its available assets (taking into account any waiver or moratorium its creditors may have consented to)), whereas only the judicial reorganisation and judicial liquidation are available to insolvent debtors. PAGE N° 9

1. 3 Main features of Court-controlled proceedings Accelerated Safeguard (AS) A new “accelerated sauvegarde”

1. 3 Main features of Court-controlled proceedings Accelerated Safeguard (AS) A new “accelerated sauvegarde” (AS) was introduced by the 2014 reform, as a specific type of sauvegarde proceeding intended to be implemented on an accelerated basis. This proceeding is available only to companies which have first been through a conciliation proceeding and failed to reach a unanimous restructuring agreement with their creditors. The court will open an AS proceeding if the outcome of the conciliation suggests that the restructuring plan negotiated during the conciliation has sufficient support from the creditors such that it is reasonably likely to be adopted on an expedited basis (3 months maximum). Accelerated Financial Safeguard (AFS) Special kind of sauvegarde proceeding for financial restructuring available only to relatively large companies, exceeding certain thresholds regarding workforce, turnover or balance sheet and which have first been through a conciliation proceeding and failed to reach a unanimous restructuring agreement with their financial creditors. The court will open an AFS proceeding if the outcome of the conciliation suggests that the restructuring plan negotiated during the conciliation has sufficient support from the debtor’s financial creditors such that it is reasonably likely to be adopted within two months. Trade creditors are not affected by the AFS proceeding PAGE N° 10

2 Practical implementation of Pre-Insolvency proceedings Restructuring of a distressed LBO: Preparation of a

2 Practical implementation of Pre-Insolvency proceedings Restructuring of a distressed LBO: Preparation of a conciliation agreement 1. Focus on Pre-insolvency proceedings Main features and limits of the Mandat Ad Hoc Main features and limits of the Conciliation Differences between acknowledgment and approval Main steps 2. Practical implementation Preparation of the conciliation agreement Diagnosis of the current situation Emergence of (a) proposal(s) Negotiation of the proposal(s) Implementation of the agreement PRÉSENTATION DU 00/00/0000 PAGE N° 11

2. 1 Main features of the Mandat Ad Hoc To resolve the various (potential

2. 1 Main features of the Mandat Ad Hoc To resolve the various (potential or actual) difficulty a company (may) encounter(s) with the help of an independent practitioner and in a confidential environment. Purpose Flexible tool since the scope of the mission entrusted to the mandataire ad hoc can be very broad (negotiations with creditors/suppliers/trade partners, conflict between shareholders, sale of the company/assets…) Management still runs the business (debtor-in-possession proceeding) Condition Requesting party Duration Procedure PRÉSENTATION DU 00/00/0000 Any company may request for the opening of a mandat ad hoc proceeding provided that it has not become insolvent. Proceeding opened at the sole request of the company No statutory time limit The mandataire ad hoc is chosen by the company and appointed by the president of the commercial court following the filing of a request by the company PAGE N° 12

2. 1 Limits of the Mandat Ad Hoc Amicable proceedings The limits of the

2. 1 Limits of the Mandat Ad Hoc Amicable proceedings The limits of the mandat ad hoc derive from its nature (pre-insolvency proceeding). Negotiations are conducted in an amicable context no coercive means in the hands of the mandataire ad hoc The mandataire ad hoc cannot force the creditors to accept a restructuring plan The agreement reached in a mandat ad hoc proceeding does not benefit from the legal security attached to a conciliation agreement Unanimous consent required The success of the proceeding depends on whether or not a unanimous consent is reached at the end In the absence of a unanimous consent (and unlike in a conciliation proceeding), there is no possibility to convert the mandat ad hoc into an accelerated safeguard / financial accelerated safeguard so as to implement a restructuring plan supported by a majority of creditors and override the refusal of dissenting creditors PRÉSENTATION DU 00/00/0000 PAGE N° 13

2. 1 Main features of the conciliation Purpose To reach a unanimous agreement between

2. 1 Main features of the conciliation Purpose To reach a unanimous agreement between the company and its main creditors in view of overcoming its financial, economic or legal difficulties with the help of an independent practitioner and in a confidential environment Introduction of the prepack disposal (pre-pack cession) pursuant to court order dated 12 March 2014 Conditions Requesting party Duration Procedure Legal privilege PRÉSENTATION DU 00/00/0000 Any company may request for the opening of a conciliation proceeding provided that is it not insolvent for more than 45 days Proceeding opened at the sole request of the company The initial duration cannot exceed 4 months , extendable at the conciliateur’s request provided that the total duration does not exceed 5 months. The conciliateur is chosen by the company and appointed by the president of the commercial court following the filing of a request by the company. If an agreement has been reached, it may be either: acknowledged by the president of the commercial court Approved by the commercial court Both give the agreement the legal force of an enforceable court decision. Legal privilege granted to the providers of new financing provided in the course of the conciliation proceeding or pursuant to the conciliation agreement. In case of future insolvency proceeding, claims of new money providers will not be affected by the rescheduling of debt repayment (reorganization plan) PAGE N° 14

2. 1 Difference between acknowledgment and approval ACKNOWLEDGMENT APPROVAL Jurisdiction President of the commercial

2. 1 Difference between acknowledgment and approval ACKNOWLEDGMENT APPROVAL Jurisdiction President of the commercial court Order from the president Examination in a Chamber Commercial court Public court decision Approval hearing: hearing of the employee representatives body Requesting parties Join and several request of all the parties Request from the company Conditions Legal privilege Legal force and enforceability of a court decision Attestation from the company stating that it (i) The company shall not be insolvent or the agreement shall put an end to was not insolvent at the execution date of the such insolvency situation, and agreement or that such agreement will put an (ii) Terms of the agreement shall ensure the sustainability of the business of end to such insolvency situation the company, and (iii) The agreement shall not affect the interests of third parties creditors YES: Stated in the court decision with the amount secured by the legal NO privilege YES: The court decision is public but shall not refer to the terms and conditions YES Confidentiality Right of appeal Suspension of actions YES of the agreement. Express reference is however made to the security interests and the legal privilege in the court decision YES: right of appeal from the State prosecutor, No right of appeal from the parties in case of dispute regarding the legal privilege, Third party may raise objection (provided they are affected) Suspension of actions regarding the claims treated in the conciliation agreement. Suspension of actions also benefits to the coobligated persons and guarantors Limit to the hardening period effects PRÉSENTATION DU 00/00/0000 NO YES: the date of the suspension of payment cannot be set prior to the date of approval of the conciliation agreement by the commercial court Legal security as regards fraudulent conveyances (nullité de la période suspecte, i. e. risk that certain types of transactions may be set aside by the court if entered into during the hardening period which can predate judgment commencing an insolvency proceeding by up to 18 months) PAGE N° 15

2. 1 Limits of the conciliation Duration Short duration (5 months at maximum) compared

2. 1 Limits of the conciliation Duration Short duration (5 months at maximum) compared to mandat ad hoc (without statutory time limit). In practice, mandat ad hoc can be opened prior to a conciliation Rights of the creditors not involved in the conciliation cannot be affected by the agreement No automatic suspensions of individual actions against the company Necessity to get the consent of all the creditors involved in the conciliation proceeding No legal tool/lever in the hands of the conciliateur to force the consent (except possibility to ask the president of the commercial court for grace periods (including in respect of claims not affected by the agreement), for a maximum period of 24 months No cram-down: conciliation agreement cannot be imposed by the court PRÉSENTATION DU 00/00/0000 PAGE N° 16

2. 1 Main steps Identification of the difficulties Filing of a request to the

2. 1 Main steps Identification of the difficulties Filing of a request to the president of the commercial court Opening of a mandat ad hoc Absence of unanimous consent (but sufficient support) Request for opening a AS or AFS PRÉSENTATION DU 00/00/0000 Opening of a conciliation Unanimous consent with the creditors parties to the agreement Implementation of the agreement Non performance of the agreement Absence of unanimous consent (and no sufficient support) Request for opening a judicial proceeding (JS/JR/JL) PAGE N° 17

2. 2 Preparation of the conciliation agreement Reach a consensual agreement ensuring the interests

2. 2 Preparation of the conciliation agreement Reach a consensual agreement ensuring the interests of the company Given that the interests of the parties involved in the conciliation are not aligned, the preparation of the agreement shall require mutual concessions The agreement shall ensure that the interest of all the involved parties are better preserved than in case of a potential insolvency judicial proceeding The process of preparation of the agreement may be divided into four different steps PRÉSENTATION DU 00/00/0000 PAGE N° 18

2. 2 Diagnosis of the current situation Goals Ensuring that all the parties: •

2. 2 Diagnosis of the current situation Goals Ensuring that all the parties: • Share the same level of information on the situation of the company and its difficulty • Share the same diagnosis of the situation The good understanding of the difficulties encountered by the company is an essential prerequisite for the preparation of the future agreement • Failing that, there is a risk of failure or delay in the process • It may cause a damage to the company and/or affect the necessary atmosphere of trust that shall exist PRÉSENTATION DU 00/00/0000 PAGE N° 19

2. 2 Diagnosis of the current situation Way to achieve these goals 1 st

2. 2 Diagnosis of the current situation Way to achieve these goals 1 st step: Definition of a timeline 2 nd step: Review of the past situation with a full strategic and financial review • Independent review conducted by experts (the independence is a condition for a validation of the review and analysis by all the parties involved), • Independent review will highlight the cause of the difficulty and the challenges the company is facing 3 rd step: business plan • Preparation of a business plan on the basis of such strategic and financial reviews, • Independent review of the business plan • Preparation of a « restructuring proposal » by the company on the basis of the business plan PRÉSENTATION DU 00/00/0000 PAGE N° 20

2. 2 Emergence of (a) proposal(s) Goal Obtain the issuance of one or several

2. 2 Emergence of (a) proposal(s) Goal Obtain the issuance of one or several restructuring proposals Way to achieve this goal: Bidders: natural priority according to the ranks of subordination/value of the equity • shareholders, • lenders (junior / mezzanine / senior), • third party investors Order dated 12 March 2014: the mission entrusted to the conciliateur may include the total or partial sale of the business to be implemented, as necessary, through court-controlled proceedings ( « pre-pack disposal » ). Elements to be considered: Is there any need for new money injection? « First » restructuring versus « another » restructuring What is the negotiation deadline … PRÉSENTATION DU 00/00/0000 PAGE N° 21

2. 2 Negotiation of the proposal(s) Goal To improve the proposal(s) that has(ve) been

2. 2 Negotiation of the proposal(s) Goal To improve the proposal(s) that has(ve) been issued (i) first in the interest of the company and (ii) then in the interest of all the other involved parties Main terms and conditions Determination of a sustainable capital structure New money needs Terms and conditions of the reinstated debt (amount, maturity, remuneration, …) Terms and conditions of the converted debt (debt-to-equity swap) Governance Waterfall MIP … Order dated 12 March 2014: new money injected during the conciliation proceeding can now benefit from the legal privilege (so far the privilege was limited to new money injected in accordance with the conciliation agreement approved by the court Clarification of the rank of the legal privilege which is not affected by the rescheduling of debt repayments (reorganization plan) or in the event of a future liquidation PRÉSENTATION DU 00/00/0000 PAGE N° 22

2. 2 Implementation of the agreement In case of unanimous agreement: the parties may

2. 2 Implementation of the agreement In case of unanimous agreement: the parties may elect for an acknowledgment or an approval by the commercial court (cf. supra) In the absence of unanimous agreement and provided that the restructuring plan benefits from sufficient support from the creditors such that is likely to be adopted (support of 2/3 of the total amount of the claims), the agreement can be implemented through an accelerated safeguard or an accelerated financial safeguard PRÉSENTATION DU 00/00/0000 PAGE N° 23

2. 2 Acknowledgment or approval Acknowledgment by the president of the commercial court of

2. 2 Acknowledgment or approval Acknowledgment by the president of the commercial court of the conciliation agreement on a basis of a representation of the company that (i) it was not insolvent at the execution date of the conciliation agreement or (ii) that such conciliation agreement puts an end to such insolvency situation Approval by the commercial court of the conciliation agreement provided that the 3 following conditions are met: • The company is not insolvent (or the conciliation agreement puts an end to such insolvency situation) • The terms and conditions of the conciliation agreement ensure the sustainability of the business of the company • The interest of third parties to the agreement are not affected Appointment of a mandataire ad hoc in charge to ensure proper implementation of the conciliation agreement Order dated 12 March 2014 : Possibility for the company to request from the president of the commercial court the appointment of a mandataire ad hoc which will ensure that the acknowledged or approved conciliation agreement is duly implemented PRÉSENTATION DU 00/00/0000 PAGE N° 24

2. 2 Acknowledgment or approval Conditions for opening Company has first been through a

2. 2 Acknowledgment or approval Conditions for opening Company has first been through a conciliation proceeding Company fails to reach a unanimous restructuring agreement Company can justify that the restructuring plan has sufficient support from its creditors such that it is reasonably likely to be adopted (2/3 of total amount of claims) in 1 (AFS) or 3 (AS) month(s) Company has not been insolvent for more than 45 days as of opening of the conciliation proceeding Constitution of committees (mandatory – to be expressly provided in the court decision) Effects the court approves the plan provided that (i) the plan is approved by the committees (and the shareholders if there is a debt-to-equity swap) and (ii) the creditors’ interests are adequately preserved. In such a case, the plan becomes binding on all parties (including dissenting committee members and shareholders) if not, the court may impose a rescheduling of debt repayments over a maximum period of 10 years but cannot impose a write-off of claim. PRÉSENTATION DU 00/00/0000 PAGE N° 25

3 The main axes of the Reform of French Insolvency Law Executive Orders dated

3 The main axes of the Reform of French Insolvency Law Executive Orders dated 12 March 2014 and 26 Septembre 2014 1. Incentives to use pre-insolvency proceedings 2. Rebalancing of power among players PRÉSENTATION DU 00/00/0000 PAGE N° 26

3. 1 Incentives to use pre-insolvency proceedings Prohibition of default clauses Restricted third party

3. 1 Incentives to use pre-insolvency proceedings Prohibition of default clauses Restricted third party fees Fees of the creditors' advisors can be charged to the company up to a maximum of 75% only Any clause requiring the debtor, upon the designation of a mandataire ad hoc or the opening of a conciliation proceeding, to pay the costs of the creditors’ advisors over 75% shall be deemed void. The fees of the mandataire ad hoc and/or of the conciliator may not be determined based on the amount of debt to be written-off. Broader scope of New-Money privilege The New Money privilege is extended to new money contributions made during the course of the conciliation, New money debt will not be stretched out in the event of further bankruptcy proceedings. PAGE N° 27

3. 1 Incentives to use pre-insolvency proceedings Broader scope of article 1244 -1 If

3. 1 Incentives to use pre-insolvency proceedings Broader scope of article 1244 -1 If during the application of the conciliation agreement, a creditor requests the payment for a debt which is not covered by such agreement, the judge, upon the debtor 's request, may nevertheless apply for a moratorium based on article 1244 -1 of the French Civil Code Better follow-up of agreement Possibility to appoint a nominee in charge of the good application of the adopted plan Introduction of a “pre-pack” asset sale plan Enable asset sales during a reorganization proceeding or judicial liquidation to a buyer identified in the context of an amicable procedure, The conciliator may, at the request of the debtor and after hearing the opinion of the participating creditors, be entrusted with the mission of organizing a partial or total sale of the business of the company. Any offers received in this context by the mandataire ad hoc or the conciliator may be directly submitted to the court in the context of reorganization or liquidation proceedings subject to the supervision of the public minister (ministère public) whose opinion shall be requested. PAGE N° 28

3. 2 Rebalancing of power among players Easier filing for proof of claim for

3. 2 Rebalancing of power among players Easier filing for proof of claim for creditors Creditors no longer have to go through that process if their claim is mentioned in the filing made by the debtor itself at the outset of the proceeding. Creditors can elect to make that filing themselves if there was an omission in the debtor’s filing, or if they dispute the amount mentioned by the debtor. Possibility for creditors to propose an alternative plan Creditors (but not bondholders) can now become more involved in the development of restructuring plans In both safeguard and reorganization proceedings, and submit to the Court an alternative plan as a counter-proposal to the plan prepared by the debtor, Possibility to exit shareholders For debt-to-equity swap organized under safeguard or reorganization, the court can now authorize the Court Administrator to convene a shareholders meeting. The court may decide to reduce the majority required for the shareholders’ approval of debt-to-equity swaps from 66. 33% down to 50%. In a reorganization proceeding, the Court administrator can request that a representative be appointed to organize a shareholders’ meeting to vote and approve in place of the shareholder the capital increase of a debtor which suffers from accounting losses PAGE N° 29

4 Next steps: remaining expectations 1. Groups 2. Creditors’ committees: class of creditors 3.

4 Next steps: remaining expectations 1. Groups 2. Creditors’ committees: class of creditors 3. Regime of the financial lease (crédit-bail) 4. Forced debt-to-equity swap PRÉSENTATION DU 00/00/0000 PAGE N° 30

3. 1 Groups Latest reform only creates the possibility to appoint a coordinator A

3. 1 Groups Latest reform only creates the possibility to appoint a coordinator A common judicial administrator A representative of creditors The French insolvency regime does not yet include specific rules tailored for corporate groups. Therefore, a separate insolvency proceeding must be opened with respect to each distressed company of the group and conflicts of jurisdiction (even within France among different local courts) may arise as a result. Practitioners have attempted to avoid such conflicts and centralize all proceedings of the group companies using concepts such as ‘centre of main interests’ (COMI)12 (stemming from the EC Regulation No. 1346/2000 of 29 May 2000 on insolvency proceedings (the EU Insolvency Regulation) PAGE N° 31

3. 2 Creditors’ committees: class of creditors Under French law, if a debtor meets

3. 2 Creditors’ committees: class of creditors Under French law, if a debtor meets certain conditions, committees of creditors are created: Financial creditors are classified within one class Trade creditors within as second class Bondholders within a third class Within each of these classes, French law does not distinguish between creditors. Each class of creditors will vote collectively on the plan (except unimpaired creditor) Plan is approved by a committee if it is accepted by a 2/3 rd majority in amount of claims held by voting creditors of that class: Weight of a creditor within a class only depends on the nominal value of its claim It does not take into account rank of subordination / secured or unsecured claim / credit default swap / sub participation agreement Voting rules are not adapted to today’s financing structuring. Creditors that have lost their economic value of their investment are in strong bargaining position There is a need to (i) adapt the rules to create classes with creditors having aligned interest and (ii) weight their vote according to the economic value of their claim PAGE N° 32

3. 3 Regime of the financial lease (crédit-bail) Under French law, the financial lease

3. 3 Regime of the financial lease (crédit-bail) Under French law, the financial lease (crédit-bail) is considered as an « ongoing contract » (contrats en cours) It means that if the debtor wants to maintain the financial lease into force, it has to pay when it falls due each term arising after commencement of the proceeding The economic vision of the financial lease shall prevail on the legal vision Financial lease shall be considered as a credit operation and not as a lease As a consequence, regime of the ongoing contract shall not apply. The regime of the financial lease shall be the same than the regime for loan agreements. Rents arising after the commencement of the proceeding shall be automatically stayed (and shall be considered as pre-filing claims) PAGE N° 33

3. 4 Forced debt-to-equity swap The reform organizes a rebalancing of power in favor

3. 4 Forced debt-to-equity swap The reform organizes a rebalancing of power in favor of creditors. However, if it is a step in the right direction, still more needs to be done As of today: Forced debt-to-equity swap is only possible in reorganization proceeding (redressement judiciaire) It also supposes that debtor suffers accounting losses (net equity amounts to less than half of the share capital) with a share capital increase provided in the restructuring plan to restore the net equity Proposal: Creditors shall have the possibility to impose on shareholders who refuse to approve the restructuring plan a forced debt-to-equity swap or the sale of their share PAGE N° 34

Thank you FHB, www. fhbx. eu

Thank you FHB, www. fhbx. eu