Reorganization plan
Decision of the court that halts the continuation of the business and organizes the payment of creditors over several financial years, instead of a liquidation or a transfer.
Definition
A recovery plan is the decision by which the court orders the continuation of the business and organises the settlement of liabilities. It occurs at the end of the observation period, when recovery is possible: the business continues to operate, the manager remains in place, and the debts are paid according to a schedule agreed with the creditors or set by the court.
A recovery plan is distinct from a sale plan. In the first case, the business continues with those who currently run it, and the liabilities are spread over time. In the second, the business is taken over by a third party and the proceeds of the sale are used to pay the creditors.
The duration of the plan is regulated: it may not extend beyond ten years, except for rules specific to certain agricultural activities. Each year, the debtor must report on the execution of the plan, and the court may amend the payment schedule or replace a manager if the situation so requires.
What the plan changes for each party
For the debtor
They retain the management of the company and return to normal operations, but under supervision throughout the duration of the plan. Failure to comply with the payment schedule, concealment of information or a new management fault can lead to the termination of the plan, and therefore a return to insolvency proceedings.
For the creditors
They are paid according to the plan, with reductions and time limits that may be substantial. Claims arising before the judgment opening the proceedings are subject to the plan, and claims arising after are paid when due, which allows the company to continue working with its suppliers.
For the employees
The reorganization plan is the good news of the proceedings: employment contracts continue, the business is maintained and the wage guarantee scheme remains in support during the observation period. However, job protection plans implemented during the observation period may already have taken effect.
How the BODACC publishes the reorganization plan
The judgment that adopts the plan is published in the BODACC, as are the decisions that subsequently amend it, and the judgment that terminates it and, in general, opens judicial liquidation proceedings. This publication is the only way for an unadvised creditor to know that the plan is taking effect.
Our platform reproduces these judgments. For a company being monitored, reading the publications makes it possible to reconstruct the life of the plan: adopted, possibly amended, sometimes not complied with and then terminated. This is a useful indicator for a supplier who wants to know whether the company is actually paying its debts.
Frequently asked questions
What is the difference from a sale plan?
A reorganization plan keeps the company alive with its management, whereas a sale plan sells the business to a buyer. The former spreads out the debt, the latter settles it with the proceeds of the sale, and the original company is then generally liquidated.
What happens if the plan is not complied with?
The court may order the termination of the plan, most often at the request of the court-appointed agent or a creditor and after the opinion of the supervising judge. The termination is published in the BODACC and the company then switches to a new proceeding, generally a judicial liquidation.
Do the creditors have to accept the plan?
They are consulted when creditors' committees are formed, and the court then approves the plan taking into account the write-offs accepted. Where the committees are not formed or in the absence of an agreement, the court itself sets the time limits and the write-offs, within the limits provided for by the legislation.