France's New Fast-Track Safeguard Law

• Published in: American Bankruptcy Institute journal Vol. 30; no. 2; p. 30
• Main Author: Gallagher, Adam
• Format: Journal Article
• Language: English
• Published: Alexandria American Bankruptcy Institute 01.03.2011
• Subjects: Bankruptcy laws; Creditors; Debt restructuring; Enforcement; Insolvency; Mediation; Moratoriums; Proposals; Reforms; Stockholders; France
• ISSN: 1931-7522

Safeguard is rooted in the philosophy of French insolvency law, which is to preserve the continuity of business and employment rather than creditor's rights. It is often criticized (usually by financiers) for tipping the balance of interests between the stakeholders in business too far away from the providers of capital, and for allowing the management and sponsors of a failing debtor to avoid their debt obligations too easily. Safeguard was introduced in 2005 and was given its first successful large-scale international road test in the Eurotunnel case, which gave rise to reforms of the safeguard regime at the end of 2008. The latest 2010 reform described in this article makes the implementation of pre-agreed restructurings, or pre-packs, easier by introducing an accelerated safeguard timetable with a modified regime for the consultation of creditors. The new procedure is a positive step forward, but does not go as far as it should, possibly because it was introduced and passed too quickly.