Insolvency & restructuring

A distressed company can opt to negotiate an out-of-court settlement with one or more essential creditors under the supervision of a judge appointed by the court. The company can choose which creditors it will negotiate with, without having to involve all its creditors in the out-of-court settlement.

Where the company opts for a collective agreement, it will have to submit a reorganisation plan to its creditors, the aim being to repay all or part of its outstanding debts over a period of up to five years. The court will set a date for the approval of the reorganisation plan, which must be approved by the majority of the creditors representing at least half of the outstanding claims. Once approved by the creditors, the reorganisation plan will be ratified by the court. After ratification, the plan will be binding on all creditors, including those who abstained or dissented.

In order to give a financially distressed company the opportunity to transfer its divisions or activities that are still profitable, all or part of the company may also be transferred as part of a court-supervised reorganisation procedure. A crucial element here is that the debtor can sell the profitable activities of the company in order to rescue another part of the business. The transferee, for its part, is safeguarded against all risks associated with the transferor company.