Major changes were inserted into French insolvency law earlier this year which came into effect July 1. Some of these changes were subject to further decrees that were to be adopted. One of the changes, namely the restriction of the faculty for creditors to offload all of their restructuring related advisory fees on the debtor have been set.
This was done by decree (“arrêté”) of the Minister of Justice on July 25, 2014, officially published on July 30, 2014.
Prior to the reform bill, French debtors as in many other jurisdictions used to be charged with most if not all of creditors’ advisory fees in relation to “mandat ad hoc” and “conciliation” procedures, i.e. generally those related to the cost of IBRs, negotiating and drafting moratoriums and other agreements with the debtor in order to favor the latter’s turnaround.
The reform on this point appeared interesting as a fee allocation was to be fixed by decree, i.e. the decree mentioned above which was published after the reform bill came into force.
On this issue, the decree of July 25, 2014 appears rather disappointing from a debtor’s perspective as it sets the maximum amount of advisory fees that can be borne by debtors at 75% of these fees. It remains to be seen whether this is the first step towards later amendments concerning this fee allocation.
Read the full article originally published in the July issue of INSOL (PDF) for further details on this point and for a presentation and comments on other relevant points of the French insolvency reform.