A supplier delivers goods to a company that has been under protection for two weeks. The invoice remains unpaid. Will this supplier be treated like the previous creditors, forced to wait for the plan and endure potential delays or discounts? Not necessarily. The mechanism of privileged claims provided by the commercial code specifically protects partners who continue to support the business after the opening of the collective procedure.
Procedure Privilege: What the Date of the Opening Judgment Changes in Practice
We often think in terms of “pre-existing claims” and “post-existing claims,” but the dividing line deserves to be understood in detail. The date of the opening judgment (protection, recovery, or judicial liquidation) sets the threshold. Any claim that arises regularly after this date can claim privileged treatment, provided it meets the criteria set by Article L 622-17 of the commercial code.
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In practice, we distinguish three categories of eligible claims:
- Claims arising for the needs of the procedure itself (legal fees, fees of the administrator or judicial representative)
- Claims arising in exchange for a service provided to the debtor during the observation period or during the continuation of activity in liquidation
- Claims arising for the needs of the debtor’s daily life (individual)
Only these “useful” post-existing claims benefit from the privilege. A claim arising after the judgment but without a link to the continuation of activity or the conduct of the procedure falls back into the common regime and must be declared in the liabilities.
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Privileged Claims and Payment Ranking: Who Comes Before Whom
The privilege of Article L 622-17 is not limited to a vague right to be paid “first.” The text organizes a precise order of payment among privileged post-existing creditors themselves, and in relation to creditors with prior securities.
Ranking Among Post-Existing Creditors
Within the claims benefiting from the privilege, the commercial code establishes a hierarchy. Super-privileged salary claims come first. Next are the legal fees related to the procedure, followed by loans granted by a credit institution and claims resulting from the execution of ongoing contracts.
Returns vary on how jurisdictions handle competitions among creditors of the same rank, especially when the available assets are insufficient to satisfy all. In this case, a pro-rata distribution is applied among creditors of the same category.
Against Prior Securities
The procedure privilege takes precedence over prior unsecured creditors without difficulty. In the case of a secured creditor or pledgee, the situation is more nuanced. The text provides that the privilege of post-existing claims takes precedence over the movable and immovable securities of prior creditors, except for exceptions provided for certain published real estate securities.
2021 Ordinance and Impact on the Treatment of Post-Existing Claims
Ordinance No. 2021-1193 of September 15, 2021, transposing the European directive “Restructuring and Insolvency,” has revised the wording of Article L 622-17. The main objective: to better articulate the procedure privilege with the new restructuring tools introduced into French law.
Among the notable adjustments, there is a rapprochement between the privilege of Article L 622-17 and the treatment of new financing encouraged by Directive 2019/1023. The privilege now also serves as an incentive for post-opening bank support, and not just as a distribution mechanism. In clear terms, a credit institution that agrees to finance the company during the observation period knows that its claim will be protected.
This “pro-financing” positioning changes the game for practitioners. The judicial administrator negotiating a bridge loan can rely on this privilege to convince the bank to intervene.
Common Trap: Claims Arising After the Adoption of the Plan
A point that regularly leads to litigation concerns claims arising after the adoption of a recovery plan. The case law has ruled: these claims cannot be considered privileged claims under Article L 622-17. The privilege covers the observation period and, if applicable, the phase of maintaining activity in liquidation, but not the phase of executing the plan.
For a supplier, the practical consequence is direct. Delivering goods to a company under a recovery plan does not confer any particular privilege. One finds oneself in the common law of obligations, with the usual risks of non-payment.
- During the observation period: the claim arising from a service provided benefits from the privilege if it is useful to the procedure or to the continuation of activity
- During the execution of the plan: the claim no longer benefits from the privilege of Article L 622-17, even if it arises from an ongoing contract
- In case of resolution of the plan and opening of a liquidation: claims arising during the execution of the resolved plan regain specific treatment but distinct from the initial privilege
The distinction between the observation period and the execution of the plan remains the main point of vigilance for any creditor who continues to work with a struggling company. Checking the procedural phase before each commercial commitment allows for a proper assessment of the level of protection one will have in case of non-payment. The privilege of Article L 622-17 protects those who support the activity at the moment it needs it most, not beyond.