Vol 21 (2024) - Issue 1

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Formation of Classes of Affected Parties in France: The Takeaways from the Orpea Restructuring and Related Ruling

Synopsis
On 22 June 2023, the Versailles Court of Appeal handed down a decision (the 'Decision') on one of the very first disputes regarding the formation of classes of affected parties under the new scheme, resulting from the transposition of the 2019 European directive on restructuring and insolvency (the 'Directive') into French law under the 2021 ordinance (the 'Ordinance'). As such, the Versailles Court helped structure a scheme that the French legislator largely left open to interpretation.
The Decision was rendered in relation to the restructuring plan of Orpea ('Orpea'), the European leader in the nursing homes and home care services industry, employing more than 75,000 people in 17 countries in 2022. Orpea had filed for a conciliation procedure, and subsequently for accelerated safeguard proceedings ('sauvegarde accélérée') in the wake of the publication of a book accusing it of mistreating the residents of its nursing homes. In addition to Orpea and the bodies appointed by the Court at the start of the accelerated safeguard proceedings, the dispute involved fifteen foreign creditors (mainly investment firms) from five different countries. The Court's position toward the new scheme of classes of affected parties will therefore likely become familiar abroad and considered before investing in France.
The implications of the Decision are particularly important, given that the Court of Appeal's decision is conclusive, insofar as the French Commercial Code rules out seeking recourse before the French Supreme Court on the matter at stake. As such, the Supreme Court cannot rule against an appellate court's decision on the allocation into classes of affected parties. In addition the Court of Appeal ruled on several complex issues, most of which had never been settled by the courts beforehand, with some of these positions still up for debate.
To begin with, the Court of Appeal settled various procedural issues on the available remedies pertaining to the formation of the classes of affected parties (I.).
Secondly, the Court shed light on the allocation of affected parties into different classes of unsecured creditors – in particular as regards the unsecured creditors holding different types of claims, some of which were covered by guarantees (II.). The Court also ruled on the legal classification of the holders (as equity or debt holders) of bonds convertible or exchangeable into shares ('OCEANE'), to decide on their assignment to a specific class, under the new scheme of affected parties (III.) and diverged in this regard from the public prosecutor's position, which is deemed to reflect the State's legal opinion.
Finally, the Decision provides practitioners with guidelines on how French courts shall handle disputes relating to a scheme left largely open to interpretation under the Ordinance (IV.).