Covid-19 : The government tries to immunize companies in difficulty

April 3rd 2020

We have compiled a practical summary – that we hope will be a more comprehensible version! – of Order no. 2020-341 dated March 27, 2020 relating to the adaptation of the rules concerning the difficulties for companies and agricultural exploitations during the health crisis and modifying certain provisions of the French Criminal Code.

  1. The fixation over time for the cessation of payments – 

  2. Neutralization of the period from March 12 to June or August 24, 2020

  • Freezing of the appreciation of the companies’ situation as of March 12, 2020 with regard to the possible cessation of payments, and through to the expiry of a period of three months after the end of cessation of the health crisis (i.e., until August 24, 2020).

It enables companies to benefit from protective measures or procedures even if, after March 12, 2020 and during the period corresponding to the public health crisis, increased by three months, they encounter an aggravation of their situation, resulting in insolvency.

This provision mainly concerns the conciliation and safeguard procedures. Nevertheless, in this latter case, the debtor (i.e., the company in difficulty) - and only the debtor – may file for receivership or compulsory court liquidation, or for the benefit of a professional recovery, for this aggravation.

The fixation as of March 12, 2020 for considering of the cessation of payments is defined for the debtor’s benefit as this prevents from incurring individual sanctions for a delayed declaration.

Example: a company undergoing insolvency proceedings on March 30, 2020 shall not be considered as insolvent, in accordance with Book VI of the French Commercial Code, and, accordingly, shall not be obliged to file for receivership proceedings at the latest on May 15, 2020 (in principle, a period of 45 days), as its situation shall be considered on March 12, 2020 and on this date, it was not insolvent.

  • Pursuant to Order no.2020-306 dated March 25, 2020 concerning the extension of time periods which provides that the acts stipulated by law must be accomplished between March 12, 2020 and June 24, subject to sanctions (such as the obligation to declare the insolvency), shall be considered to have been made within the statutory periods, if they are made within the statutory period as from June 24, 2020 (a period of one month as from the expiry of the public health crisis). This new Order fully protects the company director in the event of non-compliance with his obligation to declare the insolvency within the 45-day period.

 

  1. The adaptation of the procedural chronological constraints –

  2. Extensions that could be subject to a decision until August 24, 2020

  • Until August 24, 2020 (expiry of the three month time period following the end of the health crisis), the salary claims may be communicated by the court officers to AGS (salary guarantee scheme) without first being presented before the employee representative and without first being approved by the bankruptcy judge; nonetheless, such claims will have to be subsequently submitted.
  • Until August 24, 2020 (and since March 29, 2020, date of the Order), i.e., for a total period of four months and 25 days, the conciliation procedures may be extended. Over the same period, it is possible to cumulate several conciliation periods without complying with the three-month consideration period.
  • Until August 24, 2020, the duration of the safeguard and receivership plans may be extended
- for a period of four months and 25 days, upon an order by the President of the Court, referred to upon petition by the bankruptcy officer;
 
- for a period of one year, upon an order by the President of the Court, referred to upon petition by the public prosecution department.
 

After this period (August 24, 2020) and within a period of six months (i.e., until February 24, 2021), the safeguard and receivership plans may be extended for a maximum period of one year, upon petition by the bankruptcy officer or the public prosecution department.

  • Until August 24, 2020, the President of the Court may extend the time periods set by the court receiver or bankruptcy officer for a period of four months and 25 days.

 

  1. The relaxation of formalities –

  2. Period from March 29 to June 24, 2020

  • Until June 24, 2020

- The recall of the receivership files before the Court within a two-month period, to order the continuation of the observation period, is no longer applicable (Article L. 631-15 I of the French Commercial Code).

- The debtor’s referral before the Court or the President of the Court shall be made upon issuance of the act before the Court registry with a certificate mentioning that he shall not attend the hearing and that he shall file his claims and grounds in writing (Article 441-6 of the French Code of Civil Procedure).

- The communications between the Court registry, official receiver and bankruptcy officer and between the procedural authorities shall be made by any means.

  • The observation periods, safeguard plans, the periods of continuation of activity during compulsory liquidation and the simplified compulsory liquidation proceedings pending shall be extended until June 24, 2020i.e., two months and 25 days after the date stipulated in the Order.
  • AGS warranty periods shall be adjusted accordingly with the extensions of the observation periods, safeguard plans and the periods for the continuation of activity during the compulsory court liquidation proceedings.

The Order shall apply to the current proceedings.

 

Faye Tadros & Charles Herzecke