Author
Alfred Fink

Alfred Fink

Partner

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Author
Alfred Fink

Alfred Fink

Partner

Read More

17 April 2020

COVID-19 insolvency emergency measures in France

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The French Government made temporary changes to the insolvency law in order to protect companies, employees and managers from the cash flow consequences of the state of health emergency (Government order dated 27 March 2020 (No. 2020-341)).

When a debtor is in cessation of payments, it generally has 45 days from the 'cash-flow insolvency' to file for insolvency. The Government decided that the cash-flow insolvency of an enterprise shall be assessed based on its status on 12 March 2020 or the time of the expiry of the state of health emergency increased by three months.

Hence, the company will not have to file for insolvency if the 45 days have not expired at 12 March 2020 or may apply for the opening of a preventive procedure (even though it is in a cash-flow insolvency at that point in time) in order to be assisted in negotiations with creditors to agree on the reorganisation or rescheduling of debt. Moreover, creditors are not entitled to force the company into juridical insolvency proceedings.

The opening of an insolvency procedure may be necessary if it does not have sufficient funds to cover its current expenses and wishes to benefit from protective measures, like the assumption of unpaid salaries by the Wage Guarantee Insurance Association (AGS) and the freeze of its former debts. The governmental order permits debtors to file a cash-flow insolvency and any auxiliary document electronically or by post at court.

The mandatory periods of ongoing insolvency procedures are extended until 1 month after the expiry of the state of health emergency:

  • The continuation or safeguard plans implemented during the state of health emergency may be extended by the court until 3 months after its expiry or even by 1 year at the request of the public prosecutor's office.
  • Ongoing conciliation procedures are extended by 3 months after the expiry of the state of health emergency; as such, companies may resume their negotiations with their creditors and partners taking into consideration the consequences of the health crisis.
  • The following deadlines are automatically extended for the duration of the state of health emergency plus 1 month: deadlines relating to the observation period (ie the period available to develop an exit plan in safeguard and judicial recovery proceedings), deadlines relating to the implementation of safeguard plans, recovery plans and asset sale plans approved following the exit of safeguard or judicial recovery proceedings, the deadlines relating to continuing operations when judicial liquidation proceedings are pending, and the duration of simplified liquidation proceedings.
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