Temporary adaptations in corporate law in France

IN-DEPTH ANALYSIS

Temporary adaptations were made by three orders issued, on the basis of the legislative authorization granted by Article 11 of law n° 2020-290 of 23 March 2020 of emergency to face the COVID-19 epidemic, and published in the Official Gazette on 26 March 2020:

Order n° 2020-318 of 25 March 2020 adapting the rules relating to the establishment, decree, audit, review, approval and publication of annual accounts and other documents and information that legal persons and entities without legal personality under private law are required to file or publish in the context of the COVID-19 epidemic JORF n°0074 of 26 March 2020 text n°41;
Order n° 2020-321 of 25 March 2020 adapting the rules of meeting and deliberation of the general meetings and governing bodies of legal persons and entities without legal personality under private law due to the COVID-19 epidemic JORF n°0074 of 26 March 2020 text n°47;
Order n° 2020-306 of March 25, 2020 relating to the extension of the time limits during the period of health emergency and the adaptation of procedures during this same period. JORF n°0074 of 26 March 2020 text n°8.

A practical guide "Keeping your general meeting and respecting accounting deadlines in the context of the COVID-19 crisis" was also published by the Ministry of the Economy on 26 March 2020 [1] in order to assist companies in the application of these measures.

These three orders provide temporary and exceptional derogations that will help companies to operate more securely in the context of the COVID-19 crisis, particularly in terms of corporate law.

The adaptation measures are as follows :

Topics	Measures
Annual accounts/ Approval of annual accounts in dual form public limited companies “société anonyme or SA de forme duale” (with a management board “Directoire” and a supervisory board “Conseil de Surveillance”)	Extension by three months of the three-month period (as from the end of the financial year) given to the management Board to present the annual and the management report to the supervisory board. These provisions are applicable only to dual form public limited companies “société anonyme or SA de forme duale ”(i.e., with a management board and a supervisory board) closing their annual accounts between 31 December 2019 and the expiration of a period of one month after the date of cessation of the state of health emergency declared by Article 4 of the aforementioned law n° 2020-290 of 23 March 2020. However, this extension does not apply to companies that have appointed a statutory auditor when the latter has issued his report on the annual accounts before 12 March 2020. Consequently, in a dual-form public limited company closing its annual accounts on 31 December 2019, the management board, which must in principle present the annual accounts to the supervisory board within three months of the closing, may be held until 30 June 2020.
Annual Accounts / Approval of annual accounts in all legal persons or entities without legal personality under private law	Extension by three months of the legal, regulatory and statutory deadlines for approving the annual accounts (and attached documents) and calling the annual general meeting. These provisions are applicable only to legal entities and entities without legal personality under private law closing their annual accounts between 30 September 2019 and the expiry of a period of one month after the date of cessation of the state of health emergency declared by article 4 of the law n° 2020-290 of 23 March 2020. However, this extension does not apply to legal persons and private law entities that have appointed an auditor when the latter has issued his report on the annual accounts before 12 March 2020. The statutory deadlines for the approval of the annual accounts (e.g. imposed in the articles of association of an SAS) are also concerned by this extension. Consequently, for companies closing their annual accounts on 31 December 2019 that are required to approve their annual accounts within 6 months of the closing date, they have until 30 September 2020 to do so.
Establishment of provisional management documents in commercial companies subject to the provisions of Article L.232-2 of the French Commercial Code	Extension by two months of the four-month period imposed on the board of directors, the management board or the managers, in commercial companies which, at the end of a financial year, have 300 or more employees or whose net turnover is equal to or greater than 18 million euros, to establish a situation of realizable and available assets, excluding operating values, and of liabilities due and a forecast income statement, a cash flow statement together with the annual balance sheet and a forecast financing plan. These provisions are applicable to documents relating to the accounts or to the half-yearly accounts closed between 30 November 2019 and the expiry of a period of one month after the date of cessation of the state of health emergency declared by Article 4 of the Act of 23 March 2020. As a result, commercial companies closing on 31 December 2019 and subject to the provisions of Article L.232-2 of the French Commercial Code will be able to draw up their provisional management documents until 30 June 2020.
Formalities for filing annual accounts (and related documents) applicable to commercial companies and required by Articles L.232-21 et seq. of the French Commercial Code	The third order dated 25 March 2020 n°2020-306 mentioned above extended the time limits for acts, appeals, legal action, formalities, registration, declaration, notification or publication if these acts are imperatively prescribed and must be carried out between 12 March 2020 and the expiry of a period of one month from the date of cessation of the state of public health emergency declared under the conditions of Article 4 of law n° 2020-290 of 23 March 2020 (i.e. between 12 March 2020 and 24 June 2020 unless the state of public health emergency is extended) (the "Application Period "). The actions referred to above are extended as from the end of the Application Period, for the duration that was legally stipulated, within the limit of two months. Thus the act or formality, the term of which expires during the Application Period will not be considered as late, if it is carried out within the legal deadline set from the end of the Application Period (i.e. from 24 June 2020 unless extended), within the limit of two months. Consequently, the deadlines for the formalities for filing annual accounts at the commercial registry benefit from an additional period of one month from the end of the Application Period (or two months if such filing is made by electronic means), if it expires during the Application Period. However, it is still possible during the period of health emergency to carry out the formalities online at www.infogreffe.fr.
Adaptation of the rules of participation in general meetings	If the general meeting is convened in a place affected on the date of the convening notice or on the date of the meeting by an administrative measure limiting or prohibiting collective gatherings for health reasons, the body competent to convene it or the legal representative acting on delegation from that body may decide that the general meeting will be held without the members or persons entitled to attend (such as the auditor or representatives of staff representative bodies) being present physically or by telephone or audiovisual conference. In this case, members shall participate or vote at the meeting in accordance with the other terms and conditions provided for by the texts that govern it, as amended and supplemented, as the case may be, by this order (for example: sending a proxy, remote voting, video-conferencing or telecommunications means). Decisions are then regularly taken. The members of the meeting and other persons entitled to attend shall be notified by any means that ensures that they are effectively informed of the date and time of the meeting and of the conditions under which they may exercise all the rights attached to their membership or to their right to attend. This type of measure does not affect the voting rights of shareholders, their right to information, the right to ask written questions or to request the inclusion of questions on the agenda if necessary. These measures are temporary and apply to shareholders' meetings held from 12 March 2020 until 31 July 2020, unless extended until a later date set by decree and no later than 30 November 2020.
The use of videoconferencing is facilitated to allow members to participate in meetings, regardless of any statutory clauses that might limit its use	Without a specific clause in the articles of association (or in the issuance contract for bond meetings) being necessary for this purpose or being able to oppose it, the body competent to convene the meeting or the legal representative acting on delegation from this body may decide that the members of the meetings who participate by means of a telephone or audiovisual conference allowing their identification are deemed present for the calculation of the quorum and the majority. Other persons entitled to attend meetings may attend by the same means. It is specified that the technical means used must transmit at least the voice of the participants and satisfy technical characteristics allowing the continuous and simultaneous retransmission of the deliberations. The use of a simple conference call should meet these conditions. As an exception to the preceding paragraph, for meetings subject to the provisions of II of Article L. 225-107 of the French Commercial Code (meetings of public limited companies) or of Article L. 228-61 of the same code (meetings of bondholders), the nature of the technical means allowed and the conditions of application of the preceding paragraph shall be those determined by thedecree of the Conseil d’Etat provided for in the said articles (Article R225-61 et seq. of the French Commercial Code). These provisions are applicable regardless of the subject matter of the decision on which the meeting is called to vote, including meetings relating to the approval of the financial statements or extraordinary meetings). These measures are temporary and apply to shareholders' meetings held from 12 March 2020 until 31 July 2020, unless this period is extended to a later date set by decree and no later than 30 November 2020.
Easing the use of written consultation for decision-making in general meeting	Where the law provides that decisions of the meetings may be taken by written consultation of their members, the body competent to convene the meeting or the legal representative acting on delegation from that body may decide to make use of this option without a specific clause in the articles of association or in the issuance contract (for bondholders meetings) being necessary for this purpose or being able to oppose it. These provisions are applicable regardless of the purpose of the decision on which the meeting is called to vote, including meetings held to approve the financial statements or extraordinary meetings). These measures are temporary and apply to shareholders' meetings held from 12 March 2020 until 31July 2020, unless this period is extended to a later date set by decree and no later than 30 November 2020.
Rules applicable to collegiate, administrative, supervisory or management bodies	Without a specific clause in the articles of association or the internal regulations being necessary for this purpose or being able to oppose it, are deemed to be present at the meetings of the collegiate administrative, supervisory or management bodies, their members who participate in them by means of a telephone or audiovisual conference allowing their identification and guaranteeing their effective participation. It is specified that these means must transmit at least the voice of the participants and satisfy technical characteristics allowing the continuous and simultaneous retransmission of the deliberations. The use of a simple telephone conference should meet these conditions. Furthermore, decisions of the collegiate administrative, supervisory or management bodies may be taken by written consultation of their members under conditions that ensure collegial deliberation, without any specific clause in the articles of association or the internal rules of procedure being necessary for this purpose or being able to oppose it. These provisions shall apply whatever the subject of the decision on which the body is called upon to take a decision. These measures are temporary and apply to meetings of the collegial administrative, supervisory and management bodies held from 12 March 2020 until 31 July 2020, unless this period is extended until a later date set by decree and no later than 30 November 2020.
Extension of time limits during the period of health emergency likely to have an impact on the conduct of a number of corporate law transactions	Pursuant to Article 2 of the aforementioned Order No. 2020-306 of 25 March 2020, "any act, appeal, legal action, formality, registration, declaration, notification or publication prescribed by law or regulation, on pain of nullity, sanction, lapse, foreclosure, prescription, unenforceability, inadmissibility, lapse, automatic withdrawal, application of a special regime, nullity or forfeiture of any right whatsoever" and which should have been completed between 12 March 2020 and the expiry of a period of one month from the date of cessation of the state of public health emergency declared under the conditions of Article 4 of law n° 2020-290 of 23 March 2020 (i.e. between 12 March 2020 and 24 June 2020 unless the state of public health emergency is extended) (the "Application Period") will be deemed to have been completed on time if it is completed within a period which may not exceed, as of the end of the Application Period, the legally prescribed period for taking action, up to a limit of two months. The time limits are therefore extended as from the end of the Application Period, for the duration that was legally required, within the limit of two months. Thus the act or formality, the term of which expires during the Application Period, shall not be considered late if it is carried out within the additional period of time of the legal deadline set as from the end of the Application Period, within the limit of two months. In practice, this concerns the deadlines for objections that may be filed by creditors with the Commercial Court in the context of company restructuring operations decided before 12 March 2020 or during the period of health emergency, such as, for example, a capital reduction not motivated by losses, a merger, a dissolution without liquidation (TUP) in accordance with the provisions of Article 1844-5 paragraph 3 of the French Civil Code, etc. This suspension of opposition periods thus delays the possibility for shareholders or managers to acknowledge the definitive completion of restructuring operations (implying an opposition period for the company’s creditors) decided before 12 March 2020 or during the period of health emergency.