COVID-19 France - the new temporary 'crisis exit treatment' procedure for SMEs

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Background

The crisis exit treatment procedure has been introduced to provide a temporary judicial procedure for debtors encountering difficulties related to the pandemic and the financing of their activities. This excludes debtors that are structurally in distress.

The procedure enables debtors to adopt a repayment plan within a three-month period to resolve the company's financial difficulties. The procedure is subject to the rules governing judicial reorganisation proceedings with certain adaptations and exclusions.

The procedure came into force on 18 October 2021 and will apply until 1 June 2023.

Who can apply?

The procedure applies to debtors that are natural or legal persons. However, it is restricted to debtors with:

fewer than 20 employees, and
total liabilities, excluding equity, of less than €3 million.

The procedure's purpose is to restructure the company's debts, which can be of any nature, excluding wage claims.

The debtor must provide a list of its creditors which must be specified by a decree and filed at the Court Registry. The duration of the debtor's plan may be up to 10 years.

If a draft plan cannot be produced within three months, the Public Prosecutor's Office, the judicial representative or the debtor may apply to the court to end the crisis exit treatment procedure and to open a judicial recovery or judicial liquidation procedure.

Key takeaway

Only debts resulting from the pandemic are targeted by this procedure, (eg rent, tax and social debts). The procedure cannot be used to implement a plan to sell the company.