R&I update - April 2020
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: