Apart from the financial measures detailed at Question 3, the management of a company in France can take several measures if it is affected by the Corona crisis.

Measures to protect health and safety of employees, and contain the effects of the downturn:

The management of a company has many options: teleworking, short time working and.

>> Teleworking

According to the Article L. 1222.11 of French Labor code, the employer in the case of an epidemic can impose the teleworking without the employee’s consent.

>> Short-time working

According to the article L. 5122-1 of French Labor code, the employer can use the short time working for its employees.

The Emergency Law (Loi n° 2020-290 du 23 mars 2020 d’urgence pour faire face à l’épidémie de covid-19) permit the French Government to take news measures to simplify and to reinforce the use of short-time working.

A draft decree is currently being prepared; notably to extend, from 6 to 12 months, the duration during which a company can recourse to short-time working.

The Labor Law Code provides that for companies with more than 50 employees, implementation is subject to prior information and consultation of the Social and Economic Council (works council) of the companies. If the company does not have an ESC, the employer must inform the employees.

A request for a partial activity must be formalized through an application to be filled in on the administration website (Direction Regionale des Entreprises, de la Concurrence, de la Consommation, du Travail et de l’Emploi, DIRECCTE).

A draft executive order allows companies to bypass the obligation to consult the works council for the time being. Works council shall be informed and consulted with a delay of two months from the date of the request.

Measures to defer rent and water, gas and electricity bills:

The smallest companies eligible for the solidarity fund financed by the State and the Regions may benefit from the possibility to postpone the payment of their rent, water, gas and electricity bills.

Considering the confinement measures in place, approval of the 2019 financial accounts by the Boards and the General assemblies that generally take place in Springtime, is jeopardized. Two executive orders of March 25th (Ordonnance n° 2020-318 and Ordonnance n°2020-321) covering the issue and to adapt the rules for approving the financial accounts:

  • The time limits set by law to the Boards and the General assemblies are extended by three months.
  • The meeting of the administrative, management or supervisory bodies may take place through call or video conference, or through written consultation. An amendment to the status and internal rules is not necessary. However, members must be identified, and their effective participation must be guaranteed.

Measures regarding the capacity to perform contracts

Considering the situation, some companies are unable to perform their contracts for various reasons:

  • They do not receive their supplies from overseas
  • They have to limit their activity in order to be able to comply with the health and safety rules now in place to limit the sanitary risk
  • They are not allowed to continue to work

This incapacity may be temporary and it means that the will not be able to comply with contractual deadlines or definitive if the purpose of performing the contract is going to be definitively lost considering the delay.

To avoid any liability for that matter, companies are currently writing to their counterparts to inform them of their incapacity. Doing so, they may base their lack of performance on different grounds:

  • The first one is the force majeure provision included in most of the contracts by which performance is waived in case an event renders impossible the performance. For that matter, this matter must be external, unpredictable and irresistible.

Depending on the way the force majeure provision was drafted, to invoke the application of this provision should allow companies to waive their liability.

  • In case the impossibility to perform the contract, companies may refer to the principle of performance impediment. In that situation, the cause of the impediment must not have been contemplated at the time the contract was negotiated.

Note that an executive order was adopted on March 25th by which no penalties, penalty clauses, termination clauses and forfeiture clauses provided for in the contracts can apply for the duration of the emergency state and for a month after it is lifted.

Disclaimer: Although this legal summary has been prepared with the utmost care, we do not assume any liability for the content being correct, complete and up to date. Our summary cannot replace legal advice in individual cases. We are at your disposal for specific legal advice.