Bankruptcy Law in France offers several processes to companies depending on the level of difficulties they are encountering:
>> It goes from Amicable procedures (mandate ad hoc, conciliation) to actual court-monitored procedures (procedure de sauvegarde, redressement judiciaire, liquidation judiciaire).
>> A company may request the benefit of the Safeguard Procedure (procedure de sauvegarde) whenever it is encountering difficulties that it is capable to overcome by itself. At that stage, the company should be yet insolvent.
>> Insolvency is defined by article L. 631-1 of the Commercial Code as a situation where a company is unable to settle the accrued current liabilities with its available assets. At that stage, it should declare its state of cessation of payments and request the benefit of the Rehabilitation Procedure (redressement judiciaire).
Both the Safeguard Procedure and the Rehabilitation Procedure allow the company to restructure its liabilities through either a restructuring plan or a partial or total sale of its assets.
>> Whenever the situation of the company is totally jeopardized and that no restructuring will permit to save the company, the Court may decide to open a Judicial Liquidation Procedure (liquidation judiciaire).
The French Parliament took on March 23rd an Emergency Law (Loi n° 2020-290 du 23 mars 2020 d’urgence pour faire face à l’épidémie de covid-19).
Article 11 of the law authorizes the government to adopt emergency measures to sustain the economy through executive orders (ordonnances, décrets, arrêtés) among which measures relating to the adaptation of bankruptcy law due to the current situation.
Article 11 details all the measures taken to sustain the economy, among which the possibility for the government to issue an executive order to adapt the commercial code with regards with bankruptcy procedure to take into account the impact of the sanitary crisis on corporations.
We understand that around 40 Ordonnances should be published in the coming days to detail each one of the issues. One of them should deal with bankruptcy. Publication in the Official Journal (journal officiel) of said Ordonnances started on March 26th.
Note that the Law also confirms measures already taken by the Ministry of Justice to postpone any legal proceedings. Only urgent matters are currently dealt with by French courts.
As commercial courts are closed, ailing companies cannot currently request the opening of any bankruptcy procedure. An executive order should be released on that specific issue in the coming days, in order to assist companies who need urgently to protect their assets and be placed under the protection of these procedures.
In the meantime, a toll-free number (0 800 94 25 64) has been set up by the Ministry of Economy and the public officers in charge of supervising companies under a bankruptcy procedure (Conseil national des Administrateurs judiciaires et les Mandataires judiciaires) to answer any queries regarding the emergency economic measures they may benefit of. These measures are detailed in Questions 3 and 4 here below.
For Paris, we learnt on March 25th that urgent matters are going to be dealt with by the Commercial court:
>> Declarations of cessation of payment to request the opening of a restructuring procedure may be filed electronically
>> Hearings regarding transfer of assets in case of bankruptcy or requests to open an amicable procedure could be fixed.
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