Presentation of Order N° 2020-341 of 27 March 2020 adapting the rules for companies in difficulty in light of the health crisis

The French government, using the powers conferred upon it by law n°2020-290 of 23 March 2020 to counter the Covid-19 epidemic urgency, adopted order n°2020-341 of 27 March 2020 in order to adapt the rules for companies in difficulty in the light of the health crisis (the “Order”).

The Order was supplemented by a circular of the Ministry of Justice n°CIV/03/20 dated 30 March 2020 (the “Circular”).

This note presents the principal provisions of the Order which are intended to adapt the rules applicable to not only conciliation proceedings but also collective proceedings in the light of the consequences of the health crisis linked to Covid-19.

This note does not cover aspects of the Order relating to agricultural business and criminal proceedings.

1. PROVISIONS RELATING TO THE ADAPTATION OF CONCILIATION PROCEEDINGS

1.1 Automatic extension of the duration of current conciliation proceedings

Until the expiry of 3 months after the date the health crisis is meant to have finished, which means at present until 24 August 20201, the duration of current conciliation proceedings is automatically extended for a period equal to that of the health crisis plus 3 months (which means in effect extended by a period of 5 months)2.

1.2 Removal of the three month interval between two successive conciliation proceedings

Until the expiry of 3 months after the date the health crisis is meant to have finished, which means at present until 24 August 2020, the Order removes the 3-month interval between two successive conciliation proceedings3, so that a second conciliation proceeding can start immediately after the failure of a first conciliation proceeding.

2. PROVISIONS RELATING TO THE ADAPTATION OF COLLECTIVE PROCEEDINGS

2.1 Assessment at 12 March 2020 of the debtor having ceased to make payments

Until the expiry of 3 months after the date the health crisis is meant to have finished, which means at present until 24 August 2020, the relevant date at which cessation of payments by a debtor is to be assessed is 12 March 20204.

This crystallisation of a debtor’s position at 12th March 2020 allows a company to benefit from protective proceedings (proceedings for a mandat ad hoc, for conciliation and for sauvegarde) even if after 12 March 2020 and during the period of the health crisis plus 3 months the company in question experiences a downturn in its position such that it would have been in cessation of payment5.

However the debtor (and only the debtor) may at any time apply for the opening of redressement judiciaire or liquidation judiciaire proceedings if the cessation of payments occurs during the period of the health crisis (which would in particular allow the company to benefit from the cost of salaries being taken over by the AGS6).

Retaining 12 March 2020 as the relevant date for assessment of cessation of payments has been designed with the interest of the debtor in mind, so as to avoid in particular (i) members of the management incurring personal liability for having delayed in declaring the cessation of payments or (ii) that the debtor should be subject to a redressement or liquidation judiciaire proceeding initiated by a creditor or a state official due to the cessation of payments having occurred during the period of the health crisis.

However one needs to bear in mind the risk of fraud on creditors’ rights, either on the part of the debtor or on the part of other creditors, which explains why provisions relating to void transactions during the suspect period have been maintained.

2.2 Adaptation of the duration of Collective Proceedings

(a) Extension as of right of certain time periods

Until the expiry of 3 months after the date the health crisis is meant to have finished, which means at present until 24 August 2020, the Order extends as of right certain time periods without the need to file a request, to hold a court hearing or to deliver a judgment.

(i) Extension of the observation period

The duration of the observation period is extended as of right by a period equal to that of the health crisis plus one month (which means in effect extended by a period of 3 months); as a result no application for extension is needed (i) after the first 6 months by the debtor, the judicial administrator or a state official and (ii) beyond the first 12 months by a state official.7

(ii) Extension of the duration of sauvegarde and redressement plans

The duration of sauvegarde and redressement plans are extended as of right by a period equal to that of the health crisis plus one month (which means in effect extended by a period of 3 months); in addition to this extension a judicial extension is also possible (see 2.2.b below)8.

(iii) Extension of the duration of the period of liquidation judiciaire whilst carrying on business

The duration of the period of liquidation judiciaire whilst carrying on business (in principle of 3 months extendible by a further 3 months) is extended as of right by a period equal to that of the health crisis plus one month (which means in effect extended by a period of 3 months)9.

(iv) Extension of the duration of the period of simplified regime of liquidation judiciaire

The duration of the period of simplified liquidation judiciaire (in principle of 6 months or one year, extendible by a further 3 months) is extended as of right by a period equal to that of the health crisis plus one month (which means in effect extended by a period of 3 months)10.

(b) Extension on a case by case basis of time periods imposed by court process

The Order covers the risk of court process not being able to comply with normal time periods.

The Order provides that during the period of the health crisis extended by 3 months (which means in effect to 24 August 2020), the President of the court may decide on application by a judicial administrator, a mandataire judiciaire, a liquidateur or a commissaire à l'exécution du plan that the time periods imposed on these officers may be extended by a period equal to that of the health crisis plus 3 months (which means in effect extended by a period of 5 months)11.

It is for the President of the court to decide, on a case by case basis, to what extent these exceptional circumstances justify extending these time periods.

(c) Removal of the hearing to decide on continuing the observation period

During the period of the health crisis plus one month (which means in effect until 24 June 2020), there will be no hearing, within the two months of the judgment initiating the proceedings, to decide on continuing the observation period12.

This adaptation does not prevent an application being made to the court, where appropriate, to convert the proceedings.

(d) Judicial extension of sauvegarde and redressement plans on application by the commissaire à l'exécution du plan and/or the state official

During the period of the health crisis plus 3 months, the President of the court may, on application of the commissaire à l’exécution du plan, extend a plan for sauvegarde or redressement by a period equal to that of the health crisis plus 3 months (which means in effect extended by a period of 5 months)13. During this period, a state official may also apply to the President of the court to extend a plan for sauvegarde or redressement for a maximum period of one year14.

During the period of 6 months after the expiry of the health crisis plus 3 months, only the court may, on application of the commissaire à l’exécution du plan or a state official, extend a plan for sauvegarde or redressement by a period up to a maximum of one year15.

The Circular provides that these possibilities to extend a plan, even if they are used on a cumulative basis, must be used prudently.

These extensions to the duration of a plan are possible without having to comply with the onerous procedure to allow a substantial amendment to a plan initially agreed by the court, although this procedure is still possible.

2.3 Facilitation of the assumption by AGS of the cost of salaried employees' wages and compensation

Two measures have been taken to facilitate the assumption by AGS of the cost of salaried employees’ wages and compensation after the start of collective proceedings.

(a) Speed-up of assumption by AGS of employees' claims

The Order provides that during the period of the health crisis plus 3 months, employee claims arising under an employment contract are sent directly and without delay by the mandataire judiciaire to AGS, without having been previously presented to any representative of the employees and without having been previously approved by the juge-commissaire16.

The Order does not prevent in this process the involvement of the representative of the employees nor the juge-commissaire; it simply allows, without their involvement, delivery of employee claims by the mandataire judiciaire to AGS which speeds up the process of paying out these claims by AGS.

(b) Extending the period within which redundancies must be implemented in order to benefit from the AGS guarantee

Until the expiry of one month after the end of the health crisis (which means in effect until 24 June 2020), the period within which redundancies must be implemented in order to benefit from the AGS guarantee17 are extended by a period equivalent to that of the health crisis plus one month (in effect a period of 3 months)18.

3. PROVISIONS ALLEVIATING THE PROCEDURAL FORMALITIES IN CONCILIATION AND COLLECTIVE PROCEEDINGS

3.1 Alleviation of debtor's application to court

Until the expiry of one month after the end of the health crisis (which means in effect until 24 June 2020):

applications by the debtor to initiate court process may be delivered to the clerk of the court by any means19;

  • the debtor in such an application asks for permission not to appear in person but to make his submissions in writing (Art. 446-1, C. proc. civ.); and
  • where the President of the court has jurisdiction (ie in particular where there is a proceeding for a mandat ad hoc or conciliation) he or she may collect evidence from the applicant by any appropriate means.

3.2 Alleviation of communications between the clerk of the court and the institutions involved in the proceedings

The Order provides until the expiry of one month after the end of the health crisis (which means in effect 24 June 2020) communications between the clerk of the court, the judicial administrator and the mandataire judiciaire with the institutions involved in the proceedings may be carried out by any appropriate means20.

4. DISAPPLICATION OF LOCAL LAW PROVISIONS IN CONCILIATION AND COLLECTIVE PROCEEDINGS

The provisions of local law in Moselle and in the départements of Bas-Rhin and Haut-Rhin are temporally disapplied to facilitate court hearings in conditions which are compatible with the health crisis21.


1The health crisis began on 24 March 2020 for a period of two months (which means until 24 May 2020).
2Art.1, II, amending art. L. 611-6 of the French Commercial Code
3Art. 1er, II, amending art. L. 611-6 of the French Commercial Code
4Art. 1, I of the Order
5Report to the President of the French Republic
6Association for the management of employee claims
7Art. 2, II, 1° of the Order, amending art. L. 621-3 of the French Commercial Code
8Art. 2, II, 1° of the Order
9Art. 2, II, 2° of the Order, amending art. L. 641-10 of the French Commercial Code
10Art. 2, II, 2° of the Order, amending art. L. 644-5 of the French Commercial Code
11Art 2, IV, of the Order
12Art. 2, I, 1° of the Order, amending art. L. 631-15, I of the French Commercial Code
13Art. 1, III, 1° of the Order, amending art. L. 626-12 and L. 631-19 of the French Commercial Code
14Art. 1, III, 1° of the Order, amending art. L. 626-12 and L. 631-19 of the French Commercial Code
15Art. 1, III, 1° of the Order, amending art. L. 626-12 and L. 631-19 of the French Commercial Code
16Art. 1, I, 2° of the Order
17Pursuant to art. L. 3253-8 of the French Employment Code, dismissals must take place, in principle, (i) within the expiry of one month after the judgment of the plan for sauvegarde, redressement or cession, (ii) within the expiry of fifteen days, or twenty-one days when there is an employment protection plan (PSE), after the liquidation order and (iii) during the provisional continuation of the activity authorised by the order for liquidation judiciaire and within the expiry of fifteen days, or twenty-one days when an employment protection plan (PSE) is in the process of being drawn up, after the cessation of the continuation of this activity.
18Art 2, II, 2° of the Order, amending art. L. 3253-8, 2° of the French Employment Code
19Art. 2, I, 2° of the Order
20Art. 2, I, 3° of the Order
21Art 5, II of the Order, amending art. R. 670-1 of the French Commercial Code


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