Faced with an unprecedented crisis and completely exceptional measures (confinement, restriction of economic activities to essential day-to-day needs, etc.), the economic fabric is being severely tested.
Two types of responses are available to company leaders – one economic, the other structural.
From an economic perspective, the French government reacted quickly with a range of emergency measures, including the option for companies to suspend payments of their main tax and social security liabilities, easier use of short-time working and potential tax relief for SMEs in difficulty.
As a continuation of these measures, the government has announced that, in addition to suspending their taxes and social security contributions, payment of bills for water, gas, electricity and rent will very soon be suspended for SMEs in difficulty. It is not yet known how this will be implemented.
In practice, this should substantially improve these companies’ cash flow to enable them to tackle the crisis.
As well as this “liabilities freeze”, BPI has indicated that it is ready to provide companies with financial support (guaranteeing companies’ commitments, awarding finance, etc.). The finance bill (Art. 4) sets a total budget of €300 billion for guarantees to be awarded by BPI for loans granted to non-financial companies by credit institutions between 16 March and 31 December 2020. This effort is being supported by local banks under the aegis of the French Banking Federation (FBF – Fédération Bancaire Française).
From a structural perspective, there is no indication to date that existing legal measures available to companies to address their difficulties will be suspended or modified.
Amicable procedures for dealing with difficulties remain available, such as special mediation (mandat ad hoc) and conciliation. These are procedures implemented at the request of the head of the company and undertaken by a professional appointed by order of the President of the court. That professional, either a special mediator or conciliator, is responsible for initiating discussions with the company's partners (banks, suppliers, tax authorities, URSSAF, etc.) in order to find a solution to overcome the difficulties.
For the largest companies (400 or more employees), these negotiations may be organised collectively under the supervision of the Interministerial Committee for Industrial Restructuring (CIRI – Comité Interministériel à la Restructuration Industrielle).
Similarly, legal procedures (safeguard proceedings, court-ordered receivership or winding-up) still appear to be available to companies in difficulty. However, initiating such procedures is likely to prevent the debtor company from benefiting from the exceptional €300 billion guarantee.
Emerging from the crisis will certainly be the real challenge from an economic perspective. Will companies be sufficiently resilient to finance the recovery of their business as well as pay off the “frozen liabilities” from the crisis period? The BPI coverage period is already focusing on providing support for this emergence from the crisis, since the aim is to grant loans until 31 December 2020, it being specified that eligible loans must include a deferred repayment period of at least 12 months.
Finally, the government is fully assuming its responsibilities and appears not to have ruled out any options, potentially even including nationalisation of flagship French companies if necessary. However, it is more likely that the State's intervention as a shareholder will be via the acquisition of holdings to be managed by BPI.
Naturally, the Restructuring team at CMS Francis Lefebvre Avocats is fully committed to providing you with any assistance necessary. It can do this by drawing at any time on our firm’s wide range of skills (in tax law, labour law, contract law, corporate law, real estate law, etc.).
We will keep you informed of all the latest news in this respect.
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