Home / Publications / COVID-19 | is article 61-1 of the Commercial Code...

COVID-19 | is article 61-1 of the Commercial Code becoming a sanctuary?

Bill No 1014 : A variable geometry "moratorium" for banks

24/04/2020

The former draft bill has become a full-fledged bill aiming at adapting, exceptionally and temporarily, Monegasque law to the effects of the COVID-19 pandemic, and has now been put on the desk of the National Council (the Monegasque Parliament).

This bill contains exceptional derogatory provisions that may affect the banks' prerogatives to approve commitments made by their clients to their establishments: 

  • a suspension (also called "moratorium") of the execution of certain contractual clauses applicable in the event of non-performance by the contracting party (penalty clauses, termination clauses, forfeiture clauses) is envisaged;
  • the creditor's prerogatives will therefore be "blocked" for a period between 18 March and 18 June 2020 (possibly extendable).

But this bill also seeks to turn article 61-1 of the Commercial Code into a sanctuary. 

Subject to the review of the final version of the Act which should soon be voted by the National Council:

  • a default in payment of the guaranteed debt on the due date would thus allow the pledge to be executed under the usual conditions; but also 
  • an unsuccessful margin call would still allow the creditor, where provided for in the contract, to terminate the agreement and require an early repayment from the debtor and thus, subsequently, to execute his pledge.

These exceptional derogations would apply retroactively to 18 March 2020 for a period of three months from that date, which may be extended.

This bill must now be debated before the National Council. 

Authors

Olivier Marquet
Olivier Marquet
Avocat Associé | Managing Partner
Monaco
The picture of Michael Dearden
Michaël Dearden
Middle Associate
Monaco
The picture of Gautier Barat
Gautier Barat
Senior Associate
Monaco