The state of health emergency declared by the French law of 23 March 2020 to deal with the COVID-19 epidemic clearly affects the country’s companies. In order to support them in these exceptional circumstances, the government has temporarily adapted the procedures applicable to companies facing financial stress.
1. Crystallization of the state of cessation of payments on 12 March 2020
Order No. 2020-341 of 27 March 2020, adapting the rules relating to the difficulties of undertakings and agricultural holdings to the health emergency and amending certain provisions of criminal procedure (the “Order“) freezes the assessment of the state of cessation of payments of undertakings on 12 March 2020, until the expiry of a period of three months after the date of expiry of the state of health emergency (Article 1, I, 1° of the Order).
As pointed out in the report to the French President of the Republic, this crystallization of situations makes it possible for companies to benefit from preventive measures or procedures – such as conciliation or safeguard procedures – even though they would suffer “after 12 March and during the period corresponding to the state of health emergency plus three months, […] a worsening of their situation such that they would then be in cessation of payments“.
A debtor who was not in a state of cessation of payments for 45 days on 12 March 2020 may therefore apply for the initiation of conciliation proceedings, even if its situation has since worsened.
The assessment of the cessation of payments on 12 March 2020 has been established to the debtor’s benefit:
- it does not affect the debtor’s ability, in the event his situation has gotten worse during the period corresponding to the state of health emergency plus three months, to request the opening of receivership or liquidation proceedings, or the benefit of a professional recovery;
- only the debtor may request the opening of such proceedings, thus excluding any summons by a creditor;
- the legal representatives may not be held liable for failure to declare a state of cessation of payments within the legal period of 45 days.
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