Measures adapting French insolvency law to the Covid-19 sanitary crisis
Unsurprisingly, France has massively promoted the recourse to state-guaranteed loans to help companies overcome the crisis. More than EUR 120 billion have already been borrowed through such loans (so-called “PGE” or prêts garantis par l’Etat). Their restructuring, together with that of more “traditional” debts, is expected to be a key topic for 2021.
In this context, exceptional measures aimed at protecting borrowers have also been adopted. Two of them are particularly worth being mentioned.
Firstly, it has now become easier for borrowers to request a court-imposed grace period against creditors refusing to participate in confidential debt restructuring negotiations under the aegis of a court-appointed “conciliator” (conciliateur). Traditionally, such restructuring discussions remain purely consensual, although a limited possibility to request, in summary proceedings, a two-year grace period against an uncooperative creditor has always existed. The new measures broaden the borrower’s options. There in now a possibility to request, ex parte, a prohibition for uncooperative creditors to enforce their rights during the time of the negotiations under the aegis of the conciliator. In addition, the conditions for the granting of the two-year grace period have been facilitated.
Secondly, the new measures encourage a rather radical debt restructuring process, namely the takeover of a company’s assets by its own managers or shareholders, in insolvency proceedings. Traditionally, de facto or de jure managers are barred from purchasing the company’s assets in insolvency proceedings, unless they obtain a specific authorization from the Court, and such authorization may only be granted upon petition of the public prosecutor. The exceptional measures allow the debtor itself (or the insolvency administrator) to request such authorization, if that is a way to preserve jobs. This derogatory measure has been applied in a number of recent significant insolvency proceedings, and indeed helped saving jobs. However, it is due to end on 31 December 2020.
Gilles Podeur, Partner and Julien Brouard, Trainee.