France has changed the rules of the bankruptcy proceedings due to the Coronavirus pandemic

Each state tries to support its citizens affected by the COVID-19 pandemic differently. In Russia, the authorities simplify the bankruptcy procedure for individuals, while in France they are forced to adapt the bankruptcy law to the new conditions by introducing temporary amendments.

On March 27, 2020, the French authorities adopted a special act (No. 2020-341), which changed the terms and procedure of bankruptcy. First of all, as stated in the document, this has been done for companies and citizens, who have experienced the negative consequences of the crisis that hit the European healthcare system.

Earlier, the French bankruptcy law prescribed that if the debtor found out that he could not pay his debts at the expense of his financial and property assets, he should file for bankruptcy within a month and a half.

Now, an entrepreneur or company can evaluate its solvency at the time of March 12, 2020. If the status of payments is assessed as negative, the law gives the debtor three months after the end of the emergency to file an application.

Considering the fact that the deadline for the emergency mode is now set to May 23, the companies, their managers and individuals are actually given a deadline of August 23 to decide on the application.

Thus, the companies may not file for bankruptcy if, whereas on March 12, they have ceased to fulfill their obligations to creditors, but have less than 45 days to pay off debt. They can apply for the so-called preventive procedure, and then have three months after the cancellation of the emergency mode, in order to decide whether they should go bankrupt or not, depending on the circumstances. This preventive procedure (ad hoc mandate, conciliation) allows the company executives to receive assistance in negotiations with creditors, restructure debts or otherwise ensure stability in the company’s activities during a crisis.

The amendments to French law are also interesting as they offer the possibility of opening a number of legal procedures in electronic form. Thus, the foundations are laid for their conduct and subsequent observation without organizing the hearings.

The current amendments will allow debtors to apply to the court by electronic (or regular) mail, sending any necessary materials and documents.

In some cases, when the organization does not have sufficient funds to cover the current expenses (for example, to pay salaries to employees), the opening of bankruptcy procedures may allow taking special protective measures. In this case, the Wage Insurance Association may assume the obligation to pay salaries. The previous debts may be frozen in this situation.