Category: Legal news

On 15 september 2021, a major reform of French insolvency law was enacted, mainly to implement the European Restructuring Directive.

This directive made it mandatory for all EU Member States to offer a « preventive restructuring framework » for companies facing financial difficulties, thus allowing debtors to place themselves under the protection of the court before they actually become insolvent. But paradoxically, from a French perspective, its implementation is generally viewed as shifting the balance of powers in favour of creditors, by comparison with our existing insolvency law. The reason for that is simple : on the one hand, several types of preventive restructuring proceedings already exist in France  – namely mandat ad hoc, conciliation, and the various types of  procédure de sauvegarde (safeguard proceedings), but on the other hand, the directive includes a number of rules protecting creditors which are totally new in the French restructuring landscape, such as the absolute priority rule and the best interest test. Similarly, the directive now allows to « cram down » shareholders, thus avoiding scenarios where shareholders would be able to block a debt restructuring (by refusing any share capital increase) although they were out of the money.

The situation is all the more complex as, because of the COVID-19 sanitary crisis, new legal provisions increasing debtors’ protection have also been enacted since 2020, in particular in the framework of our « conciliation » proceedings. Some of those additional protections will be maintained, although amended.

In light of such reforms, the question arises as to whether foreign lenders should now consider that they will benefit from legal tools allowing them to take the lead in French restructurings.

1. Why was France viewed as “debtor-friendly”?

Back in 2011, the famous Cœur Défense restructuring had a major impact on how foreign lenders viewed the French market.

A real estate special purpose vehicle, holding the Cœur Défense building, had placed itself into French « safeguard proceedings » to prevent the risk that its sole creditor (a securitization vehicle) might decide to accelerate the loan which had financed the acquisition of the building. Simultaneously, its parent company, a Luxembourgish entity, had also placed itself under the protection of French safeguard proceedings (on the ground that its center of main interest was actually located in France), thus preventing the enforcement of the plege it had granted over the shares of the French SPV. Then, French courts imposed a debt rescheduling plan upon the sole creditor, whereby the debt was frozen for four years.

Thereafter, various strategies have been used by lenders to try to avoid facing a similar scenario. The famous « double luxco » structure was invented to circumvent French insolvency law by creating two Luxembourgish entities above the French borrowers, thus allowing the lenders to benefit from a Luxembourg law share pledge. Alternatively, in some cases, lenders were granted a French law fiducie over the shares of the borrower, whereby the ownership of the shares was transferred to a trustee. In a limited number of cases, golden shares have also been used.

As a matter of fact, though, the use of so-called « hostile » safeguard proceedings, in the same way as in the Cœur Defense case, remained very exceptional.

Another specific feature of French restructurings was the treatment of shareholders. Unlike in a number of other jurisdictions, they did retain the possibility to prevent any debt to equity swap. Therefore lenders had to accept, in some cases, that shareholders would not be totally wiped out (e.g. they would retain a small portion of the share capital) although they were out of the money.

2. Does the “court-imposed debt rescheduling plan” still exist after the reform?

The concept of « court-imposed plan » traditionally refers to a debt rescheduling, over up to ten years, which the court is entitled to impose upon creditors, even if a majority (or all) of them expressly refused to grant it. Such a scenario is particularly feared by creditors, also because the rescheduling plan may provide for very low installments on the first years (e.g. 1% of the debts to be paid on year 1 and 2 ; 5% each year as from year 3 to year 9 ; and 63% on year 10).

This traditional « court-imposed plan » will no longer exist in safeguard proceedings, except for entities which are too small for classes of creditors to be created. Instead, the court will now be in position to impose a « cross-class cram down » upon dissenting creditors and / or shareholders, but only if at least a class of creditors voted for the plan and if a number of other conditions are met, including the absolute priority rule (i.e. a class of creditors must be paid in full if the restructuring plan includes any type of payment in favour of a class of a lower ranking). In other words, the support of at least some creditors will be necessary for the debtor to obtain the adoption of a debt restructuring plan.

The situation will be quite similar in the framework of redressement judiciaire (rehabilitation proceedings). The possibility to adopt a « traditional » court-imposed plan still exists, but only if no plan has been adopted through the vote of the classes of creditors and, interestingly, creditors may elaborate and put to the vote their own restructuring plan (which they are not allowed to do in safeguard proceedings).

3. Is secutiry enforcement easier after the reform ?

The reform does not facilitate security enforcement in the framework of insolvency proceedings.

The French Cour de Cassation (the highest civil and commercial court) had adopted on 25 November 2020 a case law which was extremely favourable to creditors, by allowing them to enforce security interest granted by a company to secure the debt of a third party (e.g. a subsidiary), even in case of insolvency proceedings. For example, according to this case law, the creditor of a subsidiary was entitled to enforce the pledge granted by its parent company over its shares, even if the parent company itself was subject to insolvency proceedings.

Interestingly, the reform aims to annihilate this case law. Double luxco or fiducie structures will therefore remain attractive tools for creditors.

In addition, the reform makes it easier for debtors to obtain a grace period, in summary proceedings, against creditors refusing to negotiate a consensual restructuring in the framework of confidential conciliation proceedings.

It is also worth noting that the law now weakens security interest granted over future assets (such as future receivables), by providing that as from the date of the commencement of insolvency proceedings, future assets are excluded from the scope of the existing security interest (except for the so-called « Dailly law » assignments of receivables which can be granted to financial institutions).

4. Have shareholders lost their ability to block debt to equity swaps ?

The answer is yes (at least in companies of a significant size), and that is one of the key features of the reform.

In safeguard proceedings and in rehabilitation proceedings, the court now has the power to « cram down » not only the classes of dissenting creditors, but also shareholders.

This being said, it is worth noting that shareholders may benefit from a derogation to the absolute priority rule if such derogation proves « necessary to reach the goals of the plan and if the plan does not excessively affect the rights of the affected parties ». It remains to be seen whether this derogation will often be invoked in practice.

Conclusion– In light of the above, there is no doubt that the reform will dramatically change the way restructurings of large companies are handled in France, in particular because the debtor will no longer be able to rely on a credible « plan B» consisting of a court-imposed debt restructuring over ten years. That does not mean, however, that the French legal system is no longer « friendly » to debtors. Very efficient tools are available for debtors to negotiate and, if necessary, impose a debt restructuring upon all stakeholders, thus preserving the viability of the business. It would be more appropriate to say that the French restructuring environment is no longer « shareholder-friendly », as shareholders will now face the risk of being crammed down in the same way as creditors.

Gilles Podeur, Partner in Restructuring.

This article was originally published on mondaq.com on September, 30 2021.

The French commercial code (section L.651-2) provides for sanctions against executives of French companies who have contributed by their management errors to a lack of assets, and French courts do not hesitate to apply such sanctions.

The goal is to repair the damage caused to the company and to remove those managers from business life.

1. Who are the executives concerned?

French law simply refers to de jure or de facto managers.

Thus, a legal representative of a foreign company appointed as president of a French company argued not to be exposed to sanctions himself, not being directly the CEO in France, while another asserted that he accepted the mandate as CEO for free.

The French High Court (« Cour de cassation ») considered that not to receive any remuneration is not a criterion for liability (cass.com. 9 December 2020 n° 18-24730), nor does the indirect mandate prevent from sanctions.

The same degree of severity was applied to a CEO assistant (« directeur général délégué ») who argued not to have any independence regarding his decisions, acting internally only as an assistant to the general manager.

The French High Court nevertheless considered that the CEO assistant is empowered towards third parties with the same duties as the CEO himself, and thus subject to the same sanctions (cass.com 5 May 2021 n° 19-23575).

Consequently, the acceptance of a mandate as executive manager in a French company could be risky!

2. Could simple negligence be considered as a management error?

In principle, with reference to section L.651-2 of the French Commercial Code, simple negligence cannot be subject to sanctions, but the question is, whether the fact that a manager could not have ignored the error, could be considered as a simple negligence, or automatically constitutes an intentional fault.

In a decision dated 3 February 2021 (cass.com. 3. February 2021 n° 19-20.004), the French High Court considered that the impossibility to ignore the status of insolvency (« état de cessation des paiements ») does not exclude de facto an error by simple negligence while the same court judged (cass.com. 5 February 2020 n° 18-15/075) that the knowledge of an error demonstrates obviously the intentional element of the management error and insofar excludes any qualification as simple error.

Consequently, it is not advisable to ignore any problem a manager of a French company has to be aware of.

3. What does « lack of assets » mean?

Since the sanction of the faulty manager is linked to a « lack of assets » in the frame of an insolvency or liquidation procedure, the liquidator has at least to prove that the management error contributed to such a lack and that such a situation occurred during the mandate of the concerned manager, in other words if the dismissal is stated before the lack of assets occurs and even if the publication and formalities are not already completed, the manager cannot be held liable.

Consequently, once a manager is aware of major difficulties and is not able to proceed with their improvement, he should withdraw as soon as possible from his mandate and evidence his dismissal, for example by registered letter with acknowledgement of receipt.

4. What are the sanctions the manager may face?

On the one hand, the manager may be condemned to reimburse in part or in total the lack of assets and, on the other hand, sections L.653-2 and L.653-8 of the French Commercial Code provide for personal bankruptcy or the prohibition to direct, manage or administrate a French commercial cooperation.

Nicola Kömpf, Partner.

Law n°2020-1525 of 7 December 2020 “to accelerate and simplify public action“, known as the “ASAP” law, was published in the Official Journal on 8 December 2020.

Most of the new rules will come into force on 1 June 2022.

Regarding the environment part of this law, Article 57 has modified the rules relating to polluted sites and soils and to the cessation of activity of Installations Classified for the Protection of the Environment (ICPE).

The application decree was published in the Official Journal on 21 August 2021.

What are the main points to remember about this decree?

1. Information on polluted sites and soils (SIS)

It should already be noted that this addition was not provided for in the ASAP law and that it has been integrated into the Environmental Code by the decree.

It should be remembered that Article R.125-43 of the Environmental Code excluded from the perimeter of the soil information sectors (hereinafter SIS), the land within the boundaries of ICPEs in operation and in the process of being closed.

This article has been amended and allows the said land to be included in the SIS when the operator of the classified installation has disappeared or is insolvent and the installation has been made safe in accordance with the ICPE regulations.

Also new, mines in operation, including those in the process of being closed, are now listed in the SIS exclusions.

2. Decontamination of polluted sites and soils (articles R.512-39-3 for ICPEs subject to authorisation and R.512-46-27 for installations subject to the registration regime)

The operator has a period of six months from the final shutdown of its plant to send the prefect a decontamination report specifying the measures taken or planned to ensure the protection of the environment and/or public health.

The decree’s contribution is to allow the operator to postpone, upon express and justified request, the decontamination as well as the operations to determine the future use of the site.

Thus, the operator must notify the prefect of its intention to postpone the decontamination and transmit a statement of the justifications associated with this request within a certain period.

The prefect will then rule on this request, specifying in particular

• The measures conditioning the release of the land concerned.

• The prior information required before the implementation of the decontamination operation.

• The periodic re-evaluation of the justification for the postponement.

It should be noted that the absence of a response from the prefect within four months is equivalent to a refusal of the request.

3. The submission of a certificate by a certified company

From now on, the operator must have the remediation work carried out by a company certified in the field of polluted sites and soils or with equivalent skills in providing services in this field.

A decree will define the reference system with which this company must comply, and the audit procedures implemented by the certifying bodies as well as their accreditation conditions.

The text specifies that the company providing the attestation of the adequacy of the measures proposed for the decontamination of the area may be the same as the one that produced the decontamination report but not the one that carried out the work.

4. Substitution of the third-party applicant by another third party applicant

From now on, another interested third party may substitute itself for the third-party applicant with the agreement of the latter and the operator by sending a request to the prefect.

The decree adds a paragraph to the current Article R.512-76 of the Environmental Code, which details the applicable procedure and specifies that the silence of the prefect for more than two months after receipt of the request for substitution of the third-party applicant is deemed to be a rejection.

5. Safety certificate for certain ICPEs subject to declaration

For ICPEs subject to declaration, the obligation to provide an attestation by a certified company is limited to making the site safe.

The list of headings concerned is set out in the new article R.512-66-3 of the Environmental Code “these have been selected mainly on the basis of the dangerousness of the substances used and the feedback from the DREALs“.

6. Review of future use in the event of unforeseen technical impossibility

Concerning installations subject to authorisation and registration, from now on, in the event of technical impossibility resulting in manifestly excessive additional costs for the rehabilitation of the land, the operator may send the prefect a memorandum presenting the work carried out, the planned work not carried out and the difficulties encountered.

This statement will also set out the justifications for the impossibility of meeting the requirements.

After consultation with the mayor or the president of the EPCI competent in urban planning matters and the owners of the land concerned, the prefect may revise the use determined and modify the applicable requirements accordingly.

Finally, it should be noted that the decree specifies that “after the rehabilitation work has been carried out, the Prefect may, if necessary, take measures to monitor and preserve the memory of the site, as well as restrictions on use“.

Thus, the decree shows the will of the Ministry of Ecological Transition not to call into question the police power of the Prefect who can intervene at any time in the rehabilitation operations of polluted sites and soils.

Philippe Mathurin, Partner and Fahima Gasmi, Counsel in Environment.

French so-called “amicable procedures” are widely used to rescue companies facing difficulties due to the “Covid” crisis.

Our restructuring partner explains the benefits of this procedures for companies. Here is a brief explanatory video.

If you have any questions regarding “amicable procedures” or restructuring in France, please feel free to contact Gilles Podeur or Nicola Kömpf (for German-speaking clients).

Foreign companies are increasingly sanctionned by the French Data Protection Authority (CNIL). Our team is presenting the main risks for foreign companies regarding cookies and data privacy. Here is a brief explanatory video.

If you have any questions regarding cookies and data privacy issues in France, please feel free to contact Corinne Thiérache.

March 31, 2021: deadline to comply with the new rules on cookies

As a reminder, the reasonable timeframe granted by the French Data Protection Authority (also knows as the “CNIL”) to bring your websites and mobile applications into compliance with the new rules on cookies and other trackers contained in its guidelines and recommendation published on October 1, 2020 expires on March 31, 2021 at night.

Considering this timetable, the CNIL has indicated that formal controls will be carried out as of April 2021 and that it will not hesitate to impose sanctions in case of non-compliance.

Economic players are therefore strongly advised to conduct an audit of the cookies and trackers used in order to, if necessary, take the necessary measures to meet with the requirements of the legislation.

For the record, certain cookies are exempt from the requirement of obtaining consent, such as functional cookies and various audience measurement cookies, if they fulfill the conditions recently recalled by the CNIL on March 8, 2021.

For cookies requiring consent, particularly those used for targeted marketing, the following principles must be followed:

• Principle 1: the mere continuation of navigation on a website can no longer be considered a valid expression of user consent.

• Principle 2: individuals must consent to the deposit of trackers by a clear positive act (such as clicking on “I agree”). If they do not do so, no tracker that is not essential to the operation of the service may be deposited on their device.

• Principle 3: users should be able to withdraw their consent easily and at any time.

• Principle 4: refusing cookies should be as easy as accepting them.

• Principle 5: data subjects must be clearly informed of the purposes of the trackers before consenting, and of the consequences of accepting or refusing trackers.

• Principle 6: data subjects should also be informed of the identity of all actors using trackers (including third-party cookies) that are subject to consent.

• Principle 7: entities using trackers must be able to provide, at any time, proof of the valid collection of the freely given, informed, specific and unambiguous consent of the user.

These principles must be strictly complied with by the economic players, as the financial penalties for non-compliance can be particularly heavy.

Thus, on December 7, 2020, the CNIL fined Amazon and Google 35 million and 100 million euros respectively for failing to comply with their obligations to obtain consent and provide information prior to the deposit of advertising cookies. Despite an appeal filed by Google before the Council of State, the latter validated the legality of the CNIL’s decision on March 4, 2021 hence reinforcing its sanctioning power.

Notification of a personal data breach

The fire at OVH’s Strasbourg data center on March 10, 2021 and its potential consequences on personal data (loss, damage) are an opportunity to remind the obligations set by the General Data Protection Regulation (GDPR) in this kind of situation, which requires data controllers, among other obligations, to:

• notify without undue delay and, where feasible, not later than 72 hours after having become aware of it, the personal data breach likely to result in a risk to the rights and freedoms of natural persons to the CNIL (Article 33) and, when the risk is high, directly to the data subjects concerned (Article 34),

• document any personal data breaches, comprising the facts relating to the personal data breach, its effects and the remedial action taken.

As for the processor, it shall notify the controller without undue delay after becoming aware of a personal data breach.

The situation will therefore differ according to the role of each party in the processing of personal data (controller, processor or joint controller). For instance, contracts with processors generally contain provisions on incident and personal data management that address this issue in practice.

When breaches of the GDPR or the law are brought to its attention, the CNIL’s restricted committee may:

• issue a reprimand;

• enforce the processing to comply, including under penalty;

• temporarily or permanently restrict a processing operation;

• suspend data flows;

• issue an order to comply with requests to exercise the rights of individuals, including under penalty;

• impose an administrative fine.

In case of non-compliance with the obligation to notify, the CNIL’s restricted committee may impose administrative fines on the controller and/or processor up to 10 million euros or, in the case of an undertaking, up to 2% of the total worldwide annual turnover of the preceding financial year, whichever is higher.

The lawyers of Alerion’s Data Privacy department can assist their clients in complying with their obligations under the RGPD, especially with the regulation on cookies and other trackers before next April 1st.

Corinne Thiérache, Partner and Alice Marie, Associate in Digital and Technology Law.

On 13 January 2021, the court of appeal of Toulouse rendered a very interesting decision ruling upon the outcome of the insolvency proceedings of BVA, a well-known research and consulting firm.

Context – The specific feature of this insolvency case was the fierce competition to take over the company’s assets (together with the assets of three other entities of the group) between the bidders: (i) Alcentra, a major creditor of the group (having granted an EUR 140 000 0000 unitranche financing in 2017), whose bid had been chosen by the court of first instance and (ii) the existing managers and key shareholders of the group, who had set up their own takeover bid through of special purpose vehicle named XPage, and whose bid ultimately prevailed before the court of appeal.

• On the one hand, it is quite unusual to see creditors bid for assets in insolvency proceedings, all the more as they are not allowed to offset the price they offer for the assets with the amount of their claims against the company. Lender-led transactions are more frequent at an earlier stage of the financial difficulties, where creditors take control of the debtor entity through a debt-to-equity swap.

• But on the other hand, it is equally unusual to see managers being allowed to bid for the company’s assets. The French commercial code expressly prohibits managers to participate in the bid process, unless they obtain a specific authorization from the court, which can be granted only in the event that the public prosecutor so requests (this rule was temporarily amended during the COVID crisis, until 31 December 2020, so that the managers themselves or the insolvency administrator were also entitled to make such request).

First instance ruling – In a judgment dated 15 September 2020, the commercial court of Toulouse had chosen Alcentra’s bid. It is worth noting that in the course of the insolvency proceedings, in July 2020, Alcentra had already taken control over some US assets of the group, through a security enforcement.

• In a “normal” case, things would have stopped there. The right of appeal against a decision selecting a bidder in insolvency proceedings is very restricted by law and must be exercised within ten days from the decision. Unfortunate bidders, such as XPage in this case, are barred from raising an appeal.

Appeal by the public prosecutor – But the public prosecutor decided otherwise and did file an appeal against the commercial court’s decision – which is highly uncommon.

• The fact that the appeal was made by the public prosecutor is absolutely key here, because an appeal by another party would not have stayed the enforcement of the judgement, and Alcentra would have immediately taken control over the business, until the court of appeal’s decision.

Appeal by the debtor – BVA also filed an appeal.

• Interestingly, the public prosecutor’s appeal ended up being rejected on procedural grounds (the public prosecutor having made a procedural mistake), but the court of appeal nevertheless remained in position to rule on the case because of the appeal filed by BVA itself.

Appeal ruling – The court of appeal of Toulouse overturned the judgment of first instance and chose XPage’s bid, on the grounds that (i) it was widely supported by the employees of the group, and that (ii) the governance to be put in place by Alcentra was potentially detrimental to the French rooting of the group and the preservation of jobs in France. The court also took the view that XPage’s bid was superior to that of Alcentra in terms of sale price.

• Aside from the purely legal aspects of the case, this decision is also another example of a current trend of French public authorities’ interventionism in situations where the acquisition of significant French business is contemplated by foreign investors, especially in a context where they are weakened by the COVID crisis.

Gilles Podeur, Partner, Louis Renucci, Associate, and Yann Aubert, Trainee in Restructuring and Insolvency.

The interest of producers and manufacturers for the “Made in France” label is renewed, in this pandemic period where consumers’ sensibility is exacerbated.

The French economic administration has just published a guide on the essential rules (available here), so that the “Made in France” is not considered as deceptive marketing practice (art. L 121-1 et seq. of the French Consumer Code) or as deception on origin (art. L. 413-8 of the French Consumer Code), nor prohibited by customs provisions as being a fraudulent origin marking on import (art. 39 of the French Customs Code).

For non-food products, companies are invited to refer to the European regulations about non-preferential customs origin in order to identify the “nationality” of the product concerned. When several countries are involved in the manufacturing process, the product originates from the country where the last substantial transformation (1), economically justified (2), carried out in a company equipped for this purpose and having resulted in the manufacture of a new product or corresponding to an important manufacturing stage (3) took place (circular of May 13, 2016). In other words, a non-food product can benefit from a “Made in France” label or its equivalent, if its last substantial transformation was carried out in France. Depending on the category of products concerned, the notion of “last substantial transformation” means a specific transformation (working for textiles), a change in the price heading of the product or a value-added criterion.

The manufacturer is free to put “French manufacture” or an equivalent on its products. This kind of mention differs from labels and collective marks such as “Origine France Garantie”, created by professionals or private structures and whose function is to identify the origin of products emanating from a group of actors (association, group of manufacturers, producers or merchants, legal entity of public law) authorized to use it by a regulation of use.

Controls are carried out by the French economic administration (Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes, DGCCRF) and the French customs administration (Direction Générale des Douanes et des Droits Indirects, DGDDI).

In addition to criminal sanctions, the wrong use of “Made in France” may have serious consequences under tort, if a competitor brings an action for unfair competition on this basis.

Indeed, for the first time this year, the Cour de Cassation has ruled that the damage caused by a misleading practice can be compensated by taking into account, not only the loss of profit or losses suffered by the (unfortunate) competitor, but the savings made by the unfair competitor (Cass. com. 12 Feb. 2020, n°17-31614).

In this case, a French factory of crystal goods sued a competitor for having presented products consisting of glass, crystalline or luxion products made in China with a “Made in France” label, to give the impression that the entire product was made of crystal. Held responsible for unfair competition through a deceptive commercial practice, the competitor was ordered to pay compensation calculated in consideration of the undue competitive advantage and the unfair savings (with reference to its personnel expenses). The Cour de cassation approved the reasoning of the first judges, which departs from the traditional analysis of unfair competition consisting in the assessment of the damage to be repaired by lost profits, lower sales, reduced sales, orders, loss of margin, loss of value, etc.

The solution deserves approval insofar as negative consequences of acts of unfair competition such as free-riding or failure to comply with mandatory regulations are difficult to quantify.

Thus, the Cour de cassation agrees to take into consideration the savings of the unfair competitor obtained by taking advantage of a competitive advantage to which it is not entitled. This method already exists for counterfeiting litigation, which already takes into consideration the savings made by the counterfeiter on design and promotion costs (art. L. 716-4-10 of the French Intellectual Property Code, introduced in 2019).

The action in unfair competition thus finds an attractive power already initiated by the jurisprudence according to which a prejudice is necessarily inferred from the unfair act. There is now an adequate method of evaluation of the damage which will not only compensate the victim but also discourage unfair acts.

Catherine Robin, Partner in charge of the Distribution Department and Ambre Luciak, legal counsel.

In recent years, France has steadily tightened up its legislation on the posting of workers to prevent undeclared work and social dumping.

The latest legislation entered into force on 30 July 2020.

The posting of workers to France therefore represents a significant financial risk for foreign companies with temporary activities in France.

Even if the employment contract between the foreign company and the posted worker is subject to foreign law, the worker is subject to certain aspects of French law while working in France. New stricter rules have been in force since 30 July 2020.

In particular, a distinction is made between postings of more or less than 12 months.

Parts of French law are, according to Art. L.1262-2 of the French Labour Code, applicable to postings of less than 12 months, including in particular equal treatment in terms of remuneration (i.e. not only the minimum wage obligation (as of 01.01.2020 – 10.15 € gross/hour) but also equality must be guaranteed). Furthermore, the expenses incurred by the secondment must be remunerated separately.

These provisions represent the so-called “hard core” which must always be observed.

For postings for more than 12 months, all provisions of French labour law apply, except for the conclusion and termination of the employment contract, post-contractual non-competition clauses and supplementary pension schemes.

Where appropriate, the application of all French law may be suspended for a further 6 months on request before the end of the first 12 months if special circumstances arise.

In conclusion, the formalities for posting workers to France are and will remain strict, unless an exception applies, and the penalties are costly.

However, since most companies make use of the same type of posting repeatedly, it is generally sufficient to seek detailed advice once and then to carry out the measures on their own.

The same applies to the application of French labour law. One should always bear in mind that French law is structured differently from foreign legal systems and consequently make the right adjustments in advance to avoid difficulties and high costs afterwards.

Nicola Kömpf, Partner.

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.