What is the health crisis recovery procedure?
The crisis recovery procedure was created by the law of 31 May 2021 in the current context to provide an additional tool for companies experiencing economic difficulties arising from the health crisis or linked to the financing of their business.
It is known as “simplified receivership”. It could also be described as “express receivership”.
The PTSC lasts for a maximum of three months and allows a company that is insolvent – but with no employee claims – to benefit from a freeze on all its debts with a view to presenting a plan for repaying them over a period of up to ten years.
Unlike receivership, a sale plan (i.e. the purchase of the company by a third party) is not possible during the PTSC.
This temporary procedure came into force on 18 October 2021 and will apply until 1 June 2023.
Which situations are covered by this procedure?
The PTSC is restricted to debtors meeting two cumulative criteria:
- the number of employees is less than twenty; and
- total liabilities excluding shareholders’ equity are less than €3,000,000 (Decree no. 2021-1355, art. 1).
The application to open a PTSC must be accompanied by the fourteen documents listed in article 1, it being specified that the annual accounts for the last financial year are also required. The text specifies that the annual accounts for the last financial year must be “regular, accurate and give a true and fair view of the company’s financial position”.
This procedure is designed to deal with companies’ debt problems by enabling them to restructure their liabilities without having to consider restructuring measures.
Who is involved in the procedure?
Company managers, who are the only ones entitled to do so, request the opening of conciliation, by applying to the commercial court if their company is engaged in a commercial or artisanal activity, or to the judicial court in other cases (farmers, civil companies or groupings, associations, liberal professions, etc.). If the court accepts the application, it appoints a representative – an insolvency practitioner – to help the manager draw up a draft plan to ensure the company’s long-term survival.
When does the procedure begin?
The crisis recovery procedure begins with the court’s decision to grant the application to open the procedure made by the company manager.
How does the procedure work?
Within ten days of the opening judgment, the debtor must file with the court registry a list of the claims of each creditor identified in its accounting documents, or with whom it is bound by a commitment that he can prove exists
The appointed insolvency practitioner informs the creditors on the list individually.
The observation period lasts 3 months, although there is an intermediate stage of 2 months during which the court decides whether or not it continues (probably on the basis of the insolvency practitioner’s report) if the debtor has sufficient financial capacity.
During this period, the manager and the insolvency practitioner work together to draw up a draft debt repayment plan.
This plan only applies to the creditors on the list drawn up by the debtor prior to the opening judgment, and cannot affect claims arising from an employment contract, maintenance claims, tort claims or claims for amounts below a threshold set by decree. The amount of the annual instalments from the third onwards may not be less than 8% (and not 5% as is the case for the safeguard or receivership plan) of the liabilities established by the debtor (and therefore not 8% of the actual liabilities as a result of updates or disputes).
The plan is approved by the Court, after consultation with the creditors (the Court may authorise a period of 15 days for objections).
If no plan is drawn up within three months, the Court opens a receivership or judicial liquidation, at the request of the debtor, the insolvency practitioner or the public prosecutor.
What are the effects of the procedure?
If a plan is approved, the company will benefit from a moratorium imposed on creditors
If the crisis recovery plan is still in progress at the end of a period of one year from the date on which it is approved, the details of the procedure published in the RCS will be deleted.
The measure encourages:
– helping the manager to get back on his feet by removing the references to the crisis recovery procedure.
– Access to company credit
