The Judicial Crisis Recovery Management Procedure: A New Temporary Tool For Businesses In Financial Distress Because Of The Health Crisis

• Published date: 30 June 2021
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Corporate and Company Law, Insolvency/Bankruptcy, Contracts and Commercial Law
• Law Firm: Soulier Avocats
• Author: Sophie Hosri

Seeking to ensure the survival of companies that could become insolvent in the coming months due to the phasing-out of the support measures that have been put in place, the French legislator has adopted a Law introducing a new procedure, i.e., the judicial crisis recovery management procedure.

This temporary procedure is of particular interest to debtors who may be experiencing short-term difficulties caused by the COVID-19 health crisis and who wish to benefit from a simple and rapid mechanism for spreading out their current liabilities over a long period of time.

In addition to the extension of financial aid and the evolution of procedural rules to favor preventive judicial procedures¹, Law of May 31, 2021² on health crisis recovery management introduced a so-called "crisis recovery management" procedure ³ from June 2, 2021 until "applications filed before the expiration of a period of two years from that same date."

By making this tool - which favors a simple and rapid spread of current liabilities over a long period of time through a debt repayment plan - available to companies, the objective is not to prevent the difficulties caused by the crisis, but actually to resolve such difficulties.

In fact, the French legislator is seeking to ensure the survival of companies that could become insolvent in the coming months due to the phasing-out of the support measures put in place and to the difficulties encountered by businesses that are faced with the six-year amortization limit for renegotiating their state-guaranteed loan(s).

Compared to existing amicable and insolvency/bankruptcy proceedings, this new procedure, which is a temporary addition to the measures provided for in Book VI of the French Commercial Code, will definitely be of great interest to debtors who are encountering economic difficulties as a result of the health crisis.

What debtors are eligible for the crisis recovery management procedure?

• A debtor who is eligible for the preventive procedures and insolvency/bankruptcy proceedings that already exist

This new procedure is intended for, and will benefit, any person engaged in a commercial, craft or agricultural business, any natural person engaged in an independent professional activity, including a liberal profession subject to a legislative or regulatory status or whose professional title is protected, as well as any private law legal entity⁴.

• A debtor that does not exceed certain thresholds relating to the number of employees and the...