The continuity of your company depends on the actions you take as of now: despite a reduced functioning of Courts, several solutions might enable you to secure financially your business.
Since the beginning of April, the courts are holding dematerialized hearings (through videoconference or even phone call). As an alternative, the judge may also decide to rule without any hearing and it would not be possible to object if the case is urgent.
Secure your ante COVID-19 claims
Requests for interim relief
According to several court registries, the processing of the requests (non-adversarial proceedings to be submitted to the Presidents of the Commercial Courts or the Enforcement Judges without hearings) continues to be carried out.
It is more urgent than ever to secure your claims when they cannot validly be contested (e.g. unpaid invoice when the service or the delivery has been properly performed with unconditional acceptance).
The following interim relief can be executed:
- Protective attachments enabling precautionary seizure of tangible rights (furniture, motor vehicles…) and intangible rights (shareholder’s rights, securities…), especially financial claims (attachments on bank accounts, rents).
- Judicial securities on real estate, business assets, shareholder’s rights, transferable securities (registration of provisional mortgages, pledges).
Summary proceedings in the most urgent situations
The Judge of summary judgments (“référés”) is empowered to order interim relief at short notice in the context of adversarial proceedings.
The judge may also order the sequestration of an amount of money in a view of potential compensations regarding cross debts or to pronounce any measures or restraining injunctions completed by coercive fine aiming to prevent imminent damages.
Amendments or memoranda of understanding
In the meantime, amendments or memoranda of understanding can also be concluded with your business partners to agree on new payment periods or payment schedules.
Obtaining an acknowledgment of debt in the course of these discussions will prevent your partner from challenging both the principle and quantum of the debts for the future.
The certification (homologation) of these agreements by a judge will provide them a certain date and a definitive probative value.
Monitor carefully the new deadlines
Ordinance No. 2020-306 dated March 25, 2020 provides several time extensions over contractual and procedural deadlines during the health crisis (deadlines are extended for a duration up to 2 months following a period called “legally protected period” * (read our previous article about deadlines), as well as a moratorium on all sanctions for failure to comply with contractual deadlines during the health crisis.
Ordinance No 2020-427 dated April 15, 2020 amends noticeably the previous dispositions: It will be necessary to be careful regarding the computation of each periods:
Regarding the time limit to go to court, the ordinance exclude, from the exceptional 2 months prorogation, reflection period, withdrawal period and waiver period, provided by law or regulation as well as the refund period related to such rights, when they expire between March 12, 2020 and the end of the heath crisis plus 1 month (= the legally protected period).
Whereas it was initially decided that they should be neutralize for an extra one month period following the end of the legally protected period, contractual sanctions are now ruled by a triple mechanism:
- If the deadline expired before March 12, 2020, the effects of the contractual sanctions are only suspended during the legally protected period (in principle until June 24, 2020).
- If the deadline expires during the legally protected period, the effects of the contractual sanctions are suspended, as from the end of such period, for a duration equal to the remainder of the term left as of March 12, 2020.
- If the deadline expires after the legally protected period, the effects of the contractual sanction are suspended for a duration equal to such legally protected period, except if the performance is about a payment, where the contractual penalties are enforced at their contractual deadline.
Regardless these specific procedural deadlines and considering the complexity of deadline calculation, we recommend that you do not wait until the collection of your debts is irremediably compromised before taking action.
Anticipate your post COVID-19 litigations
In a context where the courts were already overburdened before the crisis, the indefinite postponements of almost all hearings will necessarily extend even more the proceedings delays.
We therefore highly recommend you to anticipate as much as possible all current or upcoming problematic situations by identifying your partners at risk and carefully monitoring their outstanding balances.
It is essential to prepare the case together at the earliest possible stage so the bailiff may summon your opponent at the earliest possible date following the end of the lockdown (summons for urgent proceedings must be issued no later than 8 days before the hearing).
Regarding disputes requiring an adversarial debate on the merits (i.e. non-urgent cases or when there is a serious contestation about the claim), an immediate preparation would enable us to initiate proceedings as soon as the courts activity is getting back to normal.
Depending on the circumstances, we propose you to review together whether your case can be subject to faster processing.
Protect yourself as of now for the current and coming orders
Prior to the conclusion of new contracts, mind to secure your receivables from your debtors by taking conventional securities: surety bonds, independent / first demand guarantees, pledges, conventional mortgages…
As soon as possible and whenever possible, it is also advisable to provide retention of title clauses, as well as payment delegations that will enable suppliers to request payment directly to the final customers in case of default by their intermediary customers.
Such measures are subject to the express acceptance of your contractual partners, but they will secure your claims with greater efficiently.
Find solutions to overcome cash flow issues
It is important to note that the moratorium issued by Ord. No 2020-306 (as modified by Ord. No 2020-427) does not apply to the payment to be made after the legally protected period. Therefore, you will not be allowed to invoke that ordinance to postpone a payment without risk of contractual sanctions.
If your company is experiencing cash flow difficulties, it will also be possible to apply to the judge for a grace period (moratorium, extended payment terms, schedule) or to request guarantees.
Indeed, article 1343-5 of the French Civil Code provides that "taking into account the situation of the debtor and the needs of the creditor, a court may defer payment of sums that are due, or allow it to be made in instalments, for a period no greater than two years. […]
The court may make these measures subject to the debtor effecting acts appropriate to facilitate or to secure payment of the debt.”
Should you have any further question, please contact all the members of our team at their usual email address.
Be assure of our responsive presence by your side during this period.
For any question, you can contact our team to:
* The date of cessation of the state of health emergency is currently expected to be on 24 May 2020 but it is subject to change. Subject to this reserve, the legally protected period should cover the elapsed time between March 12, 2020 and June 24, 2020, meaning for a total duration of 3 months and 12 days.