COVID-19 Response in France: Legal Measures Adopted in Various Fields

The French government has been adopting a series of legal measures in response to the coronavirus (COVID-19) pandemic. The French Parliament voted on a law responding to the epidemic on 23 March (the Bill). In addition to measures relating to the holding of municipal elections and sanctions for breaches of the confinement regime which has been in force since 17 March, the government also took measures that affect French business and legal proceedings before the French courts in a variety of ways.

The Bill allows the French government to adopt by ordinance, within three months of the publication of the Bill, any measure falling within its scope. The scope of the Bill is outlined below, together with commentary on the ordinances and other measures and recommendations for business during the COVID-19 epidemic that have been published since the confinement regime was established.

Employment

The Bill allows the government to adopt by ordinance, measures

• limiting the possible termination of employment contracts and mitigating the effects of the reduction in economic activity caused by the pandemic, by facilitating and strengthening the use of part-time work for all companies, whatever their size, in particular by temporarily adapting the rules applicable to allowances paid in this context and by promoting a better coordination with vocational training;
• adapting the conditions and procedures for granting the “additional allowance” provided for in the Labor Code (under certain conditions, any employee with one year's seniority benefits, in the event of absence from work justified by incapacity resulting from illness or accident established by a medical certificate, from a social security allowance in addition to the daily social security allowance);
• allowing a company or branch collective employee agreement to authorize the employer to impose or modify the dates of paid holidays, up to a limit of six working days;
• allowing any employer to unilaterally impose or modify the dates of days off (for employees whose working-time schedule in calculated in days worked) and rest days allocated to the employee's time-saving account;
• allowing companies in sectors that are particularly necessary for national security or the continuity of economic and social life to derogate from the public policy rules and collective bargaining agreement provisions relating to working hours, weekly rest, and Sunday rest;
• modifying, on an exceptional basis, the deadlines and terms of payment of amounts paid under employee profit-sharing (“participation”) and employee incentive (“intéressement”) plans;
• modifying the deadline and terms of payment of the exceptional employee bonus (the so-called “Macron Bonus”); and
• modifying the procedures for informing and consulting staff representative bodies to enable them to issue opinions required to be given by them within the legal time limits and suspending elections to employee social and economic committees.

For further information, please see our lawflashes on employment measures:

Facing Coronavirus in France: Focus on Partial Unemployment

Responding to the 2019 Novel Coronavirus: Guidance for French Employers

COVID-19: French Government Allows Derogations from Labor Law by Ordinance

Guide to French Government’s Social Measure in Response to COVID-19

COMMERCIAL CONTRACTS

The COVID-19 pandemic may trigger force majeure clauses in commercial contracts governed by French law. Under French law, “force majeure in contractual matters exists where an event beyond the control of the debtor, which could not have been reasonably foreseen at the time of the contract was entered into and whose effects cannot be avoided by appropriate measures, prevents the performance of its obligation by the debtor.”

The contractual effects of a force majeure event may be subject to specific contractual provisions agreed between the parties. The parties to a contract are free, for example, to disapply or limit the relief available as a result of a force majeure event (for example, through a performance guarantee clause) or agree on a broader definition of force majeure than the legal definition referred to above.

To determine whether and how the force majeure provisions will apply in a given case, a careful analysis of both the factual particularities of the situation and the relevant contractual provisions is needed in each case.

For further details, please refer to our law flash, COVID-19 and Force Majeure under French Law.

COURT PROCEEDINGS

Time Limits

An ordinance dated 25 March 2020[1] provides for the extension of time limits during the public health emergency period. The extension will apply to all time limits that would otherwise expire between 12 March and the date which falls one month after the end of the state of public health emergency. The end of the state of public health emergency is currently planned to occur on 24 May 2020 (Article 4 of the Bill).

During the period of the public health emergency, time limits are suspended for any act, appeal, legal action, formality, registration, declaration, notification, or publication prescribed by law or regulation. One month after the date on which the state of public health emergency ends, the time limit will start to run again. However, in all cases, the postponement is limited to two months following the end of the period of the state of public health emergency.

The suspension of time limits also applies to state administrations, territorial authorities, public administrative establishments, and public and private law organizations and persons entrusted with a public administrative service function, including social security bodies. Periods during which a decision, agreement, or opinion of any such body or person may or must be made or delivered (or at the end of which the body or person is deemed to have made or delivered them) and which have not expired before 12 March 2020 shall, as of that date, be suspended until one month after the end of the state of public health emergency.

Court Proceedings

Two ordinances dated 25 March 2020[2] introduce a series of practical measures designed to mitigate the effect of the pandemic and allow the courts to continue to function. For the sole purpose of limiting the spread of the COVID-19 pandemic among persons involved in the conduct and progress of legal proceedings, the rules relating to the territorial jurisdiction and trial panels of the administrative and judicial courts have been modified, as well as the rules relating to the time limits for proceedings and trials, the admission of the public to court hearings and the use of videoconferencing by the court.

CORPORATE AND SECURITIES LAW

The Bill allows the government to adopt by ordinance the following measures for French companies:

• simplification and adaptation of the conditions in which corporate boards meet and deliberate, as well as the rules relating to general meetings;

• simplification and adaptation of the rules relating to the drawing up, adoption, auditing, review, approval, and publication of financial statements and other documents which companies are required to file or publish, in particular those relating to time limits;

• adaptation of the rules relating to the allocation of profits and the payment of dividends.

Pursuant to the Bill, the following ordinances covering specific aspects of corporate law have been adopted:

• Ordinance n° 2020-318 of 25 March 2020 adapting the rules relating to the drawing up, adoption, auditing, review, approval, and publication of financial statements and other documents and information which companies are required to file or publish in the context of the COVID-19 epidemic; and
•  Ordinance n° 2020-321 of 25 March 2020 adapting the rules governing meetings and deliberations of meetings and governing bodies of companies as a result of the COVID-19 epidemic.
• In the meantime, the French securities regulator, the Autorité des Marchés Financiers, has published recommendations to guide public companies during the COVID-19 period, which we outline below, in addition to the measures contained in Ordinances n° 2020-318 of 25 March 2020 and n° 2020-321 of 25 March 2020.

APPROVAL OF ANNUAL FINANCIAL STATEMENTS (ORDINANCE N° 2020-318 OF 25 MARCH 2020)

The time limits imposed by law or regulation or by the bylaws of a company for approving its annual financial statements or for convening the meeting of the shareholders responsible for that approval, are extended by three months for companies closing their financial year between 30 September 2019 and one month after the date of cessation of the state of health emergency.

SHAREHOLDERS ‘AND DIRECTORS’ MEETINGS (ORDINANCE N° 2020-321 OF 25 MARCH 2020)

Shareholders’ Meetings

Where a meeting is convened in a place affected, on the date of the notice convening the meeting or on the date of the meeting, by an administrative measure restricting or prohibiting collective gatherings due to the COVID-19 pandemic, the corporate officer or body empowered to convene the meeting may decide that it is to be held without the shareholders and other persons entitled to attend being physically present, or by means of a telephone or audiovisual conference. Persons entitled to attend may be given notice by any means capable of ensuring that they are effectively informed of the date and time of the meeting and of the manner in which they may exercise their right to attend and related rights.

Regardless of the provisions of the company’s bylaws, the competent corporate body (typically the board of directors) may decide that shareholders who participate by means of a telephone or audiovisual conference allowing their identification will be deemed to be present for the calculation of the quorum and the voting majority. Where the law provides that resolutions of shareholders may be adopted by written decision without the holding of a meeting, the board may decide to avail itself of this option whether or not it is contemplated by the company’s bylaws.

Board Meetings

Regardless of any provision of the company’s bylaws, (i) a company’s directors will be deemed to be present at board meetings if they participate by means of a telephone or audiovisual conference allowing them to be identified and guaranteeing their effective participation; and (ii) decisions of the board may be taken by means of written resolution, without the need for a meeting to be held. Normal majority requirements continue to apply.

SECURITIES LAWS

The French securities regulator (the Autorité des Marchés Financiers) has published a recommendation concerning the information that must be published by public companies in the context of the COVID-19 pandemic. The Autorité des Marchés Financiers has directed public companies to regularly reassess the need to communicate the known and/or anticipated impact of the pandemic on their activities, financial situation, and prospects. The "risk factors" section of companies’ universal registration document must be up to date at the time of the filing as regards COVID-19-related risks. Risks presented in universal registration statements must be “significant, specific and substantiated:”

• With regard to specificity, the risk factor description must make it possible to establish a clear and direct link between the risk factor and the issuer. Thus, issuers are invited to describe, to the extent possible, the effects on their business and to mention the specific uncertainties that concern them, due to their activities, their geographical area of operations, but also those of their main customers and suppliers.
•  The risk factor description should highlight the importance of the risk factor and its potential impact. The huge uncertainty regarding the consequences and effects of the COVID-19 pandemic renders this task particularly difficult at the current time. Impacts on the issuer which have been observed or which are currently anticipated, where they are significant and sufficiently precise, must be described, as must the risk management measures put in place by the issuer. The assumptions used in estimated impact disclosures must be disclosed.
• The Autorité des Marchés Financiers verifies the overall consistency of the information included in a prospectus or a universal registration document and pays particular attention to the consistency between the risks described and the prospective information disclosed.

The EU Market Abuse Regulation[3] requires issuers to make public, as soon as possible, any inside information that concerns them directly or indirectly, i.e., any nonpublic information of a precise nature that is likely to have a material effect on the price of the issuer’s securities. Thus, any knowledge of a significant impact of the epidemic on the business, performance or prospects of the issuer in particular must be disclosed without delay. Because of the uncertainty as to future developments with regard to the COVID-19 epidemic, issuers are recommended by the Autorité des Marchés Financiers to periodically reassess the materiality of the known and anticipated impact of the pandemic on their business and prospects.

On 17 March 2020, the Autorité des Marchés Financiers announced a ban until 16 April 2020 on any person established or resident in France or abroad from creating net short positions or increasing existing positions if (i) the position concerns a security admitted to trading on a trading platform established in France, and (ii) the security falls within the jurisdiction of the Autorité des Marchés Financiers. The Autorité des Marchés Financiers has published, and regularly updates, an FAQ in English on the net short position ban.

INSOLVENCY AND RESTRUCTURING

On 27 March 2020, an ordinance[4] was issued which adapts the rules relating to companies which experience financial difficulties and the onset of insolvency during the COVID-19 pandemic.

It will now be possible for companies that are in financial difficulty to initiate insolvency proceedings by declaring online that they are “in a state of cessation of payments” (i.e., unable to pay their debts when due out of their available assets), with hearings held by video conference. The intention of the government is to make the process more flexible and remote in light of the circumstances, contrary to the initial decision of the government to suspend all except emergency insolvency proceedings until the end of the confinement period.

All the provisions of the ordinance concerning insolvency proceedings apply until the end of the third month commencing on the date on which the state of public health emergency ceases (i.e., currently planned for 24 May 2020) (hereafter, the “legally protected period”).

The ordinance has temporarily amended French law on insolvency and restructuring proceedings as follows:

• As regards the state of cessation of payments (the triggering event for the obligation to commence insolvency proceedings):
• It will be assessed as of 12 March 2020 for the whole period in question. In other words, the company in difficulty can now benefit from preventive procedures even if, after 12 March 2020, and throughout the legally protected period, its situation worsens to the point where it is in a state of cessation of payments.
• However, this does not preclude the possibility of the company applying for collective proceedings to be initiated if the state of cessation of payments occurs after 12 March 2020. The company may, however, waive the benefit of the provision that freezes the date of assessment of the state of cessation of payments at 12 March 2020.
• There is an exception to the relief afforded by the ordinance for cases of fraud.

Adaptation of the time limits for conciliation, safeguard, and recovery proceedings:

• In conciliation proceedings, the four-month term of the conciliator’s appointment by the court is extended by a period equivalent to the legally protected period.
• The duration of judicial safeguard and recovery plans is extended by a period at least equivalent to the legally protected period.
• The duration of the following periods and proceedings is automatically extended for a period equivalent to the legally protected period:

• the observation period (i.e., the period opened by the judgment of safeguard or judicial recovery, during which a safeguard or recovery plan for the company is prepared);
• the continuation of activity period (i.e., the period during which the continuation of the company’s activity is exceptionally authorized by the court within the framework of a judicial liquidation proceeding);
• the judicial liquidation proceeding (i.e., proceedings that are applicable to debtors who are in cessation of payments and which are intended to put an end to the company's activity or to realize the debtor's assets).

During the legally protected period, the president of the court may extend the time limits granted to the insolvency administrator, the judicial representative, the liquidator, or the commissioner for the performance of the plan for a period equivalent to the legally protected period.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following members of Morgan Lewis’s corporate and business transactions, employment, and litigation practices in our Paris office:

Paris
Alexandre Bailly (Litigation)
Charles Dauthier (Employment)
Xavier Haranger (Litigation)
Sabine Smith-Vidal (Employment)