The effectiveness of conciliation (French amicable proceedings) (once again) reinforced by Order No. 2020-596 of 20 May 2020

One of the major objectives pursued by the new Order No. 2020-596 of 20 May 2020 “on the adaptation of the rules relating to the difficulties of businesses and agricultural operations to the consequences of the covid-19 epidemic” is to strengthen the effectiveness of conciliation (French amicable proceedings), a preventive proceeding for business difficulties provided for by Articles L 611-4 et seq. of the French Commercial Code.

To this end, the report to the President of the Republic relating to this Order states that the debtor will henceforth be able to “refer the matter to the president of the court in order to preserve, for the duration of the negotiation and as a protective measure, its ability to maintain its activity, by requesting the president to order, under the ex parte petition procedure, a certain number of measures similar to those provided for in the event of the opening of insolvency proceedings; however, these measures will have no collective character and the judge may take into consideration, on a case-by-case basis, both the situation of the debtor and that of the creditor concerned. Unlike section III of Article L. 622-21 of the Commercial Code, Article 2 does not provide for an interruption of the time limits imposed on pain of forfeiture or termination of rights, but for a suspension.”

One might think that this new measure duplicates the one provided for in Article L 611-7, paragraph 5 of the Commercial Code, which allows a debtor formally notified or sued by a creditor during conciliation (French amicable proceedings) to ask the judge who opened the proceedings to apply Articles 1244-1 to 1244-3 of the Civil Code (granting of grace periods – maximum 24 months) within the framework of an accelerated proceeding on the merits. In this latter case, the judge rules after gathering the observations of the conciliator and may make the duration of the measures thus taken conditional on the conclusion of a conciliation agreement.

However, the report to the President of the Republic presenting the Order of 20 May 2020 emphasises that the new measure is not distinct from the rule provided for in Article L 611-7 of the Commercial Code but may be combined with it.

Indeed, whereas Article L 611-7 of the Commercial Code specifies that the debtor may refer the matter to the judge so that the judge applies the provisions of Article 1343-5 of the Civil Code if the debtor is formally notified or sued, the Order of 20 May 2020 allows that same debtor, from the moment the creditor has expressly or tacitly refused the request made by the conciliator, to suspend the enforceability of its claim for the duration of the negotiation.

Moreover, the scope of the new measure is broader than the rule provided for by Article L 611-7 of the Commercial Code (which concerns the recovery of a sum of money), since it allows the debtor to ask the judge to interrupt or prohibit any legal action initiated by one of its creditors seeking an order to pay a sum of money or the termination of a contract for failure to pay a sum of money (art. 2, II, 1°), and also to ask the judge to halt or prohibit any enforcement proceeding against movable or immovable property (art. 2, II, 2°).

This new measure, which unquestionably strengthens the effectiveness of conciliation (French amicable proceedings) and strongly encourages the creditor to negotiate the handling of its claim, should resonate with many company directors who, in these troubled times, may be tempted to resort to a State-guaranteed loan rather than negotiate with their creditors.

As a coincidence of timing, the provisions of Article 2 of the Order of 20 May 2020 are applicable to proceedings under way from 22 May 2020, the date of entry into force of the Order, until 31 December 2020, a deadline which also corresponds to that allowing a State-guaranteed loan to be requested (Act No. 2020-289, 23 March 2020, art. 6, I, Official Journal 24 March).

🤝 SAINT-LOUIS AVOCATS is at your disposal on +33 (0)1 44 32 07 00 / contact@saintlouisavocats.com to assist you in connection with the difficulties faced by your company in these unprecedented times.