The amending finance law for 2020 concerning the financing of emergency measures

Following the Council of Ministers meeting on March 18, 2020, the government decided to submit to the legislature a draft amending finance bill for 2020 which aims to:

• on the one hand, to establish a state guarantee for loans granted to companies by banks for 300 billion euros and;
• On the other hand, to open emergency credit lines to finance emergency measures already adopted or scheduled for adoption in the coming days: namely, a need for 45 billion euros to support the economy and businesses
  • partial activity, which will be made more protective for workers (a scheme estimated at 5.5 billion euros),
  • a compensation fund for very small businesses, co-financed by the regions,
  • the deferral of tax and social security contributions for the month of March,
  • the necessary provision to support healthcare workers in hospitals (equipment, salaries, etc., an estimated need of 2 billion euros).

France's growth assumption for 2020 is set at -1% (in agreement with European authorities' estimates), which would bring the public deficit to 3.9% of GDP (compared to 2.2% initially planned when the 2020 budget law was drawn up).

Key points of this project:

• the regions will be called upon to contribute, without any compensation currently being provided for in the text: the overall aid from the regions would amount to 250 million euros;
• the “great fragility” of the forecasts given the context of “exceptionally high” uncertainty according to the High Council of Public Finances in its opinion of March 17, 2020.

The report on the evolution of the economic and budgetary situation specifies that the forecast, on which this project was based, "is marked by a high level of uncertainty, due to the impossibility of accurately assessing at this stage the duration of the measures necessary to contain the epidemic, as well as the persistence over time of the economic effects of the epidemic on the national territory."

The government has considered two main assumptions: a lockdown limited to one month and a rapid return to normal for French and international demand.

The amending finance law for 2020 organizes the State guarantee granted for loans made by credit institutions and financing companies to non-financial companies registered in France, between March 16, 2020 and December 31, 2020 (total outstanding amount guaranteed: 300 billion euros).

The loans covered will be defined by a set of specifications defined by order of the Minister of the Economy.

In addition, they must meet the following minimum requirements :

• a minimum deferral of amortization of 12 months;
• a clause giving the borrower the option, at the end of the first year, to amortize them over an additional period calculated in number of years (to be defined by ministerial decree);
• be an additional loan in relation to the total loans already granted by the banking institution concerned before March 16, 2020.

The state guarantee will be subject to a fee and will not cover the entire loan amount. It is only granted after a waiting period, as stipulated in the loan agreement.

This state guarantee cannot be granted to loans benefiting companies undergoing safeguard, reorganization or liquidation proceedings.

Bpifrance is designated as the institution responsible by the State for monitoring the outstanding amounts of guaranteed loans, collecting and paying back to the State the guarantee fees and verifying, in the event of a call on the guarantee, that the conditions are met .

Bpifrance will accept loan guarantee applications for companies that employed fewer than 5,000 employees in their last fiscal year or had a turnover of less than €1.5 billion. For companies exceeding these thresholds, guarantee applications will be granted by order of the Minister for the Economy.

The National Assembly added to the initially prepared draft details regarding this guarantee and the addition of a monitoring committee under the direction of the Prime Minister (amendment to article 4 of the PLFR).

This monitoring committee will be set up to oversee the implementation and evaluation of emergency measures, namely financial support for businesses facing the Covid-19 epidemic, the state guarantee and the solidarity fund.

The adoption of this amending finance bill on March 20, 2020, took place in less than 3 days by Parliament, due to the urgency of the situation:

• Bill adopted on first reading on March 19, 2020 at the National Assembly.
• Amended bill adopted on first reading on March 20, 2020 by the Senate, without any changes.

We should expect a second amending finance bill in the coming months, particularly to consider measures to stimulate the economy. This is also why the amendment to the Senate Finance Committee's report, which aimed to exempt overtime worked by employees exposed to significant health risks due to the coronavirus from income tax and social security contributions, was withdrawn.

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Press contact: mmietkiewicz@arst-avocats.com