Additional measures to support companies particularly affected by the Covid19: creation of a state fund of solidarity

Jean-François Adelle , Christophe Jacomin

Updated pursuant to publication of decree n°2020-371 dated 30 March 2020 and decree n°2020-394 dated 2 April 2020

The French Government Ordinance enacted on 26 March 2020[1] create a solidarity fund intended to provide financial aid to natural and private law legal persons having economic activity severely affected by the Covid19 crisis. The Solidarity Fund is created for a three-month period (renewable once for the same duration by decree) and will be funded by the State, and on voluntary basis, by regions and certain other territorial authorities.

Conditions of eligibility to the financial aids, their amount, together with the operation and management conditions of the Solidarity Fund have been further determined by a decree dated 30 March 2020 (modified by a decree dated 2 April 2020). In order to be eligible, the enterprises shall fulfil the following criteria:

  • having started their activity before 1 February 2020;
  • not having suspended its payment as at 1 March 2020;
  • employ less than 10 employees;
  • turnover inferior to 1 million euros;
  • taxable profit inferior to 60,000 euros;
  • not be controlled by a commercial company;
  • not be, as at 31 December 2020, in difficulty within the meaning of EU Regulation n°651/2014.


In addition, these enterprises must be prohibited to open to public between 1 March 2020 and 31 March 20202 or have lost at least 70% of turnover in March 2020 in comparison with March 2019.

The amount of such aid will amount a maximum of 1,500 euros, which may be increased by 2,000 euros if the enterprise (i) employs, as at 1 March 2020, at least one employee (with a fixed-term or open-ended contract), (ii) is not be able to pay its debts for the next thirty days and (iii) has been refused a loan of a reasonable amount from a bank of which it was already client (if the demand was made after 1 March 2020).

Such companies can apply for the aid as from 31 March 2020.

This mechanism, essential to support the vitality of the supply chain, completes the general mechanism of state guarantee of 300 billion euros and adds to other schemes (such as partial unemployment benefits, payment moratorium for tax and social security charges or tax redemption) that apply to individual cases.

French Minister of Economy has already announced that this fund will be strengthen and that the amount of the aid could equal 5,000 euros in order to take into account payment of commercial leases.

[1] Ordonnance n° 2020-317 du 25 mars 2020 portant création d’un fonds de solidarité à destination des entreprises particulièrement touchées par les conséquences économiques, financières et sociales de la propagation de l’épidémie de covid-19 et des mesures prises pour limiter cette propagation

  • The application shall be accompanied with a business plan and a cash flow forecast up to end of 2020.
  • It is not specified if the mechanism (which can be coupled with other guarantees or securities, but only for loan granted to very large companies) is compatible with other credit enhancement mechanism.
  • The borrower shall pay particular attention to representations and warranties on which the guarantor will commit and the lender shall monitor carefully such obligations in order to be able to enforce the guarantee.

The European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) each presented the way in which the moratoria that the States will ask them to apply on loans to companies and individuals in the face of the consequences of the Covid epidemic should be approached from a regulatory and accounting point of view.19.

Under Basel 3 regulations, a loan is considered to be in “default” for any delay in payment (principal or interest) of more than 90 days, which mechanically results in the bank consuming more capital (standard weighting raised to 150%). For single European Supervision Authority, a non-performing loan (NPL) is 90 days past due, or 30 days past due for those that have already been restructured.

Regulators are proposing to move away from a downgrading to “default” or “restructuring” in the prudential or IFRS9 sense, which used to be automatic, to now make a case-by-case analysis of the borrower’s structural situation by not taking into account the structural shock suffered by the borrower.