PACTE law (The Action Plan for Business Growth and Transformation) led by the Minister of the Economy Bruno Le Maire was adopted by Parliament on April the 11th 2019. The stakes of this law are various. However, the main goals of this law are to make life easier for entrepreneurs and to promote the growth of companies based in France.
Among the most significant measures to be implemented within the frame of this law are the following:
1. The simplification of the thresholds applicable to SMEs:
The various applicable thresholds to SMES are firstly simplified by the removal of some. In addition, the extension of deadlines to comply with the requirements related to the crossing of the various thresholds has also been implemented. These measures help to avert hiring barriers in thriving SMEs.
The threshold of 20 employees, often seen as an impediment to business growth, has thus been raised to 50 employees. In the same way, the thresholds of 10, 25, 100, 100, 150 and 2000 employees have been removed. As a result, there are three different levels of thresholds: 11, 50 and 250 employees.
Time limits for meeting the obligations of the thresholds crossed have so far been too short, so, in order to tackle this issue and to simplify the transition of hiring SMEs, these time limits have been standardized to 5 years.
2. The raise in the thresholds for the approval of financial statements:
The cost of approval of financial statements is a significant burden for small businesses: an average of €5500. Besides, it may be a “superfluous” cost. Indeed, most of small businesses resort to the services of a chartered accountant in addition to the external auditor.
In order to reduce the burden on entrepreneurs, PACTE law raises the thresholds for legal approval of financial statements. Indeed, from now on, only companies that meet 2 of the following 3 conditions will be required to call on an external auditor to approve their financial statements:
- A balance sheet greater than or equal to €4 million
- A turnover excluding taxes greater than or equal to €8 million
- A workforce of 50 or more people
3. The promotion of the right of entrepreneurs to rebound:
The rebound of entrepreneurs is a very cultural notion that has made its way into the world of French entrepreneurship. It revolves around considering that the entrepreneur has the right to fail, and that strengthening his ability to rebound is necessary.
As a result, the report of the PACTE law draft raised two issues. Indeed, the average duration between the opening of a judicial liquidation procedure and its closure is two and a half years long. During this time, the entrepreneur who has failed in his entrepreneurial project cannot start a new activity. On the other hand, more than two out of three French people consider the French government isn’t lenient enough when it comes to giving entrepreneurs a second chance.
PACTE law contemplates bolstering the case for the rebound of entrepreneurs by promoting the automatic use of the “professional recovery” procedure. This procedure is designed as an alternative to judicial liquidation and allows for the cancellation of debts for companies that have no employees and that hold less than €5,000 in assets.
PACTE law “universalizes” simplified judicial liquidation. In this way, it becomes the new standard for SMEs with less than 5 employees. This procedure makes it possible to close a liquidation within a period time of:
o 6 to 9 months for companies with no more than one employee and a turnover of less than €300,000
o 12 to 15 months for those with a turnover of less than €750,000.
As you must have understood, the aim of PACTE law is in line with Made in Law‘s mission. We are all for making easier for entrepreneurs! In order to incorporate your company or manage your paperwork, contact us!