PACTE law

On April 11th 2019, the French Parliament adopted the PACTE law (Action Plan for Business Growth and Transformation) which is a new step in France’s economic transformation.
From creation to transfer, companies are overburdened with obligations that complicate every step of their development. The PACTE’s objective is to remove such obstacles and simplify business creation.
More precisely, the PACTE law has two objectives:

• to grow businesses in order to create more jobs, by removing all the obstacles that complicate their lives and providing them with the resources required to innovate for success;
• And to redefine the role of companies in society to increase employee involvement, by involving employees more closely in their governance and results through development of incentive and profit-sharing schemes

The following development presents an overview of the new provisions implemented by the PACTE law and interesting SMEs.

Increase of the thresholds for legal certification of accounts

The thresholds for legal certification of accounts is raised and harmonized by the PACTE Law. From now on, only companies fulfilling 2 of the following 3 conditions will be required to have their accounts certified by an auditor [“commissaire aux comptes”]:

• a balance sheet greater than or equal to 4 million euros ;
• a turnover excluding taxes of 8 million or more EUR ;
• workforce greater than or equal to 50 persons.

simplification of the process with the creation of a single online platform

The PACTE law provides the replacement of the different networks of formalities centers (Centres de formalité des enterprises – CFE) with an electronic one-stop shop which will be the only interface between the organizations currently receiving the information collected by the CFE and the companies, regardless of the activity, location or the legal form of the company.

This measure is accompanied by a generalization of the dematerialized way as modality of completion of the formalities.

The creation – as well as the other formalities related to the life of the company – will therefore necessarily be done in dematerialized form.

To allow the adaptation of the different management bodies of companies formalities centers to this new device, as well as the full deployment of single teleservice, a gradual implementation by 2021 is planned and is subject to the publication of a decree in Council of State (“Conseil d’Etat”).

Assistance in completing formalities to assist remote digital entrepreneurs will be maintained in the current formalities centers.

streamlining and simplification of membership threshold requirements

• Thresholds are now grouped on three levels, 11, 50, 250 employees: the threshold of 20 employees will be eliminated with the exception of the threshold of obligation of employment of handicapped workers (OETH) which will not be concerned by the measure. In the interest of legal stability, the staffing thresholds resulting from the reform of the Labor Code are not affected by these provisions. The thresholds of 10, 25, 100, 150, 200 employees will be removed.
• A harmonized method of calculation of the workforce: on that of the social security code, more favorable to companies.
• the different obligations in labor law will only be effective when the threshold is crossed for 5 consecutive calendar years: if the size of the firm decreases and falls below the threshold, the threshold will have to be reached again for five consecutive years to generate the threshold.

Increase of public procurement payments to SMEs and improvement of payment extension

• The minimum rate of advances paid by the State to SMEs holding state public contracts will increase (by decree) from 5 to 20%: this will give SMEs an incentive to apply for public contracts. This new rate will initially apply to public contracts concluded by the State when the initial amount of the contract will exceed € 50,000 excluding tax and its execution period exceeds two months.
• Simplified procedures and reduced payment terms: e-invoicing will help improve business cash flow by securing payment times and limiting reminders and disputes arising from different invoice formats. In addition, for companies, the introduction of a European e-billing standard will be a source of simplification of the execution of public order contracts.

Reduction of time and costs of judicial liquidation

The simplified judicial liquidation is shorter than usual procedures. It allows to close a procedure within a maximum period of 6 to 9 months for companies that do not employ more than one employee and that achieve a turnover of less than 300 000 € and 12 to 15 months for those realizing a turnover of less than 750 000 €.

With the PACTE law, the simplified judicial liquidation becomes the norm for SME with less than 5 employees.

Industrial property

• Creation of a provisional patent application

The PACTE law creates a provisional patent application for a limited period of 12 months.

This will be a “first step” for patenting that is both simplified and cost-effective for SMEs. The patent application can be completed later, as the company advances in the patent investigation, while preserving the benefit of prior art.

• Creation of a new opposition procedure before the INPI

A new opposition procedure to patents issued before the INPI is created.

It is a simpler alternative to the only legal remedy in place today and will allow lower-cost patents to be cheaply attacked, especially without inventiveness.

• Creation of a priori review of the patent inventiveness criterion

The French Patent Examination System developed by INPI will study from the outset the degree of inventiveness of the patent. Patents that are not inventive will thus be blocked as early as the investigation stage, where a court was needed before the PACTE law.

• Strengthening of the utility certificate

The utility certificate is extended from 6 to 10 years. It can be transformed into a patent application if the invention of the company requires stronger protection.

The company will be able to choose the title that best fits its strategy, in terms of scope of protection, duration of production and cost.

Social and environmental responsibilities

The PACTE law amends the Civil Code and the Commercial Code with the addition of “social and environmental issues” and “self-interest” of company in the Civil Code and the addition of the concept of “raison d’être” in the Commercial code.

Companies will then be able to set social and environmental goals in their by-laws.